10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2009

Commission file No. 333-144337

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

Delaware (State of Incorporation)	75-2749762 (I.R.S. Employer Identification No.)
15305 Dallas Parkway, Suite 1600 Addison, Texas (Address of principal executive offices)	75001 (Zip Code)

(972) 713-3500

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

None

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes þ     No o

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes o     No þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

None of the registrant’s common stock is held by non-affiliates.

As of February 23, 2010, 100 shares of the Registrant’s common stock were outstanding.

Documents Incorporated by Reference

None.

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
2009 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I
Item 1.	Business	4
Item 1A.	Risk Factors	27
Item 1B.	Unresolved Staff Comments	39
Item 2.	Properties	39
Item 3.	Legal Proceedings	39
Item 4.	Submission of Matters to a Vote of Security Holders	39
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	40
Item 6.	Selected Financial Data	40
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	74
Item 8.	Financial Statements and Supplementary Data	74
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	75
Item 9A.	Controls and Procedures	75
Item 9B.	Other Information	76
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	77
Item 11.	Executive Compensation	79
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	88
Item 13.	Certain Relationships and Related Transactions, and Director Independence	90
Item 14.	Principal Accounting Fees and Services	92
PART IV
Item 15	Exhibits, Financial Statement Schedules	93
EX-10.1
EX-10.3
EX-21.1
EX-24.1
EX-24.2
EX-24.3
EX-24.4
EX-24.5
EX-24.6
EX-24.7
EX-24.8
EX-24.9
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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FORWARD LOOKING STATEMENTS

Certain statements contained in this Annual Report on Form 10-K, including, without limitation, statements containing the words “believes,” “anticipates,” “expects,” “continues,” “will,” “may,” “should,” “estimates,” “intends,” “plans” and similar expressions, and statements regarding the Company’s business strategy and plans, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management’s current expectations and involve known and unknown risks, uncertainties and other factors, many of which the Company is unable to predict or control, that may cause the Company’s actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Such factors include, among others, the following: our significant indebtedness; general economic and business conditions, including without limitation the condition of the financial markets, both nationally and internationally; foreign currency fluctuations; demographic changes; changes in, or the failure to comply with, laws and governmental regulations; the ability to enter into and retain managed care provider arrangements on acceptable terms; changes in Medicare, Medicaid and other government funded payments or reimbursement in the U.S. and the United Kingdom (U.K.); the effects of insurers, healthcare providers and others to contain healthcare costs; the possible enactment of federal or state healthcare reform; liability and other claims asserted against us; the highly competitive nature of healthcare; changes in business strategy or development plans of healthcare systems with which we partner; the ability to attract and retain qualified physicians and personnel, including nurses and other health care professionals and other personnel; the availability of suitable acquisition and development opportunities and the length of time it takes to accomplish acquisitions and developments; our ability to integrate new and acquired businesses with our existing operations; the availability and terms of capital to fund the expansion of our business, including the acquisition and development of additional facilities and certain additional factors, risks and uncertainties discussed in this Annual Report on Form 10-K. We disclaim any obligation and make no promise to update any such factors or forward-looking statements or to publicly announce the results of any revisions to any such factors or forward-looking statements, whether as a result of changes in underlying factors, to reflect new information as a result of the occurrence of events or developments or otherwise. Given these uncertainties, investors and prospective investors are cautioned not to rely on such forward-looking statements.

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PART I

Item 1.   Business

General

United Surgical Partners International, Inc. (together with its subsidiaries, “we,” the “Company” or “USPI”) owns and operates short stay surgical facilities including surgery centers and hospitals in the United States and the United Kingdom. We focus on providing high quality surgical facilities that meet the needs of patients, physicians and payors better than hospital-based and other outpatient surgical facilities. We believe that our facilities (1) enhance the quality of care and the healthcare experience of patients, (2) offer significant administrative, clinical and economic benefits to physicians, (3) offer a strategic approach for our health system partners to expand capacity and access within the markets they serve, and (4) offer an efficient and low cost alternative for payors. We acquire and develop our facilities through the formation of strategic relationships with physicians and not-for-profit healthcare systems to better access and serve the communities in our markets. Our operating model is efficient and scalable, and we have adapted it to each of our markets. We believe that our acquisition and development strategy and operating model enable us to continue to grow by taking advantage of highly-fragmented markets and an increasing demand for short stay surgery.

Since physicians are critical to the direction of healthcare in the U.S. and U.K., we have developed our operating model to encourage physicians to affiliate with us and to use our facilities as an extension of their practices. We operate our facilities, structure our strategic relationships and adopt staffing, scheduling and clinical systems and protocols with the goal of increasing physician productivity. We believe that our focus on physician satisfaction, combined with providing high quality healthcare in a friendly and convenient environment for patients, will continue to increase the number of procedures performed at our facilities each year.

Donald E. Steen, who is our chairman, formed USPI with the private equity firm Welsh, Carson, Anderson & Stowe in February 1998. As of December 31, 2009, we operated 169 facilities, consisting of 165 in the United States and four in the United Kingdom. Of the 165 U.S. facilities, 109 are jointly owned with major not-for-profit healthcare systems. Overall, as of December 31, 2009, we held ownership interests in 167 of the facilities and operated the remaining two under service and management contracts. Due in large part to our partnerships with physicians and not-for-profit healthcare systems, we do not consolidate the financial results of 109 of the 169 facilities we operate, meaning that while we record a share of their net profit within our operating income, we do not include their revenues and expenses in the consolidated revenue and expense line items of our consolidated financial statements.

This trend in our business contributed to our consolidated revenues decreasing from $642.2 million in 2008 to $622.4 million in 2009, even as our operating income increased from $199.8 million to $229.7 million during the same period. To help understand this relationship in our consolidated financial statements, we review an operating measure called systemwide revenue growth, which includes both consolidated and unconsolidated facilities. While revenues of our unconsolidated facilities are not recorded as revenues by USPI, we believe the information is important in understanding USPI’s financial performance because these revenues are the basis for calculating our management services revenues and, together with the expenses of our unconsolidated facilities, are the basis for USPI’s equity in earnings of unconsolidated affiliates. In addition, we disclose growth rates and operating margins for the facilities that were operational in both the current and prior year periods, a group we refer to as same store facilities.

The Merger Transaction

USPI had publicly traded equity securities from June 2001 until April 2007. Pursuant to an Agreement and Plan of Merger (the merger) dated as of January 7, 2007, with an affiliate of Welsh, Carson, Anderson & Stowe X, L.P. (Welsh Carson), we became a wholly owned subsidiary of USPI Holdings, Inc. on April 19, 2007. USPI Holdings, Inc. is a wholly owned subsidiary of USPI Group Holdings, Inc., which is owned by an investor group that includes affiliates of Welsh Carson, members of our management and other investors. As a result of the merger, we no longer have publicly traded equity securities.

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In this Form 10-K, we have reported our operating results and financial position for the period subsequent to the merger date of April 19, 2007, as the “Successor Period” and all periods prior to April 19, 2007, as “Predecessor Periods.” For the purposes of presenting a comparison of our 2007 results to our 2008 results, we have presented our 2007 results as the sum of our operating results from the Predecessor Period from January 1, 2007 through April 18, 2007 and our operating results for the Successor Period from April 19, 2007 to December 31, 2007. We believe that this presentation provides the most meaningful information about our operating results. This approach is not consistent with GAAP and may yield results that are not strictly comparable on a period-to-period basis. Even on a combined basis, our results of operations for the year ended December 31, 2007 is neither comparable with other periods nor indicative of results to be expected in future periods given our incurrence of merger-related expenses and indebtedness in 2007.

Available Information

We file annual, quarterly and current reports with the Securities and Exchange Commission. You may read and copy any document that we file at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. You may also call the Securities and Exchange Commission at 1-800-SEC-0330 for information on the operation of the public reference room. Our SEC filings are also available to you free of charge at the SEC’s web site at http://www.sec.gov. We also maintain a web site at http://www.unitedsurgical.com that includes links to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports. These reports are available on our website without charge as soon as reasonably practicable after such reports are filed with or furnished to the SEC. Information on our web site is not deemed incorporated by reference into this Form 10-K.

Industry Background

We believe many physicians prefer surgery centers and surgical hospitals over general acute care hospitals. We believe that this is due to the non-emergency nature of the procedures performed at our surgery centers and surgical hospitals, which allows physicians to schedule their time more efficiently and therefore increase the number of surgeries they can perform in a given amount of time. In addition, outpatient facilities usually provide physicians with greater scheduling flexibility, more consistent nurse staffing and faster turnaround time between cases. While surgery centers and surgical hospitals generally perform scheduled surgeries, acute care hospitals and national health service facilities generally provide a broad range of services, including high priority and emergency procedures. Medical emergencies often demand the unplanned use of operating rooms and result in the postponement or delay of scheduled surgeries, disrupting physicians’ practices and inconveniencing patients. Surgery centers and surgical hospitals in the United States and the United Kingdom are designed to improve physician work environments and improve physician efficiency. In addition, many physicians choose to perform surgery in facilities like ours because their patients prefer the comfort of a less institutional atmosphere and the convenience of simplified admissions and discharge procedures.

United States

New surgical techniques and technology, as well as advances in anesthesia, have significantly expanded the types of surgical procedures that are being performed in surgery centers and have helped drive the growth in outpatient surgery. Lasers, arthroscopy, enhanced endoscopic techniques and fiber optics have reduced the trauma and recovery time associated with many surgical procedures. Improved anesthesia has shortened recovery time by minimizing post-operative side effects such as nausea and drowsiness, thereby avoiding the need for overnight hospitalization in many cases. In addition, some states in the United States permit surgery centers to keep a patient for up to 23 hours. This allows more complex surgeries, previously only performed in an inpatient setting, to be performed in a surgery center.

In addition to these technological and other clinical advancements, a changing payor environment has contributed to the rapid growth in outpatient surgery in recent years. Government programs, private insurance companies, managed care organizations and self-insured employers have implemented cost containment measures to limit increases in healthcare expenditures, including procedure reimbursement. These cost containment measures have contributed to the significant shift in the delivery of healthcare services away from traditional inpatient

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hospitals to more cost-effective alternate sites, including surgery centers. We believe that surgery performed at a surgery center is generally less expensive than hospital-based outpatient surgery because of lower facility development costs, more efficient staffing and space utilization and a specialized operating environment focused on quality of care and cost containment.

Today, large healthcare systems in the United States generally offer both inpatient and outpatient surgery on site. In addition, a number of not-for-profit healthcare systems have begun to expand their portfolios of facilities and services by entering into strategic relationships with specialty operators of surgery centers in order to expand capacity and access in the markets they serve. These strategic relationships enable not-for-profit healthcare systems to offer patients, physicians and payors the cost advantages, convenience and other benefits of outpatient surgery in a freestanding facility. Further, these relationships allow the not-for-profit healthcare systems to focus their attention and resources on their core business without the challenge of acquiring, developing and operating these facilities.

United Kingdom

The United Kingdom provides government-funded healthcare to all of its residents through the National Health Service. However, due to funding and capacity limitations, the demand for healthcare services exceeds the public system’s capacity. In response to these shortfalls, private healthcare networks and private insurance companies have developed in the United Kingdom. Approximately 12% of the U.K. population has private insurance to cover elective surgical procedures, and another segment of the population pays for elective procedures from personal funds. For the year ended December 31, 2009, in the United Kingdom, we derived 64% of our revenues from private insurance, 26% from self-pay patients, who typically arrange for payment prior to surgery being performed, 5% from government payors, and 5% from other payors.

Our Business Strategy

Our goal is to steadily increase our revenues and cash flows. The key elements of our business strategy are to:

•  attract and retain top quality surgeons and other physicians;

•  expand our presence in existing markets;

•  pursue strategic relationships with not-for-profit healthcare systems;

•  expand selectively in new markets; and

•  enhance operating efficiencies.

Attract and retain top quality surgeons and other physicians

Since physicians are critical to the direction of healthcare in the U.S. and U.K., we have developed our operating model to encourage physicians to affiliate with us and to use our facilities as an extension of their practices. We believe we attract physicians because we design our facilities, structure our strategic relationships and adopt staffing, scheduling and clinical systems and protocols to increase physician productivity and promote their professional and financial success. We believe this focus on physicians, combined with providing high quality healthcare in a friendly and convenient environment for patients, will continue to increase case volumes at our facilities. In addition, in the United States, we generally offer physicians the opportunity to purchase equity interests in the facilities they use as an extension of their practices. We believe this opportunity attracts quality physicians to our facilities and ownership increases the physicians’ involvement in facility operations, enhancing quality of patient care, increasing productivity and reducing costs.

Pursue strategic relationships with not-for-profit healthcare systems

Through strategic relationships with us, not-for-profit healthcare systems can benefit from our operating expertise and create a new cash flow opportunity with limited capital expenditures. We believe that these relationships also allow not-for-profit healthcare systems to attract and retain physicians and improve their hospital operations by focusing on their core business. We also believe that strategic relationships with these healthcare

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systems help us to more quickly develop relationships with physicians, communities, and payors. Generally, the healthcare systems with which we develop relationships have strong local market positions and excellent reputations that we use in branding our facilities. In addition, our relationships with not-for-profit healthcare systems enhance our acquisition and development efforts by (1) providing opportunities to acquire facilities the systems may own, (2) providing access to physicians already affiliated with the systems, (3) attracting additional physicians to affiliate with newly developed facilities, and (4) encouraging physicians who own facilities to consider a strategic relationship with us.

Expand our presence in existing markets

Our primary strategy is to grow selectively in markets in which we already operate facilities. We believe that selective acquisitions and development of new facilities in existing markets allow us to leverage our existing knowledge of these markets and to improve operating efficiencies. In particular, our experience has been that newly developed facilities in markets where we already have a presence and a not-for-profit hospital partner are the best use of our invested capital.

Expand selectively in new markets

We may continue to enter targeted markets by acquiring and developing surgical facilities. In the United States, we expect to do this primarily in conjunction with a local not-for-profit healthcare system or hospital. We typically target the acquisition or development of multi-specialty centers that perform high volume, non-emergency, lower risk procedures requiring lower capital and operating costs than hospitals. In addition, we will also consider the acquisition of multi-facility companies.

In determining whether to enter a new market, we examine numerous criteria, including:

•  the potential to achieve strong increases in revenues and cash flows;

•  whether the physicians, healthcare systems and payors in the market are receptive to surgery centers and/or surgical hospitals;

•  the demographics of the market;

•  the number of surgical facilities in the market;

•  the number and nature of outpatient surgical procedures performed in the market;

•  the case mix of the facilities to be acquired or developed;

•  whether the facility is or will be well-positioned to negotiate agreements with insurers and other payors; and

•  licensing and other regulatory considerations.

Upon identifying a target facility, we conduct financial, legal and compliance, operational, technology and systems reviews of the facility and conduct interviews with the facility’s management, affiliated physicians and staff. Once we acquire or develop a facility, we focus on upgrading systems and protocols, including implementing our proprietary methodology of defined processes and information systems, to increase case volume and improve operating efficiencies.

Enhance operating efficiencies

Once we acquire a new facility in the U.S., we integrate it into our existing network by implementing a specific action plan to support the local management team and incorporate the new facility into our group purchasing contracts. We also implement our systems and protocols to improve operating efficiencies and contain costs. Our most important operational tool is our management system “Every Day Giving Excellence,” which we refer to as USPI’s EDGE. This proprietary measurement system allows us to track our clinical, service and financial performance, best practices and key indicators in each of our facilities. Our goal is to use USPI’s EDGE to ensure that we provide each of the patients using our facilities with high quality healthcare, offer physicians a superior work environment and eliminate inefficiencies. Using USPI’s EDGE, we track and monitor our

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performance in areas such as (1) providing surgeons the equipment, supplies and surgical support they need, (2) starting cases on time, (3) minimizing turnover time between cases, and (4) providing efficient case and personnel schedules. USPI’s EDGE compiles and organizes the specified information on a daily basis and is easily accessed over the Internet by our facilities on a secure basis. The information provided by USPI’s EDGE enables our employees, facility administrators and management to analyze trends over time and share processes and best practices among our facilities. In addition, the information is used as an evaluative tool by our administrators and as a budgeting and planning tool by our management. USPI’s EDGE is now deployed in substantially all of our U.S. facilities. In addition to USPI’s EDGE, we are currently investing in other tools that will allow us to better manage our facilities in challenging economic conditions.

Operations

Operations in the United States

Our operations in the United States consist primarily of our ownership and management of surgery centers. As of December 31, 2009, we have ownership interests in 151 surgery centers and 12 surgical hospitals and operate, through service and management agreements, two additional surgery centers. We also own interests in and expect to operate three more surgical facilities that are currently under construction and have four projects under development, and numerous other potential projects in various stages of consideration, which may result in our adding additional facilities during 2010. All of the facilities under construction and in the earlier stages of development include a not-for-profit hospital partner. Approximately 7,400 physicians have privileges to use our facilities. Our surgery centers are licensed outpatient surgery centers, and our surgical hospitals are licensed as hospitals. Each of our facilities is generally equipped and staffed for multiple surgical specialties and located in freestanding buildings or medical office buildings. Our average surgery center has approximately 12,000 square feet of space with three operating rooms, as well as ancillary areas for preparation, recovery, reception and administration. Our surgery center facilities range from a 4,000 square foot, one operating room facility to a 33,000 square foot, nine operating room facility. Our surgery centers are normally open weekdays from 7:00 a.m. to approximately 5:00 p.m. or until the last patient is discharged. We estimate that a surgery center with four operating rooms can accommodate up to 6,000 procedures per year. Our surgical hospitals average 50,000 square feet of space with seven operating rooms, ranging in size from 20,000 to 167,000 square feet and having from four to eleven operating rooms.

Our surgery center support staff typically consists of registered nurses, operating room technicians, an administrator who supervises the day-to-day activities of the surgery center, and a small number of office staff. Each center also has appointed a medical director, who is responsible for and supervises the quality of medical care provided at the center. Use of our surgery centers is generally limited to licensed physicians, podiatrists and oral surgeons who are also on the medical staff of a local accredited hospital. Each center maintains a peer review committee consisting of physicians who use our facilities and who review the professional credentials of physicians applying for surgical privileges.

All of our U.S. surgical facilities are accredited by either the Joint Commission on Accreditation of Healthcare Organizations or by the Accreditation Association for Ambulatory Healthcare or are in the process of applying for such accreditation. We believe that accreditation is the quality benchmark for managed care organizations. Many managed care organizations will not contract with a facility until it is accredited. We believe that our historical performance in the accreditation process reflects our commitment to providing high quality care in our surgical facilities.

Generally, our surgical facilities are limited partnerships, limited liability partnerships or limited liability companies in which ownership interests are also held by local physicians who are on the medical staff of the facilities. Our ownership interests in the facilities range from 5% to 99%. Our partnership and limited liability company agreements typically provide for the monthly or quarterly pro rata distribution of cash equal to net profits from operations, less amounts held in reserve for expenses and working capital. Our facilities derive their operating cash flow by collecting a fee from patients, insurance companies, or other payors in exchange for providing the facility and related services a surgeon requires in order to perform a surgical case. Our billing systems estimate revenue and generate contractual adjustments based on a fee schedule for over 85% of the total cases performed at our facilities. For the remaining cases, the contractual allowance is estimated based on the historical collection percentages of each facility by payor group. The

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historical collection percentage is updated quarterly for each facility. We estimate each patient’s financial obligation prior to the date of service. We request payment of that obligation at the time of service. Any amounts not collected at the time of service are subject to our normal collection and reserve policy. We also have a management agreement with each of the facilities under which we provide day-to-day management services for a management fee that is typically a percentage of the net revenues of the facility.

Our business depends upon the efforts and success of the physicians who provide medical services at our facilities and the strength of our relationships with these physicians. Our business could be adversely affected by the loss of our relationship with, or a reduction in use of our facilities by, a key physician or group of physicians. The physicians that affiliate with us and use our facilities are not our employees. However, we generally offer the physicians the opportunity to purchase equity interests in the facilities they use.

Strategic Relationships

A key element of our business strategy is to pursue strategic relationships with not-for-profit healthcare systems (hospital partners) in selected markets. Of our 165 U.S. facilities, 109 are jointly-owned with not-for-profit healthcare systems. Our strategy involves developing these relationships in three primary ways. One way is by adding new facilities in existing markets with our existing hospital partners. An example of this is our relationship with the Baylor Health Care System (Baylor) in Dallas, Texas. Our joint ventures with Baylor own a network of 25 surgical facilities that serve the approximately six million people in the Dallas / Fort Worth area. These joint ventures have added new facilities each year since their inception in 1999, including two during 2009. Another example of a growing single-market relationship is our network of facilities in Houston, Texas with Memorial Hermann Healthcare System, with whom we opened our first facility in 2003 and with whom we now operate 17 facilities, including one added during 2009.

Another way we develop these relationships is through expansion into new markets, both with existing hospital partners and with new partners. A good long-term example of this strategy is our relationship with Ascension Health, with whom we initially owned a single facility in Nashville, Tennessee and now have a total of eleven facilities in four states. Similarly, with Catholic Healthcare West (CHW) we began with one facility, which was in a suburb of Las Vegas, Nevada. This relationship has expanded to a total of 12 facilities, including five in various California markets and four in the Phoenix, Arizona market. Our newest facility with CHW is located in Stockton, California and was acquired in February 2009. We also continue to grow our relationship with Bon Secours Health System, where we now operate five facilities in four different Virginia cities. During 2008, we entered into a new partnership with Legacy Health in Portland, Oregon where we now have ownership in and manage two surgical facilities. Also during 2008, we entered into a new partnership with Centura Health in Denver, Colorado where we now have ownership in and manage three surgical facilities, two of which were added in January 2009.

A third way we develop our strategic relationships with not-for-profit healthcare systems is through the contribution of our ownership interests in existing facilities to a joint venture relationship. For example, during 2007, we added a hospital partner, CHRISTUS Spohn, to two of our facilities in Corpus Christi, Texas. We engaged in similar transactions with existing partners, Memorial Hermann and CHW, during 2008. We expect to add a not-for-profit hospital partner in the future to some of the remaining 56 facilities that do not yet have such a partner.

Operations in the United Kingdom

We operate three hospitals and an oncology center in greater London. We acquired Parkside Hospital and Holly House Hospital in 2000 and Highgate Hospital in 2003. Parkside Hospital, located in Wimbledon, a suburb southwest of London, has 72 registered acute care beds, including four high dependency beds and four operating theatres, one of which is a dedicated endoscopy suite and an outpatient surgery unit. Parkside also has its own on-site pathology laboratory which provides services to the on-site cancer treatment center. The imaging department, which has been extensively upgraded in the past four years, has two MRI scanners, a CT scanner, and two X-ray screening rooms, plus mammography, dental and ultrasound services available. Over 500 surgeons, anesthesiologists, and physicians have admitting privileges to the hospital. Parkside’s key specialties include orthopedics, oncology, gynecology, neurosurgery, ear-nose-throat, endoscopy and general surgery. The development of a 22,000 square feet outpatient facility is due to be

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completed by August 2010, facilitating the addition of 15 inpatient rooms and six additional clinical offices for medical staff members by mid-2011.

Parkside Oncology Clinic opened in August 2003 and has state of the art equipment designed to provide a wide range of cancer treatments. The pre-treatment and planning suite houses a dedicated CT scanner, which, along with the linear accelerators and virtual simulation software, is linked to the department’s planning system. The clinic provides inverse planned intensity-modulated radiation therapy (IMRT). The clinic has its own pharmacy aseptic suite which provides chemotherapy to the day case unit at the hospital. The clinic also has a nuclear medicine unit.

Holly House Hospital, located in a suburb northeast of London near Essex, has 55 registered acute care beds, including the ability to provide high dependency care. The hospital has three operating theatres and its own on-site pathology laboratory and pharmacy. A diagnostic suite houses MRI and CT scanners, X-ray screening rooms, mammography, ultrasound, and other imaging services. Approximately 300 surgeons, anesthesiologists, and physicians have admitting privileges at the hospital, and there are well-established orthopedic, cosmetic, in vitro fertilization, and general surgery practices.

Highgate Hospital is a 32 bed acute care hospital located in the affluent Highgate area of London. The hospital has an established cosmetic surgery business and additional practices including endoscopy and general surgery. Approximately 200 surgeons, anesthesiologists, and physicians have admitting privileges at the hospital.

Case Mix

The following table sets forth the percentage of the internally reported case volume of our U.S. facilities and internally reported revenue from our U.K. facilities for the year ended December 31, 2009 from each of the following specialties:

Specialty	U.S.			U.K.
Orthopedic		21	%		25	%
Pain management		19			2
Gynecology		3			6	(1)
General surgery		5			14
Ear, nose and throat		8			3
Gastrointestinal		18			2
Cosmetic surgery		3			16
Ophthalmology		11			2
Other		12			30
Total		100	%		100	%

(1) Also includes in vitro fertilization.

Payor Mix

The following table sets forth the percentage of the internally reported case volume of our U.S. surgical facilities and internally reported revenue from our U.K. facilities for the year ended December 31, 2009 from each of the following payors:

Payor	U.S.			U.K.
Private insurance		67	%		64	%
Self-pay		2			26
Government		28	(1)		5
Other		3			5
Total		100	%		100	%

(1) Based solely on case volume. Because government payors typically pay less than private insurance, the percentage of our U.S. revenue attributable to government payors is approximately 14% for Medicare and 2% for Medicaid.

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The following table sets forth information relating to the not-for-profit healthcare systems with which we were affiliated as of December 31, 2009:

		Number of
		Facilities
	Healthcare System’s	Operated
Healthcare System	Geographical Focus	with USPI
Single Market Systems:
Baylor Health Care System	Dallas/Fort Worth, Texas		25
Centura Health	Colorado		3
Covenant Health	Eastern Tennessee		2
INTEGRIS Health	Oklahoma		2
Kennedy Health System	New Jersey		1
Legacy Health System	Portland, Oregon		2
McLaren Health Care Corporation	Michigan		5
Memorial Hermann Healthcare System	Houston, Texas		17
Meridian Health System	New Jersey		5
Mountain States Health Alliance	Northeast Tennessee		1
North Kansas City Hospital	Kansas City, Missouri		3
NorthShore University Health System	Chicago, Illinois		4
Scripps Health	San Diego, California		1
St. John Health System	Oklahoma		1
Multi-Market Systems:
Adventist Health System:	11 states(a)		2
Adventist Hinsdale Hospital	Hinsdale, Illinois
Huguley Memorial Medical Center	Fort Worth, Texas
Ascension Health:	18 states and D.C.(b)		11
Carondelet Health System (1 facility)	Blue Springs, Missouri
St. Thomas Health Services System (7 facilities)	Middle Tennessee
St. Vincent Health (1 facility)	Indiana
Seton Healthcare Network (2 facilities)	Austin, Texas
Bon Secours Health System:	Seven states(c)		5
Bon Secours Health Center at Virginia Beach	Virginia Beach, Virginia
Mary Immaculate Hospital	Newport News, Virginia
Maryview Medical Center	Suffolk, Virginia
Memorial Regional Medical Center	Richmond, Virginia
St. Mary’s Hospital	Richmond, Virginia
	California, Arizona,
Catholic Healthcare West:	Nevada		12
Mercy Hospital of Folsom (1 facility)	Sacramento, California
Mercy Medical Center (3 facilities)	Redding, California
Mercy San Juan Medical Center (1 facility)	Roseville, California
St. Joseph’s Hospital and Medical Center (2 facilities) and Arizona Orthopedic Surgical Hospital (2 facilities)	Phoenix, Arizona
St. Joseph’s Medical Center (1 facility)	Stockton, California
St. Rose Dominican Hospital (2 facilities)	Las Vegas, Nevada
CHRISTUS Health:	Eight states(d)		4
CHRISTUS Health Central Louisiana (1 facility)	Alexandria, Louisiana
CHRISTUS Santa Rosa Health Corporation (1 facility)	San Antonio, Texas
CHRISTUS Spohn Health System (2 facilities)	Corpus Christi, Texas
Providence Health System:	Five states(e)		2
Providence Holy Cross Health Center	Santa Clarita, California
Providence Holy Cross Medical Center	Mission Hills, California
SSM Healthcare:	Four states(f)
SSM St. Clare Health System	St. Louis, Missouri		1
Totals			109

11

(a)	Colorado, Florida, Georgia, Illinois, Kansas, Kentucky, North Carolina, Tennessee, Texas, West Virginia, and Wisconsin.
(b)	Alabama, Arkansas, Arizona, Connecticut, District of Columbia, Florida, Idaho, Illinois, Indiana, Kansas, Louisiana, Maryland, Michigan, Missouri, New York, Tennessee, Texas, Washington, and Wisconsin.
(c)	Florida, Kentucky, Maryland, New York, Pennsylvania, South Carolina, and Virginia
(d)	Arkansas, Georgia, Louisiana, Oklahoma, Missouri, New Mexico, Texas, and Utah.
(e)	Alaska, California, Montana, Oregon, and Washington.
(f)	Illinois, Missouri, Oklahoma and Wisconsin.

Facilities

The following table sets forth information relating to the facilities that we operated as of December 31, 2009:

		Date of			Number
		Acquisition			of		Percentage
		or			Operating		Owned by
Facility		Affiliation			Rooms		USPI
United States
Atlanta
	East West Surgery Center, Austell, Georgia		9/1/00	(2)		3		70	%
	Lawrenceville Surgery Center, Lawrenceville, Georgia		8/1/01			2		15
	Northwest Georgia Surgery Center, Marietta, Georgia		11/1/00	(2)		3		15
	Orthopaedic South Surgical Center, Morrow, Georgia		11/28/03			2		15
	Resurgens Surgical Center, Atlanta, Georgia		10/1/98	(2)		4		48
	Roswell Surgery Center, Roswell, Georgia		10/1/00	(2)		3		15
Austin
*	Cedar Park Surgery Center, Cedar Park, Texas		11/22/05			2		26
*	Northwest Surgery Center, Austin, Texas(1)		5/30/07			6		29
	Texan Surgery Center, Austin, Texas		6/1/03			3		55
Chicago
*	Hinsdale Surgical Center, Hinsdale, Illinois		5/1/06			4		22
*	Same Day Surgery 25 East, Chicago, Illinois		10/15/04			4		45
*	Same Day Surgery Elmwood Park, Elmwood Park, Illinois		10/15/04			3		33
*	Same Day Surgery North Shore, Evanston, Illinois		10/15/04			2		35
*	Same Day Surgery River North, Chicago, Illinois		10/15/04			4		35
Corpus Christi
*	Corpus Christi Outpatient Surgery Center, Corpus Christi, Texas(1)		5/1/02			5		30
*	Shoreline Surgery Center, Corpus Christi, Texas		7/1/06			4		26
Dallas/Fort Worth
*	Baylor Medical Center at Frisco, Frisco, Texas(3)		9/30/02			11		25
*	Baylor Surgicare at Bedford, Bedford, Texas(1)		12/18/98			5		32
*	Baylor Surgicare, Dallas, Texas(1)		6/1/99			6		34
*	Baylor Surgicare at Denton, Denton, Texas(1)		2/1/99			4		25
*	Baylor Surgicare at Garland, Garland, Texas		2/1/99			4		30
*	Baylor Surgicare at Granbury, Granbury, Texas		2/1/09			4		26
*	Baylor Surgicare at Grapevine, Grapevine, Texas		2/16/02			4		28
*	Baylor Surgicare at Lewisville, Lewisville, Texas(1)		9/16/02			6		37
*	Baylor Surgicare at Plano, Plano, Texas		10/1/07			1		27

12

		Date of			Number
		Acquisition			of		Percentage
		or			Operating		Owned by
Facility		Affiliation			Rooms		USPI
*	Baylor Surgicare at North Garland, Garland, Texas		5/1/05			6		26
*	Baylor Surgicare at Trophy Club, Trophy Club, Texas(3)		5/3/04			6		34
*	Bellaire Surgery Center, Fort Worth, Texas		10/15/02			4		25
*	Doctor’s Surgery Center at Huguley, Burleson, Texas		2/14/06			3		26
*	Heath Surgicare, Rockwall, Texas(1)		11/1/04			3		25
*	Irving-Coppell Surgical Hospital, Irving, Texas(3)		10/20/03			5		9
*	Mary Shiels Hospital, Dallas, Texas(3)		4/1/03			5		17
*	Medical Centre Surgical Hospital, Fort Worth, Texas(3)		12/18/98			8		33
*	North Central Surgical Center, Dallas, Texas(3)		12/12/05			10		18
*	North Texas Surgery Center, Dallas, Texas(1)		12/18/98			4		35
	Park Cities Surgery Center, Dallas, Texas(1)		6/9/03			4		55
*	Physicians Day Surgery Center, Dallas, Texas		10/12/00			4		34
*	Physicians Surgical Center of Fort Worth, Fort Worth, Texas		7/13/04			4		25
*	Physicians Surgical Center of Fort Worth — Campus II, Fort Worth, Texas		5/1/07			2		25
*	Rockwall Surgery Center, Rockwall, Texas		09/1/06			3		37
*	Surgery Center of Arlington, Arlington, Texas(1)		2/1/99			6		26
*	Texas Surgery Center, Dallas, Texas(1)		6/1/99			4		34
*	Valley View Surgery Center, Dallas, Texas		12/18/98			4		32
Denver
*	Crown Point Surgical Center, Parker, Colorado		10/1/08			4		40
*	Harvard Park Surgery Center, Denver Colorado		1/1/09			3		25
*	Summit View Surgery Center, Littleton, Colorado		1/1/09			3		25
Houston
*	Doctors Outpatient Surgicenter, Pasadena, Texas(1)		9/1/99			5		43
*	Kingsland Surgery Center, Katy, Texas		12/31/08			4		28
*	KSF Orthopaedic Surgery Center, Houston, Texas(1)		5/1/07			3		44
*	Memorial Hermann Specialty Hospital Kingwood, Kingwood, Texas(3)		9/1/07			6		25
*	Memorial Hermann Surgery Center — Katy, Katy, Texas(1)		1/19/07			4		10
*	Memorial Hermann Surgery Center — Northwest, Houston, Texas(1)		9/1/04			5		10
*	Memorial Hermann Surgery Center — Red Oak, Houston, Texas(1)		4/19/06	(5)		5		28
*	Memorial Hermann Surgery Center — Richmond, Richmond, Texas		12/31/09			2		25
*	Memorial Hermann Surgery Center — Southwest, Houston, Texas(1)		9/21/06			6		9
*	Memorial Hermann Surgery Center — Sugar Land, Sugar Land, Texas(1)		9/21/06			4		9
*	Memorial Hermann Surgery Center — Texas Medical Center, Houston, Texas(1)		1/17/07			5		10
*	Memorial Hermann Surgery Center — The Woodlands, The Woodlands, Texas		8/9/05			4		11
*	North Houston Endoscopy and Surgery, Houston, Texas		10/1/08			2		26
*	Sugar Land Surgical Hospital, Sugar Land, Texas(3)		12/28/02			4		13

13

		Date of			Number
		Acquisition			of		Percentage
		or			Operating		Owned by
Facility		Affiliation			Rooms		USPI
*	TOPS Surgical Specialty Hospital, Houston, Texas(3)		7/1/99			7		44
*	United Surgery Center — Southeast, Houston, Texas(1)		9/1/99			3		34
	West Houston Ambulatory Surgical Associates, Houston, Texas		4/19/06	(5)		5		51
Kansas City
*	Briarcliff Surgery Center, Kansas City, Missouri		6/1/05			2		27
*	Creekwood Surgery Center, Kansas City, Missouri(1)		7/29/98			4		36
*	Liberty Surgery Center, Liberty, Missouri		6/1/05			2		28
*	Saint Mary’s Surgical Center, Blue Springs, Missouri		5/1/05			4		19
Knoxville
*	Parkwest Surgery Center, Knoxville, Tennessee		7/26/01			5		22
*	Physician’s Surgery Center of Knoxville, Knoxville, Tennessee		1/1/08			6		26
Las Vegas
*	Durango Outpatient Surgery Center, Las Vegas, Nevada		12/9/08			4		37
*	Parkway Surgery Center, Henderson, Nevada		8/3/98			5		30
Los Angeles
	Coast Surgery Center of South Bay, Torrance, California(1)		12/18/01			3		24
	Pacific Endo-Surgical Center, Torrance, California		8/1/03			1		57
*	San Fernando Valley Surgery Center, Mission Hills, California		11/1/04			4		26
	San Gabriel Valley Surgical Center, West Covina, California		11/16/01			3		48
*	Santa Clarita Ambulatory Surgery Center, Santa Clarita, California(1)		3/7/06			3		26
	The Center for Ambulatory Surgical Treatment, Los Angeles, California(1)		11/14/02			4		39
Michigan
*	Clarkston Surgery Center, Clarkston, Michigan		6/1/09			4		36
*	Genesis Surgery Center, Lansing, Michigan		11/1/06			4		23
*	Lansing Surgery Center, Lansing, Michigan		11/1/06			4		23
*	McLaren ASC of Flint, Flint, Michigan		8/2/07			4		43
*	Utica Surgery and Endoscopy Center, Utica, Michigan		4/1/07			3		33
Nashville
*	Baptist Ambulatory Surgery Center, Nashville, Tennessee		3/1/98	(2)		6		25
*	Baptist Plaza Surgicare, Nashville, Tennessee		12/3/03			9		21
*	Center for Spinal Surgery, Nashville, Tennessee(3)		12/31/08			6		20
*	Middle Tennessee Ambulatory Surgery Center, Murfreesboro, Tennessee		7/29/98			4		35
*	Northridge Surgery Center, Nashville, Tennessee		4/19/06	(5)		5		31
*	Physicians Pavilion Surgery Center, Smyrna, Tennessee		7/29/98			4		47
*	Saint Thomas Surgicare, Nashville, Tennessee		7/15/02			5		21
New Jersey
*	Central Jersey Surgery Center, Eatontown, New Jersey		11/1/04			3		35
*	Northern Monmouth Regional Surgery Center, Manalapan, New Jersey		7/10/06			4		35
*	Select Surgical Center at Kennedy, Sewell, New Jersey		10/29/09			3		30

14

		Date of			Number
		Acquisition			of		Percentage
		or			Operating		Owned by
Facility		Affiliation			Rooms		USPI
*	Shore Outpatient Surgicenter, Lakewood, New Jersey		11/1/04			3		42
*	Shrewsbury Surgery Center, Shrewsbury, New Jersey		4/1/99			4		14
	Suburban Endoscopy Services, Verona, New Jersey		4/19/06	(5)		2		51
*	Toms River Surgery Center, Toms River, New Jersey		3/15/02			4		20
Oklahoma City
*	Oklahoma Center for Orthopedic MultiSpecialty Surgery, Oklahoma City, Oklahoma(3)		8/2/04			4		20
*	Southwest Orthopaedic Ambulatory Surgery Center, Oklahoma City, Oklahoma		8/2/04			2		20
Orlando
	Sand Lake Surgery Center, Orlando, Florida		2/18/08			3		35
	University Surgical Center, Winter Park, Florida		10/15/98			3		38
Phoenix
*	Arizona Orthopedic Surgical Hospital, Chandler, Arizona(3)		5/19/04			6		36
*	Desert Ridge Outpatient Surgery Center, Phoenix, Arizona		3/30/07			4		34
	Metro Surgery Center, Phoenix, Arizona		4/19/06	(5)		4		83
	Physicians Surgery Center of Tempe, Tempe, Arizona		4/19/06	(5)		2		10
*	St. Joseph’s Outpatient Surgery Center, Phoenix, Arizona(1)		9/2/03			8		30
	Surgery Center of Peoria, Peoria, Arizona		4/19/06	(5)		3		55
	Surgery Center of Scottsdale, Scottsdale, Arizona		4/19/06	(5)		4		54
	Surgery Center of Gilbert, Gilbert, Arizona		4/19/06	(5)		3		22
*	Warner Outpatient Surgery Center, Chandler, Arizona		7/1/99			4		35
Portland
*	East Portland Surgical Center, Portland, Oregon		12/31/09			4		29
*	Northwest Surgery Center, Portland, Oregon		12/1/08			3		27
Redding
*	Court Street Surgery Center, Redding, California		4/19/06	(5)		2		31
*	Mercy Surgery Center, Redding, California		3/1/08			4		31
*	Redding Surgery Center, Redding, California		4/19/06	(5)		2		31
Sacramento
*	Folsom Outpatient Surgery Center, Folsom, California		6/1/05			2		32
*	Roseville Surgery Center, Roseville, California		7/1/06			2		30
San Antonio
*	Alamo Heights Surgery Center, San Antonio, Texas(1)		12/1/04			3		59
	San Antonio Endoscopy Center, San Antonio, Texas		5/1/05			1		54
St. Louis
	Advanced Surgical Care, Creve Coeur, Missouri(1)		1/1/06			2		60
	Chesterfield Surgery Center, Chesterfield, Missouri(1)		1/1/06			2		65
	Frontenac Surgery and Spine Care Center, Frontenac, Missouri(1)		5/1/07			2		40
	Manchester Surgery Center, St. Louis, Missouri		2/1/07			3		60
	Mason Ridge Surgery Center, St. Louis, Missouri(1)		2/1/07			2		57
	Mid Rivers Surgery Center, Saint Peters, Missouri		1/1/06			2		66
	Old Tesson Surgery Center, St. Louis, Missouri		8/1/08			3		61

15

		Date of			Number
		Acquisition			of		Percentage
		or			Operating		Owned by
Facility		Affiliation			Rooms		USPI
	Olive Surgery Center, St. Louis, Missouri		1/1/06			2		62
	Riverside Ambulatory Surgery Center, Florissant, Missouri		8/1/06			2		74
	South County Outpatient Endoscopy Services, St. Louis, Missouri		10/1/08			2		25
*	SSM St. Clare Surgical Center, Fenton, Missouri		10/23/09			3		21
	Sunset Hills Surgery Center, St. Louis, Missouri		1/1/06			2		66
	The Ambulatory Surgical Center of St. Louis, Bridgeton, Missouri		8/1/06			2		66
	Twin Cities Ambulatory Surgery Center, St. Louis, Missouri		9/1/08			2		62
	Webster Surgery Center, Webster Groves, Missouri(1)		3/1/07			2		29
Virginia
*	Bon Secours Surgery Center at Harbour View, Suffolk, Virginia		11/12/07			6		21
*	Bon Secours Surgery Center at Virginia Beach, Virginia Beach, Virginia		5/30/07			2		29
*	Mary Immaculate Ambulatory Surgical Center, Newport News, Virginia		7/19/04			3		17
*	Memorial Ambulatory Surgery Center, Mechanicsville, Virginia		12/30/05			5		17
*	St. Mary’s Ambulatory Surgery Center, Richmond, Virginia		11/29/06			4		20
	Surgi-Center of Central Virginia, Fredericksburg, Virginia		11/29/01			4		80
Additional Markets
	Austintown Ambulatory Surgery Center, Austintown, Ohio		4/12/02			5		65
*	Beaumont Surgical Affiliates, Beaumont, Texas(1)		4/19/06	(5)		6		25
	Chico Surgery Center, Chico, California		4/19/06	(5)		3		80
*	CHRISTUS Cabrini Surgery Center, Alexandria, Louisiana		6/22/07			4		25
	Day-Op Center of Long Island, Mineola, New York(4)		12/4/98			4		99
	Destin Surgery Center, Destin, Florida		9/25/02			2		30
	Great Plains Surgery Center, Lawton, Oklahoma		4/19/06	(5)		2		49
	Idaho Surgery Center, Caldwell, Idaho		4/19/06	(5)		3		20
	Mayfield Clinic Spine Surgery Center, Cincinnati, Ohio		12/31/09			3		51
*	Mountain Empire Surgery Center, Johnson City, Tennessee		2/20/00	(2)		4		18
	New Horizons Surgery Center, Marion, Ohio		4/19/06	(5)		2		11
	New Mexico Orthopaedic Surgery Center, Albuquerque, New Mexico		2/29/00	(2)		6		51
	Northeast Ohio Surgery Center, Cleveland, Ohio		4/19/06	(5)		3		49
	Reading Surgery Center, Spring Township, Pennsylvania		7/1/04			3		57
	Redmond Surgery Center, Redmond, Oregon		4/19/06	(5)		2		68
*	Scripps Encinitas Surgery Center, Encinitas, California		2/6/08			3		19
*	St. Joseph’s Surgery Center, Stockton, California		2/1/09			6		5
	Surgery Center of Canfield, Canfield, Ohio(1)		4/19/06	(5)		3		28
	Surgery Center of Columbia, Columbia, Missouri(1)		8/1/06			2		61
	Surgery Center of Fort Lauderdale, Fort Lauderdale, Florida		11/1/04			4		67
	Templeton Surgery Center, Templeton, California		1/20/07			2		65
*	Terre Haute Surgical Center, Terre Haute, Indiana		12/19/07			2		24
	Teton Outpatient Services, Jackson, Wyoming(1)		8/1/98	(2)		2		49
	Tri-City Orthopaedic Center, Richland, Washington(4)		4/19/06	(5)		2		17

16

		Date of			Number
		Acquisition			of		Percentage
		or			Operating		Owned by
Facility		Affiliation			Rooms		USPI
*	Memorial Surgery Center, Tulsa, Oklahoma		10/1/09			4		25
	Victoria Ambulatory Surgery Center, Victoria, Texas		4/19/06	(5)		2		59
United Kingdom
	Parkside Hospital, Wimbledon		4/6/00			4		100
	Parkside Oncology Clinic, Wimbledon		8/1/03			—		100
	Holly House Hospital, Essex		4/6/00			3		100
	Highgate Private Clinic, Highgate		4/29/03			3		100

*	Facilities jointly owned with not-for-profit hospital systems.
(1)	Certain of our surgery centers are licensed and equipped to accommodate 23-hour stays.
(2)	Indicates date of acquisition by OrthoLink Physician Corporation. We acquired OrthoLink in February 2001.
(3)	Surgical hospitals, all of which are licensed and equipped for overnight stays.
(4)	Operated through a consulting and administrative agreement.
(5)	Indicates the date of our acquisition of Surgis.

We lease the majority of the facilities where our various surgery centers and surgical hospitals conduct their operations. Our leases have initial terms ranging from one to twenty years and most of the leases contain options to extend the lease period, in some cases for up to ten additional years.

Our corporate headquarters is located in a suburb of Dallas, Texas. We currently lease approximately 70,000 square feet of space at 15305 Dallas Parkway, Addison, Texas. The lease expires in April 2011.

Our administrative office in the United Kingdom is located in London. We currently lease 2,300 square feet. The lease expires in October 2013.

We also lease approximately 40,000 square feet of total additional space in Brentwood, Tennessee; Chicago, Illinois; Houston, Texas; St. Louis, Missouri; Denver, Colorado; and Pasadena, California for regional offices. These leases expire between November 2012 and March 2021.

Acquisitions and Development

The following table sets forth information relating to facilities that are currently under construction:

			Expected		Number of
	Hospital		Opening		Operating
Facility Location	Partner	Type	Date		Rooms
Arlington, Texas(1)	Baylor	Hospital		Q110		6
Austin, Texas	Seton	Surgery Center		Q310		5
Dallas, Texas	Baylor	Hospital		Q111		6
Phoenix, Arizona	CHW	Hospital		Q211		6

(1) This facility opened in February 2010.

The hospital under construction in Dallas, Texas is a replacement facility for an existing facility. We also have four additional projects under development, all of which involve a hospital partner. It is possible that some of these projects, as well as other projects which are in various stages of negotiation with both current and prospective joint venture partners, will result in our operating additional facilities sometime in 2010. While our history suggests that many of these projects will culminate with the opening of a profitable surgical facility, we can provide no assurance that any of these projects will reach that stage or will be successful thereafter.

17

Marketing

Our sales and marketing efforts are directed primarily at physicians, who are principally responsible for referring patients to our facilities. We market our facilities to physicians by emphasizing (1) the high level of patient and physician satisfaction with our facilities, which is based on surveys we take concerning our facilities, (2) the quality and responsiveness of our services, (3) the practice efficiencies provided by our facilities, and (4) the benefits of our affiliation with our hospital partners, if applicable. We also directly negotiate, together in some instances with our hospital partners, agreements with third-party payors, which generally focus on the pricing, number of facilities in the market and affiliation with physician groups in a particular market. Maintaining access to physicians and patients through third-party payor contracting is essential for the economic viability of most of our facilities.

Competition

In all of our markets, our facilities compete with other providers, including major acute care hospitals and other surgery centers. Hospitals have various competitive advantages over us, including their established managed care contracts, community position, physician loyalty and geographical convenience for physicians’ inpatient and outpatient practices. However, we believe that, in comparison to hospitals with which we compete, our surgery centers and surgical hospitals compete favorably on the basis of cost, quality, efficiency and responsiveness to physician needs in a more comfortable environment for the patient.

We compete with other providers in each of our markets for patients, physicians and for contracts with insurers or managed care payors. Competition for managed care contracts with other providers is focused on the pricing, number of facilities in the market and affiliation with key physician groups in a particular market. We believe that our relationships with our hospital partners enhance our ability to compete for managed care contracts. We also encounter competition with other companies for acquisition and development of facilities and in the United States for strategic relationships with not-for-profit healthcare systems and physicians.

There are several companies, both public and private, that acquire and develop freestanding multi-specialty surgery centers and surgical hospitals. Some of these competitors have greater resources than we do. The principal competitive factors that affect our ability and the ability of our competitors to acquire surgery centers and surgical hospitals are price, experience, reputation and access to capital. Further, in the United States many physician groups develop surgery centers without a corporate partner, and this presents a competitive threat to the Company.

In the United Kingdom, we face competition from both the National Health Service and other privately operated hospitals. Across the United Kingdom, a large number of private hospitals are owned by the four largest hospital operators. In addition, the two largest payors account for over half of the privately insured market. We believe our hospitals can effectively compete in this market due to location and specialty mix of our facilities. Our hospitals also have a higher portion of self pay business than the overall market. Self pay business is not influenced by the private insurers.

Employees

As of December 31, 2009, we employed approximately 6,800 people, 6,000 of whom are full-time employees and 800 of whom are part-time employees. Of these employees, we employ approximately 5,800 in the United States and 1,000 in the United Kingdom. The physicians that affiliate with us and use our facilities are not our employees. However, we generally offer the physicians the opportunity to purchase equity interests in the facilities they use.

Professional and General Liability Insurance

In the United States, we maintain professional and general liability insurance through a wholly-owned captive insurance company. We make premium payments to the captive insurance company and accrue for claims costs based on actuarially predicted ultimate losses and the captive insurance company then pays administrative fees and the insurance claims. We also maintain business interruption, property damage and umbrella insurance with third party providers. The governing documents of each of our surgical facilities require physicians who conduct surgical

18

procedures at those facilities to maintain stated amounts of insurance. In the United Kingdom, we maintain general public insurance, malpractice insurance and property and business interruption insurance. Our insurance policies are generally subject to annual renewals. We believe that we will be able to renew current policies or otherwise obtain comparable insurance coverage at reasonable rates. However, we have no control over the insurance markets and can provide no assurance that we will economically be able to maintain insurance similar to our current policies.

Government Regulation

United States

General

The healthcare industry is subject to extensive regulation by federal, state and local governments. Government regulation affects our business by controlling growth, requiring licensing or certification of facilities, regulating how facilities are used and controlling payment for services provided. Further, the regulatory environment in which we operate may change significantly in the future. While we believe we have structured our agreements and operations in material compliance with applicable law, there can be no assurance that we will be able to successfully address changes in the regulatory environment.

Every state imposes licensing and other requirements on healthcare facilities. In addition, many states require regulatory approval, including certificates of need, before establishing or expanding various types of healthcare facilities, including ambulatory surgery centers and surgical hospitals, offering services or making capital expenditures in excess of statutory thresholds for healthcare equipment, facilities or programs. In addition, the federal Medicare program imposes additional conditions for coverage and payment rules for services furnished to Medicare beneficiaries. We may become subject to additional regulations as we expand our existing operations and enter new markets.

In addition to extensive existing government healthcare regulation, there have been numerous initiatives on the federal and state levels for comprehensive reforms affecting the payment for and availability of healthcare services. We believe that these healthcare reform initiatives will continue during the foreseeable future. If adopted, some aspects of proposed reforms, such as further reductions in Medicare or Medicaid payments, or additional prohibitions on physicians’ financial relationships with facilities to which they refer patients, could adversely affect us.

We believe that our business operations materially comply with applicable law. However, we have not received a legal opinion from counsel or from any federal or state judicial or regulatory authority to this effect, and many aspects of our business operations have not been the subject of state or federal regulatory scrutiny or interpretation. Some of the laws applicable to us are subject to limited or evolving interpretations; therefore, a review of our operations by a court or law enforcement or regulatory authority might result in a determination that could have a material adverse effect on us. Furthermore, the laws applicable to us may be amended or interpreted in a manner that could have a material adverse effect on us. Our ability to conduct our business and to operate profitably will depend in part upon obtaining and maintaining all necessary licenses, certificates of need and other approvals, and complying with applicable healthcare laws and regulations.

Licensure and certificate-of-need regulations

Capital expenditures for the construction of new facilities, the addition of capacity or the acquisition of existing facilities may be reviewable by state regulators under statutory schemes that are sometimes referred to as certificate of need laws. States with certificate of need laws place limits on the construction and acquisition of healthcare facilities and the expansion of existing facilities and services. In these states, approvals are required for capital expenditures exceeding certain specified amounts and that involve certain facilities or services, including ambulatory surgery centers and surgical hospitals.

State certificate of need laws generally provide that, prior to the addition of new beds, the construction of new facilities or the introduction of new services, a designated state health planning agency must determine that a need exists for those beds, facilities or services. The certificate of need process is intended to promote comprehensive

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healthcare planning, assist in providing high quality healthcare at the lowest possible cost and avoid unnecessary duplication by ensuring that only those healthcare facilities that are needed will be built.

Typically, the provider of services submits an application to the appropriate agency with information concerning the area and population to be served, the anticipated demand for the facility or service to be provided, the amount of capital expenditure, the estimated annual operating costs, the relationship of the proposed facility or service to the overall state health plan and the cost per patient day for the type of care contemplated. The issuance of a certificate of need is based upon a finding of need by the agency in accordance with criteria set forth in certificate of need laws and state and regional health facilities plans. If the proposed facility or service is found to be necessary and the applicant to be the appropriate provider, the agency will issue a certificate of need containing a maximum amount of expenditure and a specific time period for the holder of the certificate of need to implement the approved project.

Our healthcare facilities are also subject to state and local licensing regulations ranging from the adequacy of medical care to compliance with building codes and environmental protection laws. To assure continued compliance with these regulations, governmental and other authorities periodically inspect our facilities. The failure to comply with these regulations could result in the suspension or revocation of a healthcare facility’s license.

Our U.S. healthcare facilities receive accreditation from the Joint Commission on Accreditation of Healthcare Organizations or the Accreditation Association for Ambulatory Health Care, Inc., nationwide commissions which establish standards relating to the physical plant, administration, quality of patient care and operation of medical staffs of various types of healthcare facilities. Generally, our healthcare facilities must be in operation for at least six months before they are eligible for accreditation. As of December 31, 2009, all of our eligible healthcare facilities had been accredited by either the Joint Commission on Accreditation of Healthcare Organizations or the Accreditation Association for Ambulatory Health Care, Inc. or are in the process of applying for such accreditation. Many managed care companies and third-party payors require our facilities to be accredited in order to be considered a participating provider under their health plans.

Medicare and Medicaid Participation in Short Stay Surgical Facilities

Medicare is a federally funded and administered health insurance program, primarily for individuals entitled to social security benefits who are 65 or older or who are disabled. Medicaid is a health insurance program jointly funded by state and federal governments that provides medical assistance to qualifying low income persons. Each state Medicaid program has the option to determine coverage for ambulatory surgery center services and to determine payment rates for those services. All of the states in which we currently operate cover Medicaid short stay surgical facility services; however, these states may not continue to cover short stay surgical facility services and states into which we expand our operations may not cover or continue to cover short stay surgical facility services.

Medicare payments for procedures performed at short stay surgical facilities are not based on costs or reasonable charges. Instead, Medicare prospectively determines fixed payment amounts for procedures performed at short stay surgical facilities. These amounts are adjusted for regional wage variations. The various state Medicaid programs also pay us a fixed payment for our services, which amount varies from state to state. A portion of our revenues are attributable to payments received from the Medicare and Medicaid programs. For the year ended December 31, 2009 and 2008, and the combined year ended December 31, 2007, 28%, 26%, and 27%, respectively, of our domestic case volumes were attributable to Medicare and Medicaid payments, although the percentage of our overall revenues these cases represent is significantly less because government payors typically pay less than private insurers. For example, approximately 14% and 2% of our 2009 domestic patient service revenues were contributed by Medicare and Medicaid, respectively, despite those cases representing a total of 28% of our domestic case volume during 2009.

In order to participate in the Medicare program, our short stay surgical facilities must satisfy a set of regulations known as “conditions of participation.” Each facility can meet this requirement through accreditation with the Joint Commission on Accreditation of Healthcare Organizations or other CMS-approved accreditation organizations, or through direct surveys at the direction of CMS. All of our short stay surgical facilities in the United States are certified or, with respect to newly acquired or developed facilities, are awaiting certification to participate in the Medicare program. We have established ongoing quality assurance activities to monitor and ensure our

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facilities’ compliance with these conditions of participation. Any failure by a facility to maintain compliance with these conditions of participation as determined by a survey could result in the loss of the facility’s provider agreement with CMS, which would prohibit reimbursement for services rendered to Medicare or Medicaid beneficiaries until such time as the facility is found to be back in compliance with the conditions of participation. This could have a material adverse affect on the individual facility’s billing and collections.

The Department of Health and Human Services and the states in which we perform surgical procedures for Medicaid patients may revise the Medicare and Medicaid payments methods or rates in the future. Any such changes could have a negative impact on the reimbursements we receive for our surgical services from the Medicare program and the state Medicaid programs. We do not know at this time if any such changes will be made, when any changes will occur, and to what extent revisions to such payment methodologies will be implemented.

As with most government programs, the Medicare and Medicaid programs are subject to statutory and regulatory changes, possible retroactive and prospective rate adjustments, administrative rulings, freezes and funding reductions, all of which may adversely affect the level of payments to our short stay surgical facilities. In late 2005, Congress enacted legislation that limited reimbursement for certain ambulatory surgery center procedures, to the lower of the rate for ambulatory surgery centers or the rate for hospital outpatient departments. CMS implemented this legislative change effective January 1, 2007, resulting in decreased payment for approximately 280 procedures, primarily ophthalmology, dermatology and urology procedures. As part of a Congressional mandate to revise the Medicare payment system for procedures performed in ambulatory surgery centers, CMS, in November 2007, issued a revised payment methodology for services performed in ambulatory surgery centers. The revised system was implemented on January 1, 2008 and is phased in over a four-year period. The revised system expanded the number of procedures that are covered in ambulatory surgery centers and, among other things, set the payment rate at approximately 65% of the payment for procedures that are performed in a hospital outpatient department. Reductions or changes in Medicare or Medicaid funding could significantly affect our results of operations. We cannot predict at this time whether additional healthcare reform initiatives will be implemented or whether there will be other changes in the administration of government healthcare programs or the interpretation of government policies that would adversely affect our business.

Federal Anti-Kickback Law

State and federal laws regulate relationships among providers of healthcare services, including employment or service contracts and investment relationships. These restrictions include a federal criminal law, referred to herein as the anti-kickback statute, that prohibits offering, paying, soliciting or receiving any form of remuneration in return for:

•  referring patients for services or items payable under a federal healthcare program, including Medicare or Medicaid, or

•  purchasing, leasing or ordering, or arranging for or recommending purchasing, leasing or ordering, any good, facility, service or item for which payment may be made in whole or in part by a federal healthcare program.

A violation of the anti-kickback statute constitutes a felony. Potential sanctions include imprisonment of up to five years, criminal fines of up to $25,000, civil money penalties of up to $50,000 per act plus three times the remuneration offered or three times the amount claimed and exclusion from all federally funded healthcare programs. The applicability of these provisions to some forms of business transactions in the healthcare industry has not yet been subject to judicial or regulatory interpretation. Moreover, several federal courts have held that the anti-kickback statute can be violated if only one purpose (not necessarily the primary purpose) of the transaction is to induce or reward a referral of business, notwithstanding other legitimate purposes.

Pursuant to the anti-kickback statute, and in an effort to reduce potential fraud and abuse relating to federal healthcare programs, the federal government has announced a policy of a high level of scrutiny of joint ventures and other transactions among healthcare providers. The Office of the Inspector General of the Department of Health and Human Services closely scrutinizes healthcare joint ventures involving physicians and other referral sources. The Office of the Inspector General published a fraud alert that outlined questionable features of “suspect” joint ventures

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in 1989 and a Special Advisory Bulletin related to contractual joint ventures in 2003, and the Office of the Inspector General has continued to rely on fraud alerts in later pronouncements.

The anti-kickback statute contains provisions that insulate certain transactions from liability. In addition, pursuant to the provisions of the anti-kickback statute, the Health and Human Services Office of the Inspector General has also published regulations that exempt additional practices from enforcement under the anti-kickback statute. These statutory exceptions and regulations, known as “safe harbors,” if fully complied with, assure participants in particular types of arrangements that the Office of the Inspector General will not treat their participation in that arrangement as a violation of the anti-kickback statute. The statutory exceptions and safe harbor regulations do not expand the scope of activities that the anti-kickback statute prohibits, nor do they provide that failure to satisfy the terms of a safe harbor constitutes a violation of the anti-kickback statute. The Office of the Inspector General has, however, indicated that failure to satisfy the terms of an exception or a safe harbor may subject an arrangement to increased scrutiny. Therefore, if a transaction or relationship does not fit within an exception or safe harbor, the facts and circumstances as well as intent of the parties related to a specific transaction or relationship must be examined to determine whether or not any illegal conduct has occurred.

Our partnerships and limited liability companies that are providers of services under the Medicare and Medicaid programs, and their respective partners and members, are subject to the anti-kickback statute. A number of the relationships that we have established with physicians and other healthcare providers do not fit within any of the statutory exceptions or safe harbor regulations issued by the Office of the Inspector General. All of the 163 surgical facilities in the United States in which we hold an ownership interest are owned by partnerships or limited liability companies, which include as partners or members physicians who perform surgical or other procedures at the facilities.

On November 19, 1999, the Office of the Inspector General promulgated regulations setting forth certain safe harbors under the anti-kickback statute, including a safe harbor applicable to surgery centers. The surgery center safe harbor generally protects ownership or investment interests in a center by physicians who are in a position to refer patients directly to the center and perform procedures at the center on referred patients, if certain conditions are met. More specifically, the surgery center safe harbor protects any payment that is a return on an ownership or investment interest to an investor if certain standards are met in one of four categories of ambulatory surgery centers (1) surgeon-owned surgery centers, (2) single-specialty surgery centers, (3) multi-specialty surgery centers, and (4) hospital/physician surgery centers.

For multi-specialty ambulatory surgery centers, for example, the following standards, among several others, apply:

(1) all of the investors must either be physicians who are in a position to refer patients directly to the center and perform procedures on the referred patients, group practices composed exclusively of those physicians, or investors who are not employed by the entity or by any of its investors, are not in a position to provide items or services to the entity or any of its investors, and are not in a position to make or influence referrals directly or indirectly to the entity or any of its investors;

(2) at least one-third of each physician investor’s medical practice income from all sources for the previous fiscal year or twelve-month period must be derived from performing outpatient procedures that require an ambulatory surgery center or specialty hospital setting in accordance with Medicare reimbursement rules; and

(3) at least one third of the Medicare-eligible outpatient surgery procedures performed by each physician investor for the previous fiscal year or previous twelve-month period must be performed at the ambulatory surgery center in which the investment is made.

Similar standards apply to each of the remaining three categories of ambulatory surgery centers set forth in the regulations. In particular, each of the four categories includes a requirement that no ownership interests be held by a non-physician or non-hospital investor if that investor is (a) employed by the center or another investor, (b) in a position to provide items or services to the center or any of its other investors, or (c) in a position to make or influence referrals directly or indirectly to the center or any of its investors.

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Because one of our subsidiaries is an investor in each partnership or limited liability company that owns one of our ambulatory surgery centers, and since this subsidiary provides management and other services to the surgery center, our arrangements with physician investors do not fit within the specific terms of the ambulatory surgery center safe harbor or any other safe harbor.

In addition, because we do not control the medical practices of our physician investors or control where they perform surgical procedures, it is possible that the quantitative tests described above will not be met, or that other conditions of the surgery center safe harbor will not be met. Accordingly, while the surgery center safe harbor is helpful in establishing that a physician’s investment in a surgery center should be considered an extension of the physician’s practice and not as a prohibited financial relationship, we can give no assurances that these ownership interests will not be challenged under the anti-kickback statute. In an effort to monitor our compliance with the safe harbor’s extension of practice requirement, we have implemented an internal certification process, which tracks each physician’s annual extension of practice certification. While this process provides support for physician compliance with the safe harbor’s quantitative tests, we can give no assurance of such compliance. However, we believe that our arrangements involving physician ownership interests in our ambulatory surgery centers do not fall within the activities prohibited by the anti-kickback statute.

With regard to our hospitals, the Office of Inspector General has not adopted any safe harbor regulations under the anti-kickback statute for physician investments in hospitals. Each of our hospitals is held in partnership with physicians who are in a position to refer patients to the hospital. There can be no assurances that these relationships will not be found to violate the anti-kickback statute or that there will not be regulatory or legislative changes that prohibit physician ownership of hospitals.

While several federal court decisions have aggressively applied the restrictions of the anti-kickback statute, they provide little guidance regarding the application of the anti-kickback statute to our partnerships and limited liability companies. We believe that our operations do not violate the anti-kickback statute. However, a federal agency charged with enforcement of the anti-kickback statute might assert a contrary position. Further, new federal laws, or new interpretations of existing laws, might adversely affect relationships we have established with physicians or other healthcare providers or result in the imposition of penalties on us or some of our facilities. Even the assertion of a violation could have a material adverse effect upon us.

Federal Physician Self-Referral Law

Section 1877 of the Social Security Act, commonly known as the “Stark Law,” prohibits any physician from referring patients to any entity for the furnishing of certain “designated health services” otherwise payable by Medicare or Medicaid, if the physician or an immediate family member has a financial relationship such as an ownership interest or compensation arrangement with the entity that furnishes services to Medicare beneficiaries, unless an exception applies. Persons who violate the Stark Law are subject to potential civil money penalties of up to $15,000 for each bill or claim submitted in violation of the Stark Law and up to $100,000 for each “circumvention scheme” they are found to have entered into, and potential exclusion from the Medicare and Medicaid programs. In addition, the Stark Law requires the denial (or, refund, as the case may be) of any Medicare and Medicaid payments received for designated health services that result from a prohibited referral.

The list of designated health services under the Stark Law does not include ambulatory surgery services as such. However, some of the ten types of designated health services are among the types of services furnished by our ambulatory surgery centers. The Department of Health and Human Services, acting through the Centers for Medicare and Medicaid Services, has promulgated regulations implementing the Stark Law. These regulations exclude health services provided by an ambulatory surgery center from the definition of “designated health services” if the services are included in the surgery center’s composite Medicare payment rate. Therefore, the Stark Law’s self-referral prohibition generally does not apply to health services provided by an ambulatory surgery center. However, if the ambulatory surgery center is separately billing Medicare for designated health services that are not covered under the ambulatory surgery center’s composite Medicare payment rate, or if either the ambulatory surgery center or an affiliated physician is performing (and billing Medicare) for procedures that involve designated health services that Medicare has not designated as an ambulatory surgery center service, the Stark Law’s self-referral prohibition would apply and such services could implicate the Stark Law. We believe that our operations do

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not violate the Stark Law, as currently interpreted. However, it is possible that the Centers for Medicare and Medicaid Services will further address the exception relating to services provided by an ambulatory surgery center in the future. Therefore, we cannot assure you that future regulatory changes will not result in our ambulatory surgery centers becoming subject to the Stark Law’s self-referral prohibition.

Twelve of our U.S. facilities are hospitals rather than ambulatory surgery centers. The Stark Law includes an exception for physician investments in hospitals if the physician’s investment is in the entire hospital and not just a department of the hospital. We believe that the physician investments in our hospitals fall within the exception and are therefore permitted under the Stark Law. However, over the past few years there have been various legislative attempts to change the way the hospital exception applies to physician investments in hospitals and it is possible that there could be another legislative attempt to alter this exception in the future. See “Risk Factors — Future Legislation could restrict our ability to operate our domestic surgical hospitals.”

False and Other Improper Claims

The federal government is authorized to impose criminal, civil and administrative penalties on any person or entity that files a false claim for payment from the Medicare or Medicaid programs. Claims filed with private insurers can also lead to criminal and civil penalties, including, but not limited to, penalties relating to violations of federal mail and wire fraud statutes. While the criminal statutes are generally reserved for instances of fraudulent intent, the government is applying its criminal, civil and administrative penalty statutes in an ever-expanding range of circumstances. For example, the government has taken the position that a pattern of claiming reimbursement for unnecessary services violates these statutes if the claimant merely should have known the services were unnecessary, even if the government cannot demonstrate actual knowledge. The government has also taken the position that claiming payment for low-quality services is a violation of these statutes if the claimant should have known that the care was substandard.

Over the past several years, the government has accused an increasing number of healthcare providers of violating the federal False Claims Act. The False Claims Act prohibits a person from knowingly presenting, or causing to be presented, a false or fraudulent claim to the U.S. government. The statute defines “knowingly” to include not only actual knowledge of a claim’s falsity, but also reckless disregard for or intentional ignorance of the truth or falsity of a claim. Because our facilities perform hundreds of similar procedures a year for which they are paid by Medicare, and there is a relatively long statute of limitations, a billing error or cost reporting error could result in significant penalties. Additionally, anti-Kickback or Stark Law claims can be “bootstrapped” to claims under the False Claims Act on the theory that, when a provider submits a claim to a federal health care program, the claim includes an implicit certification that the provider is in compliance with the Medicare Act, which would require compliance with other laws, including the anti-kickback statute and the Stark Law. As a result of this “bootstrap” theory, the U.S. government can collect additional civil penalties under the False Claims Act for claims that have been “tainted” by the anti-kickback or Stark Law violation.

Under the “qui tam,” or whistleblower, provisions of the False Claims Act, private parties may bring actions on behalf of the federal government. Such private parties, often referred to as relators, are entitled to share in any amounts recovered by the government through trial or settlement. Both direct enforcement activity by the government and whistleblower lawsuits have increased significantly in recent years and have increased the risk that a healthcare company, like us, will have to defend a false claims action, pay fines or be excluded from the Medicare and Medicaid programs as a result of an investigation resulting from a whistleblower case. Although we believe that our operations materially comply with both federal and state laws, they may nevertheless be the subject of a whistleblower lawsuit, or may otherwise be challenged or scrutinized by governmental authorities. A determination that we have violated these laws could have a material adverse effect on us.

State Anti-Kickback and Physician Self-Referral Laws

Many states, including those in which we do or expect to do business, have laws that prohibit payment of kickbacks or other remuneration in return for the referral of patients. Some of these laws apply only to services reimbursable under state Medicaid programs. However, a number of these laws apply to all healthcare services in the state, regardless of the source of payment for the service. Based on court and administrative interpretations of

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the federal anti-kickback statute, we believe that the federal anti-kickback statute prohibits payments only if they are intended to induce referrals. However, the laws in most states regarding kickbacks have been subjected to more limited judicial and regulatory interpretation than federal law. Therefore, we can give you no assurances that our activities will be found to be in compliance with these laws. Noncompliance with these laws could subject us to penalties and sanctions and have a material adverse effect on us.

A number of states, including those in which we do or expect to do business, have enacted physician self-referral laws that are similar in purpose to the Stark Law but which impose different restrictions. Some states, for example, only prohibit referrals when the physician’s financial relationship with a healthcare provider is based upon an investment interest. Other state laws apply only to a limited number of designated health services. Some states do not prohibit referrals, but require that a patient be informed of the financial relationship before the referral is made. We believe that our operations are in material compliance with the physician self-referral laws of the states in which our facilities are located.

Health Information Security and Privacy Practices

The regulations promulgated under the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) contain, among other measures, provisions that require many organizations, including us, to employ systems and procedures designed to protect the privacy and security of each patient’s individual healthcare information. Among the standards that the Department of Health and Human Services has adopted pursuant to HIPAA are standards for the following:

•  electronic transactions and code sets;

•  unique identifiers for providers, employers, health plans and individuals;

•  security and electronic signatures;

•  privacy; and

•  enforcement.

In August 2000, the Department of Health and Human Services finalized the transaction standards, which we comply with. The transaction standards require us to use standard code sets established by the rule when transmitting health information in connection with some transactions, including health claims and health payment and remittance advices.

The Department of Health and Human Services has also published a rule establishing standards for the privacy of individually identifiable health information, which we comply with. These privacy standards apply to all health plans, all healthcare clearinghouses and many healthcare providers, including healthcare providers that transmit health information in an electronic form in connection with certain standard transactions. We are a covered entity under the final rule. The privacy standards protect individually identifiable health information held or disclosed by a covered entity in any form, whether communicated electronically, on paper or orally. These standards not only require our compliance with rules governing the use and disclosure of protected health information, but they also require us to impose those rules, by contract, on any business associate to whom such information is disclosed. A violation of the privacy standards could result in civil money penalties of $100 per incident, up to a maximum of $25,000 per person per year per standard. The final rule also provides for criminal penalties of up to $50,000 and one year in prison for knowingly and improperly obtaining or disclosing protected health information, up to $100,000 and five years in prison for obtaining protected health information under false pretenses, and up to $250,000 and ten years in prison for obtaining or disclosing protected health information with the intent to sell, transfer or use such information for commercial advantage, personal gain or malicious harm.

Finally, the Department of Health and Human Services has also issued a rule establishing, in part, standards for the security of health information by health plans, healthcare clearinghouses and healthcare providers that maintain or transmit any health information in electronic form, regardless of format. We are an affected entity under the rule. These security standards require affected entities to establish and maintain reasonable and appropriate administrative, technical and physical safeguards to ensure integrity, confidentiality and the availability of the information. The security standards were designed to protect the health information against reasonably anticipated threats or

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hazards to the security or integrity of the information and to protect the information against unauthorized use or disclosure. Although the security standards do not reference or advocate a specific technology, and affected entities have the flexibility to choose their own technical solutions, the security standards required us to implement significant systems and protocols. We also comply with these regulations.

Signed into law on February 17, 2009, the American Recovery and Reinvestment Act of 2009 (“ARRA”) broadened the scope of the HIPAA privacy and security regulations. Among other things, the ARRA extends the application of certain provisions of the security and privacy regulations to business associates (entities that handle identifiable health information on behalf of covered entities) and subjects business associates to civil and criminal penalties for violation of the regulations. Violations of the HIPPA privacy and security regulations may result in civil and criminal penalties, and the ARRA has strengthened the enforcement provisions of HIPAA, which may result in increased enforcement activity. The ARRA increased the amount of civil penalties, with penalties now ranging up to $50,000 per violation for a maximum civil penalty of $1,500,000 in a calendar year for violations of the same requirement. In addition, the ARRA authorized state attorneys general to bring civil actions seeking either injunction or damages in response to violations of HIPAA privacy and security regulations that threaten the privacy of state residents.

In addition to HIPAA, many states have enacted their own security and privacy provisions concerning a patient’s health information. These state privacy provisions will control whenever they provide more stringent privacy protections than HIPAA. Therefore, a health care facility could be required to meet both federal and state privacy provisions if it is located in a state with strict privacy protections.

European Union and United Kingdom

The European Commission’s Directive on Data Privacy has been implemented in national EU data protection laws (such as the Data Protection Act of 1998). EU data protection legislation prohibits the transfer of personal data to non-EEA countries that do not meet the European “adequacy” standard for privacy protection. The European Union privacy legislation requires, among other things, the creation of government data protection agencies, registration of processing with those agencies, and in some instances prior approval before personal data processing may begin.

The U.S. Department of Commerce, in consultation with the European Commission, developed a “safe harbor” framework to protect data transferred in trans Atlantic businesses like ours. The safe harbor provides a way for us to avoid experiencing interruptions in our business dealings in the European Union. It also provides a way to avoid prosecution by European authorities under European privacy laws. By certifying to the safe harbor, we will notify the European Union organizations that we provide “adequate” privacy protection, as defined by European privacy laws, in relation to international data transfers to the USA. To certify to the safe harbor, we must adhere to seven principles. These principles relate to notice, choice, onward transfer or transfers to third parties, access, security, data integrity and enforcement.

We intend to satisfy the requirements of the safe harbor. Even if we are able to formulate programs that attempt to meet these objectives, we may not be able to execute them successfully, which could have a material adverse effect on our revenues, profits or results of operations.

While there is no specific anti-kickback legislation in the United Kingdom that is unique to the medical profession, general criminal legislation prohibits bribery and corruption. Our hospitals in the United Kingdom do not pay commissions to or share profits with referring physicians who invoice patients or insurers directly for fees relating to the provision of their services. Hospitals in the United Kingdom are required to register with the Healthcare Commission pursuant to the Care Standards Act 2000, as amended by the Health and Social Care (Community Health and Standards) Act 2003, which provides for regular inspections of the facility by representatives of the Healthcare Commission. Beginning April 1, 2009, these registration and inspection functions will transfer to the Care Quality Commission established under the Health and Social Care Act 2008. Hospitals are also required to comply with the Private and Voluntary Health Care (England) Regulations 2001. The operation of a hospital without registration is a criminal offense. Under the Misuse of Drugs Act 1971, the supply, possession or production of controlled drugs without a license from the Secretary of State is a criminal offense. The Data Protection Act 1998 requires hospitals to register as “data controllers.” The processing of personal data, such as

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patient information and medical records, without prior registration or maintaining an inaccurate registration is a criminal offense. We believe that our operations in the United Kingdom are in material compliance with the laws referred to in this paragraph.

Item 1A.   Risk Factors

You should carefully read the risks and uncertainties described below and the other information included in this report. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations.

We depend on payments from third party payors, including government healthcare programs. If these payments are reduced, our revenue will decrease.

We are dependent upon private and governmental third party sources of payment for the services provided to patients in our surgery centers and surgical hospitals. The amount of payment a surgical facility receives for its services may be adversely affected by market and cost factors as well as other factors over which we have no control, including Medicare and Medicaid regulations and the cost containment and utilization decisions of third party payors. In the United Kingdom, a significant portion of our revenues result from referrals of patients to our hospitals by the national health system. We have no control over the number of patients that are referred to the private sector annually. Fixed fee schedules, capitation payment arrangements, exclusion from participation in or inability to reach agreement with managed care programs or other factors affecting payments for healthcare services over which we have no control could also cause a reduction in our revenues.

If we are unable to acquire and develop additional surgical facilities on favorable terms, are not successful in integrating operations of acquired surgical facilities, or are unable to manage growth, we may be unable to execute our acquisition and development strategy, which could limit our future growth.

Our strategy is to increase our revenues and earnings by continuing to acquire and develop additional surgical facilities, primarily in collaboration with our hospital partners. Our efforts to execute our acquisition and development strategy may be affected by our ability to identify suitable candidates and negotiate and close acquisition and development transactions. We are currently evaluating potential acquisitions and development projects and expect to continue to evaluate acquisitions and development projects in the foreseeable future. The surgical facilities we develop typically incur losses in their early months of operation (more so in the case of surgical hospitals) and, until their case loads grow, they generally experience lower total revenues and operating margins than established surgical facilities, and we expect this trend to continue. Historically, most of our newly developed facilities have generated positive cash flow within the first 12 months of operations. We may not be successful in acquiring surgical facilities, developing surgical facilities or achieving satisfactory operating results at acquired or newly developed facilities. Further, the companies or assets we acquire in the future may not ultimately produce returns that justify our related investment. If we are not able to execute our acquisition and development strategy, our ability to increase revenues and earnings through future growth would be impaired.

If we are not successful in integrating newly acquired surgical facilities, we may not realize the potential benefits of such acquisitions. Likewise, if we are not able to integrate acquired facilities’ operations and personnel with ours in a timely and efficient manner, then the potential benefits of the transaction may not be realized. Further, any delays or unexpected costs incurred in connection with integration could have a material adverse effect on our operations and earnings. In particular, if we experience the loss of key personnel or if the effort devoted to the integration of acquired facilities diverts significant management or other resources from other operational activities, our operations could be impaired.

We have acquired interests in or developed all of our surgical facilities since our inception. We expect to continue to expand our operations in the future. Our rapid growth has placed, and will continue to place, increased demands on our management, operational and financial information systems and other resources. Further expansion of our operations will require substantial financial resources and management attention. To accommodate our past and anticipated future growth, and to compete effectively, we will need to continue to improve our management,

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operational and financial information systems and to expand, train, manage and motivate our workforce. Our personnel, systems, procedures or controls may not be adequate to support our operations in the future. Further, focusing our financial resources and management attention on the expansion of our operations may negatively impact our financial results. Any failure to improve our management, operational and financial information systems, or to expand, train, manage or motivate our workforce, could reduce or prevent our growth.

Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our debt obligations.

We have a substantial amount of indebtedness. As of December 31, 2009, we had $1.1 billion of total indebtedness and a total indebtedness to total capitalization percentage ratio of approximately 55%.

Our and our subsidiaries’ high degree of leverage could have important consequences to you. For example, it:

•  requires us and certain of our subsidiaries to dedicate a substantial portion of cash flow from operations to payments on indebtedness, reducing the availability of cash flow to fund working capital, capital expenditures, development activity, acquisitions and other general corporate purposes;

•  increases vulnerability to adverse general economic or industry conditions;

•  limits flexibility in planning for, or reacting to, changes in our business or the industry in which we operate;

•  makes us and our subsidiaries more vulnerable to increases in interest rates, as borrowings under our senior secured credit facilities are at variable rates;

•  limits our and our subsidiaries’ ability to obtain additional financing in the future for working capital or other purposes, such as raising the funds necessary to repurchase our senior subordinated notes upon the occurrence of specified changes of control, or

•  places us at a competitive disadvantage compared to our competitors that have less indebtedness.

Our significant indebtedness could limit our flexibility.

We are significantly leveraged and will continue to have significant indebtedness in the future. Our acquisition and development program requires substantial capital resources, estimated to range from $60.0 million to $80.0 million per year over the next three years, although the range could be exceeded if we identify attractive multi-facility acquisition opportunities. The operations of our existing surgical facilities also require ongoing capital expenditures. We believe that our cash on hand, cash flows from operations and available borrowings under our revolving credit facility will be sufficient to fund our acquisition and development activities in 2010, but if we identify favorable acquisition and development opportunities that require additional resources, we may be required to incur additional indebtedness in order to pursue these opportunities. However, we may be unable to obtain sufficient financing on terms satisfactory to us, or at all, especially given the current uncertainty in the credit markets. In that event, our acquisition and development activities would have to be curtailed or eliminated and our financial results could be adversely affected.

Our debt agreements contain restrictions that limit our flexibility in operating our business.

The operating and financial restrictions and covenants in our debt instruments, including our senior secured credit facilities and the indenture governing our senior subordinated notes, may adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest. For example, our senior secured credit facility restricts, subject to certain exceptions, our and our subsidiaries’ ability to, among other things:

•  incur, assume or permit to exist additional indebtedness or guarantees;

•  incur liens and engage in sale leaseback transactions;

•  make loans, investments and other advances;

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•  declare dividends, make payments or redeem or repurchase capital stock;

•  engage in mergers, acquisitions and other business combinations;

•  prepay, redeem or repurchase certain indebtedness including the notes;

•  amend or otherwise alter terms of certain subordinated indebtedness including the notes;

•  enter into agreements limiting subsidiary distributions;

•  sell assets;

•  engage in certain transactions with affiliates;

•  alter the business that we conduct; and

•  issue and sell capital stock of subsidiaries.

In addition, the senior secured U.K. credit facility restricts, subject to certain exceptions, the ability of certain of our subsidiaries existing in the United Kingdom to, among other things:

•  incur or permit to exist additional indebtedness;

•  incur liens;

•  make loans, investments or acquisitions;

•  declare dividends or other distributions;

•  enter into operating leases;

•  engage in mergers, joint ventures or partnerships;

•  sell assets;

•  alter the business that the U.K. borrowers and their subsidiaries conduct; and

•  incur financial lease expenditures.

The indenture governing our senior subordinated notes includes similar restrictions. Our senior secured credit facility also requires us to comply with a financial covenant with respect to the revolving credit facility that becomes more restrictive over time and the senior secured U.K. credit facility requires certain of our subsidiaries in the United Kingdom to comply with certain financial covenants, including a maximum leverage ratio test, a debt service coverage ratio test and an interest coverage ratio test. Our and our subsidiaries’ ability to comply with these covenants and ratios may be affected by events beyond our control. A breach of any covenant or required financial ratio could result in a default under the senior secured credit facilities. In the event of any default under the senior secured credit facilities, the applicable lenders could elect to terminate borrowing commitments and declare all borrowings and accrued interest and fees to be due and payable, to require us to apply all available cash to repay these borrowings or to prevent us from making or permitting subsidiaries to make distributions or dividends, the proceeds of which are used by us to make debt service payments on our senior subordinated notes, any of which would be an event of default under the notes.

If we incur material liabilities as a result of acquiring surgical facilities, our operating results could be adversely affected.

Although we conduct extensive due diligence prior to the acquisition of surgical facilities and seek indemnification from prospective sellers covering unknown or contingent liabilities, we may acquire surgical facilities that have material liabilities for failure to comply with healthcare laws and regulations or other past activities. Although we maintain professional and general liability insurance, we do not currently maintain insurance specifically covering any unknown or contingent liabilities that may have occurred prior to the acquisition of surgical facilities. If we incur these liabilities and are not indemnified or insured for them, our operating results and financial condition could be adversely affected.

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We depend on our relationships with not-for-profit healthcare systems. If we are not able to maintain our relationships with these not-for-profit healthcare systems, or enter into new relationships, we may be unable to implement our business strategies successfully.

Our domestic business depends in part upon the efforts and success of our not-for-profit healthcare system partners and the strength of our relationships with those healthcare systems. Our business could be adversely affected by any damage to those healthcare systems’ reputations or to our relationships with them. We may not be able to maintain our existing agreements on terms and conditions favorable to us or enter into relationships with additional not-for-profit healthcare systems. Our relationships with not-for-profit healthcare systems and the joint venture agreements that represent these relationships are structured to comply with current revenue rulings published by the Internal Revenue Service as well as case law relevant to joint ventures between for-profit and not-for-profit healthcare entities. Material changes in these authorities could adversely affect our relationships with not-for-profit healthcare systems. If we are unable to maintain our existing arrangements on terms favorable to us or enter into relationships with additional not-for-profit healthcare systems, we may be unable to implement our business strategies successfully.

If we and our not-for-profit healthcare system partners are unable to successfully negotiate contracts and maintain satisfactory relationships with managed care organizations or other third party payors, our revenues may decrease.

Our competitive position has been, and will continue to be, affected by initiatives undertaken during the past several years by major domestic purchasers of healthcare services, including federal and state governments, insurance companies and employers, to revise payment methods and monitor healthcare expenditures in an effort to contain healthcare costs. As a result of these initiatives, managed care companies such as health maintenance and preferred provider organizations, which offer prepaid and discounted medical service packages, represent a growing segment of healthcare payors, the effect of which has been to reduce the growth of domestic healthcare facility margins and revenue. Similarly, in the United Kingdom, most patients at hospitals have private healthcare insurance, either paid for by the patient or received as part of their employment compensation. Our hospitals in the United Kingdom contract with healthcare insurers on an annual basis to provide services to insured patients.

As an increasing percentage of domestic patients become subject to healthcare coverage arrangements with managed care payors, we believe that our success will continue to depend upon our and our not-for-profit healthcare system partners’ ability to negotiate favorable contracts on behalf of our facilities with managed care organizations, employer groups and other private third party payors. We have structured our ventures with not-for-profit healthcare system partners in a manner we believe to be consistent with applicable regulatory requirements. If applicable regulatory requirements were interpreted to require changes to our existing arrangements, or if we are unable to enter into these arrangements on satisfactory terms in the future, we could be adversely affected. Many of these payors already have existing provider structures in place and may not be able or willing to change their provider networks. Similarly, if we fail to negotiate contracts with healthcare insurers in the United Kingdom on favorable terms, or if we fail to remain on insurers’ networks of approved hospitals, such failure could have a material adverse effect on us. We could also experience a material adverse effect to our operating results and financial condition as a result of the termination of existing third party payor contracts.

We depend on our relationships with the physicians who use our facilities. Our ability to provide medical services at our facilities would be impaired and our revenues reduced if we are not able to maintain these relationships.

Our business depends upon the efforts and success of the physicians who provide medical and surgical services at our facilities and the strength of our relationships with these physicians. Our revenues would be reduced if we lost our relationship with one or more key physicians or group of physicians or such physicians or groups reduce their use of our facilities. In addition, any failure of these physicians to maintain the quality of medical care provided or to otherwise adhere to professional guidelines at our surgical facilities or any damage to the reputation of a key physician or group of physicians could damage our reputation, subject us to liability and significantly reduce our revenues.

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Our surgical facilities face competition for patients from other health care providers.

The health care business is highly competitive, and competition among hospitals and other health care providers for patients has intensified in recent years. Generally, other facilities in the local communities served by our facilities provide services similar to those offered by our surgery centers and surgical hospitals. In addition, the number of freestanding surgical hospitals and surgery centers in the geographic areas in which we operate has increased significantly. As a result, most of our surgery centers and surgical hospitals operate in a highly competitive environment. Some of the hospitals that compete with our facilities are owned by governmental agencies or not-for-profit corporations supported by endowments, charitable contributions and/or tax revenues and can finance capital expenditures and operations on a tax-exempt basis. Our surgery centers and surgical hospitals are facing increasing competition from unaffiliated physician-owned surgery centers and surgical hospitals for market share in high margin services and for quality physicians and personnel. If our competitors are better able to attract patients, recruit physicians, expand services or obtain favorable managed care contracts at their facilities than our surgery centers and surgical hospitals, we may experience an overall decline in patient volume.

Current economic conditions may adversely affect our financial condition and results of operations.

The current economic conditions will likely have an impact on our business. We regularly monitor quantitative as well as qualitative measures to identify changes in our business in order to react accordingly. Although we have not seen any significant trends as it relates to our case volume through December 2009, there can be no assurance that we will not be negatively impacted. The most likely impact on us will be lower case volumes as elective procedures may be deferred or cancelled, which could have an adverse effect on our financial condition and results of operations.

Our United Kingdom operations are subject to unique risks, any of which, if they actually occur, could adversely affect our results.

We expect that revenue from our United Kingdom operations will continue to account for a significant percentage of our total revenue. Further, we may pursue additional acquisitions in the United Kingdom, which would require substantial financial resources and management attention. This focus of financial resources and management attention could have an adverse effect on our financial results. In addition, our United Kingdom operations are subject to risks such as:

•  fluctuations in exchange rates;

•  competition with government sponsored healthcare systems;

•  unforeseen changes in foreign regulatory requirements or domestic regulatory requirements affecting our foreign operations;

•  identifying, attracting, retaining and working successfully with qualified local management;

•  difficulties in staffing and managing geographically and culturally diverse, multinational operations;

•  the economic conditions in the United Kingdom, which could adversely affect the ability or willingness of employers and individuals in these countries to purchase private health insurance; and

•  a higher concentration of self-pay business than our U.S. facilities.

These or other factors could have a material adverse effect on our ability to successfully operate in the United Kingdom and our financial condition and operations.

Our revenues may be reduced by changes in payment methods or rates under the Medicare or Medicaid programs.

The Department of Health and Human Services and the states in which we perform surgical procedures for Medicaid patients may revise the Medicare and Medicaid payment methods or rates in the future. Any such changes could have a negative impact on the reimbursements we receive for our surgical services from the Medicare program and the state Medicaid programs. Notably, as part of a Congressional mandate to revise the Medicare

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payment system for procedures performed in ambulatory surgery centers, the Center for Medicare and Medicaid Services published proposed rules revising the payment system for ambulatory surgery centers in August 2006. This Congressional mandate required that the new payment system begin no later than January 1, 2008. The final rule expanded the number of procedures that are covered in ambulatory surgery centers and, among other things, set the payment rate at approximately 65% of the payment for the same procedure when performed in a hospital outpatient department. The final rule will be phased in over a four-year period which began in 2008.

Efforts to regulate the construction, acquisition or expansion of healthcare facilities could prevent us from acquiring additional surgical facilities, renovating our existing facilities or expanding the breadth of services we offer.

Many states in the United States require prior approval for the construction, acquisition or expansion of healthcare facilities or expansion of the services they offer. When considering whether to approve such projects, these states take into account the need for additional or expanded healthcare facilities or services. In a number of states in which we operate, we are required to obtain certificates of need for capital expenditures exceeding a prescribed amount, changes in bed capacity or services offered and under various other circumstances. Other states in which we now or may in the future operate may adopt certificate of need legislation or regulatory provisions. Our costs of obtaining a certificate of need have ranged up to $500,000. Although we have not previously been denied a certificate of need, we may not be able to obtain the certificates of need or other required approvals for additional or expanded facilities or services in the future. In addition, at the time we acquire a facility, we may agree to replace or expand the acquired facility. If we are unable to obtain the required approvals, we may not be able to acquire additional surgery centers or surgical hospitals, expand the healthcare services provided at these facilities or replace or expand acquired facilities.

Failure to comply with federal and state statutes and regulations relating to patient privacy and electronic data security could negatively impact our financial results.

There are currently numerous federal and state statutes and regulations that address patient privacy concerns and federal standards that address the maintenance of the security of electronically maintained or transmitted electronic health information and the format of transmission of such information in common health care financing information exchanges. These provisions are intended to enhance patient privacy and the effectiveness and efficiency of healthcare claims and payment transactions. In particular, the Administrative Simplification Provisions of the Health Insurance Portability and Accountability Act of 1996 required us to implement new systems and to adopt business procedures for transmitting health care information and for protecting the privacy and security of individually identifiable information.

We believe that we are in material compliance with existing state and federal regulations relating to patient privacy, security and with respect to the format for electronic health care transactions. However, if we fail to comply with the federal privacy, security and transactions and code sets regulations, we could incur significant civil and criminal penalties. Failure to comply with state laws related to privacy could, in some cases, also result in civil fines and criminal penalties.

If we fail to comply with applicable laws and regulations, we could suffer penalties or be required to make significant changes to our operations.

We are subject to many laws and regulations at the federal, state and local government levels in the jurisdictions in which we operate. These laws and regulations require that our healthcare facilities meet various licensing, certification and other requirements, including those relating to:

•  physician ownership of our domestic facilities;

•  the adequacy of medical care, equipment, personnel, operating policies and procedures;

•  building codes;

•  licensure, certification and accreditation;

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•  billing for services;

•  handling of medication;

•  maintenance and protection of records; and

•  environmental protection.

We believe that we are in material compliance with applicable laws and regulations. However, if we fail or have failed to comply with applicable laws and regulations, we could suffer civil or criminal penalties, including the loss of our licenses to operate and our ability to participate in Medicare, Medicaid and other government sponsored healthcare programs. A number of initiatives have been proposed during the past several years to reform various aspects of the healthcare system, both domestically and in the United Kingdom. In the future, different interpretations or enforcement of existing or new laws and regulations could subject our current practices to allegations of impropriety or illegality, or could require us to make changes in our facilities, equipment, personnel, services, capital expenditure programs and operating expenses. Current or future legislative initiatives or government regulation may have a material adverse effect on our operations or reduce the demand for our services.

In pursuing our growth strategy, we may expand our presence into new geographic markets. In entering a new geographic market, we will be required to comply with laws and regulations of jurisdictions that may differ from those applicable to our current operations. If we are unable to comply with these legal requirements in a cost-effective manner, we may be unable to enter new geographic markets.

If a federal or state agency asserts a different position or enacts new laws or regulations regarding illegal remuneration under the Medicare or Medicaid programs, we may be subject to civil and criminal penalties, experience a significant reduction in our revenues or be excluded from participation in the Medicare and Medicaid programs.

The federal anti-kickback statute prohibits the offer, payment, solicitation or receipt of any form of remuneration in return for referrals for items or services payable by Medicare, Medicaid, or any other federally funded healthcare program. Additionally, the anti-kickback statute prohibits any form of remuneration in return for purchasing, leasing or ordering, or arranging for or recommending the purchasing, leasing or ordering of items or services payable by Medicare, Medicaid or any other federally funded healthcare program. The anti-kickback statute is very broad in scope and many of its provisions have not been uniformly or definitively interpreted by existing case law or regulations. Moreover, several federal courts have held that the anti-kickback statute can be violated if only one purpose (not necessarily the primary purpose) of a transaction is to induce or reward a referral of business, notwithstanding other legitimate purposes. Violations of the anti-kickback statute may result in substantial civil or criminal penalties, including up to five years imprisonment and criminal fines of up to $25,000 and civil penalties of up to $50,000 for each violation, plus three times the remuneration involved or the amount claimed and exclusion from participation in all federally funded healthcare programs. An exclusion, if applied to our surgery centers or surgical hospitals, could result in significant reductions in our revenues, which could have a material adverse effect on our business.

In July 1991, the Department of Health and Human Services issued final regulations defining various “safe harbors.” Two of the safe harbors issued in 1991 apply to business arrangements similar to those used in connection with our surgery centers and surgical hospitals: the “investment interest” safe harbor and the “personal services and management contracts” safe harbor. However, the structure of the partnerships and limited liability companies operating our surgery centers and surgical hospitals, as well as our various business arrangements involving physician group practices, do not satisfy all of the requirements of either safe harbor. Therefore, our business arrangements with our surgery centers, surgical hospitals and physician groups do not qualify for “safe harbor” protection from government review or prosecution under the anti-kickback statute. When a transaction or relationship does not fit within a safe harbor, it does not mean that an anti-kickback violation has occurred; rather, it means that the facts and circumstances as well as the intent of the parties related to a specific transaction or relationship must be examined to determine whether or not any illegal conduct has occurred.

On November 19, 1999, the Department of Health and Human Services promulgated final regulations creating additional safe harbor provisions, including a safe harbor that applies to physician ownership of or investment

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interests in surgery centers. The surgery center safe harbor protects four types of investment arrangements: (1) surgeon owned surgery centers; (2) single specialty surgery centers; (3) multi-specialty surgery centers; and (4) hospital/physician surgery centers. Each category has its own requirements with regard to what type of physician may be an investor in the surgery center. In addition to the physician investor, the categories permit an “unrelated” investor, who is a person or entity that is not in a position to provide items or services related to the surgery center or its investors. Our business arrangements with our surgical facilities typically consist of one of our subsidiaries being an investor in each partnership or limited liability company that owns the facility, in addition to providing management and other services to the facility. As a result, these business arrangements do not comply with all the requirements of the surgery center safe harbor, and, therefore, are not immune from government review or prosecution.

Although we believe that our business arrangements do not violate the anti-kickback statute, a government agency or a private party may assert a contrary position. Additionally, new domestic federal or state laws may be enacted that would cause our relationships with the physician investors to become illegal or result in the imposition of penalties against us or our facilities. If any of our business arrangements with physician investors were deemed to violate the anti-kickback statute or similar laws, or if new domestic federal or state laws were enacted rendering these arrangements illegal, our business could be adversely affected.

Also, most of the states in which we operate have adopted anti-kickback laws, many of which apply more broadly to all third-party payors, not just to federal or state healthcare programs. Many of the state laws do not have regulatory safe harbors comparable to the federal provisions and have only rarely been interpreted by the courts or other governmental agencies. We believe that our business arrangements do not violate these state laws. Nonetheless, if our arrangements were found to violate any of these anti-kickback laws, we could be subject to significant civil and criminal penalties that could adversely affect our business.

If physician self-referral laws are interpreted differently or if other legislative restrictions are issued, we could incur significant sanctions and loss of reimbursement revenues.

The U.S. federal physician self-referral law, commonly referred to as the Stark law, prohibits a physician from making a referral for a “designated health service” to an entity to furnish an item or service payable under Medicare if the physician or a member of the physician’s immediate family has a financial relationship with the entity such as an ownership interest or compensation arrangement, unless an exception applies. The list of designated health services under the Stark law does not include ambulatory surgery services as such. However, some of the designated health services are among the types of services furnished by our facilities.

The Department of Health and Human Services, acting through the Centers for Medicare and Medicaid Services, has promulgated regulations implementing the Stark law. These regulations exclude health services provided by an ambulatory surgery center from the definition of “designated health services” if the services are included in the facility’s composite Medicare payment rate. Therefore, the Stark law’s self-referral prohibition generally does not apply to health services provided by a surgery center. However, if the surgery center is separately billing Medicare for designated health services that are not covered under the surgery center’s composite Medicare payment rate, or if either the surgery center or an affiliated physician is performing (and billing Medicare) for procedures that involve designated health services that Medicare has not designated as an ambulatory surgery center service, the Stark law’s self-referral prohibition would apply and such services could implicate the Stark law. We believe that our operations do not violate the Stark Law, as currently interpreted.

In addition, we believe that physician ownership of surgery centers is not prohibited by similar self-referral statutes enacted at the state level. However, the Stark law and similar state statutes are subject to different interpretations with respect to many important provisions. Violations of these self-referral laws may result in substantial civil or criminal penalties, including large civil monetary penalties and exclusion from participation in the Medicare and Medicaid programs. Exclusion of our surgery centers or surgical hospitals from these programs through future judicial or agency interpretation of existing laws or additional legislative restrictions on physician ownership or investments in healthcare entities could result in significant loss of reimbursement revenues.

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Companies within the healthcare industry continue to be the subject of federal and state audits and investigations, which increases the risk that we may become subject to investigations in the future.

Both federal and state government agencies, as well as private payors, have heightened and coordinated audits and administrative, civil and criminal enforcement efforts as part of numerous ongoing investigations of healthcare organizations. These investigations relate to a wide variety of topics, including the following:

•  cost reporting and billing practices;

•  quality of care;

•  financial reporting;

•  financial relationships with referral sources; and

•  medical necessity of services provided.

In addition, the Office of the Inspector General of the Department of Health and Human Services and the Department of Justice have, from time to time, undertaken national enforcement initiatives that focus on specific billing practices or other suspected areas of abuse. Moreover, another trend impacting healthcare providers is the increased use of the federal False Claims Act, particularly by individuals who bring actions under that law. Such “qui tam” or “whistleblower” actions allow private individuals to bring actions on behalf of the government alleging that a healthcare provider has defrauded the federal government. If the government intervenes and prevails in the action, the defendant may be required to pay three times the actual damages sustained by the government, plus mandatory civil monetary penalties of between $5,500 and $11,000 for each false claim submitted to the government. As part of the resolution of a qui tam case, the party filing the initial complaint may share in a portion of any settlement or judgment. If the government does not intervene in the action, the qui tam plaintiff may pursue the action independently. Additionally, some states have adopted similar whistleblower and false claims provisions. Although companies in the healthcare industry have been, and may continue to be, subject to qui tam actions, we are unable to predict the impact of such actions on our business, financial position or results of operations.

If laws governing the corporate practice of medicine change, we may be required to restructure some of our domestic relationships which may result in significant costs to us and divert other resources.

The laws of various domestic jurisdictions in which we operate or may operate in the future do not permit business corporations to practice medicine, exercise control over physicians who practice medicine or engage in various business practices, such as fee-splitting with physicians. The interpretation and enforcement of these laws vary significantly from state to state. We are not required to obtain a license to practice medicine in any jurisdiction in which we own or operate a surgery center or surgical hospital because our facilities are not engaged in the practice of medicine. The physicians who utilize our facilities are individually licensed to practice medicine. In most instances, the physicians and physician group practices performing medical services at our facilities do not have investment or business relationships with us other than through the physicians’ ownership interests in the partnerships or limited liability companies that own and operate our facilities and the service agreements we have with some of those physicians.

Through our OrthoLink subsidiary, we provide consulting and administrative services to a number of physicians and physician group practices affiliated with OrthoLink. Although we believe that our arrangements with these and other physicians and physician group practices comply with applicable laws, a government agency charged with enforcement of these laws, or a private party, might assert a contrary position. If our arrangements with these physicians and physician group practices were deemed to violate state corporate practice of medicine, fee-splitting or similar laws, or if new laws are enacted rendering our arrangements illegal, we may be required to restructure these arrangements, which may result in significant costs to us and divert other resources.

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If domestic regulations change, we may be obligated to purchase some or all of the ownership interests of the physicians affiliated with us.

Upon the occurrence of various fundamental regulatory changes, we could be obligated to purchase some or all of the ownership interests of the physicians affiliated with us in the partnerships or limited liability companies that own and operate our surgery centers and surgical hospitals. The regulatory changes that could create this obligation include changes that:

•  make illegal the referral of Medicare or other patients to our surgical facilities by physicians affiliated with us;

•  create the substantial likelihood that cash distributions from the limited partnerships or limited liability companies through which we operate our surgical facilities to physicians affiliated with us would be illegal; or

•  make illegal the ownership by the physicians affiliated with us of interests in the partnerships or limited liability companies through which we own and operate our surgical facilities.

At this time, we are not aware of any regulatory amendments or proposed changes that would trigger this obligation. Typically, our partnership and limited liability company agreements allow us to use shares of our common stock as consideration for the purchase of a physician’s ownership interest. The use of shares of our common stock for that purpose would dilute the ownership interests of our common stockholders. In the event that we are required to purchase all of the physicians’ ownership interests and our common stock does not maintain a sufficient valuation, we could be required to use our cash resources for the acquisitions, the total cost of which we estimate to be up to approximately $420.0 million at December 31, 2009. The creation of these obligations and the possible termination of our affiliation with these physicians could have a material adverse effect on us.

Future legislation could restrict our ability to operate our domestic surgical hospitals.

The Stark law currently includes an exception relating to physician ownership of a hospital, provided that the physician’s ownership interest is in the whole hospital and the physician is authorized to perform services at the hospital, referred to as the whole hospital exception. Physician investment in our facilities licensed as hospitals meets this requirement.

For the past several years, the whole hospital exception has been the subject of regulatory action and legislative debate. The Medicare Prescription Drug, Improvement and Modernization Act of 2003, or the MMA, amended the Stark law to provide that the whole hospital exception did not apply to specialty hospitals for a period of 18 months beginning on November 18, 2003, and ending on June 8, 2005. Certain “grandfathered” hospitals that were already in operation or under development were excepted, but physician investment in such hospitals was frozen at then current levels and bed growth was limited. Prior to the moratorium’s expiration, legislation was introduced in Congress which would have made the moratorium permanent. The legislation did not pass prior to the expiration of the original Stark law moratorium. However, in June 2005, CMS announced the imposition of a six-month moratorium on the Medicare program’s enrollment of specialty hospitals. As part of that moratorium, CMS directed is fiscal intermediaries to refuse to process Medicare enrollment applications for specialty hospitals.

In February 2006, Congress passed the Deficit Reduction Act of 2005. The Deficit Reduction Act, or DRA, (1) required the Secretary of the Department of Health and Human Services to develop a strategic plan to address physician-owned specialty hospital issues such as proportionality of investment return, methods for determining bona fide investments, disclosure of investment interests and the provision of Medicaid and charity care by specialty hospitals and (2) prohibited specialty hospitals from enrolling in the Medicare program until the Secretary’s plan was completed, which, under the DRA, was required to be no later than six months (or eight months if the Secretary applied for an extension) after the date of the enactment of the DRA. The Secretary released his plan in August 2006. In his plan, the Secretary announced that CMS would address the issues surrounding physician-owned specialty hospitals by (1) continuing to reform payment rates for inpatient hospital services through DRG refinements, (2) continuing its efforts to more closely align hospital/physician incentive, (3) clarifying the Emergency Medical Treatment and Active Labor Act and patient care obligations of specialty hospitals, (4) requiring hospitals to disclose their ownership and investment information to CMS and their patients, and (5) increasing enforcement actions against persons and entities

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that are parties to arrangements involving disproportionate returns and non-bona fide investments. The Secretary also allowed Medicare’s specialty hospital enrollment moratorium to expire and did not recommend that the whole hospital exception be repealed or amended. The Secretary did not, however, rule out such actions in the future. Because many of the Secretary’s recommendations are subject to future rulemaking, we cannot predict the effect that the recommendations will have on our hospitals.

On January 14, 2009, the U.S. House of Representatives passed the Children’s Health Insurance Program Reauthorization Act of 2009 (the “CHIP Act”) that included provisions that would significantly amend the whole hospital exception to the Stark law and would have imposed significant restrictions on physician ownership. Ultimately, the CHIP Act was passed by both the House and Senate on February 4, 2009, without any provision affecting physician ownership of surgical hospitals.

On November 7, 2009, the U.S. House of Representatives passed the House Affordable Health Choices Act (the “House Reform Bill”), which included provisions that would significantly amend the whole hospital exception to the Stark law. The provisions of the House Reform Bill would, among other things: (i) prohibit a hospital from having any physician ownership unless the hospital already had physician ownership and a Medicare provider agreement in effect on January 1, 2009, (ii) limit aggregate ownership by physicians to the aggregate percentage owned on the enactment date of the legislation, (iii) require disclosures to patients of physician ownership interests, along with annual reports to the government detailing such ownership and (iv) effectively prohibit expansion of the physical plant of any of our physician-owned hospitals. On December 24, 2009, the U.S. Senate passed the Senate Patient Protection and Affordable Health Care Act (the “Senate Reform Bill”), which also included provisions that would significantly amend the whole hospital exception to the Stark law. The provisions of the Senate Reform Bill with respect to physician-owned hospitals were substantially similar to the House Reform Bill, except that a hospital that had physician ownership and a Medicare provider agreement in effect on August 1, 2010 would be grandfathered. If either the House Reform Bill or the Senate Reform Bill were enacted, all of our existing hospitals would be grandfathered, but would not be able to expand their physical plants. With respect to our three hospitals under development, only one would be grandfathered under the House Reform Bill, and we expect that two would be grandfathered under the Senate Reform Bill.

As of the date of this filing, neither the House Reform Bill nor the Senate Reform Bill have been enacted into law. However, we cannot predict whether either bill will ultimately be enacted. If neither bill is enacted, we cannot predict whether the amendments to the whole hospital exception will be included in any future legislation, or if Congress will adopt any similar provisions that would prohibit or otherwise restrict physicians from holding ownership interests in hospitals. If legislation were to be enacted by Congress that prohibits physician referrals to hospitals in which the physicians own an interest, or that otherwise limits physician ownership in existing facilities or restricts the hospital’s ability to expand, our financial condition and results of operations could be materially adversely affected. If legislation were enacted that required us to purchase the physician owners’ interests in our hospitals, and we did not use shares of our common stock to fund the purchase, we estimate the total cash required to be approximately $74.0 million.

If we become subject to significant legal actions, we could be subject to substantial uninsured liabilities.

In recent years, physicians, surgery centers, hospitals and other healthcare providers have become subject to an increasing number of legal actions alleging malpractice or related legal theories. Many of these actions involve large monetary claims and significant defense costs. We do not employ any of the physicians who conduct surgical procedures at our facilities and the governing documents of each of our facilities require physicians who conduct surgical procedures at our facilities to maintain stated amounts of insurance. Additionally, to protect us from the cost of these claims, we maintain (through a captive insurance company) professional malpractice liability insurance and general liability insurance coverage in amounts and with deductibles that we believe to be appropriate for our operations. If we become subject to claims, however, our insurance coverage may not cover all claims against us or continue to be available at adequate levels of insurance. If one or more successful claims against us were not covered by or exceeded the coverage of our insurance, we could be adversely affected.

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If we are unable to effectively compete for physicians, strategic relationships, acquisitions and managed care contracts, our business could be adversely affected.

The healthcare business is highly competitive. We compete with other healthcare providers, primarily other surgery centers and hospitals, in recruiting physicians and contracting with managed care payors in each of our markets. In the United Kingdom, we also compete with their national health system in recruiting healthcare professionals. There are major unaffiliated hospitals in each market in which we operate. These hospitals have established relationships with physicians and payors. In addition, other companies either are currently in the same or similar business of developing, acquiring and operating surgery centers and surgical hospitals or may decide to enter our business. Many of these companies have greater financial, research, marketing and staff resources than we do. We may also compete with some of these companies for entry into strategic relationships with not-for-profit healthcare systems and healthcare professionals. If we are unable to compete effectively with any of these entities, we may be unable to implement our business strategies successfully and our business could be adversely affected.

Because our senior management has been key to our growth and success, we may be adversely affected if we lose any member of our senior management.

We are highly dependent on our senior management, including Donald E. Steen, who is our chairman, and William H. Wilcox, who is our president and chief executive officer. Although we have employment agreements with Mr. Steen and Mr. Wilcox and other senior managers, we do not maintain “key man” life insurance policies on any of our officers. Because our senior management has contributed greatly to our growth since inception, the loss of key management personnel or our inability to attract, retain and motivate sufficient numbers of qualified management or other personnel could have a material adverse effect on us.

The growth of patient receivables and a deterioration in the collectability of these accounts could adversely affect our results of operations.

The primary collection risks of our accounts receivable relate to patient receivables for which the primary insurance carrier has paid the amounts covered by the applicable agreement but patient responsibility amounts (deductibles and copayments) remain outstanding. The allowance for doubtful accounts relates primarily to amounts due directly from patients.

We provide for bad debts principally based upon the aging of accounts receivable and use specific identification to write-off amounts against our allowance for doubtful accounts, without differentiation between payor sources. Our U.S. doubtful account allowance at December 31, 2009 and 2008, represented approximately 16% and 20% of our U.S. accounts receivable balance, respectively. Due to the difficulty in assessing future trends, we could be required to increase our provisions for doubtful accounts. A deterioration in the collectability of these accounts could adversely affect our collection of accounts receivable, cash flows and results of operations.

We may have a special legal responsibility to the holders of ownership interests in the entities through which we own surgical facilities, and that responsibility may prevent us from acting solely in our own best interests or the interests of our stockholders.

Our ownership interests in surgery centers and surgical hospitals generally are held through partnerships or limited liability companies. We typically maintain an interest in a partnership or limited liability company in which physicians or physician practice groups also hold interests. As general partner or manager of these entities, we may have a special responsibility, known as a fiduciary duty, to manage these entities in the best interests of the other owners. We also have a duty to operate our business for the benefit of our stockholders. As a result, we may encounter conflicts between our responsibility to the other owners and our responsibility to our stockholders. For example, we have entered into management agreements to provide management services to our domestic facilities in exchange for a fee. Disputes may arise as to the nature of the services to be provided or the amount of the fee to be paid. In these cases, we are obligated to exercise reasonable, good faith judgment to resolve the disputes and may not be free to act solely in our own best interests. Disputes may also arise between us and our affiliated physicians with respect to a particular business decision or regarding the interpretation of the provisions of the applicable partnership or limited liability company agreement. If we are unable to resolve a dispute on terms favorable or satisfactory to us, our business may be adversely affected.

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We do not have exclusive control over the distribution of revenues from some of our domestic operating entities and may be unable to cause all or a portion of the revenues of these entities to be distributed.

All of the domestic surgical facilities in which we have ownership interests are partnerships or limited liability companies in which we own, directly or indirectly, ownership interests. Our partnership, and limited liability company agreements, which are typically with the physicians who perform procedures at our surgical facilities, usually provide for the monthly or quarterly pro-rata cash distribution of net profits from operations, less amounts to satisfy obligations such as the entities’ non-recourse debt and capitalized lease obligations, operating expenses and working capital. The creditors of each of these partnerships and limited liability companies are entitled to payment of the entities’ obligations to them, when due and payable, before ordinary cash distributions or distributions in the event of liquidation, reorganization or insolvency may be made. We generally control the entities that function as the general partner of the partnerships or the managing member of the limited liability companies through which we conduct operations. However, we do not have exclusive control in some instances over the amount of net revenues distributed from some of our operating entities. If we are unable to cause sufficient revenues to be distributed from one or more of these entities, our relationships with the physicians who have an interest in these entities may be damaged and we could be adversely affected. We may not be able to resolve favorably any dispute regarding revenue distribution or other matters with a healthcare system with which we share control of one of these entities. Further, the failure to resolve a dispute with these healthcare systems could cause the entity we jointly control to be dissolved.

Welsh Carson controls us and may have conflicts of interest with us or you in the future.

An investor group led by Welsh Carson owns substantially all of the outstanding equity securities of our Parent, USPI Group Holdings, Inc. Welsh Carson controls a majority of the voting power of such outstanding equity securities and therefore ultimately controls all of our affairs and policies, including the election of our board of directors, the approval of certain actions such as amending our charter, commencing bankruptcy proceedings and taking certain corporate actions (including, without limitation, incurring debt, issuing stock, selling assets and engaging in mergers and acquisitions), and appointing members of our management. The interests of Welsh Carson could conflict with your interests.

Additionally, Welsh Carson is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. Welsh Carson may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. So long as investment funds associated with or designated by Welsh Carson continue to indirectly own a significant amount of our capital stock, even if such amount is less than 50% of our outstanding common stock on a fully-diluted basis, Welsh Carson will continue to be able to strongly influence or effectively control our decisions.

Item 1B.   Unresolved Staff Comments

None.

Item 2.   Properties

The response to this item is included in Item 1.

Item 3.   Legal Proceedings

From time to time, we may be named as a party to legal claims and proceedings in the ordinary course of business. We are not aware of any claims or proceedings against us or our subsidiaries that might have a material adverse impact on us.

Item 4.   Submission of Matters to a Vote of Security Holders

None.

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PART II

Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

We are wholly-owned by USPI Holdings, Inc., which is wholly-owned by USPI Group Holdings, Inc., both of which are privately owned corporations. There is no public trading market for our equity securities or those of USPI Holdings, Inc. or USPI Group Holdings, Inc. As of February 23, 2010, there were 99 holders of USPI Group Holdings, Inc. common stock.

Item 6.   Selected Financial Data

The selected consolidated statement of operations data set forth below for the years ended December 31, 2009 and 2008, (Successor), the periods January 1 through April 18, 2007 (Predecessor) and April 19 through December 31, 2007 (Successor) and for the years ended December 31, 2006 and 2005 (Predecessor), and the consolidated balance sheet data at December 31, 2009, 2008 and 2007 (Successor), 2006 and 2005 (Predecessor) are derived from our consolidated financial statements.

The historical results presented below are not necessarily indicative of results to be expected for any future period. The comparability of the financial and other data included in the table is affected by our merger transaction in 2007, loss on early retirement of debt in 2007 and 2006 and various acquisitions completed during the years presented. In addition, the results of operations of subsidiaries sold by us have been reclassified to “discontinued operations” for all data presented in the table below except for the “consolidated balance sheet data.” For a more detailed explanation of this financial data, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included elsewhere in this report.

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	Successor									Predecessor
							Period from			Period from
							April 19			January 1
	Year Ended			Year Ended			through			through			Years Ended
	December 31,			December 31,			December 31,			April 18,			December 31,
	2009			2008			2007			2007			2006			2005
Consolidated Statement of Operations Data:
Total revenues	$	622,365		$	642,223		$	452,488		$	191,355		$	567,374		$	458,569
Equity in earnings of unconsolidated affiliates		61,771			47,042			23,867			9,906			31,568			23,998
Operating expenses excluding depreciation and amortization		(419,181	)		(452,752	)		(313,921	)		(162,497	)		(405,467	)		(318,482	)
Depreciation and amortization		(35,297	)		(36,757	)		(26,688	)		(12,426	)		(34,516	)		(30,203	)
Operating income		229,658			199,756			135,746			26,338			158,959			133,882
Other income (expense):
Interest income		2,630			3,228			3,208			933			4,067			4,455
Interest expense		(70,915	)		(85,649	)		(67,862	)		(9,521	)		(32,604	)		(27,391	)
Loss on early retirement of debt		—			—			—			(2,435	)		(14,880	)		—
Other, net		(28,082	)		(1,790	)		(442	)		798			1,773			532
Income from continuing operations before income taxes		133,291			115,545			70,650			16,113			117,315			111,478
Income tax benefit (expense)		97			(22,333	)		(14,592	)		(4,256	)		(22,785	)		(25,939	)
Income from continuing operations		133,388			93,212			56,058			11,857			94,530			85,539
Earnings (loss) from discontinued operations, net of tax		—			(560	)		(2,154	)		(458	)		(5,763	)		590
Net income		133,388			92,652			53,904			11,399			88,767			86,129
Less: Net income attributable to noncontrolling interests		(63,722	)		(55,138	)		(45,175	)		(18,548	)		(54,521	)		(38,835	)
Net income attributable to USPI’s common stockholder	$	69,666		$	37,514		$	8,729		$	(7,149	)	$	34,246		$	47,294
Other Data:
Number of facilities operated as of the end of period(a):
Consolidated		60			62			61			64			60			42
Equity method		109			102			94			85			81			57
Total		169			164			155			149			141			99
Cash flows from operating activities	$	185,213		$	145,586		$	109,936		$	47,305		$	155,655		$	144,300

	Successor									Predecessor
	As of December 31,									As of December 31,
	2009			2008			2007			2006			2005
Consolidated Balance Sheet Data:
Working capital (deficit)	$	(113,016	)	$	(38,838	)	$	(12,569	)	$	(41,834	)	$	90,946
Cash and cash equivalents		34,890			49,435			76,758			31,740			130,440
Total assets		2,325,392			2,268,163			2,277,393			1,231,856			1,028,841
Total debt		1,071,528			1,097,947			1,098,062			347,330			286,486
Noncontrolling interests — redeemable		63,865			51,961			52,769			49,261			34,011
Total equity		798,003			806,217			837,100			622,844			560,753

(a) Not derived from audited financial statements.

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Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operation

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Selected Financial Data” and our consolidated financial statements and related notes included elsewhere in this report.

Overview

We operate ambulatory surgery centers and surgical hospitals in the United States and the United Kingdom. As of December 31, 2009, we operated 169 facilities, consisting of 165 in the United States and four in the United Kingdom. All 165 of our U.S. facilities include local physician owners, and 109 of these facilities are also partially owned by various not-for-profit healthcare systems (hospital partners). In addition to facilitating the joint ownership of the majority of our existing facilities, our agreements with these healthcare systems provide a framework for the planning and construction of additional facilities in the future. All eight facilities we are currently developing include a hospital partner.

Our U.S. facilities, consisting of ambulatory surgery centers and surgical hospitals, specialize in non-emergency surgical cases. Due in part to advancements in medical technology, the volume and complexity of surgical cases performed in an outpatient setting has steadily increased over the past two decades. Our facilities earn a fee from patients, insurance companies, or other payors in exchange for providing the facility and related services a surgeon requires in order to perform a surgical case. In addition, we earn a monthly fee from each facility we operate in exchange for managing its operations. All but four of our facilities are located in the U.S., where we have focused increasingly on adding facilities with hospital partners, which we believe improves the long-term profitability and potential of our facilities.

In the United Kingdom we operate three hospitals and an oncology clinic, which supplement the services provided by the government-sponsored healthcare system. Our patients choose to receive care at private hospitals primarily because of waiting lists to receive diagnostic procedures or elective surgery at government-sponsored facilities and pay us either from personal funds or through private insurance, which is offered by some employers as a benefit to their employees. Since acquiring our first two facilities in the United Kingdom in 2000, we have expanded selectively by adding a third facility and increasing the capacity and services offered at each facility, including the construction of an oncology clinic near the campus of one of our hospitals.

Our growth and success depends on our ability to continue to grow volumes at our existing facilities, to successfully open new facilities we develop, to successfully integrate acquired facilities into our operations, and to maintain productive relationships with our physician and hospital partners. We believe we will have significant opportunities to operate more facilities with hospital partners in the future in existing and new markets.

Due in large part to our partnerships with physician and hospital partners, we do not consolidate 109 of the 169 facilities we operate. To help analyze our results of operations, we disclose an operating measure we refer to as systemwide revenue growth, which includes both consolidated and unconsolidated facilities. While revenues of our unconsolidated facilities are not recorded as revenues by USPI, we believe the information is important in understanding USPI’s financial performance because these revenues are the basis for calculating the Company’s management services revenues and, together with the expenses of our unconsolidated facilities, are the basis for USPI’s equity in earnings of unconsolidated affiliates. In addition, USPI discloses growth rates and operating margins for the facilities that were operational in both the current and prior year periods, a group the Company refers to as same store facilities.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition, results of operations and liquidity and capital resources are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of consolidated financial statements under GAAP requires our management to make certain estimates and assumptions that impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. These estimates and assumptions also impact the reported amount of net earnings

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during any period. Estimates are based on information available as of the date financial statements are prepared. Accordingly, actual results could differ from those estimates. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and operating results and that require management’s most subjective judgments. Our critical accounting policies and estimates include our policies and estimates regarding consolidation, revenue recognition and accounts receivable, income taxes, and goodwill and intangible assets.

Consolidation

We own less than 100% of each U.S. facility we operate. As discussed in “Results of Operations,” we operate all of our U.S. facilities through joint ventures with physicians. Increasingly, these joint ventures also include a hospital partner. We generally have a leadership role in these facilities through a significant voting and economic interest and a contract to manage each facility’s operations, but the degree of control we have varies from facility to facility. Accordingly, as of December 31, 2009, we consolidated the financial results of 60 of the facilities we operate and account for 109 under the equity method.

Our determination of the appropriate consolidation method to follow with respect to our investments in subsidiaries and affiliates is based on the amount of control we have, combined with our ownership level, in the underlying entity. Our consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and other investees over which we have control. Investments in companies we do not control, but over whose operations we have the ability to exercise significant influence (including investments where we have less than 20% ownership), are accounted for under the equity method. We also consider the relevant sections of the Financial Accounting Standards Board’s Accounting Standards Codification, Topic 810, Consolidation to determine if we are the primary beneficiary of (and therefore should consolidate) any entity whose operations we do not control with voting rights. At December 31, 2009, we consolidated two entities because we are the primary beneficiary. See further discussion in Note 6 to the consolidated financial statements.

Accounting for an investment as consolidated versus equity method has no impact on our net income (loss) or stockholder’s equity in any accounting period, but it does impact individual statement of operations and balance sheet balances. Under either consolidation or equity method accounting, the investor effectively records its share of the underlying entity’s net income or loss based on its ownership percentage. At December 31, 2009, all of the Company’s investments in unconsolidated affiliates are accounted for using the equity method.

Revenue Recognition and Accounts Receivable

We recognize revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements, as updated, which has four criteria that must be met before revenue is recognized:

•  Existence of persuasive evidence that an arrangement exists;

•  Delivery has occurred or services have been rendered;

•  The seller’s price to the buyer is fixed or determinable; and

•  Collectibility is reasonably assured.

Our revenue recognition policies are consistent with these criteria. Over 85% of our facilities’ surgical cases are performed under contracted or government mandated fee schedules or discount arrangements. The patient service revenues recorded for these cases are recorded at the contractually defined amount at the time of billing. We estimate the remaining revenue based on historical collections, and adjustments to these estimates in subsequent periods have not had a material impact in any period presented. If the discount percentage used in estimating revenues for the cases not billed pursuant to fee schedules were changed by 1%, our 2009 after-tax net income would change by approximately $0.2 million. The collection cycle for patient services revenue is relatively short, typically ranging from 30 to 60 days depending upon payor and geographic norms, which allows us to evaluate our estimates frequently. Our revenues earned under management and other service contracts are typically based upon objective formulas driven by an entity’s financial performance and are generally earned and paid monthly.

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Our accounts receivable are comprised of receivables in both the United Kingdom and the United States. As of December 31, 2009, approximately 28% of our total accounts receivable were attributable to our U.K. business. Because our U.K. facilities only treat patients who have a demonstrated ability to pay, our U.K. patients arrange for payment prior to treatment and our bad debt expense in the U.K. is low. In 2009, U.K. bad debt expense was approximately $0.1 million, as compared to our total U.K. revenues of $105.1 million. Our average days sales outstanding in the U.K. were 52 and 46 as of December 31, 2009 and 2008, respectively. The increase in U.K. days sales outstanding was caused by an increase in business with the National Health Service, which pays less promptly than other payors but has virtually no risk of uncollectibility.

Our U.S. accounts receivable were approximately 72% of our total accounts receivable as of December 31, 2009. In 2009, uninsured or self-pay revenues only accounted for 2% of our U.S. revenue and 6% of our accounts receivable balance was comprised of amounts owed from patients, including the patient portion of amounts covered by insurance. Insurance revenues (including government payors) accounted for 98% of our 2009 U.S. revenue and 94% of our accounts receivable balance was comprised of amounts owed from contracted payors. Our U.S. facilities primarily perform surgery that is scheduled in advance by physicians who have already seen the patient. As part of our internal control processes, we verify benefits, obtain insurance authorization, calculate patient financial responsibility and notify the patient of their responsibility, all prior to surgery. The nature of our business is such that we do not have any significant receivables that are pending approval from third party payors. We also focus our collection efforts on aged accounts receivable. However, due to complexities involved in insurance reimbursements and inherent limitations in verification procedures, our business will always have some level of bad debt expense. In 2009 and 2008, our bad debt expense attributable to U.S. revenue was approximately 2% and 1%, respectively. In addition, as of December 31, 2009 and 2008, our average days sales outstanding in the U.S. were 34 and 37 days, respectively. The aging of our U.S. accounts receivable at December 31, 2009 was: 67% less than 60 days old, 15% between 60 and 120 days and 18% over 120 days old. Our U.S. bad debt allowance at December 31, 2009 and 2008 represented approximately 16% and 20% of our U.S. accounts receivable balance, respectively.

Due to the nature of our business, management relies upon the aging of accounts receivable as its primary tool to estimate bad debt expense. Therefore, we reserve for bad debt based principally upon the aging of accounts receivable, without differentiating by payor source. We write off accounts on an individual basis based on that aging. We believe our reserve policy allows us to accurately estimate our allowance for doubtful accounts and bad debt expense.

Income Taxes

Our income tax policy is to record the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and the bases of those assets and liabilities as reported in our consolidated balance sheets. This estimation process requires that we evaluate the need for a valuation allowance against deferred tax assets, based on factors such as historical financial information, expected timing of future events, the probability of expected future taxable income and available tax planning opportunities.

In conjunction with Welsh Carson’s acquisition of our Company in April 2007, which increased our debt, caused us to generate U.S. taxable losses, and reduced the likelihood of us generating U.S. taxable income, we established a valuation allowance against our U.S. deferred tax assets.

During the third quarter of 2009, we determined, based on factors such as those described above, including recent favorable operating trends, expected future taxable income, and other factors, that it is more likely than not that the majority of these assets, which include net operating loss carryforwards and other items, will be realized in the future. Accordingly, our results of operations for the year ended December 31, 2009 include an income tax benefit of $31.2 million related to the reversal of a majority of our valuation allowance against our deferred tax assets. We still carry a valuation allowance totaling $3.3 million against certain of our deferred tax assets which relates to deferred tax assets that have restrictions as to use and are not considered more likely than not to be realized. If our estimates related to the above items change significantly, we may need to alter the amount of our valuation allowance in the future through a favorable or unfavorable adjustment to net income.

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Goodwill and Intangible Assets

Given the significance of our intangible assets as a percentage of our total assets, we also consider our accounting policy regarding goodwill and intangible assets to be a critical accounting policy. Consistent with GAAP, we do not amortize goodwill or indefinite-lived intangibles but rather test them for impairment annually or more often when circumstances change in a manner that indicates they may be impaired. Impairment tests occur at the reporting unit level for goodwill; our reporting units are defined as our operating segments (United States and United Kingdom). Our intangible assets consist primarily of indefinite-lived rights to manage individual surgical facilities. The values of these rights are tested individually. Intangible assets with definite lives primarily consist of rights to provide management and other contracted services to surgical facilities, hospitals, and physicians. These assets are amortized over their estimated useful lives, and the portfolios are tested for impairment when circumstances change in a manner that indicates their carrying values may not be recoverable.

To determine the fair value of our reporting units, we generally use a present value technique (discounted cash flow) corroborated by market multiples when available and as appropriate. The factor most sensitive to change with respect to our discounted cash flow analyses is the estimated future cash flows of each reporting unit which is, in turn, sensitive to our estimates of future revenue growth and margins for these businesses. If actual revenue growth and/or margins are lower than our expectations, the impairment test results could differ. We base our fair value estimates on assumptions we believe to be reasonable and consistent with market participant assumptions, but that are unpredictable and inherently uncertain. The fair value of an indefinite-lived intangible asset is compared to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized. Fair values for indefinite-lived intangible assets are estimated based on market multiples and discounted cash flow models which have been derived based on our experience in acquiring surgical facilities, market participant assumptions and third party valuations we have obtained with respect to such transactions.

Based on the results of our 2009 goodwill impairment testing, both of our reporting units’ estimated fair values substantially exceed their carrying values. We recorded a $5.7 million impairment charge related to three indefinite-lived intangible assets (management contracts) as further discussed in Note 9 to our consolidated financial statements.

Merger Transaction

Pursuant to an Agreement and Plan of Merger (the merger) dated as of January 7, 2007, between an affiliate of Welsh, Carson, Anderson & Stowe X, L.P. (Welsh Carson), we became a wholly owned subsidiary of USPI Holdings, Inc. on April 19, 2007. USPI Holdings is a wholly owned subsidiary of USPI Group Holdings, Inc. (Parent), which is owned by an investor group that includes affiliates of Welsh Carson, members of our management and other investors.

In the merger, all of our stockholders received $31.05 in cash for each share of common stock owned. Additionally, all of our unvested restricted stock awards, except as otherwise agreed to by the holder and Parent, immediately vested and the holders of restricted stock awards also received $31.05 per share in cash. Holders of stock options issued by us, including unvested stock options, received cash equal to $31.05 per option minus the exercise price of the option multiplied by the number of shares subject to the option.

The transaction was valued at approximately $1.8 billion, including the assumption of $153.6 million of our existing debt. The funds necessary to consummate the transaction were approximately $1.7 billion, including $1.4 billion to pay then current stockholders and equity award holders, approximately $199.4 million to repay certain existing indebtedness and approximately $47.1 million to pay related fees and expenses. The remainder of the net proceeds was remitted to the Company. The transaction was financed by:

•  an investment of cash and rollover equity in the equity of Parent by Welsh Carson, management and other equity investors of approximately $785.0 million;

•  borrowings by the Company of $430.0 million in new senior secured credit facilities;

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•  the issuance by the Company of $240.0 million in aggregate principal amount of 87/8% senior subordinated notes, due 2017, and $200.0 million in aggregate principal amount of 91/4%/10% senior subordinated toggle notes, due 2017;

•  additional borrowings of £10.0 million (approximately $19.7 million) by Global Healthcare Partners Limited, which was repatriated to the U.S.; and

•  approximately $21.9 million of cash on hand.

Acquisitions, Equity Investments and Development Projects

As part of our growth strategy, we acquire interests in existing surgical facilities from third parties and invest in new facilities that we develop in partnership with hospital partners and local physicians. Some of these transactions result in our controlling the acquired entity (business combinations). In December 2009, we invested $9.9 million in a subsidiary jointly operated with one of our hospital partners, which the subsidiary used to acquire a controlling interest in a facility in Houston, Texas.

We also regularly engage in the purchase and sale of equity interests with respect to our investments in unconsolidated affiliates that do not result in a change of control. These transactions are primarily the acquisitions and sales of equity interests in unconsolidated surgical facilities and the investment of additional cash in surgical facilities under development. During the year ended December 31, 2009, these transactions resulted in a net cash outflow of approximately $47.4 million, which is summarized below:

Effective Date	Facility Location	Amount
Investments
December 2009	Cincinnati, Ohio(1)	$	17.7 million
December 2009	Portland, Oregon(2)		11.1 million
December 2009	Nashville, Tennessee(3)		6.1 million
September 2009	Fort Worth, Texas(3)		1.2 million
July 2009	Fort Worth, Texas(3)		1.0 million
May 2009	St. Louis, Missouri(4)		0.9 million
February 2009	Fort Worth, Texas(2)		2.0 million
February 2009	Stockton, California(2)		2.5 million
Various	Various(5)		7.3 million
Total			49.8 million
Sales (6)
December 2009	Dallas, Texas(7)		2.4 million
Total		$	47.4 million

(1)	Acquisition of a noncontrolling interest in and right to manage a surgical facility in which we previously had no involvement. This facility is jointly owned with local physicians.
(2)	Acquisition of a noncontrolling interest in and right to manage a surgical facility in which we previously had no involvement. This facility is jointly owned with one of our hospital partners and local physicians.
(3)	Acquisition of additional ownership in one of our existing facilities.
(4)	Acquisition of the right to manage a surgical facility in which we previously had no involvement. We have a purchase option to acquire a 20% equity interest in the facility within one year, and after approximately three years, an option to purchase an additional 20% equity interest.
(5)	Represents the net purchase of additional ownership and equity contributions in various unconsolidated affiliates, including $3.4 million of investment in four de novos.

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(6)	Sale transactions not involving our surrendering control of the facility are described in this section. Transactions involving the sale of our entire interest in a facility or our surrendering control of a facility are described in “Discontinued Operations and Other Dispositions.”
(7)	Sale of a portion of our noncontrolling interest in two facilities to a hospital partner. This hospital partner is a related party (Note 13). We retained a noncontrolling interest in these facilities and continue to operate them.

Additionally, effective January 1, 2009, we acquired noncontrolling equity interests in and rights to manage two surgical facilities in which we previously had no involvement. These facilities are jointly owned with one of our hospital partners and local physicians. The total purchase price of $2.2 million was paid in December 2008.

We control and therefore consolidate the results of 60 of our 169 facilities. Similar to our investments in unconsolidated affiliates, we regularly engage in the purchase and sale of equity interests in our consolidated subsidiaries that do not result in a change of control. These types of transactions are accounted for as equity transactions, as they are undertaken among us, our consolidated subsidiaries, and noncontrolling interests.

During the year ended December 31, 2009, we purchased and sold equity interests in various consolidated subsidiaries in the amounts of $9.4 million and $7.4 million, respectively. The $9.4 million of purchases includes the partial exercise of our purchase option in one of our existing centers in St. Louis for $7.1 million. The difference between our carrying amount and the proceeds received or paid in each transaction is recorded as an adjustment to our additional paid-in capital. These transactions resulted in a $14.3 million decrease to our additional paid-in capital during the year ended December 31, 2009.

We engaged in the following business combinations and transactions, formerly known as step acquisitions, during the year ended December 31, 2008:

Effective Date	Facility Location	Amount
December 2008	St. Louis, Missouri(1)	$	0.4 million
October 2008	St. Louis, Missouri(2)		1.9 million
September 2008	St. Louis, Missouri(2)		15.8 million
September 2008	St. Louis, Missouri(3)		18.0 million
August 2008	St. Louis, Missouri(2)		3.0 million
June 2008	Dallas, Texas(4)		3.9 million
April 2008	St. Louis, Missouri(5)		14.1 million
Various	Various(6)		6.6 million
Total		$	63.7 million

(1)	We acquired additional ownership in one of our existing facilities.
(2)	We had no previous investment in this facility.
(3)	We acquired additional ownership in two of our existing facilities.
(4)	We purchased all of a healthcare system’s ownership interest in an entity it co-owned with us. This entity has ownership in and manages five facilities in the Dallas/Fort Worth area. This holding company was already a subsidiary of our company and is now wholly owned by us.
(5)	We acquired additional ownership in three of our existing facilities.
(6)	Represents the purchase of additional ownership in various consolidated entities.

We also engaged in transactions that are not business combinations or step acquisitions. These transactions primarily consist of acquisitions and sales of noncontrolling equity interests in surgical facilities and the investment of additional cash in surgical facilities under development. During the year ended December 31, 2008, these transactions resulted in a net cash outflow of approximately $35.6 million, which is summarized below.

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Effective Date	Facility Location	Amount
Investments
December 2008	Nashville, Tennessee(1)	$	18.3 million
December 2008	Houston, Texas(1)		5.4 million
December 2008	Portland, Oregon(1)		5.7 million
December 2008	Denver, Colorado(2)		2.2 million
October 2008	Houston, Texas(1)		5.2 million
October 2008	Denver, Colorado(1)		2.1 million
January 2008	Knoxville, Tennessee(1)		1.4 million
January 2008	Las Vegas, Nevada(1)		1.1 million
			41.4 million
Sales
April 2008	Kansas City, Missouri(3)		3.6 million
Various	Various(4)		2.2 million
			5.8 million
Total		$	35.6 million

(1)	Acquisition of a noncontrolling equity interest in and right to manage a surgical facility in which we previously had no involvement. This facility is jointly owned with one of our hospital partners and local physicians.
(2)	Acquisition of a noncontrolling equity interest in and right to manage two surgical facilities in which we previously had no involvement. These facilities are jointly owned with one of our hospital partners and local physicians. The purchase price was paid in December 2008 and our ownership became effective January 1, 2009.
(3)	A not-for-profit hospital partner obtained ownership in a facility.
(4)	Represents the net receipt related to various other purchases and sales of equity interests and contributions of cash to equity method investees.

As further described in the section, “Discontinued Operations and Other Dispositions,” during 2008, we received proceeds of $3.4 million related to our sale of all our ownership interests in five facilities. We also received cash proceeds of $5.2 million related to the sale of noncontrolling interests in five facilities to various not-for-profit hospital partners.

We engaged in the following business combinations and transactions, formerly known as step acquisitions, during the combined year ended December 31, 2007:

Effective Date	Facility Location	Amount
September 2007	St. Louis, Missouri(1)	$	34.3 million
May 2007	Houston, Texas(2)		9.0 million
May 2007	St. Louis, Missouri(2)		28.7 million
March 2007	St. Louis, Missouri(2)		7.3 million
February 2007	St. Louis, Missouri(3)		15.9 million
Total		$	95.2 million

(1)	We acquired additional ownership in five of our existing facilities.
(2)	We had no previous investment in this facility.
(3)	We had no previous investment in these two facilities.

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During the combined year ended December 31, 2007, transactions that were not business combinations or step acquisitions resulted in a net cash outflow of approximately $0.2 million and can be summarized as follows:

Effective Date	Facility Location	Amount
Investments
September 2007	Houston, Texas(1)	$	5.7 million
April 2007	Detroit, Michigan(1)		1.5 million
Various	Various(2)		3.3 million
			10.5 million
Sales
January 2007	Chicago, Illinois		9.8 million
August 2007	Oklahoma City, Oklahoma		0.5 million
			10.3 million
Total		$	0.2 million

(1)	Acquisition of a noncontrolling equity interest in and right to manage a surgical facility in which we previously had no involvement. This facility is jointly owned with one of our hospital partners and local physicians.
(2)	Represents the net payment of approximately $3.3 million related to other purchases and sales of equity interests and contributions of cash to equity method investees.

As further described in the section, “Discontinued Operations and Other Dispositions,” during 2007, we received proceeds of $2.1 million related to our sale of all our ownership interests in five facilities. We also received proceeds of $9.8 million related to the sale of noncontrolling interests in four facilities to various not-for-profit hospital partners.

Discontinued Operations and Other Dispositions

During 2009, 2008, and 2007, we sold all of our ownership interests in 16 facilities as summarized below:

Date	Facility Location	Proceeds (Costs)			Gain (Loss)
December 2009	Oxnard, California(1)		0.3 million			(0.3 million	)
December 2009	Baton Rouge, Louisiana(2)		(5.1 million	)		(8.2 million	)
September 2009	San Antonio, Texas(1)		—			(2.6 million	)
July 2009	Cleveland, Ohio(3)		1.0 million			—
February 2009	Las Cruces, New Mexico(1)		—			—
February 2009	East Brunswick, New Jersey(1)		0.7 million			(2.6 million	)
Total		$	(3.1 million	)	$	(13.7 million	)
July 2008	Manitowoc, Wisconsin(1)	$	0.8 million		$	—
July 2008	Orlando, Florida(1)		0.5 million			(0.4 million	)
June 2008	Cleveland, Ohio(4)		1.6 million			(1.0 million	)
April 2008	Los Angeles, California(1)		—			—
February 2008	Sarasota, Florida(1)		0.5 million			—
Total		$	3.4 million		$	(1.4 million	)
December 2007	Houston, Texas(4)	$	—		$	(0.6 million	)
December 2007	Decatur, Alabama(4)		0.3 million			(2.2 million	)
November 2007	Canton, Mississippi(4)		—			(0.9 million	)
September 2007	Atlanta, Georgia(1)		1.8 million			0.5 million
September 2007	Baltimore, Maryland(1)		—			(1.2 million	)
Total		$	2.1 million		$	(4.4 million	)

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(1)	Because these investments were accounted for under the equity method, the results of operations of these facilities are not reported as discontinued operations. The gain (loss) on the disposal of these facilities is recorded in “(Loss) gain on sale of equity interests” in the accompanying consolidated statements of operations.
(2)	We paid $5.1 million to settle contingent liabilities in conjunction with the sale of this center. Such amount was expensed and included in “(Loss) gain on sale of equity interests” in the accompanying consolidated statements of operations. Because this investment was accounted for under the equity method, the results of operations of this facility are not reported as discontinued operations.
(3)	We financed the entire purchase price with the buyer and have a security interest in the facility’s assets until the note is collected, which is due in March 2010. As a result, we deferred the recognition of the gain, which is estimated at $0.6 million. Because this investment was accounted for under the equity method, the results of operations of this facility are not reported as discontinued operations.
(4)	In accordance with GAAP, we have reclassified our historical results of operations to remove the operations of these facilities from our revenues and expenses on the accompanying consolidated statements of operations, collapsing the income (loss) related to these facilities’ operations and our disposal of them into a single line, “Loss from discontinued operations, net of tax.”

In addition to the sales of ownership interests noted above, we sold controlling interests to various hospital partners during 2009, 2008, and 2007 which are described below, as part of our strategy for partnering with these systems. Our continuing involvement as an equity method investor and manager of the facilities precludes classification of these transactions as discontinued operations. Gains and losses are recorded in “(Loss) gain on sale of equity interests” in the accompanying consolidated statements of operations.

Date	Facility Location	Proceeds		Gain (Loss)
December 2009	Dallas, Texas(1)	$	1.2 million	$	0.3 million
July 2009	Oklahoma City, Oklahoma(2)		0.2 million		0.1 million
March 2009	Phoenix, Arizona(3)		0.1 million		(8.2 million	)
Total		$	1.5 million	$	(7.8 million	)
July 2008	Beaumont, Texas	$	1.2 million	$	(0.5 million	)
June 2008	Dallas, Texas(1)		2.3 million		(0.9 million	)
June 2008	Houston, Texas(4)		0.6 million		—
March 2008	Redding, California(5)		1.7 million		—
Total		$	5.8 million	$	(1.4 million	)
July 2007	Dallas, Texas(6)	$	3.7 million	$	—
April 2007	Corpus Christi, Texas(7)		6.1 million		0.9 million
Total		$	9.8 million	$	0.9 million

(1)	The hospital partner acquired a controlling interest from us in this transaction. Additionally, this hospital partner is a related party (Note 13).
(2)	We and the other owners of a facility consolidated by us agreed to merge the facility into another entity in which we hold an investment accounted for under the equity method.
(3)	A controlling interest in an entity was sold to a hospital partner. The hospital partner already had a 49% ownership interest in this entity, which owns and manages two surgical facilities, and through the transaction acquired an additional 1.1% interest. The $8.2 million loss was primarily related to the revaluation of our remaining investment in the entity to fair value.
(4)	Because we are considered the primary beneficiary of this entity, we consolidate the entity, and continue to consolidate the facility’s operating results. The sales price of $0.6 million was paid in the form of a note receivable from the buyer.
(5)	We sold a controlling interest in two facilities and gained a noncontrolling interest in a third facility in Redding.

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(6)	The hospital partner already had an ownership interest in these two facilities and acquired a controlling interest from us in this transaction. Additionally, this hospital partner is a related party (Note 13).
(7)	We sold a controlling interest in two facilities.

Combination of Operating Results

We have reported our operating results and financial position for the period subsequent to April 19, 2007, as the “Successor Period” and all periods prior to April 19, 2007, as “Predecessor Periods.” For the purposes of presenting a comparison of our 2007 results to our 2008 results, we have presented our 2007 results as the sum, as shown in the table below, of our operating results from the Predecessor Period from January 1, 2007 through April 18, 2007 and our operating results for the Successor Period from April 19, 2007 to December 31, 2007. We believe that this presentation provides the most meaningful information about our operating results. This approach is not consistent with GAAP and may yield results that are not strictly comparable on a period-to-period basis. Even on a combined basis, our results of operations for the year ended December 31, 2007 are neither comparable with prior periods nor indicative of results to be expected in future periods given our incurrence of merger-related expenses and indebtedness in 2007.

	Predecessor			Successor			Combined
	Period from			Period from			Year Ended
	January 1 through			April 19 through			December 31,
	April 18, 2007			December 31, 2007			2007
Revenues:
Net patient service revenues	$	170,598		$	402,433		$	573,031
Management and contract service revenues		19,142			46,503			65,645
Other revenues		1,615			3,552			5,167
Total revenues		191,355			452,488			643,843
Equity in earnings of unconsolidated affiliates		9,906			23,867			33,773
Operating expenses:
Salaries, benefits, and other employee costs		53,871			125,648			179,519
Medical services and supplies		34,308			77,006			111,314
Other operating expenses		31,744			74,335			106,079
General and administrative expenses		39,277			29,340			68,617
Provision for doubtful accounts		3,297			7,592			10,889
Depreciation and amortization		12,426			26,688			39,114
Total operating expenses		174,923			340,609			515,532
Operating income		26,338			135,746			162,084
Interest income		933			3,208			4,141
Interest expense		(9,521	)		(67,862	)		(77,383	)
Loss on early retirement of debt		(2,435	)		—			(2,435	)
Other, net		798			(442	)		356
Total other expense, net		(10,225	)		(65,096	)		(75,321	)
Income from continuing operations before income taxes		16,113			70,650			86,763
Income tax expense		(4,256	)		(14,592	)		(18,848	)
Income from continuing operations		11,857			56,058			67,915
Loss from discontinued operations, net of tax		(458	)		(2,154	)		(2,612	)
Net income		11,399			53,904			65,303
Less: Net income attributable to noncontrolling interests		(18,548	)		(45,175	)		(63,723	)
Net income (loss) attributable to USPI’s common stockholder	$	(7,149	)	$	8,729		$	1,580

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Sources of Revenue

Revenues primarily include the following:

•  net patient service revenues of the facilities that we consolidate for financial reporting purposes, which are those in which we have ownership interests of greater than 50% or otherwise maintain effective control;

•  management and contract service revenues, consisting of the fees that we earn from managing the facilities that we do not consolidate for financial reporting purposes and the fees we earn from providing certain consulting and other contracted services to physicians and hospitals. Our consolidated revenues and expenses do not include the management fees we earn from operating the facilities that we consolidate for financial reporting purposes as those fees are charged to subsidiaries and thus eliminate in consolidation.

The following table summarizes our revenues by type and as a percentage of total revenue for the periods presented:

	Years Ended December 31,
							Combined
	2009			2008			2007
Net patient service revenues		86	%		88	%		89	%
Management and contract service revenues		12			11			10
Other revenues		2			1			1
Total revenues		100	%		100	%		100	%

Net patient service revenues consist of the revenues earned by facilities we consolidate for financial reporting purposes. As a percentage of total revenues, these revenues decreased to 86% of our total revenues for the year ended December 31, 2009. This decrease is due in part to the U.S. dollar being stronger on average against the British pound in 2009 compared to 2008, and also is due to shifting of more of our facilities to joint ventures with hospital partners, which usually requires us to account for the facility under the equity method of accounting (as an unconsolidated affiliate). As we execute our strategy of partnering with not-for-profit healthcare systems, more of our business is being conducted through unconsolidated affiliates. With respect to unconsolidated facilities, we do not include the facilities’ net patient service revenues in our financial results; instead; our consolidated financial statements reflect revenues we earn for our management and contract services as noted below. Our share of the revenues, net of expenses of unconsolidated facilities, is reported in our consolidated financial statements as “equity in earnings of unconsolidated affiliates,” which is displayed between revenues and expenses. The percentage of our U.S. facilities we account for under the equity method was 64%, 63%, and 61% at December 31, 2009, 2008, and 2007, respectively.

Our management and contract service revenues are earned from the following types of activities (in thousands):

	Years Ended December 31,
					Combined
	2009		2008		2007
Management of surgical facilities	$	46,438	$	40,100	$	34,161
Contract services provided to hospitals, physicians and related entities		30,966		32,870		31,484
Total management and contract service revenues	$	77,404	$	72,970	$	65,645

As described above, our primary business is the operation of surgical facilities. In addition, we earn contract service revenues from other parties, primarily from hospitals through an endoscopy services business we acquired in 2006.

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The following table summarizes our revenues by operating segment:

	Years Ended December 31,
							Combined
	2009			2008			2007
United States		83	%		81	%		82	%
United Kingdom		17			19			18
Total		100	%		100	%		100	%

The net number of facilities we operate increased by five from December 31, 2008 to December 31, 2009. All of these additional facilities are in the United States. However, this increase was weighted heavily toward facilities we account for under the equity method (a net increase of eight). As described above, our revenues related to unconsolidated facilities are limited to the service fees we earn for managing them; their underlying patient service revenues are not included in ours. Between December 31, 2008 and December 31, 2009, the average value of the British pound as compared to the U.S. dollar weakened approximately 15%. This decrease in value resulted in the proportion of our total revenues derived from U.K. operations as stated in U.S. dollars to decrease in the year ended December 31, 2009 as compared to the year ended December 31, 2008.

From 2007 to 2008, the net number of facilities we operate increased by nine. All of these additional facilities are in the United States. This increase was heavily weighted towards facilities we account for under the equity method (an increase of eight). As described above, our revenues related to equity method facilities are limited to the service fees we earn for managing them. This factor, together with strong growth in our U.K. facilities, all of which we consolidate, caused the proportion of our total revenues that is derived from the United States to be slightly lower for the year ended December 31, 2008 than in the combined year ended 2007.

Results of Operations

The following table summarizes certain consolidated statements of operations items expressed as a percentage of revenues for the periods indicated:

	Years Ended December 31,
							Combined
USPI	2009			2008			2007
Total revenues		100.0	%		100.0	%		100.0	%
Equity in earnings of unconsolidated affiliates		9.9			7.3			5.2
Operating expenses, excluding depreciation and amortization		(67.4	)		(70.5	)		(74.0	)
Depreciation and amortization		(5.6	)		(5.7	)		(6.0	)
Operating income		36.9			31.1			25.2
Interest and other expense, net		(15.5	)		(13.1	)		(11.7	)
Income from continuing operations before income taxes		21.4			18.0			13.5
Income tax benefit (expense)		—			(3.5	)		(2.9	)
Income from continuing operations		21.4			14.5			10.6
Loss from discontinued operations, net of tax		—			(0.1	)		(0.4	)
Net income		21.4			14.4			10.2
Less: Net income attributable to noncontrolling interests		(10.2	)		(8.6	)		(9.9	)
Net income attributable to USPI’s common stockholder		11.2	%		5.8	%		0.3	%

Our business model of partnering with not-for-profit hospitals and physicians results in our accounting for the majority of our surgical facilities under the equity method rather than consolidating their results. The following table reflects the summarized results of the unconsolidated facilities that we account for under the equity method of accounting

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(amounts are expressed as a percentage of unconsolidated affiliates revenues, and reflect 100% of the investees’ results on an aggregated basis):

	Years Ended December 31,
USPI’s Unconsolidated Affiliates	2009			2008			2007
Revenues		100.0	%		100.0	%		100.0	%
Operating expenses:
Salaries, benefits, and other employee costs		(23.6	)		(24.7	)		(26.2	)
Medical services and supplies		(23.1	)		(21.2	)		(21.0	)
Other operating expenses		(23.1	)		(24.9	)		(25.8	)
Depreciation and amortization		(4.3	)		(4.8	)		(5.2	)
Total operating expenses		(74.1	)		(75.6	)		(78.2	)
Operating income		25.9			24.4			21.8
Interest expense, net		(2.1	)		(2.4	)		(2.5	)
Other, net		0.7			0.3			0.2
Income before income taxes		24.5			22.3			19.5
Income tax expense		(0.6	)		(0.6	)		(0.7	)
Net income		23.9	%		21.7	%		18.8	%

Executive Summary

We continue to grow our existing facilities, develop new facilities with our hospital partners and add others selectively through acquisition. Our operating results continue to be strong, as our operating income increased 15% during 2009 as compared 2008, and operating income margin increased by 580 basis points during the same period. These results were driven primarily by an increase in average revenue per procedure in our U.S. facilities and by improvements in leveraging our operating expenses. Systemwide revenues grew 10% during the year ended December 31, 2009 as compared to 2008. While acquisitions drove some of this increase, the majority of the growth was in U.S. same store facilities, which grew their revenues by 8% during 2009. Together with cost containment efforts, this growth in revenues resulted in a 250 basis point margin improvement for U.S. same store facilities.

These operational trends drove a 15% increase in USPI’s operating income, but since the majority of the growth was in entities we manage but do not consolidate, our individual revenue and expense line items did not grow at a corresponding rate. In fact, the revenues reported in our consolidated statement of operations, which consist only of consolidated facilities, decreased by approximately 3%. Although the revenues of our consolidated facilities continue to grow on average, we sold a partial interest in four consolidated facilities during 2009, which resulted in our accounting for them under the equity method and thus no longer including their revenues in our consolidated statements of operations. These transfers of facilities from consolidated to unconsolidated status contributed favorably to the 18% growth in revenues of the group of facilities we operate through unconsolidated affiliates. In addition, our consolidated revenues reported by the U.K. during 2009, which actually grew by $1.9 million before considering the effect of changes in currency exchange rates, were lower by approximately $18.9 million as compared to the prior year due to the strengthening of the U.S. dollar as compared to the British pound, which reduced our 2009 operating income by $4.2 million and net income by $2.2 million. A more detailed description of our revenues, including a table quantifying key elements of our change in revenues compared to the prior year, is presented in “Revenues,” later in this document.

The increased significance of our unconsolidated affiliates is a direct result of deploying our primary U.S. business strategy of jointly owning our facilities with not-for-profit health systems and local physicians. While we believe this strategy increases our net income over time, it does not translate to proportionate increases in revenues, as our share of these facilities’ revenues and expenses is reflected on a net basis within “equity in earnings of unconsolidated affiliates” rather than being included in the individual revenue and expense line items of our consolidated financial statements. This business model frequently results in our profits growing at a different rate than our individual revenue and expense line items. Accordingly, we include statements of income of our unconsolidated affiliates and review key operating indicators for all facilities we operate to help illustrate the underlying health and magnitude of the businesses we operate and to help explain increases in USPI’s operating income, as described more fully in the following section.

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We added 11 facilities during 2009 and completed the sale of six facilities. Consistent with our strategy, our overall net increase in facilities continues to be heavily weighted toward facilities we operate with a hospital partner. From December 31, 2008 to December 31, 2009, our overall net number of facilities increased by five, and the number of facilities we operate with a hospital partner increased by ten, including three de novo facilities, which opened during 2009. Our development pipeline remains active, with eight additional facilities under development, of which four had commenced construction by December 31, 2009. All of these facilities are being developed with a hospital partner; one facility opened in February 2010.

Our net income (attributable to USPI’s common stockholder) increased $32.2 million during the year ended December 31, 2009 as compared to the prior year, driven largely by the reversal of $31.2 million of deferred income tax asset valuation allowance, an increase in equity in earnings of unconsolidated affiliates of $14.7 million and companywide cost control measures. Additionally, our net interest expense was $17.1 million lower than 2008, primarily due to a decrease in market interest rates. These increases to net income more than offset nonoperating losses totaling $28.1 million recorded in 2009. These losses related to the deconsolidation of four facilities, which we believe will improve our long-term profitability; the sale of our interests in six others; and the recognition of impairment losses on three indefinite-lived management contracts.

Overall, we continue to grow our existing facilities and focus our business development activities primarily in markets where we have a hospital partner or believe that we have the potential to develop such a relationship. This strategy primarily directs where we deploy capital. It also leads us to sell facilities from time to time that do not meet this or other strategic objectives.

Our Business and Key Measures

We operate surgical facilities in partnership with local physicians and, in the majority of cases, a not-for-profit health system partner. We hold an ownership interest in each facility, each being operated through a separate legal entity owned by us, the health systems and physicians. We operate each facility on a day-to-day basis through a management services contract. Our sources of earnings from each facility consist of:

•  management services revenues, computed as a percentage of each facility’s net revenues (often net of bad debt expense); and

•  our share of each facility’s net income, which is computed by multiplying the facility’s net income times the percentage of each facility’s equity interests owned by us.

Our role as an owner and day-to-day manager provides us with significant influence over the operations of each facility. In a growing majority of our facilities (currently 109 of our 169 facilities), this influence does not represent control of the facility, so we account for our investment in the facility under the equity method, i.e., as an unconsolidated affiliate. We control the remaining 60 of our facilities and account for these investments as consolidated subsidiaries.

Our net earnings from a facility are the same under either method, but the classification of those earnings differs. For consolidated subsidiaries, our financial statements reflect 100% of the revenues and expenses of the subsidiaries, after the elimination of intercompany amounts. The net profit attributable to owners other than us is classified within “net income attributable to noncontrolling interests.”

For unconsolidated affiliates, our consolidated statements of operations reflect our earnings in only two line items:

•  equity in earnings of unconsolidated affiliates: our share of the net income of each facility, which is based on the facilities’ net income and the percentage of the facility’s outstanding equity interests owned by us; and

•  management and administrative services revenues: income we earn in exchange for managing the day-to-day operations of each facility, usually quantified as a percentage of each facility’s net revenues less bad debt expense.

In summary, USPI’s operating income is driven by the performance of all facilities we operate and by our ownership interest in those facilities, but USPI’s individual revenue and expense line items only contain

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consolidated businesses, which represent less than half of our operations. This translates to trends in operating income that often do not correspond with changes in revenues and expenses. The divergence in these relationships is particularly significant when our strategy is heavily weighted to unconsolidated affiliates, as it has been in recent years during the ongoing deployment of our strategy to partner with not-for-profit health systems. Accordingly, we review several types of information in order to monitor and analyze USPI’s results of operations, including:

•  The results of operations of USPI’s unconsolidated affiliates

•  USPI’s average ownership share in the facilities we operate; and

•  Facility operating indicators, such as systemwide revenue growth, same store revenue growth, and same store operating margins

Our Consolidated and Unconsolidated Results

The following table shows USPI’s results of operations and the results of operations of USPI’s unconsolidated affiliates.

	Year Ended December 31,
	2009						2008						Variance to Prior Year
	USPI As						USPI As						USPI As
	Reported						Reported						Reported
	Under			Unconsolidated			Under			Unconsolidated			Under			Unconsolidated
	GAAP			Affiliates			GAAP			Affiliates			GAAP			Affiliates
Revenues:
Net patient service revenues	$	533,609		$	1,171,242		$	561,532		$	996,315		$	(27,923	)	$	174,927
Management and contract service revenues		77,404			—			72,970			—			4,434			—
Other income		11,352			3,176			7,721			2,168			3,631			1,008
Total revenues		622,365			1,174,418			642,223			998,483			(19,858	)		175,935
Equity in earnings of unconsolidated affiliates		61,771			—			47,042			13			14,729			(13	)
Operating expenses:
Salaries, benefits, and other employee costs		174,148			277,053			184,871			246,739			(10,723	)		30,314
Medical services and supplies		102,673			271,663			112,499			211,781			(9,826	)		59,882
Other operating expenses		94,633			243,241			107,659			218,337			(13,026	)		24,904
General and administrative expenses		38,769			—			40,155			—			(1,386	)		—
Provision for doubtful accounts		8,958			28,528			7,568			29,497			1,390			(969	)
Depreciation and amortization		35,297			50,251			36,757			48,722			(1,460	)		1,529
Total operating expenses		454,478			870,736			489,509			755,076			(35,031	)		115,660
Operating income		229,658			303,682			199,756			243,420			29,902			60,262
Interest income		2,630			456			3,228			1,687			(598	)		(1,231	)
Interest expense		(70,915	)		(24,850	)		(85,649	)		(25,788	)		14,734			938
Other		(28,082	)		8,275			(1,790	)		2,962			(26,292	)		5,313
Total other expense, net		(96,367	)		(16,119	)		(84,211	)		(21,139	)		(12,156	)		5,020
Income from continuing operations before income taxes		133,291			287,563			115,545			222,281			17,746			65,282
Income tax (expense) benefit		97			(6,860	)		(22,333	)		(5,566	)		22,430			(1,294	)
Net income from continuing operations		133,388			280,703			93,212			216,715			40,176			63,988
Loss from discontinued operations		—			—			(560	)		—			560			—
Net income		133,388		$	280,703			92,652		$	216,715			40,736		$	63,988
Less: Net income attributable to noncontrolling interests		(63,722	)					(55,138	)					(8,584	)
Net income attributable to USPI	$	69,666					$	37,514					$	32,152
USPI’s equity in earnings of unconsolidated affiliates				$	61,771					$	47,042					$	14,729

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	Year Ended December 31,
	2008						Combined 2007						Variance to Prior Year
	USPI As						USPI As						USPI As
	Reported						Reported						Reported
	Under			Unconsolidated			Under			Unconsolidated			Under			Unconsolidated
	GAAP			Affiliates			GAAP			Affiliates			GAAP			Affiliates
Revenues:
Net patient service revenues	$	561,532		$	996,315		$	573,031		$	793,123		$	(11,499	)	$	203,192
Management and contract service revenues		72,970			—			65,645			—			7,325			—
Other income		7,721			2,168			5,167			2,036			2,554			132
Total revenues		642,223			998,483			643,843			795,159			(1,620	)		203,324
Equity in earnings of unconsolidated affiliates		47,042			13			33,773			118			13,269			(105	)
Operating expenses:
Salaries, benefits, and other employee costs		184,871			246,739			179,519			208,390			5,352			38,349
Medical services and supplies		112,499			211,781			111,314			167,032			1,185			44,749
Other operating expenses		107,659			218,337			106,079			183,123			1,580			35,214
General and administrative expenses		40,155			—			68,617			—			(28,462	)		—
Provision for doubtful accounts		7,568			29,497			10,889			22,192			(3,321	)		7,305
Depreciation and amortization		36,757			48,722			39,114			41,057			(2,357	)		7,665
Total operating expenses		489,509			755,076			515,532			621,794			(26,023	)		133,282
Operating income		199,756			243,420			162,084			173,483			37,672			69,937
Interest income		3,228			1,687			4,141			2,826			(913	)		(1,139	)
Interest expense		(85,649	)		(25,788	)		(77,383	)		(23,317	)		(8,266	)		(2,471	)
Other		(1,790	)		2,962			(2,079	)		1,843			289			1,119
Total other expense, net		(84,211	)		(21,139	)		(75,321	)		(18,648	)		(8,890	)		(2,491	)
Income from continuing operations before income taxes		115,545			222,281			86,763			154,835			28,782			67,446
Income tax expense		(22,333	)		(5,566	)		(18,848	)		(5,575	)		(3,485	)		9
Net income from continuing operations		93,212			216,715			67,915			149,260			25,297			67,455
Loss from discontinued operations		(560	)		—			(2,612	)		—			2,052			—
Net income		92,652		$	216,715			65,303		$	149,260			27,349		$	67,455
Less: Net income attributable to noncontrolling interests		(55,138	)					(63,723	)					8,585
Net income attributable to USPI	$	37,514					$	1,580					$	35,934
USPI’s equity in earnings of unconsolidated affiliates				$	47,042					$	33,773		$			$	13,269

The following table provides other information regarding our unconsolidated affiliates (in thousands):

	Years Ended December 31,
	2009			2008			2007
Long-term debt	$	271,781		$	273,438		$	278,417
USPI’s equity in earnings of unconsolidated affiliates		61,771			47,042			33,773
USPI’s imputed weighted average ownership percentage based on affiliates’ pretax income(1)		21.5	%		21.2	%		21.8	%
USPI’s imputed weighted average ownership percentage based on affiliates’ debt(2)		25.4	%		25.0	%		26.9	%
Unconsolidated facilities operated at period end		109			101			93

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(1)

Our weighted average percentage ownership in our unconsolidated affiliates is calculated as USPI’s equity in earnings of unconsolidated affiliates divided by the total net income of unconsolidated affiliates for each respective period. This is no comparable GAAP measure but management believes it provides further useful information about its involvement in unconsolidated affiliates.

(2)

Our weighted average percentage ownership in our unconsolidated affiliates is calculated as the total debt of each unconsolidated affiliate, multiplied by the percentage ownership USPI held in the affiliate as of the end of each respective period, divided by the total debt of all of the unconsolidated affiliates as of the end of each respective period. This is no comparable GAAP measure but management believes it provides further useful information about its involvement in unconsolidated affiliates.

One of our unconsolidated affiliates, Texas Health Ventures Group, L.L.C., is considered significant to our consolidated financial statements under regulations of the SEC. As a result, we have filed Texas Health Ventures Group, L.L.C.’s consolidated financial statements with this Form 10-K for the appropriate periods.

As shown above, USPI’s consolidated net patient service revenues for the year ended December 31, 2009 decreased $27.9 million compared to the prior year, and the net patient service revenues of USPI’s unconsolidated affiliates increased $174.9 million. These variances are analyzed more extensively in the “Revenues” section, but in general they reflect the fact that we are conducting more of our operations through unconsolidated affiliates. The increase in revenues of these unconsolidated affiliates, net of their expenses, led to the affiliates earning $64.0 million more compared to the prior year. The affiliates’ increase in net income, once allocated to USPI and the affiliates’ other investors, led to USPI’s equity in earnings of unconsolidated affiliates increasing by $14.7 million, which represents nearly 50% of the increase in USPI’s operating income.

When comparing 2008 and the combined year 2007, the relationships were similar. USPI’s consolidated net patient services revenues decreased $11.5 million for the year ended December 31, 2008 compared to the combined year 2007, and the net patient service revenues of USPI’s unconsolidated affiliates increased $203.2 million, driving a $67.5 million increase in the net income of the unconsolidated affiliates and an overall increase of $13.3 million in USPI’s equity in earnings of unconsolidated affiliates.

Our Ownership Interests in the Facilities We Operate

Our earnings are predominantly driven by our investments in the facilities we operate, so we focus on those businesses’ growth rates together with the percentage ownership interest we hold in them to help us understand our results of operations. Our average ownership interest in the U.S. surgical facilities we operate is as follows:

	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2009			2008			2007
Unconsolidated facilities(1)		21.5	%		21.2	%		21.8	%
Consolidated facilities(2)		48.1	%		48.8	%		46.5	%
Total(3)		29.4	%		30.2	%		32.6	%

(1)	Computed for unconsolidated facilities by dividing (a) our total equity in earnings of unconsolidated affiliates by (b) the aggregate net income of U.S. surgical facilities we account for under the equity method.
(2)	Computed for consolidated facilities by dividing (a) the aggregate net income of U.S. surgical facilities we operate less our total minority interests in income of consolidated subsidiaries by (b) the aggregate net income of our consolidated U.S. surgical facilities.
(3)	Computed in total by dividing our share of the facilities’ net income, defined as the sum of (a) in footnotes (1) and (2), by the aggregate net income of our U.S. surgical facilities, defined as the sum of (b) in footnotes (1) and (2).

Our average ownership interest for each group of facilities is determined by many factors, including the ownership levels we negotiate in our acquisition and development activities, the relative performance of facilities in which we own percentages higher or lower than average, and other factors. As described earlier, our increased focus on partnering our facilities with hospital partners in addition to physicians generally leads to our accounting for

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more facilities under the equity method (unconsolidated), and we have moved four facilities from consolidated to unconsolidated during each year in 2009, 2008 and 2007. Accordingly, our consolidated financial statements show small decreases in revenues and most expense line items compared to the respective prior year. However, since our average ownership in our facilities, as shown in the table above, did not significantly change from the respective prior year, our success in growing our facilities’ profits (whether consolidated or unconsolidated) translated to a 15%, 23% and 2% increase in USPI’s operating income in 2009, 2008 and the combined year 2007. The combined year 2007’s operating income was adversely affected by merger-related expenses of approximately $25.4 million.

Revenues

USPI’s consolidated net revenues decreased approximately 3% during the year ended December 31, 2009, as compared to the year ended December 31, 2008. However, our operating income increased 15%, and our net income attributable to USPI’s common stockholder increased 86%. The table below quantifies several significant items impacting year over year growth.

	Year Ended
	December 31, 2009
	USPI As
	Reported Under			Unconsolidated
	GAAP			Affiliates
Total revenues, period ended December 31, 2008	$	642,223		$	998,483
Add: revenue from acquired facilities		23,467			68,098
Less: revenue of disposed facilities		—			(29,799	)
Less: revenue of deconsolidated facilities		(42,420	)		42,420
Impact of exchange rate		(18,884	)		—
Adjusted base year		604,386			1,079,202
Operating growth		17,848			93,761
Non-facility based revenue		131			1,455
Total revenues, period ended December 31, 2009	$	622,365		$	1,174,418

The reason for the discrepancy between revenue growth and income growth is the increased proportion of our business being conducted through unconsolidated affiliates. Growing the volume and profits of those facilities has relatively little impact on our consolidated revenues, but our share of their increasing net income (equity in earnings of unconsolidated affiliates, which grew by 31% and 39% in 2009 and 2008, respectively) is reflected in our operating income and net income. Accordingly, as described above, we focus on our systemwide results in order to understand where our growth in income is coming from. Our systemwide revenues, which include revenues of facilities we account for under the equity method as well as facilities we consolidate, grew by rates more commensurate with our overall income growth: 10% during the year ended December 31, 2009; 14% during the year ended December 31, 2008, as compared to combined 2007, and 22% for combined 2007 as compared to 2006. As discussed more fully below (see “Facility Operating Margins”), our facilities’ operating margins increased compared to prior year with respect to existing facilities, and consequently we earned more operating income from our facilities despite the slight decrease in our reported revenues.

Facility Growth

Operationally, the growth of facilities we operate continued the trend experienced in recent periods, with the net revenues of our U.S. systemwide facilities (consisting of both consolidated subsidiaries and unconsolidated affiliates) increasing 12% and 15% during 2009 and 2008. While systemwide revenue growth was partially driven by acquisitions and development of new facilities, the most significant component continued to be the results of facilities that have been open for more than one year (same store facilities). This group of facilities experienced revenue growth of 8% and 11% during 2009 and 2008, respectively. The growth in these facilities in 2009 and 2008 was driven more by increases in net revenue per case than by increases in volume. While some of this shift reflects increases in rates we negotiate with payors, we believe a more significant portion of the increase is driven by the type of cases we performed, which continue to shift to more complex cases on average.

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The strengthening of the U.S. dollar versus the British pound caused a significant drop in reported revenues during 2009 as compared to 2008, but in local currency (or measured at constant exchange rates) our U.K. facilities continued to generate revenue growth. However, this growth was slower in 2009 than in recent years, largely due to a decrease in self-pay business. While self-pay business represents only 2% of our U.S. business, it represents 26% of our U.K. business. Self-pay business is generally considered more susceptible to changes in general economic conditions, as the cost of care is borne entirely by the patient rather than shared with private insurers or borne by the National Health Service. In addition, our U.K. operations’ rate of growth during the year ended December 31, 2008 and the combined year ended December 31, 2007 was extremely strong (11% and 13%, respectively), making the year-over-year comparisons in 2009 less favorable. The growth achieved during 2008 was driven largely by an increase in admissions referred by the National Health Service, due to government-owned facilities not having adequate capacity to meet demand, and during 2008 and 2007 by the ramp-up of business resulting from capital projects and operational improvements introduced in 2006 and 2007.

The following table summarizes our same store facility growth rates, as compared to the corresponding prior year period:

	Years Ended December 31,
							Combined
	2009			2008			2007
United States facilities:
Net revenue		8	%		11	%		10	%
Surgical cases		2	%		2	%		6	%
Net revenue per case(1)		5	%		9	%		3	%
United Kingdom facilities:
Adjusted admissions		(5	)%		9	%		8	%
Net revenue using actual exchange rates		(14	)%		3	%		23	%
Net revenue using constant exchange rates(2)		2	%		11	%		13	%
All same store facilities:
Net revenue using actual exchange rates		6	%		10	%		11	%

(1)

Our overall domestic same store growth in net revenue per case for 2009 was favorably impacted by the 12% growth at our twelve same store surgical hospitals, which on average perform more complex cases and thus earn a higher average net revenue per case than ambulatory surgery centers. The net revenue per case growth at our ambulatory surgery centers was 6% during 2009. The favorable impact, in the first quarter of 2008, of our collecting amounts related to past patient services in conjunction with our finalizing a new contract with a major payor has been excluded from these growth rates as it relates to dates of service prior to January 1, 2008. The revenue reductions related to two similar, but adverse, adjustments in the second quarter of 2008 were excluded for similar reasons, as was the unfavorable impact of such an amount which arose during the second quarter of 2009.

(2)

Calculated using constant exchange rates for all periods. Although this computation represents a non-GAAP measure, we believe that using a constant currency translation rate more accurately reflects the trend of the business.

Joint Ventures with Not-for-Profit Hospitals

The addition of new facilities continues to be more heavily weighted to U.S. surgical facilities with a hospital partner, both as we initiate joint venture agreements with new systems and as we add facilities to our existing arrangements. Facilities have been added to hospital joint ventures both through construction of new facilities (de novos) and through our contribution of our equity interests in existing facilities into a hospital joint venture structure, effectively creating three-way joint ventures by sharing our ownership in these facilities with a hospital partner while leaving the existing physician ownership intact.

Consistent with this strategy, our overall number of facilities increased by five from December 31, 2008 to December 31, 2009, consisting of a net increase of ten facilities partnered with not-for-profit hospitals and local

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physicians. All four facilities under construction at December 31, 2009, involve a hospital partner; one of these facilities opened in February 2010. In addition, all four of our projects in the earlier stages of development involve a hospital partner, and we continue to explore affiliating more facilities with hospital partners, especially for facilities in markets where we already operate other facilities with a hospital partner.

The following table summarizes the facilities we operated as of December 31, 2009, 2008, and 2007:

	2009			2008			2007
United States facilities(1):
With a hospital partner		109			99			91
Without a hospital partner		56			62			61
Total U.S. facilities		165			161			152
United Kingdom facilities		4			3			3
Total facilities operated		169			164			155
Change from prior year-end:
De novo (newly constructed)(2)		4			4			11
Acquisition		7			10			9
Disposals(3)		(6	)		(5	)		(6	)
Total increase in number of facilities		5			9			14

(1)	At December 31, 2009, physicians own a portion of all of these facilities.
(2)	We now consider our operations at the Parkside facility in London, consisting of a hospital and an oncology clinic, to be two separate entities in our facility count.
(3)	During 2009, we sold our ownership interests in facilities in East Brunswick, New Jersey; Cleveland, Ohio; San Antonio, Texas; Baton Rouge, Louisiana; and Oxnard, California. We also merged one of our surgery centers into one of our surgical hospitals in Oklahoma. During 2008, we sold ownership interests in facilities in Sarasota, Florida; Los Angeles, California; Cleveland, Ohio; Manitowoc, Wisconsin; and Las Cruces, New Mexico. During 2007, we sold our ownership interests in facilities in Canton, Mississippi; Atlanta, Georgia; Baltimore, Maryland; Houston, Texas and Decatur, Alabama. Additionally, we ceased operating a facility effective October 1, 2007 although we continued to hold an ownership interest until we sold it in July 2008.

Facility Operating Margins

In 2009, same store U.S. facility operating margins increased 250 basis points, largely driven by continued revenue growth together with cost saving measures introduced during 2009 at our facilities. While the improvement was broad-based, it was particularly notable in the group of facilities jointly owned with hospital partners the margins of which improved 340 basis points. The margins of facilities we operate without a hospital partner did not fare as well, but were up 20 basis points as compared to the year ended December 31, 2008. We believe this disparity generally reflects the benefits of our increased focus on developing some of our larger markets, where we more often have a hospital partner. During 2008, same store U.S. facility operating margins increased slightly (10 basis points) largely due to improved leveraging of expenses at some of our larger facilities, which underwent expansions during 2007. Despite revenue growth rates largely consistent with recent years, the same store U.S. facility operating income margins for our ambulatory surgery centers, which comprise over 90% of our facilities, increased 220 and 60 basis points in 2009 and 2008, respectively, after decreasing in 2006 and 2007.

The facility operating income margins of our larger U.S. facilities, licensed as hospitals and comprising less than 10% of our facilities, finished 2009 up 350 basis points as compared to 2008, which were down 30 basis points. These were notable improvements over the 470 basis point drop in 2007, largely driven by the ramp-up of business at two facilities we expanded in 2007, whose higher expense levels were not accompanied by commensurate increases in revenues until 2008.

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The following table summarizes our year-over-year increases (decreases) in same store operating margins (see footnote 1 below):

	Year Ended December 31,
							Combined
	2009			2008			2007
United States facilities:
With a hospital partner		340	bps		170	bps		(210	) bps
Without a hospital partner		20			(260	)		40
Total U.S. facilities(2)		250			10			(140	)
United Kingdom facilities(3)		(160	)bps		80	bps		300	bps

(1)	Operating margin is calculated as operating income divided by total revenues. This table aggregates all of the same store facilities we operate using 100% of their results. This does not represent the overall margin for USPI’s operations in either the U.S. or U.K. because we have a variety of ownership levels in the facilities we operate, and facilities open for less than a year are excluded from same store calculations.
(2)	The favorable impact, in the first quarter of 2008, of our collecting amounts related to past patient services in conjunction with our finalizing a new contract with a major payor has been excluded from these growth rates as it relates to dates of service prior to January 1, 2008. The revenue reductions related to two similar, but adverse, adjustments in the second quarter of 2008 were excluded for similar reasons, as was the unfavorable impact of such an amount which arose during the second quarter of 2009.
(3)	Calculated using constant exchange rates for all periods. Although this computation represents a non-GAAP measure, we believe that using a constant translation rate more accurately reflects the trend of the business. In addition, the $1.0 million favorable impact of a one-time recovery of value-added tax during the second quarter of 2009 has been excluded from U.K. same facility operating margins.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Revenues decreased by $19.9 million, or 3.1%, to $622.4 million for the year ended December 31, 2009 from $642.2 million for the year ended December 31, 2008. This decrease was primarily the result of our selling a partial interest in four of our consolidated facilities, which resulted in our deconsolidating the facilities. This $42.4 million decrease, together with a decrease in U.K. revenues of $18.9 million as a result of the U.S. dollar strengthening against the British pound, more than offset the increases from growth in facilities we consolidated in both years or acquired during late 2008 or 2009 (see the table in “Revenues”). As described above, the fact that we account for the majority of our U.S. facilities under the equity method means that our growth in net income generally outpaces our growth in reported revenues.

Equity in earnings of unconsolidated affiliates increased by $14.7 million, or 31.3% to $61.8 million for the year ended December 31, 2009 from $47.0 million for the year ended December 31, 2008. This increase in equity in earnings was primarily driven by same store growth ($10.9 million), acquisitions of additional facilities we account for under the equity method ($3.6 million) and the deconsolidation of four facilities which we now account for under the equity method ($0.2 million). The number of facilities we account for under the equity method increased by eight from December 31, 2008 to December 31, 2009.

Operating expenses, excluding depreciation and amortization, decreased by $33.6 million, or 7.4%, to $419.2 million for the year ended December 31, 2009 from $452.8 million for the year ended December 31, 2008. This decrease was largely driven by the deconsolidation of four facilities (approximately $28.5 million) and the recovery of $1.0 million in value added tax previously expensed by our U.K. subsidiary. Operating expenses, excluding depreciation and amortization, decreased as a percentage of revenues to 67.4% for the year ended 2009, from 70.5% for the year ended 2008. This decrease as a percentage of revenues is primarily attributable to cost saving measures being employed across our facilities.

Depreciation and amortization decreased $1.5 million, or 4.0%, to $35.3 million for the year ended December 31, 2009 from $36.8 million for the year ended December 31, 2008, primarily as a result of the deconsolidation of four facilities whose deprecation expense is no longer included in our consolidated statements of operations.

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Depreciation and amortization, as a percentage of revenues, was 5.6% for the year ended December 31, 2009 and 5.7% for the year ended December 31, 2008.

Operating income increased $29.9 million, or 15.0%, to $229.7 million for the year ended December 31, 2009 from $199.8 million for the year ended December 31, 2008. Operating income, as a percentage of revenues, increased to 36.9% for the year ended December 31, 2009 from 31.1% for the prior year, primarily as a result of the growth in our equity in earnings of unconsolidated affiliates and cost saving measures.

Interest expense, net of interest income, decreased $14.1 million to $68.3 million for the year ended December 31, 2009 from $82.4 million for the year ended December 31, 2008, primarily due to lower interest rates and additionally due to lower overall debt balances as compared to the prior period.

(Loss) gain on sale of equity interests, net of other expenses, increased $26.3 million to $28.1 million of other expense for the year ended December 31, 2009 from $1.8 million of other expense for the year ended December 31, 2008. In 2009, the primary reasons for the increase were approximately $21.4 million in losses on the sale or deconsolidation of various facilities and impairment charges totaling $5.7 million related to three management contracts. In 2008, the components were a $1.9 million loss on the sale of equity interests in four facilities offset by $1.0 million of other income related to a terminated administrative service contract and by a $0.8 million impairment of one of our management contracts.

Provision for income taxes was a $0.1 million benefit for the year ended December 31, 2009, compared to $22.3 million of tax expense for the year ended December 31, 2008. The benefit in 2009 was primarily the result of our reversing the valuation allowance ($31.2 million) against a majority of our U.S. deferred tax assets. During the third quarter of 2009, we determined it was more likely than not that we would generate taxable income to recover these assets in future periods. The implementation of new accounting guidance on January 1, 2009 (as further discussed in Note 2 to our consolidated financial statements) results in a different income statement presentation under which pretax earnings are presented before net earnings attributable to noncontrolling interests are subtracted. Comparing our income tax expense to this figure would imply a very low effective tax rate. Computing our effective tax rate the way it has historically been presented (based on pretax earnings attributable to USPI’s stockholder), our effective tax rate in 2008 was 37.0%. Our effective tax rate, excluding the benefit of reversing the deferred tax asset allowance, was 44.7% at December 31, 2009.

Net income was $133.4 million for the year ended December 31, 2009 as compared to $92.7 million for the year ended December 31, 2008. Represents the net effect of many factors described above, including an increase in equity in earnings of unconsolidated affiliates ($14.7 million), a decrease in interest expense ($14.1 million), and the recognition of the benefit of U.S. deferred tax assets ($31.2 million), which together more than offset $28.1 million in losses on disposals, deconsolidations, and impairments. In addition, despite our U.K. operations growing their profits in local currency, the strengthening U.S. dollar decreased our reported net income by $2.2 million.

Net income attributable to noncontrolling interests increased $8.6 million, or 15.6%, to $63.7 million for the year ended December 31, 2009 from $55.1 million for the year ended December 31, 2008. The increase was due to increased profitability of certain of our existing consolidated facilities and our acquisition activities, which primarily involve our acquiring less than 100% ownership.

Net income attributable to USPI’s common stockholder was $69.7 million for the year ended December 31, 2009 as compared to $37.5 million for the year ended December 31, 2008. This $32.2 million increase is primarily related to the factors described above for net income.

Year Ended December 31, 2008 Compared to Combined Year Ended December 31, 2007

Revenues decreased by $1.6 million to $642.2 million for the year ended December 31, 2008 from $643.8 million for the combined year ended December 31, 2007. This decrease was primarily related to a $10.1 million decrease in consolidated revenues due to the strengthening of the U.S. dollar against the British pound. This decrease was partially offset by the net impact of our acquisition, development, and disposal activity during 2008 which resulted in an increase of approximately $3.9 million in revenues. Increases in revenues we derived from our same store facilities also partially offset this decrease, driven largely by receiving an average of

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approximately 9% more per case than in the combined year 2007. The revenues of same store United Kingdom facilities, when measured using 2008 exchange rates for both periods, were $13.7 million higher during 2008 as compared to the combined year 2007.

Equity in earnings of unconsolidated affiliates increased by $13.3 million, or 39.3% to $47.0 million for the year ended December 31, 2008 from $33.8 million for the combined year ended December 31, 2007. This increase is primarily driven by same store growth, particularly at the two surgical hospitals we expanded in 2007, and acquisitions of additional facilities we account for under the equity method. The number of facilities we account for under the equity method increased by eight from December 31, 2007 to December 31, 2008, partially from adding facilities and also as a result of our contributing our investments in four consolidated facilities to joint ventures with not-for-profit hospital partners, which resulted in our accounting for the investments under the equity method going forward.

Operating expenses, excluding depreciation and amortization, decreased by $23.7 million, or 5.0%, to $452.8 million for the year ended December 31, 2008 from $476.4 million for the combined year ended December 31, 2007. Operating expenses, excluding depreciation and amortization, decreased as a percentage of revenues to 70.5% for the year ended 2008, from 74.0% for the combined year ended 2007. This decrease is primarily attributable to approximately $25.4 million of expenses incurred related to the merger, which did not recur in 2008.

Depreciation and amortization decreased $2.4 million, or 6.0%, to $36.8 million for the year ended December 31, 2008 from $39.1 million for the combined year ended December 31, 2007, primarily as a result of fair value adjustments recorded in conjunction with the merger and additionally as a result of the stronger U.S. dollar impacting our results for a full year in 2008. Depreciation and amortization, as a percentage of revenues, was 5.7% for the year ended December 31, 2008 and 6.0% for the combined year ended December 31, 2007.

Operating income increased $37.7 million, or 23.2%, to $199.8 million for the year ended December 31, 2008 from $162.1 million for the combined year ended December 31, 2007. Operating income, as a percentage of revenues, increased to 31.1% for the year ended December 31, 2008 from 25.2% for the prior year, primarily as a result of the additional $25.4 million of expenses incurred related to the merger in April 2007, which did not recur in 2008. Additionally, operating income was favorably impacted by the $13.3 million increase in equity in earnings as described above.

Interest expense, net of interest income, increased $9.2 million to $82.4 million for the year ended December 31, 2008 from $73.2 million for the combined year ended December 31, 2007 as a result of our significant new borrowings in conjunction with the merger, which affected our results for a full year in 2008, and additional borrowings of $33.0 million during 2008 to finance acquisitions. The impact of higher indebtedness more than offset the effect of reductions in interest rates during 2008.

(Loss) gain on the sale of equity interests, offset by other expense (income), decreased $0.3 million to $1.8 million of other expense for the year ended December 31, 2008 from $2.1 million of other expense for the combined year ended December 31, 2007. In 2008, other expense was primarily attributable to $1.0 million of other income related to a terminated administrative service contract, offset by a $0.8 million impairment of one of our management contracts, further offset by losses recorded on the sale of interests in various surgical facilities of approximately $1.9 million. In 2007, other expense was primarily attributable to a loss on the early retirement of debt in April 2007 of $2.4 million. The losses on the early retirement of debt represent the excess of payments made to retire the debt over the debt’s carrying value, including writing off the unamortized portion of costs incurred in originally issuing the debt.

Provision for income taxes was $22.3 million for the year ended December 31, 2008, compared to $18.8 million for the combined year ended December 31, 2007. The implementation of new accounting guidance on January 1, 2009 (as further discussed in Note 2 to our consolidated financial statements) results in a different income statement presentation under which pretax earnings are presented before net earnings attributable to noncontrolling interests are subtracted. Comparing our income tax expense to this figure would imply a very low effective tax rate. Computing our effective tax rate the way it has historically been presented (based on pretax earnings attributable to USPI’s stockholder), our effective tax rate in 2008 was 37.0% as compared to 81.8% for the

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combined year ended December 31, 2007. The decrease in effective rate was driven by our increased income, as described above. Higher pretax income levels diminished the impact of the factors that had caused our 2007 effective tax rate to be so much higher than statutory rates, although we still maintained, at December 31, 2008, a valuation allowance against all unused U.S. federal net operating loss carryforwards, as it was not considered more likely than not that we would be able to utilize those carryforwards.

Income from continuing operations was $93.2 million for the year ended December 31, 2008 compared to $67.9 million for the combined year ended December 31, 2007. As described above, this increase was primarily caused by merger-related costs and expenses that did not recur in 2008. Additionally, income from continuing operations was favorably impacted by the increase in equity in earnings, partially offset by higher interest costs during 2008. We have significantly higher debt balances as a result of the merger, which greatly increased our interest expense beginning on April 19, 2007 and continuing in 2008, as we borrowed an additional $33.0 million to fund various acquisitions.

In 2008, we classified the operations of a surgery center located in Ohio as discontinued operations. We recorded a loss of approximately $0.6 million, net of tax, related to the sale of this facility. Because this facility has been classified as discontinued operations, our consolidated statements of operations and the year over year comparisons reflect the historical results of its operations in discontinued operations for all years presented. In 2007, we classified the operations of three surgery centers, located in Mississippi, Texas and Alabama was discontinued operations. We recorded a loss of $2.4 million, net of tax, related to the sale of these facilities.

Net income increased $27.3 million to $92.7 million for the year ended December 31, 2008 as compared to $65.3 million for the combined year ended December 31, 2007. As noted above, this increase was primarily caused by merger-related costs and expenses that did not recur in 2008.

Net income attributable to noncontrolling interests decreased $8.6 million, or 13.4%, to $55.1 million for the year ended December 31, 2008 from $63.7 million for the combined year ended December 31, 2007. Over 50% of the decrease was due to our deconsolidation and sales of certain consolidated facilities. The remaining decrease was due to decreased profitability of certain of our existing consolidated facilities, which was partially offset by the increased net income attributable to noncontrolling interests resulting from our acquisition activities, which primarily involve our acquiring less than 100% ownership.

Net income attributable to USPI’s common stockholder increased $35.9 million to $37.5 million for the year ended December 31, 2008 as compared to $1.6 million for the combined year ended December 31, 2007. This increase was primarily caused by the merger-related costs and expenses that did not recur in 2008 and the other factors described above.

Liquidity and Capital Resources

	Years Ended December 31,
							Combined
	2009			2008			2007
Net cash provided by operating activities	$	185,213		$	145,586		$	157,241
Net cash used in investing activities		(87,928	)		(101,337	)		(78,579	)
Net cash used in financing activities		(112,026	)		(71,573	)		(34,099	)

Overview

At December 31, 2009, we had cash and cash equivalents totaling $34.9 million, as compared to $49.4 million at December 31, 2008. A more detailed discussion of changes in our liquidity follows. We adopted new accounting guidance on January 1, 2009 related to accounting for noncontrolling interests, as further discussed in Note 2 to our consolidated financial statements. As required, we have retrospectively applied these changes to prior years and as a result, certain reclassifications to cash flows between categories were made, however, overall cash flows were not changed.

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Operating Activities

Our cash flows from operating activities were $185.2 million, $145.6 million, and $157.2 million in the year ended December 31, 2009, the year ended December 31, 2008, and the year ended December 31, 2007, respectively. Operating cash flows in 2009 were higher than 2008 primarily due to lower interest costs during 2009, facility-wide cost reductions and the timing of distributions of earnings from our unconsolidated affiliates. Operating cash flows in 2008 were also impacted by these factors, but the impact on 2008 compared to 2007 was unfavorable. Our operating cash flows in 2007 were adversely affected by the payment of merger related expenses.

A significant element of our cash flows from operating activities is the collection of patient receivables and the timing of payments to our vendors and service providers. Collections efforts for patient receivables are conducted primarily by our personnel at each facility or in centralized service centers for some metropolitan areas with multiple facilities. These collection efforts are facilitated by our patient accounting system, which prompts individual account follow-up through a series of phone calls and/or collection letters written 30 days after a procedure is billed and at 30 day intervals thereafter. Bad debt reserves are established in increasing percentages by aging category based on historical collection experience. Generally, the entire amount of all accounts remaining uncollected 180 days after the date of service are written off as bad debt and sent to an outside collection agency. Net amounts received from collection agencies are recorded as recoveries of bad debts. Our operating cash flows, including changes in accounts payable and other current liabilities, are impacted by the timing of payments to our vendors. We typically pay our vendors and service providers in accordance with invoice terms and conditions, and take advantage of invoice discounts when available. In 2009, 2008 and 2007, we did not make any significant changes to our payment timing to our vendors.

Our net working capital deficit was $113.0 million at December 31, 2009 as compared to a net working capital deficit of $38.8 million in the prior year. The overall negative working capital position at December 31, 2009 and 2008 is primarily the result of $129.3 million and $57.2 million due to affiliates associated with our cash management system being employed for our unconsolidated facilities. As discussed further below, we have sufficient availability under our revolving credit agreement, together with our expected future operating cash flows, to service our obligations.

Investing Activities

During the year ended December 31, 2009, the year ended December 31, 2008 and the combined year ended December 31, 2007 our net cash used for investing activities was $87.9 million, $101.3 million and $78.6 million, respectively. The majority of the cash used in our investing activities relates to our purchases of businesses, incremental investment in unconsolidated affiliates and purchases of property and equipment and was funded by cash flows from operating activities. The cash used in investing activities in 2008 and 2007 was funded primarily from cash on hand as well as draws upon the delayed draw feature of our senior secured credit facility.

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Acquisitions and Sales

During the year ended December 31, 2009, we invested $59.5 million, net of cash received, for the purchase and sales of businesses and investments in unconsolidated affiliates. These 2009 transactions are described earlier in this Item 7 under the captions “Acquisitions, Equity Investments and Development Projects” and “Discontinued Operations and Other Dispositions.” These transactions are summarized below:

Effective Date	Facility Location	Amount
Investments
February 2009	Fort Worth, Texas	$	2.0 million
February 2009	Stockton, California		2.5 million
May 2009	St. Louis, Missouri		0.9 million
July 2009	Fort Worth, Texas		1.0 million
September 2009	Fort Worth, Texas		1.2 million
December 2009	Nashville, Tennessee		6.1 million
December 2009	Cincinnati, Ohio		17.7 million
December 2009	Portland, Oregon		11.1 million
December 2009	Houston, Texas		9.9 million
Various	Various		7.1 million
			59.5 million
Sales
February 2009	East Brunswick, New Jersey	$	0.7 million
March 2009	Phoenix, Arizona		0.1 million
July 2009	Oklahoma City, Oklahoma		0.2 million
December 2009	Fort Worth, Texas		2.4 million
December 2009	Baton Rouge, Louisiana		(5.1 million	)
December 2009	Oxnard, California		0.3 million
December 2009	Dallas, Texas		1.2 million
Various	Various		0.2 million
			— million
Total		$	59.5 million

During the year 2008 and combined year 2007, we invested $64.3 million and $63.0 million, respectively (all net of cash acquired) to make similar acquisitions. These transactions are summarized in this Item 7 under the caption “Acquisitions, Equity Investments and Development Projects.”

As part of our business strategy, we have made, and expect to continue to make, selective acquisitions in existing markets to leverage our existing knowledge of these markets and to improve operating efficiencies. Additionally, we may also make acquisitions in selective new markets. In making such acquisitions, we may use available cash on hand or draw upon our revolving credit facility as discussed below.

Property and Equipment/Facilities under Development

During the year ended December 31, 2009, approximately $16.8 million of the property and equipment purchases related to expansion and development projects, and the remaining $15.0 million primarily represents purchase of equipment at existing facilities. We added $31.2 million of property and equipment in the year 2008, of which $17.9 million related to expansion and development projects and the remaining $13.3 million related to purchases at existing facilities. Approximately $8.1 million of the property and equipment purchases was paid to acquire property adjacent to one of our London facilities. Additionally, in combined year 2007, we added $8.5 million of property and equipment for expansion and development projects and purchased $9.4 million of property and equipment for existing facilities.

At December 31, 2009, we and our affiliates had four surgical facilities under construction and four additional facilities in the development stage in the United States; one of these facilities opened in February 2010. Costs to develop a short-stay surgical facility, which include construction, equipment and initial operating losses, vary depending on the range of specialties that will be undertaken at the facility. Our affiliates have budgeted an average

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of $21.7 million for development costs for each of the projects under construction. Development costs are typically funded with approximately 50% debt at the entity level with the remainder provided as equity from the owners of the entity. Additionally, as each of these facilities becomes operational, each will have obligations associated with debt and capital lease arrangements.

Generally, we estimate that we will add 12 to 15 facilities per year through a combination of acquisition and de novo projects. This program will continue to require substantial capital resources, which for this number of facilities we would estimate to range from $60.0 million to $80.0 million per year over the next three years. If we identify strategic acquisition opportunities that are larger than usual for us, then these costs could increase greatly. For example, in April 2006, we acquired Surgis for approximately $193.1 million, net of cash acquired.

Other than the specific transactions described above, our acquisition and development activities primarily include the development of new facilities, buyups of additional ownership in facilities we already operate, and acquisitions of additional facilities. These activities also include, in some cases, payments of additional purchase price to the sellers of acquired facilities based upon the resolution of certain contingencies or based upon acquired facilities achieving certain financial targets. We currently estimate that we will pay approximately $0.8 million during 2010 related to these obligations that have been resolved. In addition, the operations of our existing surgical facilities will require ongoing capital expenditures. The amount and timing of these purchases and related cash outflows in future periods is difficult to predict and is dependent on a number of factors including hiring of employees, the rate of change in technology/equipment used in our business and our business outlook.

Financing Activities

Cash flows used in financing activities was $112.0 million for the year ended December 31, 2009. Cash flows used in financing activities was $71.6 million and $34.1 million for the year ended December 31, 2008 and for the combined year ended December 31, 2007, respectively. Historically, our cash flows from financing activities have been received through proceeds from long-term debt, offset by payments on long-term debt, as well as proceeds received from the issuance of our common stock. In 2006, we expanded our cash management program to include unconsolidated affiliates, which increased our cash flows from financing activities.

We intend to fund our ongoing capital and working capital requirements through a combination of cash flows from operations and borrowings under our $85.0 million revolving credit facility. In August 2009, we amended our revolving credit facility’s availability from $100.0 million to $85.0 million due to the bankruptcy of one of the lenders, Lehman Brothers. Management does not believe the reduction in the revolving credit facility will have a material impact on our business. We believe that funds generated by operations and funds available under the revolving credit facility will be sufficient to meet working capital requirements over at least the next 12 months. However, in the future, we may have to incur additional debt or issue additional debt or equity securities from time to time. We may be unable to obtain sufficient financing on satisfactory terms or at all.

One of our consolidated entities is currently developing and constructing a new hospital which is expected to be completed in the first quarter of 2011. The total project cost is approximately $26.2 million which is being funded by cash contributions from its partners and debt financing. The entity has arranged bank financing totaling $17.4 million. None of the bank financing was borrowed at December 31, 2009.

We and our subsidiaries, affiliates (subject to certain limitations imposed by existing indebtedness), or significant stockholders, in their sole discretion, may from time to time, purchase, redeem, exchange or retire any of our outstanding debt in privately negotiated or open market purchases, or otherwise. Such transactions will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Dividend Payment

On December 1, 2009, our board of directors declared and we paid a special cash dividend in the amount of $88.6 million on our common stock. The proceeds of the dividend were used by USPI Holdings, Inc., our sole stockholder, to pay a special cash dividend on its common stock. In turn, the proceeds were used by USPI Group Holdings, Inc., the sole stockholder of USPI Holdings, Inc., to pay amounts currently accrued on its preferred stock.

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Debt

Senior secured credit facility

The senior secured credit facility (credit facility) provides for borrowings of up to $615.0 million (with a $150.0 million accordion feature described below), consisting of (1) an $85.0 million revolving credit facility with a maturity of six years, including a $20.0 million letter of credit sub-facility, and a $20.0 million swing-line loan sub-facility; and (2) a $530.0 million term loan facility (including a $100.0 million delayed draw facility) with a maturity of seven years. On April 19, 2007, we borrowed $430.0 million of the term loan facility concurrent with the merger. During the remainder of 2007, we borrowed an additional $63.5 million under the delayed draw feature of the term loan facility to finance the acquisition of an additional surgery center in St. Louis, Missouri and to finance a buy-up of ownership in five of our existing St. Louis facilities. During 2008, we borrowed $31.5 million under the delayed draw facility to finance a buy-up of ownership in five of our existing St. Louis facilities and borrowed $1.5 million to fund the purchase of a new facility in St. Louis. No additional funds can be borrowed under the delayed draw feature.

We may request additional tranches of term loans or additional commitments to the revolving credit facility in an aggregate amount not exceeding $150.0 million, subject to certain conditions. Interest rates on the credit facility are based on LIBOR plus a margin of 2.00% to 2.25%. Additionally, we currently pay 0.50% per annum on the daily-unused commitment of the revolving credit facility. We also currently pay a quarterly participation fee of 2.38% per annum related to outstanding letters of credit. The term loans under the credit facility require principal payments each year in an amount of 1% per annum in equal quarterly installments. No principal payments are required on the revolving credit facility. In March 2009, we began to pay quarterly principal payments of $0.2 million on the outstanding balance of the delayed draw loans. At December 31, 2009, we had $518.7 million of debt outstanding under the credit facility at a weighted average interest rate of approximately 3.6%. At December 31, 2009, we had $78.4 million available for borrowing under the revolving credit facility, representing the facility’s $85.0 million capacity, net of the $5.0 million outstanding balance at December 31, 2009 and $1.6 million of outstanding letters of credit. The $5.0 million outstanding on the revolving line of credit was repaid in January 2010.

The credit facility is guaranteed by USPI Holdings, Inc. and its current and future direct and indirect wholly-owned domestic subsidiaries, subject to certain exceptions, and borrowings under the credit facility are secured by a first priority security interest in all real and personal property of these subsidiaries, as well as a first priority pledge of our capital stock, the capital stock of each of our wholly owned domestic subsidiaries and 65% of the capital stock of certain of our wholly-owned foreign subsidiaries. Additionally, the credit facility contains various restrictive covenants, including financial covenants that limit our ability and the ability of our subsidiaries to borrow money or guarantee other indebtedness, grant liens, make investments, sell assets, pay dividends, enter into sale-leaseback transactions or issue and sell capital stock. We believe we were in compliance with these covenants as of December 31, 2009.

Senior subordinated notes

Also in connection with the merger, we issued $240.0 million of 87/8% senior subordinated notes and $200.0 million of 91/4%/10% senior subordinated toggle notes (together, the Notes), all due in 2017. Interest on the Notes is payable on May 1 and November 1 of each year, which commenced on November 1, 2007. All interest payments on the senior subordinated notes are payable in cash. The initial interest payment on the toggle notes was payable in cash. For any interest period after November 1, 2007 through November 1, 2012, we may pay interest on the toggle notes (i) in cash, (ii) by increasing the principal amount of the outstanding toggle notes or by issuing payment-in-kind notes (PIK Interest) or (iii) by paying interest on half the principal amount of the toggle notes in cash and half in PIK Interest. PIK Interest is paid at 10% and cash interest is paid at 91/4% per annum. To date, we have paid all interest payments in cash. During 2009, we repurchased approximately $2.5 million in principal amount of the senior subordinated toggle notes in the open market. At December 31, 2009, we had $437.5 million of Notes outstanding. The Notes are unsecured senior subordinated obligations of our Company; however, the Notes are guaranteed by all of our current and future direct and indirect wholly-owned domestic subsidiaries. Additionally, the Notes contain various restrictive covenants, including financial covenants that limit our ability and the

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ability of our subsidiaries to borrow money or guarantee other indebtedness, grant liens, make investments, sell assets, pay dividends, enter into sale-leaseback transactions or issue and sell capital stock. We believe we were in compliance with these covenants as of December 31, 2009.

United Kingdom borrowings

In April 2007, we entered into an amended and restated credit agreement, which covered our existing overdraft facility and term loan facility (Term Loan A). This agreement provides a total overdraft facility of £2.0 million, and an additional Term Loan B facility of £10 million, which was drawn in April 2007. In March 2008, we further amended our U.K. Agreement to provide for a £2.0 million Term Loan C facility. We borrowed the entire £2.0 million in March 2008 to acquire property adjacent to one of our hospitals in London. In September 2009, we renewed our overdraft facility through April 2010. Under the renewal, we must pay a commitment fee of 0.5% per annum on the unused portion of the overdraft facility each quarter. Excluding availability on the overdraft facility, no additional borrowings can be made under the Term Loan A, B or C facilities. At December 31, 2009, we had approximately £36.8 million (approximately $60.0 million) outstanding under the U.K. credit facility at a weighted average interest rate of approximately 4.2%.

Interest on the borrowings is based on a three-month or six-month LIBOR, or other rate as the bank may agree, plus a margin of 1.25% to 2.00%. Quarterly principal payments are required on the Term Loan A, which began in September 2007, and approximate $4.9 million in the first and second year, $6.5 million in the third and fourth year; $8.1 million in the fifth year, with the remainder due in the sixth year after the April 2007 closing. The Term Loan B does not require any principal payments prior to maturity and matures in 2013. The Term Loan C requires quarterly principal payments of approximately £0.1 million ($0.2 million), which began in September 2008 and continue through its maturity date of February 2013 when the final payment of £0.5 million ($0.8 million) is due. The borrowings are guaranteed by certain of our subsidiaries in the United Kingdom with a security interest in various assets, and a pledge of the capital stock of the U.K. borrowers and the capital stock of certain guarantor subsidiaries. The Agreement contains various restrictive covenants, including financial covenants that limit our ability and the ability of certain U.K. subsidiaries to borrow money or guarantee other indebtedness, grant liens on our assets, make investments, use assets as security in other transactions, pay dividends, enter into leases or sell assets or capital stock. We believe we were in compliance with these covenants as of December 31, 2009.

We also have the ability to borrow under a capital asset finance facility in the U.K. of up to £2.5 million ($4.0 million). The exact terms and payments are negotiated upon a draw on the facility. No amounts were outstanding at December 31, 2009, 2008 or 2007.

Equity Contribution from USPI Group Holdings, Inc. and Payments to Repurchase Stock

In conjunction with the merger in 2007, our parent company, USPI Group Holdings, Inc. made a net equity contribution to us of $779.3 million. We used a substantial amount of these proceeds, along with our new borrowings to pay the former stockholders of USPI approximately $1.4 billion in conjunction with the merger. We also used a portion of the proceeds to pay various merger and other transaction expenses of approximately $47.1 million.

Purchases and Sales of Noncontrolling Interests

During 2009, 2008 and combined 2007, we purchased and sold a net of $2.1 million, $26.4 million and $20.9 million of noncontrolling interests. Under new accounting guidance, further described in Note 2 to our consolidated financial statements, we now classify transactions with noncontrolling interests in which we do not lose control of an entity as financing activities. These transactions are now considered equity transactions because they are between us (or our subsidiaries) and noncontrolling interests.

Stock Option and Stock Purchase Plans

Historically, we have received proceeds from common stock through the exercise of stock options and the purchase of common stock through our employee stock purchase plan. Proceeds from the sale of common stock totaled $6.1 million for the combined year ended December 31, 2007. As a result of the merger, our equity securities

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are no longer publicly traded and, therefore, we have not received any material proceeds from the exercise of stock options during 2008 or 2009. Additionally, our employee stock purchase plan was terminated in conjunction with the merger.

Contractual Cash Obligations

Our contractual cash obligations as of December 31, 2009 are summarized as follows:

	Payments Due by Period
			Within		Years		Years		Beyond
Contractual Cash Obligations	Total		1 Year		2 and 3		4 and 5		5 Years
					(In thousands)
Long term debt obligations:
Senior secured credit facility(1)	$	518,710	$	5,265	$	10,530	$	502,915	$	—
Senior subordinated notes, due 2017(1)		240,000		—		—		—		240,000
Senior subordinated toggle notes, due 2017(1)		197,515		—		—		—		197,515
U.K. credit facility(1)		59,966		7,038		16,784		36,144		—
Other debt at operating subsidiaries(1)		25,045		6,546		9,479		4,298		4,722
Interest on long-term debt obligations(2)		382,401		61,694		120,936		103,485		96,286
Capitalized lease obligations(3)		51,442		7,651		11,730		7,141		24,920
Operating lease obligations		70,909		14,479		23,125		14,500		18,805
Total contractual cash obligations	$	1,545,988	$	102,673	$	192,584	$	668,483	$	582,248

(1)	Scheduled principal payments.
(2)	Represents interest due on long-term debt obligations. For variable rate debt, the interest is calculated using the December 31, 2009 rates applicable to each debt instrument and also gives effect to the interest rate swaps designated in a cash flow hedging relationship against portions of the U.K. credit facility and the senior secured credit facility in the U.S.
(3)	Includes principal and interest.

Debt at Operating Subsidiaries

Our operating subsidiaries, many of which have noncontrolling interest holders who share in the cash flow of these entities, have debt consisting primarily of capitalized lease obligations. This debt is generally non-recourse to USPI and is generally secured by the assets of those operating entities. The total amount of these obligations, which was $55.3 million at December 31, 2009, is included in our consolidated balance sheet because the borrower or obligated entity meets the requirements for consolidated financial reporting. Our average percentage ownership, weighted based on the individual subsidiary’s amount of debt and capitalized lease obligations, of these consolidated subsidiaries was 48.1% at December 31, 2009. As further discussed below, our unconsolidated affiliates that we account for under the equity method have debt and capitalized lease obligations that are generally non-recourse to USPI and are not included in our consolidated financial statements.

We believe that existing funds, cash flows from operations, borrowings under our credit facilities, and borrowings under capital lease arrangements at newly developed or acquired facilities will provide sufficient liquidity for the next twelve months. We may require additional debt or equity financing for our future acquisitions and development projects. There are no assurances that needed capital will be available on acceptable terms, if at all. If we are unable to obtain funds when needed or on acceptable terms, we will be required to curtail our acquisition and development program.

In connection with our acquisition of a controlling equity interest in a surgery center in 2007, we had the option to purchase additional ownership in the facility during a specified time period in the purchase agreement. If we did not exercise the purchase option, we were required to pay an option termination fee, which was equal to the lesser of

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an EBITDA calculation, as specified in the purchase agreement, or $1.0 million. We elected not to exercise our option and paid a termination fee of $0.4 million in 2009.

We acquired an additional facility in 2007 that had a similar option termination fee clause in its purchase agreement, except that the option termination fee is the lesser of an EBITDA calculation, as specified in the purchase agreement, or $2.5 million. We elected to purchase only a portion of the ownership as stated in the agreement and therefore paid a $1.5 million termination fee in 2009. The parties agreed to another purchase option that can be exercised at any time during the 60 day period following September 30, 2011 or the remaining $1.0 million option termination fee would be required to be paid.

Accordingly, $1.9 million of termination fees were expensed in 2009 and are included in “Other, net” in the accompanying consolidated statements of operations. These fees were paid in October 2009.

In addition, our U.K. subsidiary has begun expanding our Parkside hospital, already our largest facility. Located outside London in the Wimbledon area, this facility’s expansion is expected to cost approximately £11.5 million (approximately $18.6 million) over the next two years.

Off-Balance Sheet Arrangements

As a result of our strategy of partnering with physicians and not-for-profit health systems, we do not own controlling interests in the majority of our facilities. We account for 109 of our 169 surgical facilities under the equity method. Similar to our consolidated facilities, our unconsolidated facilities have debts, including capitalized lease obligations, that are generally non-recourse to USPI. With respect to our unconsolidated facilities, these debts are not included in our consolidated financial statements. At December 31, 2009, the total debt on the balance sheets of our unconsolidated affiliates was approximately $271.8 million. Our average percentage ownership, weighted based on the individual affiliate’s amount of debt, of these unconsolidated affiliates was 25.4% at December 31, 2009. USPI or one of its wholly-owned subsidiaries had collectively guaranteed $13.6 million of the $271.8 million in total debt of our unconsolidated affiliates as of December 31, 2009. In addition, our unconsolidated affiliates have obligations under operating leases, of which USPI or a wholly-owned subsidiary had guaranteed $16.0 million as of December 31, 2009. Some of the facilities we are currently developing will be accounted for under the equity method. As these facilities become operational, they will have debt and lease obligations.

As described above, our unconsolidated affiliates own operational surgical facilities or surgical facilities that are under development. These entities are structured as limited partnerships, limited liability partnerships, or limited liability companies. None of these affiliates provide financing, liquidity, or market or credit risk support for us. They also do not engage in hedging, research and development services with us. Moreover, we do not believe that they expose us to any of their liabilities that are not otherwise reflected in our consolidated financial statements and related disclosures. Except as noted above with respect to guarantees, we are not obligated to fund losses or otherwise provide additional funding to these affiliates other than as we determine to be economically required in order to successfully implement our development plans.

Related Party Transactions

We have entered into agreements with certain majority and minority owned surgery centers to provide management services. As compensation for these services, the surgery centers are charged management fees which are either fixed in amount or represent a fixed percentage of each center’s net revenue less bad debt. The percentages range from 3% to 8%. Amounts recognized under these agreements, after elimination of amounts from consolidated surgery centers, totaled approximately $45.2 million, $39.1 million, and $32.8 million in 2009, 2008, and 2007 (combined), respectively, and are included in management and contract service revenues in our consolidated statements of operations.

We regularly engage in purchases and sales of ownership interests in our facilities. We operate 25 surgical facilities in partnership with the Baylor Health Care System (Baylor) and local physicians in the Dallas/Fort Worth area. Baylor’s Chief Executive Officer is a member of our board of directors. The following table summarizes transactions with Baylor during 2009, 2008 and 2007. We believe that the sale prices were approximately the same

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as if they had been negotiated on an arms’ length basis, and the prices equaled the value assigned by an external appraiser who valued the businesses immediately prior to the sale.

Date	Facility Location			Proceeds		Gain (Loss)
December 2009		Dallas, Texas(1	)	$	1.2 million	$	0.3 million
December 2009		Fort Worth, Texas(2	)		2.4 million		0.1 million
Total				$	3.6 million	$	0.4 million
June 2008		Dallas, Texas(3	)	$	2.3 million	$	(0.9 million	)
July 2007		Dallas, Texas(4	)	$	3.7 million	$	—

(1)	Baylor acquired a controlling interest in a facility from us, which transferred control of the facility from us to Baylor.
(2)	Baylor acquired a controlling interest in two facilities. We continue to account for these facilities under the equity method of accounting.
(3)	Baylor acquired an additional ownership interest in a facility it already co-owned with us and local physicians, which transferred control of the facility from us to Baylor.
(4)	Baylor acquired an additional ownership interest in two facilities it already co-owned with us and local physicians, which transferred control of the facilities from us to Baylor. No gain or loss was recorded upon the sale as the sale price approximated our carrying value.

In June 2009, we agreed to lend up to $10.0 million to Trinity MC, LLC (Trinity), an acute care hospital in the Dallas/Fort Worth area. A majority interest (71%) in Trinity is owned by BRMCG Holdings, LLC, a wholly owned subsidiary of Baylor Regional Medical Center at Grapevine, a controlled affiliate of Baylor. Trinity operates Baylor Medical Center at Carrollton (BMCC). We have no ownership in Trinity. The revolving note earned interest at a rate of 6.0% per annum and was paid in full in December 2009. We believe the terms of the revolving note were approximately the same as if they had been negotiated on an arms’ length basis.

In June 2008, we purchased all of Baylor’s ownership interests in an entity Baylor co-owned with us. This entity had ownership and managed five facilities in the Dallas/Fort Worth area. The purchase price was approximately $3.9 million in cash. This entity is now wholly owned by us. We believe that the sales price was approximately the same as if it had been negotiated on an arms’ length basis, and the price equaled the value assigned by an external appraiser who valued the business immediately prior to the sale. After this transaction, we account for all of the facilities we operate with Baylor under the equity method.

Our Parent issued warrants with an estimated fair value of $0.3 million to Baylor in January 2008. Similar grants have been made to other healthcare systems with which we operate facilities.

Included in general and administrative expenses of the Successor are management fees payable to an affiliate of Welsh Carson, which holds a controlling interest in our company, in the amount of $2.0 million for the years ended December 31, 2009 and 2008 and $1.4 million for the period from April 19 through December 31, 2007. Such amounts accrue at an annual rate of $2.0 million. We pay $1.0 million in cash per year with the unpaid balance due and payable upon a change in control.

New Accounting Pronouncements

In June 2009, the FASB Accounting Standards Update No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (ASU 2009-17). ASU 2009-17 changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar) interests should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities that most significantly impact the other entity’s economic performance. ASU 2009-17 requires a number of additional disclosures about an entity’s involvement with variable interest entities and any significant changes in risk exposure due to that involvement. ASU 2009-17 applies to us on January 1, 2010. We do not expect these changes to have a material impact on our consolidated financial statements and disclosures.

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Item 7A.   Quantitative and Qualitative Disclosures about Market Risk

Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse changes in interest rates and other relevant market risks. Our primary market risk is a change in interest rates associated with variable-rate borrowings. Historically, we have not held or issued derivative financial instruments other than the use of variable-to-fixed interest rate swaps for portions of our borrowings under credit facilities with commercial lenders as required by credit agreements. We do not use derivative instruments for speculative purposes. The interest rate swaps serve to stabilize our cash flow and expense but ultimately may cost more or less in interest than if we had carried all of our debt at a variable rate over the swap term.

As further discussed in Note 11 to the accompanying consolidated financial statements, in order to manage interest rate risk related to a portion of our variable-rate U.K. debt, on February 29, 2008, we entered into an interest rate swap agreement for a notional amount of £20.0 million ($32.3 million). The interest rate swap requires us to pay 4.99% and to receive interest at a variable rate of three-month GBP-LIBOR (0.6% at December 31, 2009), which is reset quarterly. The interest rate swap expires in March 2011. No collateral is required under the interest rate swap agreement. As of December 31, 2009, the rate under our swap agreement was unfavorable compared to the market.

Additionally, effective July 24, 2008, in order to manage interest rate risk related to a portion of our variable-rate U.S. Term Loan B, we entered into an interest rate swap agreement for a notional amount of $200.0 million. The interest rate swap requires us to pay 3.6525% and to receive interest at a variable rate of three-month USD-LIBOR (0.28% at December 31, 2009), which is paid and reset on a quarterly basis. The interest rate swap expires in July 2011. No collateral is required under the interest rate swap agreement. As of December 31, 2009, the rate under our swap agreement was unfavorable compared to the market.

At December 31, 2009, the fair values of the U.K. and U.S. interest rate swaps were liabilities of approximately $1.5 million and $7.7 million, respectively. The estimated fair value of the interest rate swaps was determined using present value models of the contractual payments. Inputs to the models were based on prevailing LIBOR market data and incorporate credit data that measure nonperformance risk. The estimated fair value represents the theoretical exit cost we would have to pay to transfer the obligations to a market participant with similar credit risk. These estimated fair values may not be representative of actual values that will be realized in the future.

Our financing arrangements with many commercial lenders are based on the spread over Prime or LIBOR. At December 31, 2009, $699.1 million of our outstanding debt was in fixed rate instruments and the remaining $342.2 million was in variable rate instruments. Accordingly, a hypothetical 100 basis point increase in market interest rates would result in additional annual expense of approximately $3.4 million.

Our United Kingdom revenues are a significant portion of our total revenues. We are exposed to risks associated with operating internationally, including foreign currency exchange risk and taxes and regulatory changes. Our United Kingdom facilities operate in a natural hedge to a large extent because both expenses and revenues are denominated in the local currency. Additionally, our borrowings in the United Kingdom are currently denominated in the local currency. Historically, the cash generated from our operations in the United Kingdom has been utilized within that country to finance development and acquisition activity as well as for repayment of debt denominated in the local currency. Accordingly, we have not generally utilized financial instruments to hedge our foreign currency exchange risk.

Item 8.   Financial Statements and Supplementary Data

For the financial statements and supplementary data required by this Item 8, see the Index to Consolidated Financial Statements included elsewhere in this Form 10-K.

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Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Commission. Such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this Annual Report on Form 10-K, we have carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the principal executive officer and principal financial officer concluded that, as of December 31, 2009, our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our reports filed with the Commission. There have been no significant changes in our internal controls which could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this Annual Report on Form 10-K.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that:

•  Pertain to the maintenance of records that in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets.

•  Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and

•  Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making this assessment, management used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Management’s assessment included an evaluation of the design and testing of the operational effectiveness of the Company’s internal control over financial reporting. USPI acquired several subsidiaries and equity method investments during 2009. Accordingly, management’s evaluation excluded the operations of the following subsidiaries and equity method investments acquired during 2009, with total assets of approximately $52.7 million and no revenues included in the Company’s consolidated financial statements as of December 31, 2009:

•  USP Portland, Inc. (Investment in East Portland Surgery Center, L.L.C.)

•  USP Cincinnati, Inc.

•  USP Houston, Inc. (Investment in Memorial Hermann Surgery Center Richmond, L.L.C.)

•  USP North Texas, Inc. (Investment in BremnerDuke Mary Shiels Development, L.P.)

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Based on this assessment, management did not identify any material weakness in the Company’s internal control, and management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2009.

KPMG LLP, the registered public accounting firm that audited the Company’s consolidated financial statements included in this report, has issued an attestation report on management’s assessment of internal control over financial reporting, a copy of which is included with the Company’s consolidated financial statements in Item 15(a)(1).

Limitations on the Effectiveness of Controls

Our management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, with the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of controls. For these reasons, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation described above that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.   Other Information

None.

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PART III

ITEM 10.   Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

Executive officers of USPI are elected annually by the board of directors and serve until their successors are duly elected and qualified. Directors are elected by USPI’s stockholders and serve until their successors are duly elected and qualified. There are no arrangements or understandings between any officer or director and any other person pursuant to which any officer or director was, or is to be, selected as an officer, director, or nominee for officer or director. There are no family relationships among any of our executive officers or directors. The names, ages as of February 23, 2010, and positions of the executive officers and directors of USPI are listed below along with their relevant business experience.

Name	Age		Position(s)
Donald E. Steen		63	Chairman of the Board
William H. Wilcox		58	President, Chief Executive Officer and Director
Brett P. Brodnax		45	Executive Vice President and Chief Development Officer
Mark A. Kopser		45	Executive Vice President and Chief Financial Officer
Niels P. Vernegaard		53	Executive Vice President and Chief Operating Officer
John J. Wellik		48	Senior Vice President, Chief Administrative Officer and Secretary
Joel T. Allison		62	Director
Michael E. Donovan		33	Director
John C. Garrett, M.D.		67	Director
D. Scott Mackesy		41	Director
James Ken Newman		66	Director
Boone Powell, Jr.		73	Director
Paul B. Queally		45	Director
Raymond A. Ranelli		62	Director

Donald E. Steen founded USPI in February 1998 and served as its chief executive officer until April 2004. Mr. Steen continues to serve as chairman of the board of directors and the executive committee. Mr. Steen was chairman of AmeriPath, Inc. and chief executive officer of AmeriPath, Inc. from July 2004 until May 2007. Mr. Steen served as president of the International Group of HCA, Inc. from 1995 until 1997 and as president of the Western Group of HCA from 1994 until 1995. Mr. Steen founded Medical Care International, Inc., a pioneer in the surgery center business, in 1982. Mr. Steen also serves as a director of Kinetic Concepts, Inc.

William H. Wilcox joined USPI as its president and a director in September 1998. Mr. Wilcox has served as USPI’s president and chief executive officer since April 2004 and is a member of the executive committee. Mr. Wilcox served as president and chief executive officer of United Dental Care, Inc. from 1996 until joining USPI. Mr. Wilcox served as president of the Surgery Group of HCA and president and chief executive officer of the Ambulatory Surgery Division of HCA from 1994 until 1996. Prior to that time, Mr. Wilcox served as the chief operating officer and a director of Medical Care International, Inc. Mr. Wilcox also serves as a director of Concentra, Inc.

Brett P. Brodnax serves as the executive vice president and chief development officer of USPI. Prior to joining USPI in December 1999, Mr. Brodnax was an assistant vice president of the Baylor Health Care System (Baylor) from 1990 until 1999. Mr. Brodnax also served as a director of AmeriPath, Inc. from January 2005 until May 2007.

Mark A. Kopser serves as the executive vice president and chief financial officer of USPI. Prior to joining USPI in May 2000, Mr. Kopser served as chief financial officer for the International Division of HCA from 1997 until 2000 and as chief financial officer for the London Division of HCA from 1992 until 1996.

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Niels P. Vernegaard joined USPI as the executive vice president and chief operating officer in June 2006. Prior to joining USPI, Mr. Vernegaard served in various positions with HCA (or predecessors) for 25 years, including as president and chief executive officer of HCA’s Research Medical Center in Kansas City, Missouri, and chief executive officer of the Wellington Hospital in London, England.

John J. Wellik joined USPI in April 1999 and currently serves as its senior vice president, chief administrative officer and secretary. Prior to joining USPI, Mr. Wellik served in various financial management positions.

Joel T. Allison has served on our board since March 2002. Mr. Allison has served as president and chief executive officer of Baylor since 2000 and served as its senior executive vice president from 1993 until 2000.

Michael E. Donovan joined our board in April 2007 and serves as a member of the executive and audit and compliance committees. Mr. Donovan is currently a principal at Welsh, Carson, Anderson & Stowe. Prior to joining Welsh Carson in 2001, Mr. Donovan worked at Windward Capital Partners and in the investment banking division at Merrill Lynch. He is a member of the board of directors of several private companies.

John C. Garrett, M.D.  has served on our board since February 2001 and is a member of the audit and compliance committee. Dr. Garrett had been a director of OrthoLink Physicians Corporation, which was acquired by USPI in February 2001, since July 1997. Dr. Garrett founded Resurgens, P.C. in 1986, where he maintained a specialized orthopedics practice in arthroscopic and reconstructive knee surgery until his retirement in 2007. Dr. Garrett is a Fellow of the American Academy of Orthopedic Surgeons.

D. Scott Mackesy joined our board, executive committee and compensation committee in April 2007. Mr. Mackesy is a general partner of Welsh, Carson, Anderson & Stowe, where he focuses primarily on investments in the healthcare industry and is a managing member of the general partner of Welsh, Carson, Anderson & Stowe IX, L.P. Prior to joining Welsh Carson in 1998, Mr. Mackesy was a Vice President in the Investment Research Department at Morgan Stanley Dean Witter, where he was a healthcare equity research analyst. He is a member of the board of directors of several private companies.

James Ken Newman has served on our board since May 2005 and is a member of the audit and compliance committee. Mr. Newman served as president and chief executive officer of Horizon Health Corporation from May 2003 until its sale in June 2007 and as chairman of the board from February 1992 until June 2007. From July 1989 until September 1997, he served as president of Horizon Health and from July 1989 until October 1998, he also served as chief executive officer of Horizon Health.

Boone Powell, Jr. has served on our board since June 1999. Mr. Powell served as the chairman of Baylor until June 2001 and served as its president and chief executive officer from 1980 until 2000. Mr. Powell also serves as a director of US Oncology, Inc.

Paul B. Queally has served as a director of USPI since its inception in February 1998 and serves as the chairman of the compensation committee and a member of the executive committee. Mr. Queally is Co-President of Welsh, Carson, Anderson & Stowe, where he focuses primarily on investments in the healthcare industry and is a managing member of the general partner of Welsh, Carson, Anderson & Stowe IX, L.P. Prior to joining Welsh Carson in 1996, Mr. Queally was a general partner at the Sprout Group, the private equity group of the former Donaldson, Lufkin & Jenrette. He is a member of the boards of directors of AGA Medical Corporation, Aptuit, Inc. and several private companies.

Raymond A. Ranelli joined our board in May 2007 and serves as the chairman of the audit and compliance committee. Mr. Ranelli retired from PricewaterhouseCoopers in 2003 where he was a partner for over 20 years. Mr. Ranelli held several positions at PricewaterhouseCoopers including Vice Chairman and Global Leader of the Financial Advisory Services practice. Mr. Ranelli is also a director of Renal Advantage, Inc., OHL, Inc., and United Components, Inc.

Audit Committee Financial Expert

Our board has determined that Raymond A. Ranelli, a director and chairman of the audit and compliance committee, is a financial expert and is independent as that term is used in the rules of the National Association of Securities Dealers’ listing standards (“NASDAQ Rules”).

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Nominations for the Board of Directors

Our board of directors does not have a separately designated, standing nominating committee, a nominating committee charter, or a formal procedure for security holders to recommend nominees to the board of directors. USPI is not listed on a national securities exchange or in an automated inter-dealer quotation system of a national securities association, and we are not subject to either the listing standards of the New York Stock Exchange or the NASDAQ Rules.

Section 16(a) Beneficial Ownership Reporting Compliance

USPI does not have any class of equity securities registered under Section 12 of the Exchange Act. Consequently, Section 16(a) of the Exchange Act is not applicable.

Code of Ethics

We have adopted a Code of Conduct and a Financial Code of Ethics both applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or other persons performing similar functions. Copies of the Code of Conduct and the Financial Code of Ethics may be obtained, free of charge, by writing to the secretary of the Company at: United Surgical Partners International, Inc., 15305 Dallas Parkway, Suite 1600, Addison, Texas 75001.

Item 11.   Executive Compensation

Overview

The compensation committee of our board of directors makes decisions regarding salaries, annual bonuses and equity incentive compensation for our named executive officers. Our named executive officers include our chief executive officer, our chief financial officer and our three most highly compensated executive officers other than our chief executive officer and chief financial officer. The compensation committee is also responsible for reviewing and approving corporate goals and objectives relevant to the compensation of our named executive officers, as well as evaluating their performance in light of those goals and objectives. Based on this evaluation, the compensation committee determines and approves the named executive officers’ compensation. The compensation committee solicits input from our chief executive officer regarding the performance of the company’s other named executive officers. Finally, the compensation committee also administers our equity incentive plan.

The chief executive officer reviews our compensation plan. Based on his analysis, the chief executive officer recommends a level of compensation to the compensation committee, other than for himself, which he views as appropriate to attract, retain and motivate executive talent. The compensation committee determines and approves the chief executive officer’s and other named executive officers’ compensation.

Our Compensation Philosophy and Objectives

We have sought to create an executive compensation program that balances short-term versus long-term payments and awards, cash payments versus equity awards and fixed versus contingent payments and awards in ways that we believe are most appropriate to motivate our executive officers. Our executive compensation program is designed to:

•  attract and retain superior executive talent in the healthcare industry;

•  motivate and reward executives to achieve optimum short-term and long-term corporate operating results;

•  align the interests of our executive officers and stockholders by motivating executive officers to increase stockholder value; and

•  provide a compensation package that recognizes individual contributions as well as overall business results.

In determining each component of, and the overall, compensation of our named executive officers, the compensation committee does not exclusively use quantitative methods or formulas, but instead considers various factors, including the position of the named executive officer, the compensation of officers of comparable

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companies within the healthcare industry, the performance of the named executive officer with respect to specific objectives, increases in responsibilities, recommendations of the chief executive officer and other objective and subjective criteria as the compensation committee deems appropriate. The specific objectives for each named executive officer vary each year in accordance with the scope of the officer’s position, the potential inherent in that position for impacting the Company’s operating and financial results and the actual operating and financial contributions produced by the officer in previous years.

Compensation Components

Our compensation consists primarily of three elements:  base salary, annual bonus and long-term equity incentives. We describe each element of compensation in more detail below.

Base Salary

Base salaries for our named executive officers are established based on the scope of their responsibilities and their prior relevant experience, taking into account competitive market compensation paid by other companies in our industry for similar positions and the overall market demand for such executives at the time of hire. A named executive officer’s base salary is also determined by reviewing the executive’s other compensation to ensure that the executive’s total compensation is in line with our overall compensation philosophy. Base salaries are reviewed annually and increased for merit reasons, based on the executive’s success in meeting or exceeding individual performance objectives. Additionally, we adjust base salaries as warranted throughout the year for promotions or other changes in the scope or breadth of an executive’s role or responsibilities. See “Employment Arrangements and Agreements.”

Annual Bonus

Our compensation program includes eligibility for an annual incentive cash bonus. The compensation committee assesses the level of the named executive officer’s achievement of meeting individual goals, as well as that officer’s contribution towards our long-term, Company-wide goals. The amount of the cash bonus depends on the level of achievement of the stated corporate, department, and individual performance goals, with a target bonus generally set as a percentage of base salary. See “Employment Arrangements and Agreements.”

Long-Term Equity Incentives

We believe that equity-based awards allow us to reward named executive officers for their sustained contributions to the Company. We also believe that equity awards reward continued employment by a named executive officer, with an associated benefit to us of employee continuity and retention. We believe that equity awards provide management with a strong link to long-term corporate performance and the creation of stockholder value. The compensation committee has the authority to grant shares of restricted stock and options to purchase shares of certain classes of common and preferred equity securities of our Parent. The compensation committee does not award equity awards according to a prescribed formula or target. Instead, the compensation committee takes into account the individual’s position, scope of responsibility, ability to affect profits and the individual’s historic and recent performance and the value of the awards in relation to other elements of the individual executive’s total compensation. See “Restricted Stock and Option Plan.”

Termination Based Compensation

For payments due to our named executive officers upon termination, and the acceleration of vesting of equity-based awards in the event of a change of control under our new equity plan, see “Restricted Stock and Option Plan” and “Employment Arrangements and Agreements” below.

Perquisites

We provide perquisites to our named executive officers that we believe are reasonable and consistent with the perquisites that would be available to them at companies with whom we compete for experienced senior management.

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Other Benefits

Other benefits to our named executive officers include vacation time, health care benefits and a 401(k) plan. We maintain a 401(k) plan for our employees, including our named executive officers, because we wish to encourage our employees to save a percentage of their cash compensation, through voluntary deferrals, for their eventual retirement. We match fifty percent of the first six percent of cash compensation contributed by individual employees subject to IRS limitations.

Compensation Committee Report

The compensation committee of USPI has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the compensation committee has recommended to the board of directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

The Compensation Committee

Paul B. Queally, Chairman
D. Scott Mackesy

Summary Compensation Table for 2009

The following table sets forth the total remuneration paid by us for each of the last three fiscal years to the named executive officers.

														Change in
														Nonqualified
												Non-Equity		Deferred
								Stock		Option		Incentive Plan		Compensation			All Other
Name and Principal Position	Year		Salary		Bonus			Awards(1)		Awards(1)		Compensation		Earnings			Compensation			Total
William H. Wilcox		2009	$	600,000	$	750,000	(2)	$	400,507	$	—		—	$	243,982		$	264,350	(4)	$	2,258,839
President, Chief		2008		600,000		540,000	(3)		401,605		—		—		(129,167	)		251,275	(4)		1,663,713
Executive Officer and		2007		575,000		287,500	(5)		280,903		—		—		195,436			250,739	(4)		1,589,578
Director
Brett P. Brodnax		2009		384,000		288,000	(6)		160,203		—		—		129,867			38,050	(4)		1,000,120
Executive Vice President		2008		379,167		230,000	(6)		160,642		—		—		(100,590	)		32,702	(4)		701,921
and Chief Development		2007		365,000		136,875	(2)		112,361		—		—		49,850			30,823	(4)		694,909
Officer
Mark A. Kopser		2009		358,000		268,500	(2)		143,339		—		—		81,803			35,546	(4)		887,188
Executive Vice President		2008		353,000		205,917	(2)		143,732		—		—		(92,177	)		30,924	(4)		641,396
and Chief Financial		2007		340,000		127,500	(2)		100,534		—		—		37,264			29,238	(4)		634,536
Officer
John J. Wellik		2009		261,000		156,600	(2)		16,863		—		—		55,484			26,825	(4)		516,772
Senior Vice President,		2008		257,333		128,500	(2)		16,910		—		—		(78,692	)		23,472	(4)		347,523
Chief Administrative		2007		247,000		74,100	(2)		11,828		—		—		25,243			22,138	(4)		380,309
Officer and Secretary
Niels P. Vernegaard		2009		428,000		321,000	(2)		143,339		—		—		91,422			116,039	(4)		1,099,800
Executive Vice President		2008		421,333		245,778	(2)		143,732		—		—		22,187			110,592	(4)		943,622
and Chief Operating		2007		406,667		152,500	(2)		100,534		—		—		25,634			106,250	(4)		791,585
Officer

(1) We account for the cost of stock-based compensation awarded under our 2001 Equity-Based Compensation Plan and the 2007 Equity Incentive Plan adopted by our Parent under which the cost of equity awards to employees is measured by the fair value of the awards on their grant date and is recognized over the vesting periods of the awards, whether or not the awards had any intrinsic value during the period. The 2001 Equity-Based Compensation Plan was cancelled in connection with the merger. Amounts shown in the table above reflect the dollar amount recognized for financial statement reporting purposes for 2007, 2008 and 2009 of awards granted under the 2001 Equity-Based Compensation Plan and the 2007 Equity Incentive Plan and thus may include amounts from awards granted in prior years. No forfeitures occurred during 2007, 2008 or 2009. All 2001 Equity-Based Compensation Plan awards are based on the closing market price of our common stock on the date of grant. The 2007 Equity Incentive Plan awards are valued at $0.32 per share which we determined with the assistance of a third party valuation firm as the value of our Parent’s common stock on the date of grant. Assumptions used in calculation of these amounts are included in Note 11 to our consolidated audited financial statements for the fiscal year ended December 31, 2007, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 29, 2008, and in Note 15 to our consolidated

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	audited financial statements for the fiscal year ended December 31, 2009, included in this Annual Report on Form 10-K.
(2)	Ninety percent of the amount shown was paid in cash and ten percent was deferred at our named executive officers’ election pursuant to USPI’s Deferred Compensation Plan (the “DCP”).
(3)	Seventy-five percent of the amount shown was paid in cash and twenty-five percent was deferred at Mr. Wilcox’s election pursuant to the DCP.
(4)	Includes discretionary contributions to the named executive officers’ DCP and matching contributions to the named executive officers’ 401(k) and DCP accounts as follows:

	Discretionary		Matching		Matching
	Contribution		Contribution		Contribution
	to DCP		401(k)		DCP
Mr. Wilcox
2009	$	200,000	$	7,350	$	57,000
2008		200,000		6,900		44,375
2007		200,000		6,548		44,191
Mr. Brodnax
2009		—		7,350		30,700
2008		—		6,900		25,802
2007		—		6,390		24,433
Mr. Kopser
2009		—		7,350		28,196
2008		—		6,900		24,024
2007		—		6,390		22,848
Mr. Wellik
2009		—		7,350		19,475
2008		—		6,900		16,572
2007		—		6,402		15,736
Mr. Vernegaard
2009		75,000		7,350		33,689
2008		75,000		6,900		28,692
2007		75,000		6,750		24,500

(5)	Sixty-five percent of the amount shown was paid in cash and thirty-five percent was deferred at Mr. Wilcox’s election pursuant to the DCP.
(6)	Fifty percent of the amount shown was paid in cash and fifty percent was deferred at Mr. Brodnax’s election pursuant to the DCP.

Grant of Plan-Based Awards

No plan-based awards were granted to the named executive officers during 2009.

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Outstanding Equity Awards at Fiscal Year-End

The following table shows all outstanding equity awards held by our named executive officers as of December 31, 2009.

	Stock Awards(1)
	Number of Shares			Fair Value of
	or Units of Stock			Shares or Units of
	That Have Not			Stock That Have
Name	Vested			Not Vested(2)
William H. Wilcox		3,562,500	(3)	$	4,310,625
		495,536	(4)		599,599
Brett P. Brodnax		1,425,000	(3)		1,724,250
		275,853	(4)		333,782
Mark A. Kopser		1,275,000	(3)		1,542,750
		220,683	(4)		267,026
John J. Wellik		50,000	(3)		60,500
		73,561	(4)		89,009
Niels P. Vernegaard		1,275,000	(3)		1,542,750
		245,203	(4)		296,696

(1)	Upon consummation of the merger, our named executive officers received new stock awards under the 2007 Equity Incentive Plan.
(2)	Because there is no active trading market for our common stock, we rely on members of the compensation committee and Welsh Carson to determine in good faith the fair value of our common stock. As of December 31, 2009, this value was determined to be $1.21 per share of common stock. Neither USPI, USPI Holdings, Inc. nor USPI Group Holdings, Inc. has any class of equity securities registered under Section 12 of the Exchange Act.
(3)	The restrictions with respect to 16.7% of such shares will lapse on April 19 of each of 2010 and 2011. The restrictions with respect to the remaining shares will lapse on April 19, 2015; provided however, that such restrictions may lapse sooner if certain internal rate of return targets are met.
(4)	The restrictions with respect to such shares will lapse upon a change of control or other exit event provided that Welsh Carson shall have disposed of all of its shares of our Parent acquired in connection with the merger and received its cost basis in such shares plus a return of at least 100%.

Option Exercises and Stock Values

The following table shows all stock options exercised during 2009 and the value realized upon exercise, and all stock awards vested during 2009 and the value realized upon vesting.

	Option Awards				Stock Awards
	Number of				Number of
	Shares		Value		Shares		Value
	Acquired		Realized		Acquired on		Realized
Name	on Exercise		on Exercise		Vesting		on Vesting(1)
William H. Wilcox		N/A	$	—		593,750	$	558,125
Brett P. Brodnax		N/A		—		237,500		223,250
Mark A. Kopser		N/A		—		212,500		199,750
John J. Wellik		N/A		—		25,000		23,500
Niels P. Vernegaard		N/A		—		212,500		199,750

(1) Because there is no active trading market for our common stock, we rely on members of the compensation committee and Welsh Carson to determine in good faith the fair value of our common stock. As of April 19, 2009, this value was determined to be $0.94 per share of common stock. Neither USPI, USPI Holdings, Inc. nor USPI Group Holdings, Inc. has any class of equity securities registered under Section 12 of the Exchange Act.

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Restricted Stock and Option Plan

Our Parent adopted the 2007 Equity Incentive Plan which became effective contemporaneously with the consummation of the merger, which we sometimes refer to as the equity plan. The purposes of the equity plan are to attract and retain the best available personnel, provide additional incentives to our employees, directors and consultants and to promote the success of our business. A maximum of 20,726,523 shares of common stock may be delivered in satisfaction of awards made under the equity plan.

The compensation committee administers the equity plan (the “Administrator”). Participation in the plan is limited to those key employees and directors, as well as consultants and advisors, who in the Administrator’s opinion are in a position to make a significant contribution to the success of USPI and its affiliated corporations and who are selected by the Administrator to receive an award. The plan provides for awards of stock appreciation rights (“SARs”), stock options, restricted stock, unrestricted stock, stock units, including restricted stock units, and performance awards pursuant to the Administrator’s discretion and the provisions set forth in the plan. Eligibility for incentive stock options (“ISOs”) is limited to employees of USPI or of a “parent corporation” or “subsidiary corporation” of USPI as those terms are defined in Section 424 of the United States Internal Revenue Code of 1986, as amended. Each option granted pursuant to the plan will be treated as providing by its terms that it is to be a non-incentive stock option unless, as of the date of grant, it is expressly designated as an ISO.

The exercise price of each stock option and the share value above which appreciation is to be measured in the case of a SAR will be 100% of the fair value of the stock subject to the stock option or SAR, determined as of the date of grant, or such higher amount as the Administrator may determine in connection with the grant.

Neither ISOs nor, except as the Administrator otherwise expressly provides, other awards may be transferred other than by will or by the laws of descent and distribution. During a recipient’s lifetime an ISO and, except as the Administrator may provide, other non-transferable awards requiring exercise may be exercised only by the recipient. Awards permitted by the Administrator to be transferred may be transferred only to a permitted transferee.

No awards may be made after April 18, 2017, but previously granted awards may continue beyond that date in accordance with their terms. The Administrator may at any time amend the equity plan or any outstanding award for any purpose which may at the time be permitted by law, and may at any time terminate the equity plan as to any future grants of awards; provided, that except as otherwise expressly provided in the plan, the Administrator may not, without the participant’s consent, alter the terms of an award so as to affect adversely the participant’s right under the award, unless the Administrator expressly reserved the right to do so at the time of the award.

Upon termination of a named executive officer’s employment for any reason (including, without limitation, as a result of death, disability, incapacity, retirement, resignation, or dismissal with or without cause), then any vested shares as of the date of such termination shall remain vested shares, and no additional shares will become vested after the date of such termination, except if otherwise determined by the Administrator or within 180 days after the executive’s termination, USPI consummates a change of control, in which case, the provisions pertaining to a change of control will apply.

The shares acquired under the equity plan shall vest in full upon a change of control if, as a result of such change of control, Welsh Carson shall have disposed of all of the investor shares and received its cost basis in its investor shares plus an investor return of at least 100%. In the event the shares do not vest on such change of control, such shares shall be forfeited upon the closing of such change of control.

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Nonqualified Deferred Compensation

The following table shows certain information regarding the named executive officers’ DCP accounts as of December 31, 2009.

										Aggregate
							Aggregate			Balance at
	Executive		USPI		Aggregate		Withdrawals/			December 31,
Name	Contribution		Contribution		Earnings		Distributions			2009
William H. Wilcox	$	195,000	$	257,000	$	243,982	$	(92,066	)	$	2,607,258
Brett P. Brodnax		153,400		30,700		129,867		(36,672	)		661,880
Mark A. Kopser		56,392		28,196		81,803		(21,850	)		373,926
John J. Wellik		38,950		19,475		55,484		(20,236	)		286,159
Niels P. Vernegaard		67,378		108,689		91,422		—			753,712

Deferred Compensation Plan

USPI has a deferred compensation plan that certain of its directors, executive officers and other employees participate in which allows such participants to defer a portion of their compensation to be paid upon certain specified events (including death, termination of employment, disability or some future date). Under the terms of the DCP, all amounts payable under the DCP would become immediately vested in connection with a change of control of USPI, and as a result, each participant would be entitled to be paid their full account balance upon consummation of such a transaction. Notwithstanding the foregoing, USPI amended the DCP to exclude the merger from the definition of a change of control for purposes of the DCP. As a result, the merger had no effect on the vesting of the account balance of any participant in the deferred compensation plan.

Our board of directors designates those persons who are eligible to participate in the DCP. Currently, each of Messrs. Steen, Wilcox, Brodnax, Vernegaard, Kopser and Wellik are eligible to participate in the DCP. The DCP enables participants to defer all or a portion of their bonus in a calendar year and up to 75% of their base salary, typically by making a deferral election in the calendar year prior to the year in which the bonus relates or the annual salary is otherwise payable.

Although participants are 100% vested in their deferrals of salary and bonus, USPI contributions to the DCP are subject to vesting schedules established by the compensation committee in its sole discretion (which may vary among different contributions). Notwithstanding such vesting schedules, participants will become 100% vested in their accounts under the DCP in the event of (i) retirement on or after the earlier to occur of (a) age 60 following the completion of five years of service with USPI or (b) age 65, (ii) a change in control or (iii) death.

Benefits are payable upon termination of employment. Participants may also elect, at the time they make an annual deferral, to receive a lump sum in-service distribution payable in a calendar year that is three or more years after the calendar year to which the deferral is related. A participant who elects an in-service distribution may defer the distribution for an additional five years from the original payment date so long as such election is made at least 12 months prior to the original payment date. Participants may also make an in-service withdrawal from the DCP on account of an unforeseeable emergency (as defined in the DCP). Amounts under the DCP are distributed in a lump sum cash payment, except as provided below, unless the distribution is on account of retirement at normal retirement age under the DCP. A participant can elect, at the time of a deferral under the DCP, to receive his retirement benefit in either a lump sum or pursuant to annual installments over five, 10 or 15 years. Participants may change the form of payment of their retirement benefit from a lump sum to an annual installment payment, provided such election is submitted one year prior to the participant’s retirement.

A participant’s account will be credited with earnings and losses based on returns on deemed investment options selected by the participant from a group of deemed investments established by the deferred compensation plan committee.

USPI may make a discretionary contribution on behalf of any or all participants depending upon the financial strength of USPI. The amount of the contribution, if any, is determined in the sole discretion of the compensation

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committee. Currently, USPI matches fifty percent of any deferral by a named executive officer, subject to a total cap on the matching contribution of five percent of the officer’s compensation.

The DCP is administered by USPI’s compensation committee. The DCP is an “unfunded” arrangement for purposes of ERISA. Accordingly, the DCP consists of a mere promise by USPI to make payments in accordance with the terms of the DCP and participants and beneficiaries have the status of general unsecured creditors of USPI. A participant’s account and benefits payable under the DCP are not assignable. USPI may amend or terminate the DCP provided that no amendment adversely affects the rights of any participant with respect to amounts that have been credited to his account under the DCP prior to the date of such amendment. Upon termination of the DCP, a participant’s account will be paid out as though the participant experienced a termination of employment on the date of the DCP’s termination or, for participants who have attained normal retirement age, in the form of payment elected by the participant.

Employment Arrangements and Agreements

Set forth below is a description of our employment agreements and other compensation arrangements with our named executive officers.

We have employment agreements with William H. Wilcox as President and Chief Executive Officer, Mark A. Kopser as Executive Vice President and Chief Financial Officer, Brett P. Brodnax as Executive Vice President and Chief Development Officer, Niels Vernegaard as Executive Vice President and Chief Operating Officer and John J. Wellik as Senior Vice President, Chief Administrative Officer and Secretary.

The initial term of our employment agreement with William H. Wilcox was for two years from April 18, 2007. Thereafter, Mr. Wilcox’s employment agreement automatically renews for additional two-year terms unless at least 30 days prior to the end of a two-year term, USPI or Mr. Wilcox gives notice that it or he does not wish to extend the agreement. Mr. Wilcox is paid a base salary of $600,000 per year, subject to increase from time to time with the possibility of a bonus, determined by the compensation committee in its sole discretion.

The initial term of our employment agreements with Mark A. Kopser, Brett P. Brodnax and John J. Wellik was for one year from April 18, 2007 to April 18, 2008. Thereafter, each agreement automatically renews for additional one-year terms unless at 30 days prior to the end of a one-year term, USPI or the executive gives notice that it or he does not wish to extend the agreement. Mr. Kopser is paid a base salary of $358,000 per year, Mr. Brodnax, $384,000 per year, Mr. Wellik, $261,000 per year and, subject to increase from time to time with the possibility of a bonus, determined by the compensation committee in its sole discretion.

The initial term of our employment agreement with Niels Vernegaard was for two years from April 18, 2007. Thereafter, Mr. Vernegaard’s employment agreement automatically renews for additional one-year terms unless at 30 days prior to the end of a one-year term, USPI or Mr. Vernegaard gives notice that it or he does not wish to extend the agreement. Mr. Vernegaard is paid a base salary of $428,000 per year, subject to increase from time to time with the possibility of a bonus determined by the compensation committee in its sole discretion.

Each of the employment agreements with our named executive officers also provides that if the executive is terminated for cause, or if he terminates his employment agreement without certain enumerated good reasons, we shall pay to him any accrued or unpaid base salary through the date of his termination. In addition, if we terminate the employment without cause or upon failure to renew his employment agreement, or if he terminates his employment for certain enumerated good reasons, we will (i) continue to pay him his base salary at the rate in effect on the date of his termination for twelve months; (iii) continue his health insurance benefits for 12 months (24 months for Mr. Wilcox) following his date of termination or the economic equivalent thereof if such continuation is not permissible under the terms of our health insurance plan; and (iii) pay him a good faith estimate of the bonus he would have received had he remained employed through the end of the fiscal year in which his termination occurred. Our obligations set forth in items (i) to (iii) above are conditioned on the executive signing a release of claims and the continued performance of his continuing obligations under his employment agreement.

In connection with the consummation of the merger and the adoption of our Parent’s equity plan, certain of our executive officers, including our named executive officers, were awarded restricted shares of our Parent’s common stock under the equity plan pursuant to an agreement between each such named executive officer and our Parent.

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Pursuant to these restricted stock award agreements with our named executive officers, upon termination of such named executive officer’s employment for any reason (including, without limitation, as a result of death, disability, incapacity, retirement, resignation, or dismissal with or without cause), any vested shares as of the date of such termination shall remain vested shares and no additional shares will become vested after the date of such termination unless USPI consummates a change of control within 180 days after such named executive officer’s termination, in which case, such unvested shares shall become fully vested if such awards would have become fully vested had such named executive officer not been terminated on the date of such change of control as described below. Additionally, pursuant to such restricted stock award agreements with our named executive officers, all unvested restricted shares vest in full upon a change of control if, as a result of such change of control, Welsh Carson shall have disposed of all of its shares of our Parent acquired in connection with the merger and received its cost basis in such shares plus a return of at least 100%. In the event such restricted shares do not vest on such change of control, then such restricted shares shall be forfeited upon the closing of such change of control.

Potential Payments Upon Termination or Change of Control

The following table sets forth for each named executive officer potential post-employment payments and payments on a change in control and assumes that the triggering event took place on December 31, 2009.

	Cash								Accelerated
	Severance			Accrued					Vesting upon
Name	Payment			Bonus(1)(2)		Benefits(3)			Change of Control(4)
William H. Wilcox	$	1,200,000	(5)	$	750,000	$	14,352	(5)	$	4,910,224
Brett P. Brodnax		384,000	(6)		288,000		6,876	(6)		2,058,032
Mark A. Kopser		358,000	(6)		268,500		8,004	(6)		1,809,776
John J. Wellik		261,000	(6)		156,600		8,004	(6)		149,509
Niels P. Vernegaard		428,000	(6)		321,000		8,004	(6)		1,839,446

(1)	Amounts are based on the bonus amount paid with respect to 2009.
(2)	Amounts will be paid at such time as annual bonuses are payable to other executive and officers of USPI in accordance with USPI’s normal payroll practices.
(3)	Amounts consist of the cost to continue to pay such named executive officer’s health insurance benefits for the designated term or the economic equivalent thereof if such continuation is not permissible under the terms of the USPI’s health insurance plan.
(4)	Pursuant to the restricted stock award agreements with our named executive officers, all unvested restricted shares of our Parent’s common stock will vest in full upon a change of control if, as a result of such change of control, Welsh Carson shall have disposed of all of its shares of our Parent acquired in connection with the merger and received its cost basis in such shares plus a return of at least 100%. A change of control is not defined to include an initial public offering of our stock. In the event such restricted shares do not vest on such change of control, then such restricted shares shall be forfeited upon the closing of such change of control transaction. The results in this column are the result of multiplying the total possible number of restricted shares of our Parent’s common stock that vest upon a change of control by $1.21 per share. Because there is no active trading market for our common stock, we rely on members of the compensation committee and Welsh Carson to determine in good faith the fair value of our common stock. As of December 31, 2009, this value was determined to be $1.21 per share of common stock. Neither USPI, USPI Holdings, Inc. nor USPI Group Holdings, Inc. has any class of equity securities registered under Section 12 of the Exchange Act.
(5)	Amounts to be paid over twenty-four months.
(6)	Amounts to be paid over twelve months.

Director Compensation

The chairman and members of our board of directors who are also officers or employees of USPI, affiliates of Welsh Carson and Mr. Allison do not receive compensation for their services as directors. At Mr. Allison’s direction, his compensation for his service as a director are paid to his employer Baylor. The other directors (“non-

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employee directors”) receive cash compensation in the amount of $25,000 per year and are eligible to participate in our group insurance benefits. If a non-employee director elects to participate, the director will pay the full cost of such benefits. Non-employee directors also receive the following for all meetings attended: $2,500 per board meeting, $1,250 per telephonic meeting, $1,500 per audit committee meeting and $1,000 per other committee meeting. In addition, the audit committee chairman is paid a retainer of $20,000 per year.

The following table sets forth the compensation paid to our non-employee directors in 2009.

2009 Non-Employee Director Compensation Table

	Fees Earned or		Stock		All Other
Name	Paid in Cash		Awards(1)		Compensation		Total
Joel T. Allison	$	—	$	—		—	$	—
John C. Garrett, M.D.		42,250		10,238		—		52,488
James Ken Newman		41,000		10,238		—		51,238
Boone Powell, Jr.		32,500		10,934		—		43,434
Raymond A. Ranelli		61,000		10,238		—		71,238

(1) We account for the cost of stock-based compensation awarded under the 2007 Equity Incentive Plan adopted by our Parent under which the cost of equity awards to employees is measured by the fair value of the awards on their grant date and is recognized over the vesting periods of the awards, whether or not the awards had any intrinsic value during the period. Amounts shown in the table above reflect the dollar amount recognized for financial statement reporting purposes for 2009 of awards granted under the 2007 Equity Incentive Plan and thus may include amounts from awards granted in prior years. No forfeitures occurred during 2009. The 2007 Equity Incentive Plan awards are valued at $0.32 per share which we determined with the assistance of a third party valuation firm as the value of our Parent’s common stock on the date of grant. Assumptions used in calculation of these amounts are included in Note 15 to our consolidated audited financial statements for the fiscal year ended December 31, 2009, included in this Annual Report on Form 10-K.

Compensation Committee Interlocks and Insider Participation

The compensation committee of the board of directors consists of Messrs. Queally (Chairman) and Mackesy. None of such persons are officers or employees or former officers or employees of the Company. None of the executive officers of the Company served as a member of the compensation committee of any other company during 2009, except that Mr. Wilcox served on the compensation committee of Concentra, Inc. No officer or employee of Concentra, Inc. serves on our board of directors.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

USPI does not issue any of its equity securities in conjunction with an equity compensation plan. See Item 11, “Executive Compensation- Restricted Stock and Option Plan,” for a discussion of Parent’s equity compensation plan.

All of the issued and outstanding stock of USPI is owned by Holdings, which in turn is wholly-owned by Parent. The following table sets forth information as of February 23, 2010, with respect to the beneficial ownership of the capital stock of our Parent by (i) our chief executive officer and each of the other named executive officers,

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(ii) each of our directors, (iii) all of our directors and executive officers as a group and (iv) each holder of five percent (5%) or more of any class of our Parent’s outstanding capital stock.

						Participating		Percent of
	Common		Percent of			Preferred		Outstanding
	Shares		Outstanding			Shares		Participating
	Beneficially		Common			Beneficially		Preferred
Name of Beneficial Owner(1)	Owned		Shares			Owned		Shares
Welsh, Carson, Anderson & Stowe(2)		136,448,356		86.4	%		17,326,775		96.3	%
California State Teacher’s Retirement System(3)		22,183,099		14.0	%		2,816,901		15.7	%
CPP Investment Board (USRE II) Inc.(4)		26,619,718		16.8	%		3,380,282		18.8	%
Silvertech Investment PTE Ltd(5)		8,873,239		5.6	%		1,126,761		6.3	%
Donald E. Steen(6)		1,421,127			*		78,873			*
William H. Wilcox(7)		6,488,790		4.1	%		157,746			*
Brett P. Brodnax(8)		2,388,811		1.5	%		27,042			*
Mark A. Kopser(9)		2,364,345		1.5	%		56,338			*
Niels P. Vernegaard(10)		2,007,194		1.3	%		7,872			*
John J. Wellik(11)		317,927			*		5,634			*
Joel T. Allison		—		—			—		—
Michael E. Donovan(12)(13)		40,000			*		—		—
John C. Garrett, M.D.(13)		173,095			*		16,901			*
D. Scott Mackesy(12)(13)		40,000			*		—		—
James K. Newman(13)		217,463			*		22,535			*
Boone Powell, Jr.(13)		111,001			*		9,016			*
Paul B. Queally (12)(14)		215,457			*		22,281			*
Raymond A. Ranelli(13)		93,261			*		6,985			*
All directors and executive officers as a group(15)		15,878,471		10.1	%		411,223		2.3	%

*	Less than one percent
(1)	Unless otherwise indicated, the principal executive offices of each of the beneficial owners identified are located at 15305 Dallas Parkway, Suite 1600, Addison, Texas 77001.
(2)	Represents (A) 54,671,610 common shares and 6,942,423 participating preferred shares held by Welsh Carson over which Welsh Carson has sole voting and investment power, (B) 25,200 common shares and 3,200 participating preferred shares held by WCAS Management Corporation, an affiliate of Welsh Carson, over which WCAS Management Corporation has sole voting and investment power, (C) an aggregate 1,462,785 common shares and 185,752 participating preferred over which individuals who are general partners of WCAS X Associates LLC, the sole general partner of Welsh Carson, and/or otherwise employed by an affiliate of Welsh, Carson, Anderson & Stowe have voting and investment power, and (D) an aggregate 80,288,761 common shares and 10,195,400 participating preferred shares held by other co-investors, over which Welsh Carson has sole voting power. WCAS X Associates LLC, the sole general partner of Welsh Carson and the individuals who serve as general partners of WCAS X Associates LLC, including D. Scott Mackesy, Paul B. Queally and Michael E. Donovan, may be deemed to beneficially own the shares beneficially owned by Welsh Carson. Such persons disclaim beneficial ownership of such shares. The principal executive offices of Welsh, Carson, Anderson & Stowe are located at 320 Park Avenue, Suite 2500, New York, New York 10022.
(3)	Such beneficial owner has granted to Welsh Carson sole voting power over its shares. The principal executive offices of such beneficial owner is 7667 Folsom Blvd., Suite 250, Sacramento, California 95826.
(4)	Such beneficial owner has granted to Welsh Carson sole voting power over its shares. The principal executive offices of such beneficial owner is One Queen Street East, Suite 2600, Toronto, Ontario, M5C 2W5, Canada.

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(5)	Such beneficial owner has granted to Welsh Carson sole voting power over its shares. The principal executive offices of such beneficial owner is 255 Shoreline Drive, Suite 600, Redwood City, California 94065.
(6)	Includes 100,000 common shares owned by the Michelle Ann Steen Trust and 100,000 common shares owned by the Marcus Anthony Steen Trust for which, in each case, Mr. Steen acts as a trustee and has voting and investment power over such shares. Such shares are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the merger. Also included are another 600,000 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the merger.
(7)	Includes 5,246,536 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the merger.
(8)	Includes 2,175,853 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the merger.
(9)	Includes 1,920,683 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the merger.
(10)	Includes 1,945,203 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the merger.
(11)	Includes 273,561 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the merger.
(12)	Does not include (A) 54,671,610 common shares or 6,942,423 participating preferred shares owned by Welsh Carson, or (B) 25,200 common shares or 3,200 participating preferred shares owned by WCAS Management Corporation. Messrs Queally, Mackesy and Donovan, as general partners of WCAS X Associates LLC, the sole general partner of Welsh Carson, and officers of WCAS Management Corporation, may be deemed to beneficially own the shares beneficially owned by Welsh Carson and WCAS Management Corporation. Each of Messrs Queally, Mackesy and Donovan disclaims beneficial ownership of such shares. The principal executive offices of Messrs Queally, Mackesy and Donovan are located at 320 Park Avenue, Suite 2500, New York, New York 10022.
(13)	Includes 40,000 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement.
(14)	Includes (A) an aggregate 3,090 common shares and 393 preferred shares owned by certain trusts established for the benefit of Mr. Queally’s children for which, in each case, Mr. Queally acts as a trustee and has voting and investment power over such shares and (B) 40,000 common shares which are subject to restrictions on transfer set forth in a restricted stock awards agreement.
(15)	Does not include (A) 54,671,610 common shares or 6,942,423 participating preferred shares owned by Welsh Carson, or (B) 25,200 common shares or 3,200 participating preferred shares owned by WCAS Management Corporation. Includes an aggregate 12,361,836 common shares which are subject to restrictions on transfer set forth in restricted stock award agreements entered into at the time of the consummation of the merger.

Item 13.   Certain Relationships and Related Transactions, and Director Independence

This Item 13 describes certain relationships and transactions involving us and certain of our directors, executive officers, and other related parties. We believe that all the transactions described in this Item 13 are upon fair and reasonable terms no less favorable than could be obtained in comparable arm’s length transactions with unaffiliated third parties under the same or similar circumstances.

Arrangements with Our Investors

Welsh Carson, its co-investors and the rollover stockholders entered into agreements described below with our Parent. Welsh Carson’s co-investors includes individuals and entities invited by Welsh Carson to participate in our Parent’s financings such as affiliated investment funds, individuals employed by affiliates of Welsh Carson and limited partners of Welsh Carson.

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Stockholders Agreement

The stockholders agreement contains certain restrictions on the transfer of equity securities of our Parent and provides certain stockholders with certain preemptive and information rights.

Management Agreement

In connection with the merger, USPI entered into a management agreement with WCAS Management Corporation, an affiliate of Welsh Carson, pursuant to which WCAS Management Corporation will provide management and financial advisory services to us. WCAS Management Corporation receives an annual management fee of $2.0 million, of which $1.0 million will be payable in cash on an annual basis and the remainder will accrue annually over time, and annual reimbursement for out-of-pocket expenses incurred in connection with the provision of such services.

Other Arrangements with Directors and Executive Officers

Restricted Stock and Option Plan

In connection with the merger, our Parent adopted a new restricted stock and option plan. Members of our management, including some of those who are participating in the merger as rollover stockholders, received awards under this plan. See “Compensation Discussion and Analysis — Restricted Stock and Option Plan.”

Employment Agreements

Each of the named executive officers of USPI have employment agreements with us. See “Compensation Discussion and Analysis — Employment Arrangements and Agreements.”

Other Arrangements

We have entered into agreements with certain majority and minority owned surgery centers to provide management services. As compensation for these services, the surgery centers are charged management fees which are either fixed in amount or represent a fixed percentage of each center’s net revenue less bad debt. The percentages range from 3% to 8%. Amounts recognized under these agreements, after elimination of amounts from consolidated surgery centers, totaled approximately $45.2 million, $39.1 million, and $32.8 million in 2009, 2008 and 2007, respectively, and are included in management and contract service revenue in our consolidated statements of operations.

We regularly engage in purchases and sales of ownership interests in our facilities. We operate 25 surgical facilities in partnership with the Baylor Health Care System (Baylor) and local physicians in the Dallas/Fort Worth area. Baylor’s Chief Executive Officer is a member of our board of directors. The following table summarizes transactions with Baylor during 2009, 2008 and 2007. We believe that the sale prices were approximately the same as if they had been negotiated on an arms’ length basis, and the prices equaled the value assigned by an external appraiser who valued the businesses immediately prior to the sale.

Date	Facility Location			Proceeds		Gain
December 2009		Dallas, Texas(1	)	$	1.2 million	$	0.3 million
December 2009		Fort Worth, Texas(2	)		2.4 million		0.1 million
Total				$	3.6 million	$	0.4 million

(1)	Baylor acquired a controlling interest in a facility from us, which transferred control of the facility to Baylor.
(2)	Baylor acquired a controlling interest in two facilities. We continue to account for these facilities under the equity method of accounting.

In June 2009, we agreed to lend up to $10.0 million to Trinity MC, LLC (Trinity), an acute care hospital in the Dallas/Fort Worth area. A majority interest (71%) in Trinity is owned by BRMCG Holdings, LLC, a wholly owned subsidiary of Baylor Regional Medical Center at Grapevine, a controlled affiliate of Baylor. Trinity operates Baylor

91

Medical Center at Carrollton (BMCC). We have no ownership in Trinity. The revolving note earned interest at a rate of 6.0% per annum and was paid in full in December 2009. We believe the terms of the revolving note were approximately the same as if they had been negotiated on an arms’ length basis.

Additionally, we derived 2% of our revenues and approximately 46% of our equity in earnings of unconsolidated affiliates in 2009 from our joint venture with Baylor.

Marc Steen, the son of Donald E. Steen, is employed by USPI as the market president for Atlanta. During 2009, Marc Steen earned approximately $227,500 in salary and bonus.

USPI does not have a written policy on related party transactions, however, the audit and compliance committees will review and approve all related party transactions required to be reported pursuant to item 404(a) of Regulation S-X.

Neither the Company, UPSI Holdings, Inc. nor Parent are listed on a national securities exchange or in an automated inter-dealer quotation system of a national securities association, and we are not subject to either the listing standards of the New York Stock Exchange or the NASDAQ Rules. For the purposes of the following determinations of director independence, we have chosen to use the NASDAQ Rules. Using such Rules, we have determined that each of the directors on our board of directors are independent for general board service, except Messrs. Steen, Wilcox, Mackesy, Queally, Donovan and Allison.

Our board of directors has a separately designated, standing audit and compliance committee comprised of the following members of the board: Messrs. Ranelli (Chairman), Donovan, Garrett and Newman. Under the NASDAQ Rules, Messrs. Ranelli, Garrett and Newman would be considered independent for the purposes of audit and compliance committee service.

Our board of directors also has a separately designated, standing compensation committee comprised of the following members of the board: Messrs. Queally (Chairman) and Mackesy. Under the NASDAQ Rules, Messrs. Queally and Mackesy would not be considered independent for the purposes of compensation committee service.

ITEM 14.   Principal Accounting Fees and Services

The following table shows the aggregate fees billed by KPMG LLP, our independent registered public accounting firm, during the years ended December 31, 2009 and 2008:

Description of Fees	2009		2008
Audit Fees(1)	$	1,331,900	$	1,340,500
Audit Related Fees(2)		41,995		—
Tax Fees(3)		—		—
All Other Fees(4)		198,000		155,000
	$	1,571,895	$	1,495,500

(1)	Audit Fees. Includes fees billed for professional services rendered for the audit of our annual financial statements included in our Form 10-K, reviews of our quarterly financial statements included in Forms 10-Q, reviews of our other filings with the SEC, and other research work necessary to comply with generally accepted accounting standards for the years ended December 31, 2009 and 2008.
(2)	Audit Related Fees. Includes fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include other accounting and reporting consultations.
(3)	Tax Fees. Includes fees billed for tax compliance, tax advice, and tax planning.
(4)	All Other Fees. Includes fees billed for assistance with preparation of Medicare cost reports.

The charter of our audit and compliance committee provides that the committee must approve in advance all audit and non-audit services provided by KPMG LLP. The audit and compliance committee approved all of these services.

92

PART IV

Item 15.   Exhibits, Financial Statement Schedules

(a)   (1) Financial Statements

The following consolidated financial statements are filed as part of this Form 10-K:

Reports of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets	F-4
Consolidated Statements of Operations	F-5
Consolidated Statements of Comprehensive Income (Loss)	F-6
Consolidated Statements of Changes in Equity	F-7
Consolidated Statements of Cash Flows	F-8
Notes to Consolidated Financial Statements	F-9
(2) Financial Statement Schedule — Schedule II	S-1
(3) The following consolidated financial statements of Texas Health Ventures Group, L.L.C. and Subsidiaries are presented pursuant to Rule 3-09 of Regulation S-X:
Reports of Independent Auditors	2
Consolidated Balance Sheets as of June 30, 2009 and 2008	3
Consolidated Statements of Income for the years ended June 30, 2009 and 2008	4
Consolidated Statements of Members’ Equity for the years ended June 30, 2009 and 2008	5
Consolidated Statements of Cash Flows for the years ended June 30, 2009 and 2008	6
Notes to the Consolidated Financial Statements	8
Report of Independent Auditors	24
Consolidated Balance Sheets as of June 30, 2008 and 2007	25
Consolidated Statements of Income for the years ended June 30, 2008 and 2007	26
Consolidated Statements of Members’ Equity for the years ended June 30, 2008 and 2007	27
Consolidated Statements of Cash Flows for the years ended June 30, 2008 and 2007	28
Notes to the Consolidated Financial Statements	29
(4) Exhibits	IV-1

93

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholder

United Surgical Partners International, Inc.:

We have audited the accompanying consolidated balance sheets of United Surgical Partners International, Inc. (the Company) and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the years ended December 31, 2009 and 2008 (Successor), the period from April 19 to December 31, 2007 (Successor), and the period from January 1 to April 18, 2007 (Predecessor). In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule. These consolidated financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of United Surgical Partners International, Inc. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the years ended December 31, 2009 and 2008 (Successor), the period from April 19 to December 31, 2007 (Successor), and the period from January 1 to April 18, 2007 (Predecessor), in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), United Surgical Partners International, Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 23, 2010 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for noncontrolling interests in 2009 retrospective to 2008 and 2007 due to the adoption of new accounting requirements issued by the Financial Accounting Standards Board, as of January 1, 2009.

/s/  KPMG LLP

Dallas, Texas

February 23, 2010

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholder

United Surgical Partners International, Inc.:

We have audited United Surgical Partners International, Inc.’s (the Company) internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). United Surgical Partners International, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, United Surgical Partners International, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

United Surgical Partners International, Inc. acquired several subsidiaries and equity method investments during 2009, and management excluded from its assessment of the effectiveness of United Surgical Partners International, Inc.’s internal control over financial reporting as of December 31, 2009, the Company’s internal control over financial reporting associated with total assets of $52.7 million and no revenues included in the consolidated financial statements of United Surgical Partners International, Inc. and subsidiaries as of and for the year ended December 31, 2009. Our audit of internal control over financial reporting of United Surgical Partners International, Inc. also excluded an evaluation of the internal control over financial reporting of the subsidiaries and equity method investments listed below:

•  USP Portland, Inc. (Investment in East Portland Surgery Center, L.L.C.)

•  USP Cincinnati, Inc.

•  USP Houston, Inc. (Investment in Memorial Hermann Surgery Center Richmond, L.L.C.)

•  USP North Texas, Inc. (Investment in BremnerDuke Mary Shiels Development, L.P.)

F-2

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of United Surgical Partners International, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the years ended December 31, 2009 and 2008 (Successor), the period from April 19 to December 31, 2007 (Successor), and the period from January 1 to April 18, 2007 (Predecessor), and our report dated February 23, 2010 expressed an unqualified opinion on those consolidated financial statements.

/s/  KPMG LLP

Dallas, Texas

February 23, 2010

F-3

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets
December 31, 2009 and 2008

	2009			2008
	(In thousands, except share amounts)
ASSETS
Cash and cash equivalents	$	34,890		$	49,435
Accounts receivable, net of allowance for doubtful accounts of $8,160 and $11,544, respectively		54,237			57,213
Other receivables (Note 7)		15,246			17,070
Inventories of supplies		8,789			9,079
Deferred tax asset, net (Note 14)		16,400			—
Prepaids and other current assets		14,382			11,735
Total current assets		143,944			144,532
Property and equipment, net (Note 8)		198,506			201,824
Investments in unconsolidated affiliates (Note 4)		355,499			307,771
Goodwill (Note 9)		1,279,291			1,270,287
Intangible assets, net (Note 9)		322,896			318,852
Other assets		25,256			24,897
Total assets	$	2,325,392		$	2,268,163
LIABILITIES AND EQUITY
Accounts payable	$	23,475		$	22,194
Accrued salaries and benefits		33,015			27,241
Due to affiliates		129,296			57,237
Accrued interest		8,784			9,336
Current portion of long-term debt (Note 10)		23,337			24,488
Other current liabilities		39,053			42,874
Total current liabilities		256,960			183,370
Long-term debt, less current portion (Note 10)		1,048,191			1,073,459
Other long-term liabilities		32,466			27,517
Deferred tax liability, net (Note 14)		125,907			125,639
Total liabilities		1,463,524			1,409,985
Noncontrolling interests — redeemable (Notes 2 and 5)		63,865			51,961
Commitments and contingencies (Notes 2 and 17)
Equity (Note 15):
United Surgical Partners International, Inc. (USPI) stockholder’s equity:
Common stock, $0.01 par value; 100 shares authorized, issued and outstanding		—			—
Additional paid-in capital		789,505			801,902
Accumulated other comprehensive loss, net of tax		(58,845	)		(84,008	)
Retained earnings		27,292			46,243
Total USPI stockholder’s equity		757,952			764,137
Noncontrolling interests — nonredeemable (Notes 2 and 5)		40,051			42,080
Total equity		798,003			806,217
Total liabilities and equity	$	2,325,392		$	2,268,163

See accompanying notes to consolidated financial statements

F-4

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Consolidated Statements of Operations

	Successor									Predecessor
							Period from			Period from
							April 19			January 1
	Year Ended			Year Ended			through			through
	December 31,			December 31,			December 31,			April 18,
	2009			2008			2007			2007
				(In thousands)
Revenues:
Net patient service revenues	$	533,609		$	561,532		$	402,433		$	170,598
Management and contract service revenues		77,404			72,970			46,503			19,142
Other revenues		11,352			7,721			3,552			1,615
Total revenues		622,365			642,223			452,488			191,355
Equity in earnings of unconsolidated affiliates		61,771			47,042			23,867			9,906
Operating expenses:
Salaries, benefits, and other employee costs		174,148			184,871			125,648			53,871
Medical services and supplies		102,673			112,499			77,006			34,308
Other operating expenses		94,633			107,659			74,335			31,744
General and administrative expenses		38,769			40,155			29,340			39,277
Provision for doubtful accounts		8,958			7,568			7,592			3,297
Depreciation and amortization		35,297			36,757			26,688			12,426
Total operating expenses		454,478			489,509			340,609			174,923
Operating income		229,658			199,756			135,746			26,338
Interest income		2,630			3,228			3,208			933
Interest expense		(70,915	)		(85,649	)		(67,862	)		(9,521	)
Loss on early retirement of debt		—			—			—			(2,435	)
(Loss) gain on sale of equity interests (Notes 3 and 5)		(21,371	)		(1,863	)		(636	)		798
Other, net (Note 9)		(6,711	)		73			194			—
Total other expense, net		(96,367	)		(84,211	)		(65,096	)		(10,225	)
Income from continuing operations before income taxes		133,291			115,545			70,650			16,113
Income tax benefit (expense) (Note 14)		97			(22,333	)		(14,592	)		(4,256	)
Income from continuing operations		133,388			93,212			56,058			11,857
Discontinued operations, net of tax (Note 3):
Earnings (loss) from discontinued operations		—			65			272			(458	)
Net gain (loss) on disposal of discontinued operations		—			(625	)		(2,426	)		—
Total loss from discontinued operations		—			(560	)		(2,154	)		(458	)
Net income		133,388			92,652			53,904			11,399
Less: Net income attributable to noncontrolling interests		(63,722	)		(55,138	)		(45,175	)		(18,548	)
Net income (loss) attributable to USPI’s common stockholder	$	69,666		$	37,514		$	8,729			(7,149	)
Amounts attributable to USPI’s common stockholder:
Income (loss) from continuing operations, net of tax	$	69,666		$	38,077		$	10,919		$	(6,898	)
Loss from discontinued operations, net of tax		—			(563	)		(2,190	)		(251	)
Net income attributable to USPI’s common stockholder	$	69,666		$	37,514		$	8,729		$	(7,149	)

See accompanying notes to consolidated financial statements

F-5

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

	Successor
							Period from			Period from
							April 19			January 1
	Year Ended			Year Ended			through			through
	December 31,			December 31,			December 31,			April 18,
	2009			2008			2007			2007
				(In thousands)
Net income	$	133,388		$	92,652		$	53,904		$	11,399
Other comprehensive income (loss):
Foreign currency translation adjustments		21,967			(71,790	)		(1,646	)		2,169
Unrealized gain (loss) on interest rate swaps, net of tax		3,894			(10,051	)		—			—
Pension adjustments, net of tax		(698	)		(682	)		161			—
Total other comprehensive income (loss)		25,163			(82,523	)		(1,485	)		2,169
Comprehensive income		158,551			10,129			52,419			13,568
Less: Comprehensive income attributable to noncontrolling interests		(63,722	)		(55,138	)		(45,175	)		(18,548	)
Comprehensive income (loss) attributable to USPI’s common stockholder	$	94,829		$	(45,009	)	$	7,244		$	(4,980	)

See accompanying notes to consolidated financial statements

F-6

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

				USPI Common Stockholder
																		Accumulated
												Additional						Other						Noncontrolling
				Comprehensive			Outstanding					Paid-in			Treasury			Comprehensive			Retained			Interests —
	Total			Income (Loss)			Shares			Par Value		Capital			Stock			Income (Loss)			Earnings			Nonredeemable
	(In thousands, except successor share amounts)
Predecessor
Balance, December 31, 2006	$	622,844		$	—			44,710		$	447	$	382,327		$	(109	)	$	16,349		$	200,260		$	23,570
Distributions to noncontrolling interests		(1,447	)		—			—			—		—			—			—			—			(1,447	)
Purchases and sales of noncontrolling interests, net		9,812			—			—			—		—			—			—			—			9,812
Issuance of common stock and exercise of stock options		6,216			—			474			5		6,211			—			—			—			—
Repurchases of common stock		(2,197	)		—			(71	)		—		—			(2,197	)		—			—			—
Equity-based compensation expense		17,100			—			—			—		17,100			—			—			—			—
Tax benefit related to increase in value of equity awards		15,822			—			—			—		15,822			—			—			—			—
Comprehensive income:
Net income (loss)		(5,391	)		(7,149	)		—			—		—			—			—			(7,149	)		1,758
Foreign currency translation adjustments		2,169			2,169			—			—		—			—			2,169			—			—
Comprehensive loss		(3,222	)	$	(4,980	)		—			—		—			—			—			—			1,758
Balance, April 18, 2007	$	664,928						45,113		$	452	$	421,460		$	(2,306	)	$	18,518		$	193,111		$	33,693
Successor
Capitalization of Successor company at April 19, 2007	$	825,549		$	—			100		$	—	$	791,856		$	—		$	—		$	—		$	33,693
Expenses paid on behalf of USPI Group Holdings, Inc.		(7,862	)		—			—			—		(7,862	)		—			—			—			—
Additional investment by USPI Group Holdings, Inc.		13,477			—			—			—		13,477			—			—			—			—
Distributions to noncontrolling interests		(3,251	)		—			—			—		—			—			—			—			(3,251	)
Purchases and sales of noncontrolling interests, net		(3,106	)		—			—			—		—			—			—			—			(3,106	)
Contribution related to equity award grants by USPI Group Holdings, Inc.		2,091			—			—			—		2,091			—			—			—			—
Comprehensive income:
Net income		11,687			8,729			—			—		—			—			—			8,729			2,958
Other comprehensive income:
Foreign currency translation adjustments		(1,646	)		(1,646	)		—			—		—			—			(1,646	)		—			—
Pension liability adjustment, net of tax		161			161			—			—		—			—			161			—			—
Other comprehensive income		(1,485	)		(1,485	)		—			—		—			—			—			—			—
Comprehensive income		10,202		$	7,244			—			—		—			—			—			—			2,958
Balance, December 31, 2007		837,100						100			—		799,562			—			(1,485	)		8,729			30,294
Distributions to noncontrolling interests		(5,112	)		—			—			—		—			—			—			—			(5,112	)
Purchases and sales of noncontrolling interests, net and other		14,359			—			—			—		—			—			—			—			14,359
Contribution related to equity award grants by USPI Group Holdings, Inc.		2,340			—			—			—		2,340			—			—			—			—
Comprehensive income (loss):
Net income		40,053			37,514			—			—		—			—			—			37,514			2,539
Other comprehensive loss:
Foreign currency translation adjustments		(71,790	)		(71,790	)		—			—		—			—			(71,790	)		—			—
Unrealized loss on interest rate swaps, net of tax		(10,051	)		(10,051	)		—			—		—			—			(10,051	)		—			—
Pension liability adjustment, net of tax		(682	)		(682	)		—			—		—			—			(682	)		—			—
Other comprehensive loss		(82,523	)		(82,523	)		—			—		—			—			—			—			—
Comprehensive loss		(42,470	)	$	(45,009	)		—			—		—			—			—			—			2,539
Balance, December 31, 2008		806,217						100			—		801,902			—			(84,008	)		46,243			42,080
Distributions to noncontrolling interests		(5,749	)		—			—			—		—			—			—			—			(5,749	)
Purchases of noncontrolling interests		(3,814	)		—			—			—		(8,411	)		—			—			—			4,597
Sales of noncontrolling interests		(6,062	)		—			—			—		(5,922	)		—			—			—			(140	)
Deconsolidation of subsidiaries		(6,682	)		—			—			—		—			—			—			—			(6,682	)
Payment of common stock dividend		(88,617	)		—			—			—		—			—			—			(88,617	)		—
Contribution related to equity award grants by USPI Group Holdings, Inc. and other		1,936			—			—			—		1,936			—			—			—			—
Comprehensive income (loss):
Net income		75,611			69,666			—			—		—			—			—			69,666			5,945
Other comprehensive income:
Foreign currency translation adjustments		21,967			21,967			—			—		—			—			21,967			—			—
Unrealized gain on interest rate swaps, net of tax		3,894			3,894			—			—		—			—			3,894			—			—
Pension liability adjustment, net of tax		(698	)		(698	)		—			—		—			—			(698	)		—			—
Other comprehensive income		25,163			25,163			—			—		—			—			—			—			—
Comprehensive income		100,774		$	94,829			—			—		—			—			—			—			5,945
Balance, December 31, 2009	$	798,003						100		$	—	$	789,505		$	—		$	(58,845	)	$	27,292		$	40,051

See accompanying notes to consolidated financial statements

F-7

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Successor									Predecessor
							Period from			Period from
							April 19			January 1
	Year Ended			Year Ended			through			through
	December 31,			December 31,			December 31,			April 18,
	2009			2008			2007			2007
	(In thousands)
Cash flows from operating activities:
Net income	$	133,388		$	92,652		$	53,904		$	11,399
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations		—			560			2,154			458
Provision for doubtful accounts		8,958			7,568			7,592			3,297
Depreciation and amortization		35,297			36,757			26,688			12,426
Amortization of debt issue costs and discount		3,337			2,860			1,904			202
Deferred income taxes		(10,401	)		13,860			10,143			1,426
Loss (gain) on sale of equity interests and other		20,826			1,863			737			(897	)
Loss on impairment of intangible asset		5,702			831			—			—
Loss on early retirement of debt		—			—			—			2,435
Equity in earnings of unconsolidated affiliates, net of distributions received		(6,951	)		(8,591	)		6,667			4,335
Equity-based compensation		1,951			2,297			1,810			17,100
Increases (decreases) in cash from changes in operating assets and liabilities, net of effects from purchases of new businesses:
Accounts receivable		(8,272	)		(9,579	)		(6,551	)		(973	)
Other receivables		458			(9,976	)		177			509
Inventories of supplies, prepaids and other assets		(4,347	)		7,859			1,906			919
Accounts payable and other current liabilities		2,996			7,248			3,002			12,060
Other long-term liabilities		2,271			(623	)		(197	)		(1,569	)
Tax benefit related to increase in value of equity awards		—			—			—			(15,822	)
Net cash provided by operating activities		185,213			145,586			109,936			47,305
Cash flows from investing activities:
Purchases of new businesses and equity interests, net of cash received		(59,549	)		(76,450	)		(46,576	)		(27,883	)
Proceeds from sales of businesses and equity interests, net		22			12,151			5,365			6,111
Purchases of property and equipment		(31,803	)		(31,163	)		(11,723	)		(6,172	)
Returns of capital from unconsolidated affiliates		2,894			3,039			1,581			556
Decrease (increase) in deposits and notes receivable		508			(8,914	)		9,246			(9,084	)
Net cash used in investing activities		(87,928	)		(101,337	)		(42,107	)		(36,472	)
Cash flows from financing activities:
Proceeds from long-term debt, net of debt issuance costs		5,600			45,090			912,019			20,684
Payments on long-term debt		(26,449	)		(28,318	)		(226,827	)		(7,424	)
Proceeds from issuance of common stock		—			—			—			6,135
Net equity contribution from USPI Group Holdings, Inc.		(39	)		40			779,279			—
Tax benefit related to increase in value of equity awards		—			—			—			15,822
Payments to repurchase common stock		—			—			(1,430,879	)		—
(Purchases) sales of noncontrolling interests, net		(2,067	)		(26,430	)		(31,837	)		10,983
Payment of common stock dividend		(88,617	)		—			—			—
(Decrease) increase in cash held on behalf of unconsolidated affiliates		63,101			(5,440	)		(23,342	)		13,895
Expenses paid on behalf of USPI Group Holdings, Inc.		—			—			(7,862	)		—
Distributions to noncontrolling interests		(63,555	)		(56,514	)		(45,491	)		(19,254	)
Net cash (used in) provided by financing activities		(112,026	)		(71,572	)		(74,940	)		40,841
Cash flows of discontinued operations:
Operating cash flows		—			159			969			(656	)
Investing cash flows		—			(76	)		2,579			(827	)
Financing cash flows		—			(34	)		(2,806	)		1,379
Net cash provided by (used in) discontinued operations		—			49			742			(104	)
Effect of exchange rate changes on cash		196			(49	)		(70	)		(113	)
Net (decrease) increase in cash and cash equivalents		(14,545	)		(27,323	)		(6,439	)		51,457
Cash and cash equivalents at beginning of period		49,435			76,758			83,197			31,740
Cash and cash equivalents at end of period	$	34,890		$	49,435		$	76,758		$	83,197
Supplemental information:
Interest paid, net of amounts capitalized	$	71,467		$	86,758		$	55,302		$	9,861
Income taxes (refund received) paid, net		8,060			(1,906	)		4,690			1,909
Non-cash transactions:
Predecessor rollover equity	$	—		$	—		$	18,192		$	—
Assets acquired under capital lease obligations		2,985			1,966			7,279			1,677
Receipt of note receivable for sale of noncontrolling interest		—			601			—			—

See accompanying notes to consolidated financial statements

F-8

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007

(1)   Summary of Significant Accounting Policies and Practices

(a)   Description of Business

United Surgical Partners International, Inc., a Delaware Corporation, and subsidiaries (USPI or the Company) was formed in February 1998 for the primary purpose of ownership and operation of ambulatory surgery centers, surgical hospitals and related businesses in the United States and Europe. At December 31, 2009 the Company, headquartered in Dallas, Texas, operated 169 short-stay surgical facilities. Of these 169 facilities, the Company consolidates the results of 60 and accounts for 109 under the equity method. The Company operates in two countries, with 165 of its 169 facilities located in the United States of America; the remaining four facilities are located in the United Kingdom. The majority of the Company’s U.S. facilities are jointly owned with local physicians and a not-for-profit healthcare system that has other healthcare businesses in the region. At December 31, 2009, the Company had agreements with not-for-profit healthcare systems providing for joint ownership of 109 of the Company’s 165 U.S. facilities and also providing a framework for the planning and construction of additional facilities in the future. All of the Company’s U.S. facilities include physician owners.

Global Healthcare Partners Limited (Global), a USPI subsidiary incorporated in England, manages and wholly owns three surgical hospitals in the greater London area.

The Company is subject to changes in government legislation that could impact Medicare, Medicaid and foreign government reimbursement levels and is also subject to increased levels of managed care penetration and changes in payor patterns that may impact the level and timing of payments for services rendered.

The Company maintains its books and records on the accrual basis of accounting, and the consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.

As further described below, the Company had publicly traded equity securities from June 2001 until April 2007. Effective April 19, 2007, the Company no longer has publicly traded equity securities and is controlled by the private equity firm Welsh, Carson, Anderson & Stowe (Welsh Carson). The Company is a wholly owned subsidiary of USPI Holdings, Inc. (Holdings). Holdings is a wholly owned subsidiary of USPI Group Holdings, Inc. (Parent), which in turn is owned by an investor group that includes affiliates of Welsh Carson, members of the Company’s management, and other investors. The Company’s financial position and the results of operations prior to the merger are presented separately in the consolidated financial statements as “Predecessor” financial statements, while the Company’s financial position and results of operations following the merger are presented as “Successor” financial statements. Due to the merger, which generated transaction expenses, substantially increased the Company’s debt and interest expense, and to the revaluation of assets and liabilities as a result of purchase accounting associated with the merger, the pre-merger financial statements are not comparable with those after the merger.

As further discussed in Note 2, the Company adopted new accounting standards on January 1, 2009 related to accounting for business combinations and noncontrolling interests.

Certain amounts in the consolidated financial statements for prior periods have been reclassified to conform to the 2009 presentation. Net operating results have not been affected by these reclassifications.

(b)   Merger Transaction

Pursuant to an Agreement and Plan of Merger (the merger) dated as of January 7, 2007, between an affiliate of Welsh Carson, and the Company, the Company became a wholly owned subsidiary of Holdings on April 19, 2007. In the merger, all of the stockholders of the Company received $31.05 per share in cash for common stock. Additionally, all of the Company’s unvested restricted stock awards, except as otherwise agreed to by the holders and the Company, immediately vested, and the holders of restricted stock awards also received $31.05 per share in

F-9

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

cash. Holders of stock options issued by the Company, including unvested stock options, received cash equal to $31.05 per option minus the exercise price of the option multiplied by the number of shares subject to the option.

The merger was valued at approximately $1.8 billion, including the assumption of $153.6 million of the Company’s existing debt. The funds necessary to consummate the transaction were approximately $1.7 billion, including $1.4 billion to pay then current stockholders and equity award holders, approximately $199.4 million to repay certain existing indebtedness and approximately $47.1 million to pay related fees and expenses. The merger was financed by:

•  an investment of cash and rollover equity of USPI in the equity of Parent by Welsh Carson, management and other equity investors of approximately $785.0 million;

•  borrowings by the Company of $430.0 million in new senior secured credit facilities;

•  the issuance by the Company of $240.0 million in aggregate principal amount of 87/8% senior subordinated notes, due 2017, and $200.0 million in aggregate principal amount of 91/4%/10% senior subordinated toggle notes, due 2017;

•  additional borrowings of £10.0 million (approximately $19.7 million) by Global, which was repatriated to the U.S.; and

•  approximately $21.9 million of cash on hand.

The merger was accounted for as a business combination as prescribed by U.S. generally accepted accounting principles (GAAP). The purchase price, including transaction-related fees, was allocated to the Company’s tangible and identifiable intangible assets and liabilities based upon estimates of fair value, with the remainder allocated to goodwill.

A summary of the merger is presented below (in thousands):

Net cash and equity contribution from Holdings	$	791,856
Proceeds from borrowings		889,700
Cash on hand		21,922
Expenses paid on behalf of Parent		(7,862	)
Purchase price allocated	$	1,695,616
Estimated fair value of net tangible assets acquired:
Cash	$	63,497
Accounts receivable		58,435
Other current assets		41,204
Investments in affiliates		263,666
Property and equipment		227,878
Other assets		20,668
Current liabilities		(108,596	)
Due to affiliates		(90,260	)
Long-term debt, excluding current portion		(131,158	)
Deferred tax liability		(97,016	)
Other long-term liabilities		(14,579	)
Noncontrolling interests		(84,635	)

F-10

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Net tangible assets acquired		149,104
Capitalized debt issuance costs		29,012
Intangible assets acquired		291,631
Goodwill		1,225,869
	$	1,695,616

In connection with the merger, the Predecessor incurred expenses totaling approximately $23.8 million related to the acceleration of the Predecessor’s unvested outstanding stock options and certain restricted stock awards and professional fees. The Successor incurred approximately $29.0 million of fees related to debt issuance costs which are being amortized into interest expense over the term of the debt. None of the goodwill recorded as a result of the merger is deductible for tax purposes.

(c)   Translation of Foreign Currencies

The financial statements of foreign subsidiaries are measured in local currency and then translated into U.S. dollars. All assets and liabilities have been translated using the current rate of exchange at the balance sheet date. Results of operations have been translated using the average rates prevailing throughout the year. Translation gains or losses resulting from changes in exchange rates are accumulated in a separate component of stockholder’s equity.

(d)   Principles of Consolidation

The consolidated financial statements include the financial statements of USPI and its wholly-owned and majority-owned subsidiaries. In addition, the Company consolidates the accounts of certain investees of which it does not own a majority ownership interest because the Company maintains effective control over the investees’ assets and operations. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company also determines if it is the primary beneficiary of (and therefore should consolidate) any entity whose operations it does not control with voting rights. At December 31, 2009 and 2008, the Company consolidated two and one such entities, respectively (Note 6).

(e)   Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(f)   Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents at times may exceed the FDIC limits. The Company believes no significant concentration of credit risk exists with respect to these cash investments.

The Company’s wholly-owned insurance subsidiary maintains certain balances in cash and cash equivalents that are used in connection with its retained professional and general liability risks and are not designated for general corporate purposes. At December 31, 2009 and 2008, these cash and cash equivalents balances were $2.9 million and $2.4 million, respectively.

F-11

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(g)   Inventories of Supplies

Inventories of supplies are stated at cost, which approximates market, and are expensed as used.

(h)   Property and Equipment

Property and equipment are stated at cost or, when acquired as part of a business combination, fair value at date of acquisition. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets. Upon retirement or disposal of assets, the asset and accumulated depreciation accounts are adjusted accordingly, and any gain or loss is reflected in earnings or loss of the respective period. Maintenance costs and repairs are expensed as incurred; significant renewals and betterments are capitalized. Assets held under capital leases are classified as property and equipment and amortized using the straight-line method over the shorter of the useful lives or lease terms, and the related obligations are recorded as debt. Amortization of assets under capital leases and of leasehold improvements is included in depreciation expense. The Company records operating lease expense on a straight-line basis unless another systematic and rational allocation is more representative of the time pattern in which the leased property is physically employed. The Company amortizes leasehold improvements, including amounts funded by landlord incentives or allowances, for which the related deferred rent is amortized as a reduction of lease expense, over the shorter of their economic lives or the lease term.

(i)   Goodwill and Intangible Assets

Intangible assets consist of costs in excess of net assets acquired (goodwill), costs of acquired management and other contract service rights, and other intangibles, which consist primarily of debt issue costs. Most of the Company’s intangible assets have indefinite lives. Accordingly, these assets, along with goodwill, are not amortized but are instead tested for impairment annually, or more frequently if changing circumstances warrant. Goodwill is tested for impairment at the reporting unit level, which corresponds to the Company’s operating segments, or countries. The Company amortizes intangible assets with definite useful lives over their respective useful lives to their estimated residual values and reviews them for impairment in the same manner as long-lived assets, discussed below.

(j)   Impairment of Long-lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, or related groups of assets, may not be fully recoverable from estimated future cash flows. In the event of impairment, measurement of the amount of impairment may be based on appraisal, market values of similar assets or estimates of future discounted cash flows using market participant assumptions and resulting from use and ultimate disposition of the asset.

(k)   Fair Value Measurements

The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants to sell the asset or transfer the liability. The Company uses fair value measurements based on quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2) or unobservable inputs for assets or liabilities (Level 3), depending on the nature of the item being valued. The Company discloses on a yearly basis the valuation techniques and discloses any change in method of such within the body of each applicable footnote. The estimated fair values may not be representative of actual values that will be realized or settled in the future.

The carrying amounts of cash and cash equivalents, short-term investments, accounts receivable, and accounts payable approximate fair value because of the short maturity of these instruments.

F-12

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(l)   Derivative Instruments and Hedging Activities

The Company accounts for its derivative instruments at fair value and records the value on its consolidated balance sheet as an asset or liability. The Company does not engage in derivative instruments for speculative purposes. Because the Company’s current derivatives (interest rate swaps) qualify for hedge accounting, gains or losses resulting from changes in the values of the Company’s derivatives are reported in accumulated other comprehensive income (loss), a separate component of equity (Note 11).

(m)   Revenue Recognition

Revenues consist primarily of net patient service revenues, which are based on the facilities’ established billing rates less allowances and discounts, principally for patients covered under contractual programs with private insurance companies. The Company derives approximately 76% of its net patient service revenues from private insurance payors, approximately 13% from governmental payors and approximately 11% from self-pay and other payors. Amounts are recognized as services are provided.

With respect to management and contract service revenues, amounts are also recognized as services are provided. The Company is party to agreements with certain surgical facilities, hospitals and physician practices to provide management services. As compensation for these services each month, the Company charges the managed entities management fees which are either fixed in amount or represent a fixed percentage of each entity’s earnings, typically defined as net revenue less a provision for doubtful accounts or operating income. In many cases the Company also holds equity ownership in these entities (Note 13). Amounts charged to consolidated facilities eliminate in consolidation. Contract service revenues arising from the Company’s endoscopy services business are recognized at rates defined in renewable multi-year service agreements, based on the volume of services provided each month.

(n)   Concentration of Credit Risk

Concentration of credit risk with respect to accounts receivable is limited due to the large number of customers comprising the Company’s customer base and their breakdown among geographical locations in which the Company operates. The Company provides for bad debts principally based upon the aging of accounts receivable and uses specific identification to write off amounts against its allowance for doubtful accounts. The Company believes the allowance for doubtful accounts adequately provides for estimated losses as of December 31, 2009 and 2008. The Company has a risk of incurring losses if such allowances are not adequate.

(o)   Investments and Equity in Earnings of Unconsolidated Affiliates

Investments in unconsolidated companies in which the Company exerts significant influence but does not control are accounted for using the equity method. The Company’s ownership in these entities range from 5% to 68%. Certain investments in unconsolidated companies in which the Company owns a majority interest are not consolidated due to the substantive participating rights of the minority owners.

These investments are included as investments in affiliates in the accompanying consolidated balance sheets. The carrying amounts of these investments are greater than the Company’s equity in the underlying net assets of many of these companies due in part to goodwill, which is not subject to amortization. The Company monitors its investments for other-than-temporary impairment by considering factors such as current economic and market conditions and the operating performance of the companies and records reductions in carrying values when necessary.

Equity in earnings of unconsolidated affiliates consists of the Company’s share of the profits or losses generated from its noncontrolling equity investments in 109 surgical facilities. Because these operations are central to the Company’s business strategy, equity in earnings of unconsolidated affiliates is classified as a component of

F-13

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

operating income in the accompanying consolidated statements of operations. The Company has contracts to manage these facilities, which results in the Company having an active role in the operations of these facilities and devoting a significant portion of its corporate resources to the fulfillment of these management responsibilities.

(p)   Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred tax assets may not be realized.

(q)   Equity-Based Compensation

The Company accounts for equity-based compensation, such as stock options and other stock-based awards to employees and directors, at fair value. The fair value is measured at the date of grant and recognized as expense over the employee’s requisite service period. The Company also accounts for equity instruments issued to non-employees at fair value.

(r)   Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

(2)   Adoption of New Accounting Standards

Effective January 1, 2009, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 141 (revised 2007), Business Combinations, (SFAS 141R) and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51 (SFAS 160). SFAS 141R and SFAS 160 are now included in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC), Topic 805, Business Combinations and Topic 810, Consolidations, respectively. The ASC is now the source of GAAP recognized by the FASB to be applied to nongovernmental entities. Rules and interpretative releases of the U.S. Securities and Exchange Commission (SEC) are also sources of GAAP for SEC registrants.

Under ASC 805, the Company is required to recognize the assets acquired, liabilities assumed, contractual contingencies and contingent consideration at their fair value at the acquisition date. ASC 805 further requires that acquisition-related costs are to be recognized separately from the acquisition and expensed as incurred. Among other changes, ASC 805 also requires that “negative goodwill” be recognized in earnings as a gain attributable to the acquisition, and any deferred tax benefits resulting from a business combination be recognized in income from continuing operations in the period of the combination. The adoption of ASC 805 did not have a material impact on the Company’s consolidated financial statements.

ASC 810 now requires the Company to clearly identify and present ownership interests in subsidiaries held by parties other than the Company in the consolidated financial statements within the equity section but separate from the Company’s equity, except as noted below. It also requires the amounts of consolidated net income attributable to the Company and to the noncontrolling interests to be clearly identified and presented on the face of the consolidated statements of operations; changes in ownership interests to be accounted for as equity transactions;

F-14

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

and when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary to be measured at fair value. The implementation of ASC 810 also results in the cash flow impact of certain transactions with noncontrolling interests being classified within financing activities, consistent with the view that under ASC 810 transactions between the Company (or its subsidiaries) and noncontrolling interests are considered to be equity transactions. These changes are summarized in the table below, along with the cash flow classifications of several similar types of transactions that did not change as a result of ASC 810:

	Before
	ASC 810		ASC 810
Changes in Cash Flow Classification:
Distributions of earnings paid to noncontrolling interests		Operating		Financing
Acquisitions or sales of equity interests in consolidated subsidiaries, no change of control		Investing		Financing
No Change in Cash Flow Classification:
Distributions of earnings received from unconsolidated affiliates		Operating		Operating
Returns of capital paid to noncontrolling interests		Financing		Financing
Returns of capital received from unconsolidated affiliates		Investing		Investing
Sales of equity interests in consolidated subsidiaries resulting in a change of control		Investing		Investing
Acquisitions or sales of equity interests in unconsolidated affiliates, no change of control		Investing		Investing
Acquisitions of equity interests in unconsolidated affiliates, resulting in change of control		Investing		Investing
Business combinations with no previous ownership by the Company		Investing		Investing

As summarized below, the Company has retrospectively applied the classification requirements as required by ASC 810 to all periods presented. The effect of these changes on previously reported consolidated financial statements is as follows (in thousands):

	December 31,
Consolidated Balance Sheet	2008
Total equity as previously reported	$	764,137
Reclassification of nonredeemable noncontrolling interests to equity as required by ASC 810		41,827
Total equity as adjusted for ASC 810	$	805,964

F-15

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

	Successor						Predecessor
				Period from			Period from
	Year			April 19			January 1
	Ended			through			through
	December 31,			December 31,			April 18,
Consolidated Statement of Cash Flows	2008			2007			2007
Net cash provided by operating activities as previously reported	$	91,210		$	67,358		$	29,099
Reclassification of distributions to noncontrolling interests to financing activities		54,376			42,565			18,311
Reclassification of noncontrolling interests to discontinued operations		—			13			(105	)
Net cash provided by operating activities as adjusted for ASC 810	$	145,586		$	109,936		$	47,305
Net cash used in investing activities as previously reported	$	(127,767	)	$	(73,944	)	$	(25,489	)
Reclassification of purchases and sales of noncontrolling interests to financing activities		26,430			31,837			(10,983	)
Net cash used in investing activities as adjusted for ASC 810	$	(101,337	)	$	(42,107	)	$	(36,472	)
Net cash provided by (used in) financing activities as previously reported	$	9,234		$	(538	)	$	48,169
Reclassification of distributions to noncontrolling interests from operating activities		(54,376	)		(42,565	)		(18,311	)
Reclassification of purchases and sales of noncontrolling interests from investing activities		(26,430	)		(31,837	)		10,983
Net cash (used in) provided by financing activities as adjusted for ASC 810	$	(71,572	)	$	(74,940	)	$	40,841
Net cash provided by (used in) discontinued operations as previously reported	$	49		$	755		$	(209	)
Reclassification of noncontrolling interests portion from operating activities		—			(13	)		105
Net cash provided by (used in) discontinued operations as adjusted for ASC 810	$	49		$	742		$	(104	)

Upon the occurrence of various fundamental regulatory changes, the Company could be obligated, under the terms of its investees’ partnership and operating agreements, to purchase some or all of the noncontrolling interests related to the Company’s consolidated subsidiaries. These repurchase requirements are limited to the portions of its facilities that are owned by physicians who perform surgery at the Company’s facilities and would be triggered by regulatory changes making the existing ownership structure illegal. While the Company is not aware of events that would make the occurrence of such a change probable, regulatory changes are outside the control of the Company. Accordingly, the noncontrolling interests subject to these repurchase provisions, and the income attributable to those interests, have been classified outside of equity on the Company’s consolidated balance sheets.

The implementation of ASC 810 also had a significant impact on the Company’s statement of operations format. Whereas in prior periods the Company’s consolidated statement of operations listed “minority interests in the income of consolidated subsidiaries” above the “income tax expense” line item, that order is reversed under ASC 810, which requires that minority interests (now called “net income attributable to noncontrolling interests”) be listed below income tax expense. This change has no effect on the computation or amounts of the Company’s tax expense or payments.

F-16

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(3)   Discontinued Operations and Other Dispositions

During 2009, 2008, and 2007, the Company sold all of its ownership interests in 16 facilities as summarized below:

Date	Facility Location	Proceeds (Costs)			Gain (Loss)
December 2009	Oxnard, California(1)	$	0.3 million		$	(0.3 million	)
December 2009	Baton Rouge, Louisiana(2)		(5.1 million	)		(8.2 million	)
September 2009	San Antonio, Texas(1)		—			(2.6 million	)
July 2009	Cleveland, Ohio(3)		1.0 million			—
February 2009	Las Cruces, New Mexico(1)		—			—
February 2009	East Brunswick, New Jersey(1)		0.7 million			(2.6 million	)
Total		$	(3.1 million	)	$	(13.7 million	)
July 2008	Manitowoc, Wisconsin(1)	$	0.8 million		$	—
July 2008	Orlando, Florida(1)		0.5 million			(0.4 million	)
June 2008	Cleveland, Ohio(4)		1.6 million			(1.0 million	)
April 2008	Los Angeles, California(1)		—			—
February 2008	Sarasota, Florida(1)		0.5 million			—
Total		$	3.4 million		$	(1.4 million	)
December 2007	Houston, Texas(4)	$	—		$	(0.6 million	)
December 2007	Decatur, Alabama(4)		0.3 million			(2.2 million	)
November 2007	Canton, Mississippi(4)		—			(0.9 million	)
September 2007	Atlanta, Georgia(1)		1.8 million			0.5 million
September 2007	Baltimore, Maryland(1)		—			(1.2 million	)
Total		$	2.1 million		$	(4.4 million	)

(1)	Because these investments were accounted for under the equity method, the results of operations of these facilities are not reported as discontinued operations. The gain (loss) on the disposal of these facilities is recorded in “(Loss) gain on sale of equity interests” in the accompanying consolidated statements of operations.
(2)	In conjunction with the sale, the Company paid approximately $5.1 million in cash to settle its lease guaranty related to this facility. The amount was included in the loss on the sale of the facility and is recorded in “(Loss) gain on sale of equity interests” in the accompanying consolidated statements of operations. Because this investment was accounted for under the equity method, the results of operations of this facility is not reported as discontinued operations.
(3)	The Company financed the entire purchase price with the buyer and has a security interest in the facility’s assets until the note, which matures in March 2010, is collected. As a result, the Company deferred the gain, which is estimated at $0.6 million. Because this investment was accounted for under the equity method, the results of operations of this facility are not reported as discontinued operations.
(4)	In accordance with GAAP, the Company has reclassified its historical results of operations to remove the operations of these facilities from the its revenues and expenses on the accompanying consolidated statements of operations, collapsing the income (loss) related to these facilities’ operations and the Company’s disposal of them into a single line, “Earnings (loss) from discontinued operations” The table below summarizes certain amounts related to the Company’s discontinued operations for the periods presented (in thousands).

F-17

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

	Successor						Predecessor
				Period from			Period from
				April 19			January 1
	Year Ended			through			through
	December 31,			December 31,			April 18,
	2008			2007			2007
Revenues	$	3,108		$	8,984		$	3,693
Earnings (loss) from discontinued operations before income taxes	$	95		$	363		$	(386	)
Income tax (expense) benefit		(33	)		(127	)		135
Earnings (loss) from discontinued operations	$	62		$	236		$	(251	)
Loss on sale of discontinued operations before income taxes	$	(963	)	$	(3,732	)	$	—
Income tax benefit		338			1,306			—
Loss on sale of discontinued operations	$	(625	)	$	(2,426	)	$	—

(4)   Investments in Unconsolidated Affiliates and Business Combinations

The Company’s U.S. facilities are generally operated through separate legal entities in which the Company holds an equity interest. Other investors include physicians who utilize the facility and, in many cases, a local not-for-profit health system.

The Company controls 56 of these entities and therefore consolidates their results. However, the Company accounts for an increasing majority (109 of its 165 U.S. facilities at December 31, 2009) as investments in unconsolidated affiliates, i.e., under the equity method, as the Company’s level of influence is significant but does not reach the threshold of controlling the entity. The majority of these investments are partnerships or limited liability companies, which require the associated tax benefit or expense to be recorded by the partners or members. Summarized financial information for the Company’s equity method investees on a combined basis is as follows (amounts are in thousands, except number of facilities, and reflect 100% of the investees’ results on an aggregated basis and are unaudited):

	2009		2008		2007
Unconsolidated facilities operated at year-end		109		101		93
Income statement information:
Revenues	$	1,174,418	$	998,496	$	795,276
Operating expenses:
Salaries, benefits, and other employee costs		277,053		246,739		208,390
Medical services and supplies		271,663		211,781		167,032
Other operating expenses		271,769		247,834		205,314
Depreciation and amortization		50,251		48,722		41,057
Total operating expenses		870,736		755,076		621,793

F-18

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

	2009			2008			2007
Operating income		303,682			243,420			173,483
Interest expense, net		(24,394	)		(24,101	)		(20,491	)
Other, net		8,275			2,962			1,843
Income before income taxes	$	287,563		$	222,281		$	154,835
Balance sheet information:
Current assets	$	264,944		$	236,108		$	187,758
Noncurrent assets		412,977			403,956			399,486
Current liabilities		152,081			138,199			117,436
Noncurrent liabilities		283,951			288,429			291,454

One of the Company’s equity method investments, Texas Health Ventures Group, L.L.C., is considered significant to the Company’s 2009 consolidated financial statements under regulations of the SEC. As a result, the Company has filed Texas Health Ventures Group, L.L.C.’s consolidated financial statements with this Form 10-K for the required periods.

The Company regularly engages in the purchase and sale of equity interests with respect to its investments in unconsolidated affiliates that do not result in a change of control. These transactions are primarily the acquisitions and sales of equity interests in unconsolidated surgical facilities and the investment of additional cash in surgical facilities under development. During the year ended December 31, 2009, these transactions resulted in a cash outflow of approximately $47.4 million, which is summarized as follows:

•  Payment of $17.7 million for an investment in and the rights to manage a surgical facility in the Cincinnati, Ohio area;

•  Payment of $11.1 million for the rights to manage a surgical facility in Portland, Oregon and to fund a transaction whereby an unconsolidated investee of the Company acquired an equity interest in the facility;

•  Payment of $6.1 million to obtain additional ownership in one facility in Nashville, Tennessee;

•  Payment of $3.4 million to fund initial capital investments in four de novo facilities;

•  Payment of $2.5 million for an investment in and the rights to manage a surgical facility in Stockton, California, jointly owned with one of the Company’s not-for-profit hospital partners;

•  Payment of $2.2 million to obtain additional ownership in three facilities in the Dallas/Fort Worth, Texas area;

•  Payment of $2.0 million for the rights to manage a surgical facility in the Dallas/Fort Worth, Texas area and to fund a transaction whereby an unconsolidated investee of the Company acquired an equity interest in the facility;

•  Receipt of $2.4 million for the sale of equity ownership in two facilities in the Dallas/Fort Worth, Texas area to a not-for-profit hospital partner, who is also a related party (Note 13);

•  Net payment of approximately $3.9 million related to various other purchases and sales of equity interests and contributions of cash to equity method investees.

In May 2009, the Company paid $0.9 million to acquire the rights to manage a surgical facility in the St. Louis area. The Company has the option to purchase a 20% equity interest in this facility within one year, and after approximately three years, an option to purchase an additional 20% ownership interest.

F-19

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Effective January 1, 2009, the Company acquired noncontrolling equity interests in and right to manage two surgical facilities in which it previously had no involvement. These facilities are jointly owned with one of the Company’s hospital partners and local physicians. The total purchase price of $2.2 million was paid in December 2008.

The Company obtained control of one surgical facility during 2009. In December 2009, the acquisition was made by an entity consolidated by the Company that is jointly operated with one of the Company’s hospital partners in the Houston, Texas area (Note 6). The purchase price was $9.9 million in cash. The financial results of the acquired entity are included in the Company’s consolidated financial statements beginning on the acquisition’s effective closing date. The actual results of those operations were not material. Additionally, the adjustments to arrive at pro forma operating results for this acquisition are not material.

(5)   Noncontrolling Interests

The Company controls and therefore consolidates the results of 60 of its 169 facilities. Similar to its investments in unconsolidated affiliates, the Company regularly engages in the purchase and sale of equity interests with respect to its consolidated subsidiaries that do not result in a change of control. These transactions are accounted for as equity transactions, as they are undertaken among the Company, its consolidated subsidiaries, and noncontrolling interests, and their cash flow effect is classified within financing activities.

During the year ended December 31, 2009, the Company purchased and sold equity interests in various consolidated subsidiaries in the amounts of $9.4 million and $7.4 million, respectively. The $9.4 million includes the partial exercise of the Company’s purchase option in one of its existing centers in St. Louis for $7.1 million. The basis difference between the Company’s carrying amount and the proceeds received or paid in each transaction is recorded as an adjustment to additional paid-in capital. The impact of these transactions is summarized as follows (in thousands):

	Year
	Ended
	December 31,
	2009
Net income attributable to USPI’s common stockholder	$	69,666
Transfers to the noncontrolling interests:
Decrease in USPI’s additional paid-in capital for sales of subsidiaries’ equity interests		(5,922	)
Decrease in USPI’s additional paid-in capital for purchases of subsidiaries’ equity interests		(8,411	)
Net transfers to noncontrolling interests		(14,333	)
Change in equity from net income attributable to USPI and transfers to noncontrolling interests	$	55,333

The Company from time to time surrenders control of an entity but retains a noncontrolling interest (classified within “investments in unconsolidated affiliates”). As described in Note 2, these types of transactions result in a gain or loss, computed as the difference between (a) the sales proceeds and fair value of the retained investment and (b) the Company’s carrying value of the investment prior to the transaction. Gains or losses for such transactions are classified within “(Loss) gain on sale of equity interests” and their cash flow effects within investing activities. Fair values for the retained noncontrolling interests are estimated based on market multiples and discounted cash flow models which have been derived from the Company’s experience in acquiring surgical facilities and third party

F-20

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

valuations it has obtained with respect to such transactions. During the year ended December 31, 2009, the Company surrendered control of three entities:

Effective Date	Facility Location	Proceeds		Gain (Loss)
December 2009	Dallas, Texas(1)	$	1.2 million	$	0.3 million
July 2009	Oklahoma City, Oklahoma(2)		0.2 million		0.1 million
March 2009	Phoenix, Arizona(3)		0.1 million		(8.2) million
Total		$	1.5 million	$	(7.8 million)

(1)	A controlling interest in a facility was sold to a hospital partner as part of the Company’s strategy for partnering with this hospital system. The Company recorded a net gain, included in “(Loss) gain on sale of equity interests” in the accompanying consolidated statements of operations, of $0.3 million on the sale and deconsolidation of the facility. The gain is comprised of a $1.4 million gain related to the remeasurement of the Company’s retained interest to fair value, offset by a loss of $1.1 million, the amount by which the carrying value of the investment exceeded the proceeds received. This hospital system is a related party (Note 13).
(2)	The Company and other owners of a facility consolidated by the Company agreed to merge the facility into another entity in which the Company holds an investment accounted for under the equity method. The Company recorded a gain, included in “(Loss) gain on sale of equity interests” in the accompanying consolidated statements of operations, of $0.1 million on the sale and deconsolidation of the facility.
(3)	A controlling interest in an entity was sold to a hospital partner as part of the Company’s strategy for partnering with this hospital system. The hospital partner already had a 49% ownership interest in this entity, which owns and manages two surgical facilities, and through the transaction acquired an additional 1.1% interest. The $8.2 million loss was primarily related to the revaluation of the Company’s remaining investment in the entity to fair value.

In addition to the sales of ownership interests noted above, the Company sold controlling interests to various hospital partners during 2008 and 2007, which are described below. The Company’s continuing involvement as an equity method investor and manager of the facilities precludes classification of these transactions as discontinued operations. Gains and losses are recorded in “(Loss) gain on sale of equity interests” in the accompanying consolidated statements of operations.

Date	Facility Location	Proceeds		Gain (Loss)
July 2008	Beaumont, Texas	$	1.2 million	$	(0.5 million	)
June 2008	Dallas, Texas(1)		2.3 million		(0.9 million	)
June 2008	Houston, Texas(2)		0.6 million		—
March 2008	Redding, California(3)		1.7 million		—
Total		$	5.8 million	$	(1.4 million	)
July 2007	Dallas, Texas(4)	$	3.7 million	$	—
April 2007	Corpus Christi, Texas(5)		6.1 million		0.9 million
Total		$	9.8 million	$	0.9 million

(1) The hospital partner already had an ownership interest in the facility and acquired a controlling interest from the Company in this transaction. Additionally, this hospital partner is a related party (Note 13).

F-21

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(2)	Because the Company is considered the primary beneficiary of this entity, the Company consolidates the entity to which it transferred its interest in the facility, and accordingly continues to consolidate the facility’s operating results. The sales price of $0.6 million was paid in the form of a note receivable from the buyer.
(3)	The Company sold a controlling interest in two facilities and gained a noncontrolling interest in a third facility in Redding.
(4)	The hospital partner already had an ownership interest in these two facilities and acquired a controlling interest from the Company in this transaction. Additionally, this hospital partner is a related party (Note 13).
(5)	The Company sold a controlling interest in two facilities to a hospital partner.

As further described in Note 2, upon the occurrence of various fundamental regulatory changes, the Company could be obligated, under the terms of its investees’ partnership and operating agreements, to purchase some or all of the noncontrolling interests related to the Company’s consolidated U.S. subsidiaries. As a result, these noncontrolling interests are not included as part of the Company’s equity and are carried as noncontrolling interests-redeemable on the Company’s consolidated balance sheets. The activity for the years ended December 31, 2009, 2008 and 2007 is summarized below:

	Noncontrolling
	Interests —
	Redeemable
	Predecessor
Balance, December 31, 2006	$	49,261
Net income attributable to noncontrolling interests		16,790
Distributions to noncontrolling interests		(17,807	)
Purchases of noncontrolling interests		11,369
Sales of noncontrolling interests		(8,671	)
Balance, April 18, 2007	$	50,942

	Noncontrolling
	Interests —
	Redeemable
	Successor
Balance, April 19, 2007	$	50,942
Net income attributable to noncontrolling interests		42,217
Distributions to noncontrolling interests		(42,285	)
Purchases of noncontrolling interests		2,996
Sales of noncontrolling interests		(1,101	)
Balance, December, 2007		52,769
Net income attributable to noncontrolling interests		52,599
Distributions to noncontrolling interests		(51,401	)
Purchases of noncontrolling interests		(7,446	)
Sales of noncontrolling interests		8,928
Deconsolidation of noncontrolling interests and other		(3,488	)
Balance, December 31, 2008		51,961
Net income attributable to noncontrolling interests		57,777

F-22

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

	Noncontrolling
	Interests —
	Redeemable
	Successor
Distributions to noncontrolling interests		(57,807	)
Purchases of noncontrolling interests		(2,519	)
Sales of noncontrolling interests		12,403
Deconsolidation of noncontrolling interests and other		2,050
Balance, December 31, 2009	$	63,865

(6)   Other Investments

The consolidated financial statements include the financial statements of USPI and its wholly-owned and majority-owned subsidiaries. The Company also determines if it is the primary beneficiary of (and therefore should consolidate) any entity whose operations it does not control with voting rights. At December 31, 2009, the Company consolidated two entities in accordance with this accounting guidance. At December 31, 2008, the Company consolidated one such entity.

One of these entities operates and manages five surgical facilities in the Houston, Texas area. Despite not holding a controlling voting interest, the Company is the primary beneficiary because the Company has lent the entity funds to purchase surgical facilities, but the Company does not have full recourse to the entity’s other owner with respect to repayment of the loans. As the entity earns management fees and receives cash distributions of earnings from the surgical facilities, a portion of those proceeds are used to repay the loans prior to being eligible for distribution to the entity’s other owner. At December 31, 2009, $11.3 million of such loans are outstanding and are included in other long-term assets. The Company has no exposure for the entity’s losses beyond this investment. Accordingly, the Company did not provide any financial or other support to the entity that it was not previously contractually required to provide during the years ended December 31, 2009 or 2008. At December 31, 2009 and 2008, the total assets of this entity were $55.4 million and $39.9 million, and the total liabilities were $41.9 million and $32.5 million, respectively. Such amounts are included in the accompanying consolidated balance sheets.

The second entity is currently developing and constructing a new hospital for one of the Company’s unconsolidated affiliates. The total project cost is approximately $26.2 million, which is being funded by cash contributions from its partners and debt financing. The Company is a limited partner in the entity, however, due to economic structuring of the entity, it is considered its primary beneficiary. The Company made its required equity contribution of $6.3 million in December 2009, which is the full amount expected to be required by the Company. The entity has arranged bank financing totaling $17.4 million, of which 70% is guaranteed by the Company. None of the bank financing was borrowed at December 31, 2009. The Company has no exposure for the entity’s losses beyond its investment and bank guarantee. The Company did not provide any financial or other support to the entity that it was not previously contractually required to provide during the year ended December 31, 2009. At December 31, 2009, total assets and liabilities of this entity were $9.0 million and $0.1 million, respectively. Such amounts are included in the accompanying consolidated balance sheet.

The Company also has investments in four unconsolidated variable interest entities in which it was not considered the primary beneficiary. These entities own real estate and fixed assets that are leased to various surgical facilities. The total assets of these entities were$21.2 million and $13.3 million, and the total liabilities of these entities were $11.6 million and $12.2 million at December 31, 2009 and 2008, respectively. The Company’s investment in these entities and maximum exposure to loss as a result of its involvement with these entities is not material. The Company did not provide any financial or other support to these entities that it was not previously contractually required to provide during the years ended December 31, 2009, 2008 or 2007.

F-23

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(7)   Other Receivables

Other receivables consist primarily of amounts receivable for services performed and funds advanced under management and administrative service agreements. As discussed in Note 13, many of the entities to which the Company provides management and administrative services are related parties, due to the Company being an investor in those facilities. At December 31, 2009 and 2008, the amounts receivable from related parties, which are included in other receivables on the Company’s consolidated balance sheet, totaled $4.4 million and $5.4 million, respectively.

(8)   Property and Equipment

At December 31, property and equipment consisted of the following (in thousands):

	Estimated
	Useful Lives		2009			2008
Land		—	$	34,259		$	29,089
Buildings and leasehold improvements		7-50 years		118,669			119,814
Equipment		3-12 years		106,091			94,743
Furniture and fixtures		4-20 years		9,526			8,977
Construction in progress		—		7,676			1,028
				276,221			253,651
Less accumulated depreciation				(77,715	)		(51,827	)
Net property and equipment			$	198,506		$	201,824

At December 31, 2009 and 2008, assets recorded under capital lease arrangements, included in property and equipment, consisted of the following (in thousands):

	2009			2008
Land and buildings	$	21,037		$	32,728
Equipment and furniture		10,769			10,251
		31,806			42,979
Less accumulated amortization		(8,258	)		(7,322	)
Net property and equipment under capital leases	$	23,548		$	35,657

(9)   Goodwill and Intangible Assets

Under GAAP, goodwill and intangible assets with indefinite useful lives are not amortized but instead are tested for impairment at least annually, with tests of goodwill occurring at the reporting unit level (defined as an operating segment or one level below an operating segment). Intangible assets with definite useful lives are amortized over their respective useful lives to their estimated residual values. The Company determined that its reporting units are at the operating segment (country) level. The Company completed the required annual impairment tests during 2009, 2008 and 2007. No impairment losses were identified in any reporting unit as a result of these goodwill impairment tests.

As a result of 2009 impairment testing performed on the Company’s indefinite-lived management contracts, the Company recorded impairment losses of approximately $5.7 million related to three of its indefinite-lived management contracts. These charges were primarily triggered by a reduction in the Company’s expected earnings under the contracts. The Company recorded a similar impairment charge of $0.8 million in 2008 related to one of its

F-24

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

indefinite-lived management contracts. Fair values for indefinite-lived intangible assets are estimated based on market multiples and discounted cash flow models which have been derived from the Company’s experience in acquiring surgical facilities, market participant assumptions and third party valuations it has obtained with respect to such transactions. The inputs used in these models are Level 3 inputs, which under GAAP, are significant unobservable inputs. Inputs into these models include expected revenue growth, expected gross margins and discount factors. Such expense is recorded in “Other, net” in the accompany consolidated statement of operations.

The following is a summary of changes in the carrying amount of goodwill by operating segment and reporting unit for years ended December 31, 2009 and 2008 (in thousands):

	United			United
	States			Kingdom			Total
Balance at December 31, 2007	$	1,011,193		$	263,786		$	1,274,979
Additions		82,784			216			83,000
Disposals		(18,368	)		—			(18,368	)
Other		—			(69,324	)		(69,324	)
Balance at December 31, 2008		1,075,609			194,678			1,270,287
Additions		4,047			—			4,047
Disposals		(15,517	)		—			(15,517	)
Other		—			20,474			20,474
Balance at December 31, 2009	$	1,064,139		$	215,152		$	1,279,291

Goodwill additions resulted primarily from business combinations and additionally from purchases of additional interests in subsidiaries. Disposals of goodwill relate to businesses that the Company has sold or the deconsolidation of entities the Company no longer controls. In the United Kingdom, the other changes were primarily due to foreign currency translation adjustments.

Intangible assets with definite useful lives are amortized over their respective estimated useful lives, ranging from approximately one to eleven years, to their estimated residual values. The majority of the Company’s management contracts have indefinite useful lives. Most of these contracts have evergreen renewal provisions that do not contemplate a specific termination date. Some of the contracts have provisions which make it possible for the facility’s other owners to terminate them at certain dates and under certain circumstances. Based on the Company’s history with these contracts, the Company’s management considers the lives of these contracts to be indefinite and therefore does not amortize them unless facts and circumstances indicate otherwise.

The following is a summary of intangible assets at December 31, 2009 and 2008 (in thousands):

	December 31, 2009
	Gross
	Carrying		Accumulated
	Amount		Amortization			Total
Definite Useful Lives
Management and other service contracts	$	26,605	$	(8,500	)	$	18,105
Other		30,401		(8,262	)		22,139
Total	$	57,006	$	(16,762	)	$	40,244
Indefinite Useful Lives
Management contracts							282,652
Total intangible assets						$	322,896

F-25

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

	December 31, 2008
	Gross
	Carrying		Accumulated
	Amount		Amortization			Total
Definite Useful Lives
Management and other service contracts	$	24,618	$	(5,210	)	$	19,408
Other		29,947		(4,857	)		25,090
Total	$	54,565	$	(10,067	)	$	44,498
Indefinite Useful Lives
Management contracts							274,354
Total intangible assets						$	318,852

Amortization expense from continuing operations related to intangible assets with definite useful lives was $3.3 million and $3.1 million for the year ended December 31, 2009 and 2008, respectively. The amortization of debt issuance costs, which is included within interest expense, was $3.1 million and $2.9 million for the years ended December 31, 2009 and 2008, respectively. Intangible assets were adjusted to fair value on April 19, 2007 as a result of the merger and, therefore, the historical accumulated amortization balances were eliminated.

The following table provides estimated amortization expense, including amounts that will be classified within interest expense, related to intangible assets with definite useful lives for each of the years in the five-year period ending December 31, 2014:

2010	$	6,252
2011		6,440
2012		6,473
2013		6,330
2014		5,024

(10)   Long-term Debt

At December 31, long-term debt consisted of the following (in thousands):

	2009			2008
Senior secured credit facility	$	518,710		$	518,975
U.K. senior credit agreement		59,966			59,252
Senior subordinated notes		437,515			440,000
Notes payable to financial institutions		25,045			35,366
Capital lease obligations (Note 12)		30,292			44,354
Total long-term debt		1,071,528			1,097,947
Less current portion		(23,337	)		(24,488	)
Long-term debt, less current portion	$	1,048,191		$	1,073,459

(a)   Senior secured credit facility

The senior secured credit facility (credit facility) provides for borrowings of up to $615.0 million (with a $150.0 million accordion feature described below), consisting of (1) an $85.0 million revolving credit facility with a

F-26

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

maturity of six years, including a $20.0 million letter of credit sub-facility, and a $20.0 million swing-line loan sub-facility; and (2) a $530.0 million term loan facility (including a $100.0 million delayed draw facility) with a maturity of seven years. On April 19, 2007, the Company borrowed $430.0 million of the term loan facility concurrent with the merger. During the remainder of 2007, the Company borrowed an additional $63.5 million under the delayed draw feature of the term loan facility to finance the acquisition of an additional surgery center in St. Louis, Missouri and to finance a buy-up of ownership in five of its existing St. Louis facilities. During 2008, the Company borrowed $31.5 million under the delayed draw facility to finance a buy-up of ownership in five of its existing St. Louis facilities and borrowed $1.5 million to fund the purchase of a new facility in St. Louis. No additional funds can be borrowed under the delayed draw feature.

The Company may request additional tranches of term loans or additional commitments to the revolving credit facility in an aggregate amount not exceeding $150.0 million, subject to certain conditions. Interest rates on the credit facility are based on LIBOR plus a margin of 2.00% to 2.25%. Additionally, the Company currently pays 0.50% per annum on the daily-unused commitment of the revolving credit facility. The Company also currently pays a quarterly participation fee of 2.38% per annum related to outstanding letters of credit. The term loans under the credit facility require principal payments each year in an amount of 1% per annum in equal quarterly installments. No principal payments are required on the revolving credit facility. In March 2009, the Company began to pay quarterly principal payments of $0.2 million on the outstanding balance of the delayed draw loans. At December 31, 2009, the Company had $518.7 million of debt outstanding under the credit facility at a weighted average interest rate of approximately 3.6%. At December 31, 2009, we had $78.4 million available for borrowing under the revolving credit facility, representing the facility’s $85.0 million capacity, net of the $5.0 million outstanding balance at December 31, 2009 and $1.6 million of outstanding letters of credit. The $5.0 million outstanding on the revolving credit facility was repaid in January 2010.

The credit facility is guaranteed by USPI Holdings, Inc. and its current and future direct and indirect wholly-owned domestic subsidiaries, subject to certain exceptions, and borrowings under the credit facility are secured by a first priority security interest in all real and personal property of these subsidiaries, as well as a first priority pledge of the Company’s capital stock, the capital stock of each of its wholly owned domestic subsidiaries and 65% of the capital stock of certain of its wholly-owned foreign subsidiaries. Additionally, the credit facility contains various restrictive covenants, including financial covenants that limit the Company’s ability and the ability of its subsidiaries to borrow money or guarantee other indebtedness, grant liens, make investments, sell assets, pay dividends, enter into sale-leaseback transactions or issue and sell capital stock.

Fees paid for unused portions of the senior secured credit facility were approximately $0.5 million and $0.8 million for the years ended December 31, 2009 and 2008, respectively, and $0.9 million for the period from April 19 through December 31, 2007 and are included within interest expense in the Company’s consolidated statements of operations.

(b)   Senior subordinated notes

Also in connection with the merger, the Company issued $240.0 million of 87/8% senior subordinated notes and $200.0 million of 91/4%/10% senior subordinated toggle notes (together, the Notes), all due in 2017. Interest on the Notes is payable on May 1 and November 1 of each year, which commenced on November 1, 2007. All interest payments on the senior subordinated notes are payable in cash. The initial interest payment on the toggle notes was payable in cash. For any interest period after November 1, 2007 through November 1, 2012, the Company may pay interest on the toggle notes (i) in cash, (ii) by increasing the principal amount of the outstanding toggle notes or by issuing payment-in-kind notes (PIK Interest) or (iii) by paying interest on half the principal amount of the toggle notes in cash and half in PIK Interest. PIK Interest is paid at 10% and cash interest is paid at 91/4% per annum. To date, the Company has paid all interest payments in cash. During 2009, the Company repurchased approximately $2.5 million in principal amount of the senior subordinated toggle notes in the open market. At December 31, 2009,

F-27

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

the Company had $437.5 million of Notes outstanding. The Notes are unsecured senior subordinated obligations of the Company; however, the Notes are guaranteed by all of its current and future direct and indirect wholly-owned domestic subsidiaries. Additionally, the Notes contain various restrictive covenants, including financial covenants that limit its ability and the ability of its subsidiaries to borrow money or guarantee other indebtedness, grant liens, make investments, sell assets, pay dividends, enter into sale-leaseback transactions or issue and sell capital stock.

(c)   United Kingdom borrowings

In April 2007, the Company entered into an amended and restated credit agreement, which covered its existing overdraft facility and term loan facility (Term Loan A). This agreement provides a total overdraft facility of £2.0 million, and an additional Term Loan B facility of £10 million, which was drawn in April 2007. In March 2008, the Company further amended our U.K. Agreement to provide for a £2.0 million Term Loan C facility. The Company borrowed the entire £2.0 million in March 2008 to acquire property adjacent to one of its hospitals in London. In September 2009, we renewed our overdraft facility through April 2010. Under the renewal, the Company must pay a commitment fee of 0.5% per annum on the unused portion of the overdraft facility each quarter. Excluding availability on the overdraft facility, no additional borrowings can be made under the Term Loan A, B or C facilities. At December 31, 2009, the Company had approximately £36.8 million ($60.0 million) outstanding under the U.K. credit facility at a weighted average interest rate of approximately 4.2%.

Interest on the borrowings is based on a three-month or six-month LIBOR, or other rate as the bank may agree, plus a margin of 1.25% to 2.00%. Quarterly principal payments are required on the Term Loan A, which began in September 2007, and approximate $4.8 million in the first and second year, $6.4 million in the third and fourth year; $8.0 million in the fifth year, with the remainder due in the sixth year after the April 2007 closing. The Term Loan B does not require any principal payments prior to maturity and matures in 2013. The Term Loan C requires quarterly principal payments of approximately £0.1 million ($0.2 million), which began in September 2008 and continue through its maturity date of February 2013 when the final payment of £0.5 million ($0.8 million) is due. The borrowings are guaranteed by certain of the Company’s subsidiaries in the United Kingdom with a security interest in various assets, and a pledge of the capital stock of the U.K. borrowers and the capital stock of certain guarantor subsidiaries. The Agreement contains various restrictive covenants, including financial covenants that limit the Company’s ability and the ability of certain U.K. subsidiaries to borrow money or guarantee other indebtedness, grant liens on its assets, make investments, use assets as security in other transactions, pay dividends, enter into leases or sell assets or capital stock. The Company believes it was in compliance with these covenants as of December 31, 2009.

The Company also has the ability to borrow under a capital asset finance facility in the U.K. of up to £2.5 million ($4.0 million). The exact terms and payments are negotiated upon a draw on the facility. No amounts were outstanding at December 31, 2009 or 2008.

(d)   Other Long-term Debt

The Company and its subsidiaries have notes payable to financial institutions and other parties of $25.0 million, which mature at various dates through 2018 and accrue interest at fixed and variable rates ranging from 4.4% to 11.3%.

Capital lease obligations in the carrying amount of $30.3 million are secured by underlying real estate and equipment and have implicit interest rates ranging from 5.3% to 19.0%.

The aggregate maturities of long-term debt for each of the five years subsequent to December 31, 2009 are as follows (in thousands): 2010, $23,337; 2011, $22,505; 2012, $20,496; 2013, $51,160; 2014, $495,672 and thereafter, $458,358.

F-28

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

The fair value of the Company’s long-term debt is determined by either (i) estimation of the discounted future cash flows of the debt at rates currently quoted or offered to the Company for similar debt instruments of comparable maturities by its lenders, or (ii) quoted market prices at the reporting date for traded debt securities. At December 31, 2009, the aggregate carrying amount and estimated fair value of long-term debt was $1.1 billion and $1.0 billion, respectively. At December 31, 2008, the aggregate carrying amount and estimated fair value of long-term debt was $1.1 billion and $777.4 million, respectively.

(11)   Interest Rate Swaps

The Company does not enter into derivative contracts for speculative purposes but has at times entered into interest rate swaps to fix the rate of interest owed on a portion of its variable rate debt. By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. The Company minimizes the credit risk in derivative instruments by entering into transactions with counterparties who maintain a strong credit rating. Market risk is the risk of an adverse effect on the value of a derivative instrument that results from a change in interest rates. This risk essentially represents the risk that variable interest rates decline to a level below the fixed rate the Company has locked in. The market risk associated with interest rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

At the inception of the interest rate swap, the Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged item, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method of measuring ineffectiveness. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

In order to manage the Company’s interest rate risk related to a portion of its variable-rate U.K. debt, on February 29, 2008, the Company entered into an interest rate swap agreement for a notional amount of £20.0 million ($32.3 million). The interest rate swap requires the Company to pay 4.99% and to receive interest at a variable rate of three- month GBP-LIBOR (0.6% at December 31, 2009), which is reset quarterly. The interest rate swap matures in March 2011. No collateral is required under the interest rate swap agreement.

In order to manage the Company’s interest rate risk related to a portion of its variable-rate senior secured credit facility, effective July 24, 2008, the Company entered into a three-year interest rate swap agreement for a notional amount of $200.0 million. The interest rate swap requires the Company to pay 3.6525% and to receive interest at a variable rate of three-month USD-LIBOR (0.3% at December 31, 2009), which is reset quarterly. No collateral is required under the interest rate swap agreement.

The proceeds from the swaps are used to settle the Company’s interest obligations on the hedged portion of the variable rate debt, which has the overall outcome of the Company paying and expensing a fixed rate of interest on the hedged debt.

The Company recognizes all derivative instruments as either assets or liabilities at fair value in the consolidated balance sheet. The Company designated the interest rate swaps as cash flow hedges of certain of its variable-rate borrowings. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified to earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivatives representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings and would be classified as interest expense in the

F-29

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Company’s consolidated statements of income. The Company recorded no expense related to ineffectiveness for the years ended December 31, 2009 or 2008. For the years ended December 31, 2009 and 2008, the Company reclassified $6.4 million and $0.5 million, respectively, out of other comprehensive income to interest expense related to the swaps. During the next twelve months, if current interest rates remain at December 31, 2009 levels, the Company will record $8.2 million more interest expense than if it had not entered into the interest rate swaps.

At December 31, 2009, the fair values of the U.K. and U.S. interest rate swaps were liabilities of approximately $1.5 million and $7.7 million, respectively. At December 31, 2008, the fair values of the U.S. interest rate swap was a liability of approximately $8.8 million. The fair value of the U.K. was not material at December 31, 2008. The fair value of the swaps are included in other long-term liabilities in the accompanying consolidated balance sheets, with the offset to other comprehensive income (loss). During the years ended December 31, 2009 and 2008, the amounts, net of taxes, recorded in other comprehensive income (loss) related to the interest rate swaps were $3.9 million and ($10.1 million), respectively. The estimated fair value of the interest rate swaps was determined using present value models of the contractual payments. Inputs to the models were based on prevailing LIBOR market data and incorporate credit data that measure nonperformance risk. The estimated fair value represents the theoretical exit cost the Company would have to pay to transfer the obligations to a market participant with similar credit risk. The interest rate swap agreements are classified within Level 3 of the valuation hierarchy.

(12)   Leases

The Company leases various office equipment and office space under a number of operating lease agreements, which expire at various times through the year 2024. Such leases do not involve contingent rentals, nor do they contain significant renewal or escalation clauses. Office leases generally require the Company to pay all executory costs (such as property taxes, maintenance and insurance).

Minimum future payments under noncancelable leases, with remaining terms in excess of one year as of December 31, 2009 are as follows (in thousands):

	Capital			Operating
	Leases			Leases
Year ending December 31,
2010	$	7,651		$	14,479
2011		6,574			12,763
2012		5,156			10,362
2013		3,810			8,231
2014		3,331			6,269
Thereafter		24,920			18,805
Total minimum lease payments		51,442		$	70,909
Amount representing interest		(21,150	)
Present value of minimum lease payments	$	30,292

Total rent expense from continuing operations under operating leases was $17.7 million and $18.6 million for the years ended December 31, 2009 and 2008, respectively and $5.4 million and $12.8 million, for the period from January 1 through April 18, 2007, and the period from April 19 through December 31, 2007, respectively.

(13)   Related Party Transactions

The Company has entered into agreements with certain majority and minority owned surgery centers to provide management services. As compensation for these services, the surgery centers are charged management

F-30

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

fees which are either fixed in amount or represent a fixed percentage of each center’s net revenue less bad debt. The percentages range from 3% to 8%. Amounts recognized under these agreements, after elimination of amounts from consolidated surgery centers, totaled approximately $45.2 million and $39.1 million for the years ended December 31, 2009 and 2008, respectively, and $9.5 million and $23.3 million for the period from January 1 through April 18, 2007 and the period from April 19 through December 31, 2007, respectively. Such amounts are included in management and contract service revenues in the accompanying consolidated statements of operations.

As discussed in Notes 4 and 5, the Company regularly engages in purchases and sales of ownership interests in its facilities. The Company operates 25 surgical facilities in partnership with the Baylor Health Care System (Baylor) and local physicians in the Dallas/Fort Worth area. Baylor’s Chief Executive Officer is a member of the Company’s board of directors. The following table summarizes transactions with Baylor during 2009, 2008 and 2007. The Company believes that the sale prices were approximately the same as if they had been negotiated on an arms’ length basis, and the prices equaled the value assigned by an external appraiser who valued the businesses immediately prior to the sale.

Date	Facility Location	Proceeds		Gain (Loss)
December 2009	Dallas, Texas(1)	$	1.2 million	$	0.3 million
December 2009	Fort Worth, Texas(2)		2.4 million		0.1 million
Total		$	3.6 million	$	0.4 million
June 2008	Dallas, Texas(3)	$	2.3 million	$	(0.9 million	)
July 2007	Dallas, Texas(4)	$	3.7 million	$	—

(1)	Baylor acquired a controlling interest in a facility from the Company, which transferred control of the facility to Baylor.
(2)	Baylor acquired a controlling interest in two facilities. The Company continues to account for these facilities under the equity method of accounting.
(3)	Baylor acquired an additional ownership interest in a facility it already co-owned with the Company and local physicians, which transferred control of the facility from the Company to Baylor.
(4)	Baylor acquired an additional ownership interest in two facilities it already co-owned with the Company and local physicians, which transferred control of the facilities to Baylor. No gain or loss was recorded upon the sale as the sale price approximated carrying value.

In June 2009, the Company agreed to lend up to $10.0 million to Trinity MC, LLC (Trinity), an acute care hospital in the Dallas/Fort Worth area. A majority interest (71%) in Trinity is owned by BRMCG Holdings, LLC, a wholly owned subsidiary of Baylor Regional Medical Center at Grapevine, a controlled affiliate of Baylor. Trinity operates Baylor Medical Center at Carrollton (BMCC). The Company has no ownership in Trinity. The revolving note earned interest at a rate of 6.0% per annum and was paid in full in December 2009. The Company believes the terms of the revolving note were approximately the same as if they had been negotiated on an arms’ length basis.

In June 2008, the Company purchased all of Baylor’s ownership interests in an entity Baylor co-owned with the Company. This entity had ownership and managed five facilities in the Dallas/Fort Worth area. The purchase price was approximately $3.9 million in cash. This entity is now wholly owned by the Company. The Company believes that the sales price was approximately the same as if it had been negotiated on an arms’ length basis, and the price equaled the value assigned by an external appraiser who valued the business immediately prior to the sale. After this transaction, the Company accounts for all of the facilities it operates with Baylor under the equity method.

As discussed in Note 15, the Company’s parent issued warrants with an estimated fair value of $0.3 million to Baylor in 2008. Similar grants have been made to other healthcare systems with which the Company operates facilities.

F-31

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Included in general and administrative expenses are management fees payable to an affiliate of Welsh Carson, which holds a controlling interest in the Company, in the amount of $2.0 million for the years ended December 31, 2009 and 2008 and $1.4 million the period from April 19 through December 31, 2007. Such amounts accrue at an annual rate of $2.0 million. The Company pays $1.0 million in cash per year with the unpaid balance due and payable upon a change in control.

(14)   Income Taxes

The components of income from continuing operations before income taxes were as follows (in thousands):

	Successor						Predecessor
					Period from		Period from
					April 19		January 1
					through		through
					December 31,		April 18,
	2009		2008		2007		2007
Domestic	$	114,743	$	95,306	$	60,226	$	12,151
Foreign		18,548		20,239		10,424		3,962
	$	133,291	$	115,545	$	70,650	$	16,113

Income tax expense (benefit) attributable to income from continuing operations consists of (in thousands):

Successor	Current		Deferred			Total
Year ended December 31, 2009:
U.S. federal	$	2,042	$	(9,859	)	$	(7,817	)
State and local		3,144		—			3,144
Foreign		5,118		(542	)		4,576
Net income tax expense (benefit)	$	10,304	$	(10,401	)	$	(97	)

Successor	Current		Deferred		Total
Year ended December 31, 2008:
U.S. federal	$	43	$	13,819	$	13,862
State and local		3,020		—		3,020
Foreign		5,410		41		5,451
Net income tax expense	$	8,473	$	13,860	$	22,333

Successor	Current			Deferred			Total
Period from April 19 through December 31, 2007:
U.S. federal	$	(345	)	$	10,202		$	9,857
State and local		1,334			—			1,334
Foreign		3,460			(59	)		3,401
Net income tax expense	$	4,449		$	10,143		$	14,592

F-32

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Predecessor	Current		Deferred			Total
Period from January 1 through April 18, 2007:
U.S. federal	$	—	$	1,627		$	1,627
State and local		1,302		(23	)		1,279
Foreign		1,528		(178	)		1,350
Net income tax expense	$	2,830	$	1,426		$	4,256

Income tax expense differed from the amount computed by applying the U.S. federal income tax rate of 35% to pretax income from continuing operations is as follows (in thousands):

	Successor									Predecessor
							Period from			Period from
							April 19			January 1
	Year Ended			Year Ended			through			through
	December 31,			December 31,			December 31,			April 18,
	2009			2008			2007			2007
Computed “expected” tax expense	$	46,652		$	40,441		$	24,728		$	5,640
Increase (reduction) in income taxes resulting from:
Book income of consolidated entities attributable to noncontrolling interests		(22,303	)		(19,298	)		(15,811	)		(6,492	)
Differences between U.S. financial reporting and foreign statutory reporting		(152	)		23			381			200
State tax expense, net of federal benefit		1,824			1,963			874			824
Removal of foreign tax rate differential		(1,211	)		(1,224	)		(628	)		(237	)
Nondeductible goodwill		6,338			—			—			—
Transaction costs		—			—			(453	)		2,250
Valuation allowance		(31,193	)		(223	)		5,121			1,323
Other		(52	)		651			380			748
Total	$	(97	)	$	22,333		$	14,592		$	4,256

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 2009 and 2008 are presented below (in thousands).

F-33

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

	December 31,
	2009			2008
Deferred tax assets:
Net operating loss and other tax carryforwards	$	4,413		$	17,009
Accrued expenses		10,730			11,433
Bad debts/reserves		3,741			8,064
Interest rate swaps		3,091			—
Capitalized costs and other		2,983			2,052
Total deferred tax assets		24,958			38,558
Valuation allowance		(3,283	)		(38,558	)
Total deferred tax assets, net	$	21,675		$	—
Deferred tax liabilities:
Basis difference of acquisitions	$	128,474		$	122,582
Accelerated depreciation		1,826			2,850
Capitalized interest and other		882			207
Total deferred tax liabilities	$	131,182		$	125,639

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

In conjunction with Welsh Carson’s acquisition of the Company in April 2007, which increased the Company’s debt, caused the Company to generate U.S. taxable losses, and reduced the likelihood of the Company generating U.S. taxable income, the Company established a valuation allowance against its U.S. deferred tax assets. Subsequent to the acquisition, the Company continued to establish a full valuation allowance against newly generated U.S. deferred tax assets and has continuously assessed the likelihood of the assets being realized at a future date. During the third quarter of 2009, the Company determined, based on factors such as those described above, including recent favorable operating trends, expected future taxable income, and other factors, that it is more likely than not that the majority of these assets, which include net operating loss carryforwards and other items, will be realized in the future. Accordingly, the Company’s results of operations for 2009 include an income tax benefit of $31.2 million related to the reversal of a majority of the Company’s valuation allowance against its deferred tax assets. The Company still carries a valuation allowance totaling $3.3 million against certain of its deferred tax assets, which relates to deferred tax assets that have restrictions as to use and are not considered more likely than not to be realized. It the Company’s estimates related to the above items change significantly, the Company may need to alter the amount of its valuation allowance in the future through a favorable or unfavorable adjustment to net income.

At December 31, 2009, the Company had federal net operating loss carryforwards for U.S. federal income tax purposes of approximately $4.1 million, all of which have been reserved due to restrictions as to their utilization. The Company’s ability to offset future taxable income with these carryforwards would begin to be forfeited in 2022, if unused. At December 31, 2009, the Company had state net operating loss carryforwards of approximately $37.5 million, all of which have a valuation allowance recorded against the deferred asset due to restrictions as to their utilization. The Company does not believe that it is more likely than not that it will be able to generate state taxable income in future periods to utilize its net operating loss carryforwards and other deferred tax assets.

F-34

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

The Company’s U.K. operations have no net operating loss carryforwards or other deferred tax assets. These operations continued to be profitable in 2009, and the Company therefore has accrued the related income tax expense.

The Company has analyzed its income tax filing positions in all of the federal and state jurisdictions where it is required to file income tax returns for all open tax years in these jurisdictions for uncertainty in tax positions. The Company believes, based on the facts and technical merits associated with each of its income tax filing positions and deductions, that each of its income tax filing positions would be sustained on audit. Further, the Company has concluded that to the extent any adjustments to its income tax filing positions were not to be sustained upon an IRS or other audit, such adjustments would not have a material effect on the Company’s consolidated financial statements. As a result, no reserves for uncertain income tax positions have been recorded. The Company’s policy for recording interest and penalties associated with audits is to record such items as a component of income before taxes. The Company has not recorded any material amounts for interest or penalties related to audit or other activity.

(15)   Equity and Equity-Based Compensation

On December 1, 2009, the Company’s board of directors declared and the Company paid a special cash dividend in the amount of $88.6 million on the Company’s common stock. The proceeds of the dividend were used by USPI Holdings, Inc., the sole stockholder of the Company, to pay a special cash dividend on its common stock. In turn, the proceeds were used by USPI Group Holdings, Inc., the sole stockholder of USPI Holdings, Inc., to pay amounts currently accrued on its preferred stock.

The Company accounts for equity-based compensation, such as stock options and other stock-based awards to employees and directors, at fair value. The fair value of the compensation is measured at the date of grant and recognized as expense over the recipient’s requisite service period.

Subsequent to the merger, the Company’s parent, USPI Group Holdings, Inc. (Parent), granted stock options and nonvested share awards to certain employees and members of the board of directors of the Successor. These awards were granted pursuant to the 2007 Equity Incentive Plan (the Plan) which was adopted by Parent’s board of directors. The board of directors or a designated administrator has the sole authority to determine which individuals receive grants, the type of grant to be received, the vesting period and all other option terms. Stock options granted generally have a term not to exceed eight years. A maximum of 20,726,523 shares of stock may be delivered under the Plan. As 3,535,500 shares had been delivered under the Plan at December 31, 2009, 17,191,023 remained available for delivery, with 17,372,207 having been granted at December 31, 2009.

Awards granted by the Predecessor were granted pursuant to its 2001 Equity-Based Compensation Plan, which was adopted by USPI’s board of directors in February 2001. Stock options granted generally had an option price no less than 100% of the fair value of the common stock on the date of grant with the term not to exceed ten years.

F-35

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Total equity-based compensation included in the consolidated statements of operations, classified by line item, is as follows (in thousands):

	Successor									Predecessor
							Period from			Period from
							April 19			January 1
	Year Ended			Year Ended			through			through
	December 31,			December 31,			December 31,			April 18,
	2009			2008			2007			2007
Salaries, benefits and other employee costs	$	804		$	983		$	308		$	959
General and administrative expenses		1,016			978			643			16,144
Other operating expenses		131			336			859			—
Equity in earnings of unconsolidated affiliates		—			—			—			20
Net income attributable to noncontrolling interests		—			—			—			(23	)
Expense before income tax benefit		1,951			2,297			1,810			17,100
Income tax benefit		(389	)		(463	)		(192	)		(5,366	)
Total equity-based compensation expense, net of tax	$	1,562		$	1,834		$	1,618		$	11,734

Total equity-based compensation, included in the consolidated statements of operations, classified by type of award, is as follows (in thousands):

	Successor									Predecessor
							Period from			Period from
							April 19			January 1
	Year Ended			Year Ended			through			through
	December 31,			December 31,			December 31,			April 18,
	2009			2008			2007			2007
Share awards	$	1,215		$	1,150		$	773		$	13,202
Stock options		605			811			178			3,797
Warrants		131			336			859			—
ESPP(1)		—			—			—			101
Expense before income tax benefit		1,951			2,297			1,810			17,100
Income tax benefit		(389	)		(463	)		(192	)		(5,366	)
Total equity-based compensation expense, net of tax	$	1,562		$	1,834		$	1,618		$	11,734

(1) Employee stock purchase plan (ESPP) amounts are net of reimbursements by other owners of the Company’s investees. The ESPP was terminated subsequent to the merger.

Total unrecognized compensation related to Successor nonvested awards of stock options and nonvested shares was $13.7 million at December 31, 2009 of which $4.9 million is expected to be recognized over a weighted average period of approximately three years. The remaining $8.8 million relates to restricted share awards exchanged in conjunction with the merger and will be expensed only upon the occurrence of a change in control or other qualified exit event.

F-36

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

During the year ended December 31, 2008, the Company received immaterial cash proceeds from the exercise of stock options. During the period from January 1 through April 18, 2007, the Company received cash proceeds of $6.1 million from the exercise of stock options and issuances of shares under the ESPP. Exercises of stock options and subsequent stock sales not qualifying for capital gains treatment and the release of restrictions on share awards resulted in a tax benefit of $15.8 million for the period from January 1 through April 18, 2007. No stock options were exercised during the year ended December 31, 2009 or in the period from April 19 through December 31, 2007.

Stock Options — Successor

Parent generally grants stock options vesting 25% per year over four years and having an eight-year contractual life. The fair value of stock options is estimated using the Black-Scholes formula. The expected lives of options are determined using the “simplified method” which defines the life as the average of the contractual term of the options and the weighted average vesting period for all option tranches. The risk-free interest rates are equal to rates of U.S. Treasury notes with maturities approximating the expected life of the option. Volatility was calculated as a weighted average based on the historical volatility of the Predecessor as well as industry peers. The assumptions are as follows:

							Period from
							April 19
	Year Ended			Year Ended			through
	December 31,			December 31,			December 31,
	2009			2008			2007
Assumptions:
Expected life in years		4.82			4.82			4.82
Risk-free interest rates		2.09	%		2.37-2.75	%		4.47	%
Dividend yield		0.0	%		0.0	%		0.0	%
Volatility		45.16	%		45.16	%		45.16	%
Weighted average grant-date fair value	$	0.37		$	0.55		$	0.25

Stock option activity during the year ended December 31, 2009 was as follows:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
Successor	Number of			Exercise		Contractual		Intrinsic
Stock Options	Shares (000)			Price		Life (Years)		Value ($000)
Outstanding at January 1, 2009		4,352		$	0.57		6.50	$	6,141
Additional grants		323			1.00		—		—
Exercised		—			—		—		—
Forfeited or expired		(113	)		0.77		—		—
Outstanding at December 31, 2009		4,562		$	0.59		5.7	$	3,051
Exercisable at December 31, 2009		1,863		$	0.46		5.5	$	1,460

Share Awards — Successor

On April 19, 2007, Parent granted nonvested share awards to certain Successor company employees. The first tranche (50%) of the share awards vest 25% over four years, while the second tranche (50%) vests 100% in April 2015, but can vest earlier upon the occurrence of a qualified exit event and Company performance. An additional grant was made to Parent’s board of directors in August 2007. The nonvested shares granted to the board of directors vests 25% each year over four years. The value of such share awards is equal to the share price on the date of grant.

F-37

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Additionally, in conjunction with the merger, Parent cancelled 379,000 restricted share awards of the Predecessor. These share awards were replaced with 2,212,957 nonvested shares of Parent. This cancellation and exchange was accounted for as a modification. The replacement awards vest only upon the occurrence of a change in control or other exit event as defined in the award agreement and Company performance. As a result of the modification, approximately $8.8 million of unamortized compensation cost related to the Predecessor awards will only be expensed upon the occurrence of a change in control or qualified exit event, and the completion of the derived service period. At December 31, 2009, 2,212,957 of these share awards were outstanding and unvested.

The grants of nonvested share awards, excluding the awards exchanged concurrent with the merger, during the year ended December 31, 2009 are summarized as follows:

				Weighted
				Average
Successor	Number of			Grant-Date
Nonvested Shares	Shares (000)			Fair Value
Nonvested at January 1, 2009		11,834		$	0.46
Additional grants		500			0.76
Vested		(1,736	)		0.48
Forfeited		—			—
Nonvested at December 31, 2009		10,598		$	0.47

The weighted average grant-date fair value per share award was $0.76 and $0.46 for the year ended December 31, 2009 and the period from April 19 through December 31, 2007, respectively. The Company did not grant any nonvested shares in 2008. The total fair value of shares which vested during the years ended December 31, 2009 and 2008 was approximately $1.7 million and $1.8 million. No shares vested during the period from April 19 through December 31, 2007.

Warrants — Successor

Similar to previous years, in 2009, Parent granted warrants to a not-for-profit healthcare system (hospital partner) that holds ownership in some of the Company’s facilities. The warrants are to purchase Parent’s common stock and were fully vested and non-forfeitable at the date of grant but contain exercise restrictions. Because the warrants are fully vested, the expense associated with them was recorded upon grant within other operating expenses at a fair value determined using the Black-Scholes formula. The assumptions included an expected life equal to the contractual life; a risk free interest rate of 2.7%; a dividend yield of 0.0%; and an estimated volatility of approximately 58%. In this grant, the hospital partner received 333,330 warrants with an exercise price of $3.00 per share, of which 55,555 are exercisable immediately; the exercise restrictions on additional tranches of 55,555 warrants lapse each December 1 beginning in 2009 and ending in 2013. At December 31, 2009, 111,110 warrants are exercisable. The warrants have a contractual life of approximately 81/2 years and a fair value of approximately $0.1 million.

During 2008, one of the Company’s hospital partners, Baylor, was granted 666,666 warrants to purchase Parent’s common stock for $3.00 per share. The warrants are fully vested and nonforfeitable but contain exercise restrictions. The exercise restrictions on 111,111 warrants lapse each December 31 beginning in 2008 and ending in 2013. The warrants have a contractual life of ten years. The total fair value of the warrants was approximately $0.3 million and was determined using the Black Scholes formula. The assumptions included an expected life equal to the contractual life of the warrants; a risk free interest rate of 3.5%, a dividend yield of 0.0%; and an estimated volatility of approximately 59%. Because the warrants are fully vested, the expense associated with these warrants was recorded upon grant within other operating expenses. Baylor’s Chief Executive Officer is a member of the Company’s Board of Directors (Note 13). At December 31, 2009, 222,222 warrants are exercisable.

F-38

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

During the period April 19 through December 31, 2007, Parent granted a total of 2,333,328 warrants to purchase its common stock to four of the Company’s hospital partners. The exercise price of the warrants was $3.00 per share. All of the warrants are fully vested and non-forfeitable but contain exercise restrictions. Of the 2,333,328 warrants outstanding at December 31, 2009, 1,111,109 warrants are exercisable and a portion of the remaining 1,222,219 warrants will become exercisable in 2010 and become fully exercisable by 2013. The warrants have a contractual life of eight to ten years. The total fair value of the warrants was approximately $1.1 million and was determined using the Black Scholes formula. The assumptions included an expected life equal to the contractual life of each warrant; a risk free interest rate of 3.6% to 4.6%; a dividend yield of 0.0%; and an estimated volatility of approximately 59%. Because the warrants are fully vested, the expense associated with these warrants was recorded upon grant within other operating expenses.

(16)   Segment Disclosures

The Company’s business is the operation of surgical facilities and related businesses in the United States and the United Kingdom. The Company’s chief operating decision maker, as that term is defined in GAAP, regularly reviews financial information about its surgical facilities for assessing performance and allocating resources both domestically and abroad. Accordingly, the Company’s reportable segments consist of (1) U.S. based facilities and (2) United Kingdom based facilities. All amounts related to discontinued operations have also been removed from all periods presented (Note 3).

	United			United
Successor	States			Kingdom			Total
Year Ended December 31, 2009
Net patient service revenues	$	428,512		$	105,097		$	533,609
Other revenues		88,756			—			88,756
Total revenues	$	517,268		$	105,097		$	622,365
Depreciation and amortization	$	28,564		$	6,733		$	35,297
Operating income		209,539			20,119			229,658
Net interest expense		(66,714	)		(1,571	)		(68,285	)
Income tax benefit (expense)		4,673			(4,576	)		97
Total assets		2,000,087			325,305			2,325,392
Capital expenditures		22,395			12,393			34,788

	United			United
Successor	States			Kingdom			Total
Year Ended December 31, 2008
Net patient service revenues	$	439,501		$	122,031		$	561,532
Other revenues		80,691			—			80,691
Total revenues	$	520,192		$	122,031		$	642,223
Depreciation and amortization	$	29,932		$	6,825		$	36,757
Operating income		174,294			25,462			199,756
Net interest expense		(77,248	)		(5,173	)		(82,421	)
Income tax expense		(16,881	)		(5,452	)		(22,333	)
Total assets		1,983,676			284,487			2,268,163
Capital expenditures		16,246			16,883			33,129

F-39

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

	United			United
Successor	States			Kingdom			Total
Period from April 19 through December 31, 2007
Net patient service revenues	$	318,060		$	84,373		$	402,433
Other revenues		50,055			—			50,055
Total revenues	$	368,115		$	84,373		$	452,488
Depreciation and amortization	$	21,591		$	5,097		$	26,688
Operating income		120,821			14,925			135,746
Net interest expense		(60,182	)		(4,472	)		(64,654	)
Income tax expense		(11,191	)		(3,401	)		(14,592	)
Total assets		1,906,471			370,922			2,277,393
Capital expenditures		13,663			5,339			19,002

	United			United
Predecessor	States			Kingdom			Total
Period from January 1 through April 18, 2007
Net patient service revenues	$	136,865		$	33,733		$	170,598
Other revenues		20,757			—			20,757
Total revenues	$	157,622		$	33,733		$	191,355
Depreciation and amortization	$	9,487		$	2,939		$	12,426
Operating income		20,929			5,409			26,338
Net interest expense		(7,150	)		(1,438	)		(8,588	)
Income tax expense		(2,906	)		(1,350	)		(4,256	)
Total assets		1,114,429			209,279			1,323,708
Capital expenditures		5,224			2,625			7,849

(17)   Commitments and Contingencies

(a)   Financial Guarantees

As of December 31, 2009, the Company had issued guarantees of the indebtedness and other obligations of its investees to third parties, which could potentially require the Company to make maximum aggregate payments totaling approximately $58.0 million. Of the total, $28.4 million relates to the obligations of consolidated subsidiaries, whose obligations are included in the Company’s consolidated balance sheet and related disclosures, and $23.9 million of the remaining $29.6 million relates to the obligations of unconsolidated affiliated companies, whose obligations are not included in the Company’s consolidated balance sheet and related disclosures. The remaining $5.7 million represents a guarantee of an obligation of a facility the Company has sold. The Company has full recourse to the buyer with respect to this amount.

The Company has recorded long-term liabilities totaling approximately $0.4 million related to the guarantees the Company has issued to unconsolidated affiliates on or after January 1, 2003, and has not recorded any liabilities related to guarantees issued prior to that date. Generally, these arrangements (a) consist of guarantees of real estate and equipment financing, (b) are secured by the related property and equipment, (c) require payments by the Company, when the collateral is insufficient, in the event of a default by the investee primarily obligated under the financing, (d) expire as the underlying debt matures at various dates through 2019, and (e) provide no recourse for the Company to recover any amounts from third parties. The Company also has $1.6 million of letters of credit outstanding, as discussed in Note 10.

F-40

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(b)   Litigation

From time to time the Company is named as a party to legal claims and proceedings in the ordinary course of business. The Company’s management is not aware of any claims or proceedings that are expected to have a material adverse impact on the Company.

(c)   Self Insurance and Professional Liability Claims

The Company is self-insured for certain losses related to health and workers’ compensation claims, although we obtain third-party insurance coverage to limit our exposure to these claims. The Company estimates its self-insured liabilities using a number of factors including historical claims experience, an estimate of incurred but not reported claims, demographic factors, severity factors and actuarial valuations. The Company believes that the accruals established at December 31, 2009, which were estimated based on actual employee health claim patterns, adequately provide for its exposure under this arrangement. The Company’s potential for losses related to professional and general liability is managed through a wholly-owned insurance captive.

(d)   Employee Benefit Plans

The Company’s eligible U.S. employees may choose to participate in the United Surgical Partners International, Inc. 401(k) Plan under which the Company may elect to make contributions that match from zero to 100% of participants’ contributions. Charges to expense under this plan were $2.0 million in both the years ended December 31, 2009 and 2008. Charges to expense for the period January 1 through April 18, 2007 and the period April 19 through December 31, 2007 were $0.5 million, and $1.3 million, respectively.

One of the Company’s U.K. subsidiaries, which the Company acquired in 2000, has obligations remaining under a defined benefit pension plan that originated in 1991 and was closed to new participants at the end of 1998. The plan’s overall strategy is to outperform

 

the CAPS Pooled Fund Median over rolling three year periods. To implement this strategy the plan invests in a wide diversification of asset types and fund strategies. The target allocations for plan assets are approximately 80% equity securities, 15% bonds and 5% to all other types of investments. At December 31, 2009, the plan had 63 participants, plan assets of $9.6 million, an accumulated pension benefit obligation of $13.5 million, and a projected benefit obligation of $13.5 million. At December 31, 2008, the plan had 70 participants, plan assets of $6.9 million, an accumulated pension benefit obligation of $9.4 million, and a projected benefit obligation of $9.4 million. Pension expense for the years ended December 31, 2009 and 2008 was $0.5 million and $0.3 million, respectively. Pension expense was $0.1 million and $0.3 million, for the period from January 1 through April 18, 2007, and the period from April 19 through December 31, 2007, respectively.

At December 31, 2009, the estimated fair value of U.K.’s pension plan assets by asset type was: $7.9 million — equities; $0.9 million — bonds; $0.5 million — cash; and $0.3 million of other investments, which are primarily mutual funds invested in real estate properties. The estimated fair value of equities, bonds and cash are calculated using Level 1 inputs. The estimated fair value of property mutual funds are based on Level 3 inputs. There was no significant activity within the Level 3 investments during 2009.

The Company’s Deferred Compensation Plan covers select members of management as determined by its Compensation Committee. Under the plan, eligible employees may contribute a portion of their salary and annual bonus on a pretax basis. The plan is a non-qualified plan; therefore, the associated liabilities are included in the Company’s consolidated balance sheets as of December 31, 2009 and 2008. In addition, the Company maintains an irrevocable grantor’s trust to hold assets that fund benefit obligations under the plan, including corporate-owned life insurance policies. The cash surrender value of such policies is included in the consolidated balance sheets in other noncurrent assets and totaled $10.2 million and $7.1 million at December 31, 2009 and 2008, respectively. The Company’s obligations related to the plan were $11.6 million and $7.6 million, at December 31, 2009 and 2008,

F-41

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

respectively, of which $2.3 million and $0.4 million, respectively, are included in accrued salaries and benefits with the remaining amounts included in other long-term liabilities. Total expense under the plan for the years ended December 31, 2009 and 2008 was $0.3 million and $1.2 million, respectively. Total expense for the period January 1 through April 18, 2007, the period April 19 through December 31, 2007 was $0.3 million and $0.6 million, respectively.

(e)   Employment Agreements

The Company entered into employment agreements dated April 19, 2007 with Donald E. Steen and William H. Wilcox. The agreement with Mr. Steen, who serves as the Company’s Chairman provides for annual base compensation of $300,000 (as of December 31, 2009), subject to increases approved by the board of directors, a performance bonus based on the sole discretion of the Company’s Board of Directors, and his continued employment until November 14, 2011.

The agreement with Mr. Wilcox, the Company’s President and Chief Executive Officer provides for annual base compensation of $600,000 (as of December 31, 2009), subject to increases approved by the board of directors, and Mr. Wilcox is eligible for a performance bonus based on the sole discretion of the Company’s Board of Directors. The agreement renews automatically for two-year terms unless terminated by either party.

At December 31, 2009, the Company has employment agreements with 20 other senior managers which include one year terms and renew automatically for additional one year terms unless terminated by either party. The total annual base compensation under these agreements is $5.3 million as of December 31, 2009, subject to increases approved by the board of directors, and performance bonuses of up to a total of $5.7 million per year.

(18)   Subsequent Events

The Company has entered into letters of intent with various entities regarding possible joint venture, development or other transactions. These possible joint ventures, developments or other transactions are in various stages of negotiation. The Company’s management has evaluated subsequent events through February 23, 2010, the date that the consolidated financial statements were issued, and concluded there are no material subsequent events.

(19)   Condensed Consolidating Financial Statements

The following information is presented as required by regulations of the SEC in connection with the Company’s senior subordinated notes that have been registered with the SEC. While not required by SEC regulations, additional disclosures have also been presented in this note as required by the Company’s senior secured credit facility’s covenants. None of this information is routinely prepared for use by management. The operating and investing activities of the separate legal entities included in the consolidated financial statements are fully interdependent and integrated. Accordingly, the operating results of the separate legal entities are not representative of what the operating results would be on a stand-alone basis. Revenues and operating expenses of the separate legal entities include intercompany charges for management and other services.

The $240.0 million of 87/8% senior subordinated notes and $200.0 million of 91/4%/10% senior subordinated toggle notes, all due 2017 (the Notes), were issued in a private offering on April 19, 2007 and were subsequently registered as publicly traded securities through a Form S-4 declared effective by the SEC on July 25, 2007. The exchange offer was completed in August 2007. The Notes are unsecured senior subordinated obligations of the Company; however, the Notes are guaranteed by all of the Company’s current and future direct and indirect wholly-owned domestic subsidiaries. USPI, which issued the Notes, does not have independent assets or operations. USPI’s investees in the United Kingdom are not guarantors of the obligation. USPI’s investees in the United States in which USPI owns less than 100% are not guarantors of the obligation. The financial positions and results of operations (below, in thousands) of the respective guarantors are based upon the guarantor relationship at the end of the period

F-42

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

presented. Consolidation adjustments include purchase accounting entries for investments in which the Company’s ownership percentage in non-participating investees is not high enough to permit the application of pushdown accounting.

Condensed Consolidating Balance Sheets:

			Non-Participating		Consolidation			Consolidated
As of December 31, 2009	Guarantors		Investees		Adjustments			Total
ASSETS
Current assets:
Cash and cash equivalents	$	27,430	$	7,460	$	—		$	34,890
Accounts receivable, net		—		54,202		35			54,237
Other receivables		46,975		45,776		(77,505	)		15,246
Inventories of supplies		428		8,361		—			8,789
Prepaids and other current assets		26,264		4,518		—			30,782
Total current assets		101,097		120,317		(77,470	)		143,944
Property and equipment, net		16,197		181,857		452			198,506
Investments in affiliates		1,027,814		—		(672,315	)		355,499
Goodwill and intangible assets, net		857,802		353,212		391,173			1,602,187
Other assets		96,205		2,213		(73,162	)		25,256
Total assets	$	2,099,115	$	657,599	$	(431,322	)	$	2,325,392
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,396	$	22,079	$	—		$	23,475
Accrued expenses and other		235,904		50,200		(75,956	)		210,148
Current portion of long-term debt		5,480		20,116		(2,259	)		23,337
Total current liabilities		242,780		92,395		(78,215	)		256,960
Long-term debt, less current portion		952,311		118,892		(23,012	)		1,048,191
Other long-term liabilities		146,072		13,122		(821	)		158,373
Parent’s equity		757,952		412,362		(412,362	)		757,952
Noncontrolling interests		—		20,828		83,088			103,916
Total liabilities and equity	$	2,099,115	$	657,599	$	(431,322	)	$	2,325,392

F-43

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

			Non-Participating		Consolidation			Consolidated
As of December 31, 2008	Guarantors		Investees		Adjustments			Total
ASSETS
Current assets:
Cash and cash equivalents	$	42,025	$	7,410	$	—		$	49,435
Accounts receivable, net		—		57,172		41			57,213
Other receivables		43,033		39,454		(65,417	)		17,070
Inventories of supplies		109		8,970		—			9,079
Prepaids and other current assets		9,625		2,110		—			11,735
Total current assets		94,792		115,116		(65,376	)		144,532
Property and equipment, net		16,036		184,959		829			201,824
Investments in affiliates		1,022,144		63		(714,436	)		307,771
Goodwill and intangible assets, net		790,491		322,866		475,782			1,589,139
Other assets		97,400		152		(72,655	)		24,897
Total assets	$	2,020,863	$	623,156	$	(375,856	)	$	2,268,163
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	910	$	21,284	$	—		$	22,194
Accrued expenses and other		153,249		46,371		(62,932	)		136,688
Current portion of long-term debt		5,556		20,368		(1,436	)		24,488
Total current liabilities		159,715		88,023		(64,368	)		183,370
Long-term debt, less current portion		954,968		139,445		(20,954	)		1,073,459
Other long-term liabilities		142,043		12,169		(1,056	)		153,156
Parent’s equity		764,137		371,335		(371,335	)		764,137
Noncontrolling interests		—		12,184		81,857			94,041
Total liabilities and equity	$	2,020,863	$	623,156	$	(375,856	)	$	2,268,163

F-44

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Condensed Consolidating Statements of Operations:

				Non-Participating			Consolidation			Consolidated
Year Ended December 31, 2009  — Successor	Guarantors			Investees			Adjustments			Total
Revenues	$	97,318		$	547,726		$	(22,679	)	$	622,365
Equity in earnings of unconsolidated affiliates		134,226			2,413			(74,868	)		61,771
Operating expenses, excluding depreciation and amortization		72,845			369,060			(22,724	)		419,181
Depreciation and amortization		7,380			27,541			376			35,297
Operating income		151,319			153,538			(75,199	)		229,658
Interest expense, net		(60,386	)		(7,894	)		(5	)		(68,285	)
Other income (expense), net		(28,482	)		710			(310	)		(28,082	)
Income from continuing operations before income taxes		62,451			146,354			(75,514	)		133,291
Income tax benefit (expense)		7,215			(7,118	)		—			97
Net income		69,666			139,236			(75,514	)		133,388
Less: Net income attributable to noncontrolling interests		—			(11,128	)		(52,594	)		(63,722	)
Net income attributable to Parent	$	69,666		$	128,108		$	(128,108	)	$	69,666

				Non-Participating			Consolidation			Consolidated
Year Ended December 31, 2008  — Successor	Guarantors			Investees			Adjustments			Total
Revenues	$	94,119		$	572,029		$	(23,925	)	$	642,223
Equity in earnings of unconsolidated affiliates		113,516			2,465			(68,939	)		47,042
Operating expenses, excluding depreciation and amortization		76,204			400,474			(23,926	)		452,752
Depreciation and amortization		6,993			29,224			540			36,757
Operating income		124,438			144,796			(69,478	)		199,756
Interest expense, net		(70,024	)		(12,493	)		96			(82,421	)
Other income (expense), net		(1,383	)		(97	)		(310	)		(1,790	)
Income from continuing operations before income taxes		53,031			132,206			(69,692	)		115,545
Income tax expense		(14,954	)		(7,383	)		4			(22,333	)
Income from continuing operations		38,077			124,823			(69,688	)		93,212
Loss from discontinued operations, net of tax		(563	)		3			—			(560	)
Net income		37,514			124,826			(69,688	)		92,652
Less: Net income attributable to noncontrolling interests		—			(6,960	)		(48,178	)		(55,138	)
Net income attributable to Parent	$	37,514		$	117,866		$	(117,866	)	$	37,514

F-45

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Period from April 19 through				Non-Participating			Consolidation			Consolidated
December 31, 2007  — Successor	Guarantors			Investees			Adjustments			Total
Revenues	$	63,009		$	410,684		$	(21,205	)	$	452,488
Equity in earnings of unconsolidated affiliates		71,090			833			(48,056	)		23,867
Operating expenses, excluding depreciation and amortization		52,233			282,881			(21,193	)		313,921
Depreciation and amortization		5,287			20,778			623			26,688
Operating income		76,579			107,858			(48,691	)		135,746
Interest expense, net		(55,180	)		(9,474	)		—			(64,654	)
Other income (expense), net		(574	)		177			(45	)		(442	)
Income from continuing operations before income taxes		20,825			98,561			(48,736	)		70,650
Income tax expense		(9,906	)		(4,862	)		176			(14,592	)
Income from continuing operations		10,919			93,699			(48,560	)		56,058
Loss from discontinued operations, net of tax		(2,190	)		36			—			(2,154	)
Net income		8,729			93,735			(48,560	)		53,904
Less: Net income attributable to noncontrolling interests		—			(7,673	)		(37,502	)		(45,175	)
Net income attributable to Parent	$	8,729		$	86,062		$	(86,062	)	$	8,729

F-46

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Period from January 1 through				Non-Participating			Consolidation			Consolidated
April 18, 2007  — Predecessor	Guarantors			Investees			Adjustments			Total
Revenues	$	26,714		$	173,575		$	(8,934	)	$	191,355
Equity in earnings of unconsolidated affiliates		28,137			158			(18,389	)		9,906
Operating expenses, excluding depreciation and amortization		51,244			120,371			(9,118	)		162,497
Depreciation and amortization		2,219			9,408			799			12,426
Operating income		1,388			43,954			(19,004	)		26,338
Interest expense, net		(4,996	)		(3,592	)		—			(8,588	)
Loss on early retirement of debt		(2,435	)		—			—			(2,435	)
Other income (expense), net		917			(718	)		599			798
Income from continuing operations before income taxes		(5,126	)		39,644			(18,405	)		16,113
Income tax expense		(1,772	)		(2,486	)		2			(4,256	)
Income (loss) from continuing operations		(6,898	)		37,158			(18,403	)		11,857
Loss from discontinued operations, net of tax		(251	)		(207	)		—			(458	)
Net income (loss)		(7,149	)		36,951			(18,403	)		11,399
Less: Net income attributable to noncontrolling interests		—			(4,537	)		(14,011	)		(18,548	)
Net income (loss) attributable to Parent	$	(7,149	)	$	32,414		$	(32,414	)	$	(7,149	)

Condensed Consolidating Statements of Comprehensive Income (Loss):

				Non-Participating			Consolidation			Consolidated
Year Ended December 31, 2009	Guarantors			Investees			Adjustments			Total
Net income	$	69,666		$	139,236		$	(75,514	)	$	133,388
Other comprehensive income:
Foreign currency translation adjustments		21,967			21,967			(21,967	)		21,967
Unrealized gain on interest rate swaps, net of tax		3,894			108			(108	)		3,894
Pension adjustments, net of tax		(698	)		(698	)		698			(698	)
Total other comprehensive income		25,163			21,377			(21,377	)		25,163
Comprehensive income		94,829			160,613			(96,891	)		158,551
Less: Comprehensive income attributable to noncontrolling interests		—			(11,128	)		(52,594	)		(63,722	)
Comprehensive income attributable to Parent	$	94,829		$	149,485		$	(149,485	)	$	94,829

F-47

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

				Non-Participating			Consolidation			Consolidated
Year Ended December 31, 2008	Guarantor			Investees			Adjustments			Total
Net income	$	37,514		$	124,826		$	(69,688	)	$	92,652
Other comprehensive income:
Foreign currency translation adjustments		(71,790	)		(71,790	)		71,790			(71,790	)
Unrealized loss on interest rate swaps, net of tax		(10,051	)		(1,280	)		1,280			(10,051	)
Pension adjustments, net of tax		(682	)		(682	)		682			(682	)
Total other comprehensive loss		(82,523	)		(73,752	)		73,752			(82,523	)
Comprehensive income (loss)		(45,009	)		51,074			4,064			10,129
Less: Comprehensive income (loss) attributable to noncontrolling interests		—			(6,960	)		(48,178	)		(55,138	)
Comprehensive income (loss) attributable to Parent	$	(45,009	)	$	44,114		$	(44,114	)	$	(45,009	)

Condensed Consolidating Statements of USPI Stockholder’s Equity:

				Non-Participating			Consolidation			Consolidated
Successor	Guarantors			Investees			Adjustments			Total
Balance December 31, 2007	$	806,806		$	442,925		$	(442,925	)	$	806,806
Net income		37,514			124,826			(69,688	)		92,652
Net income attributable to noncontrolling interests		—			(6,960	)		(48,178	)		(55,138	)
Contribution related to equity award grants by USPI Group Holdings, Inc.		2,340			513			(513	)		2,340
Acquisitions and contributions		—			12,918			(12,918	)		—
Disposals and deconsolidations		—			(15,675	)		15,675			—
Distributions		—			(113,463	)		113,463			—
Foreign currency translation and other		(82,523	)		(73,749	)		73,749			(82,523	)
Balance, December 31, 2008		764,137			371,335			(371,335	)		764,137

F-48

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

				Non-Participating			Consolidation			Consolidated
Successor	Guarantors			Investees			Adjustments			Total
Net income		69,666			139,236			(75,514	)		133,388
Net income attributable to noncontrolling interests		—			(11,128	)		(52,594	)		(63,722	)
Contribution related to equity award grants by USPI Group Holdings, Inc.		1,937			282			(282	)		1,937
Acquisitions and contributions		(9,536	)		26,410			(26,410	)		(9,536	)
Disposals and deconsolidations		(4,798	)		(17,259	)		17,259			(4,798	)
Distributions		—			(117,890	)		117,890			—
Dividend on common stock		(88,617	)		—			—			(88,617	)
Foreign currency translation and other		25,163			21,376			(21,376	)		25,163
Balance, December 31, 2009	$	757,952		$	412,362		$	(412,362	)	$	757,952

Condensed Consolidating Statements of Cash Flows:

				Non-Participating			Consolidation			Consolidated
Year Ended December 31, 2009 — Successor	Guarantor			Investees			Adjustments			Total
Cash flows from operating activities:
Net income	$	69,666		$	139,236		$	(75,514	)	$	133,388
Changes in operating and intercompany assets and liabilities and noncash items included in net income		(3,035	)		33,681			21,179			51,825
Net cash provided by (used in) operating activities		66,631			172,917			(54,335	)		185,213
Cash flows from investing activities:
Purchases of property and equipment, net		(5,139	)		(26,664	)		—			(31,803	)
Purchases of new businesses and equity interests, net		(57,625	)		(11,816	)		9,914			(59,527	)
Other items, net		3,837			(10,668	)		10,233			3,402
Net cash used in investing activities		(58,927	)		(49,148	)		20,147			(87,928	)
Cash flows from financing activities:
Long-term borrowings, net		(2,750	)		(19,684	)		1,585			(20,849	)
Purchases and sales of noncontrolling interests, net		(4,662	)		2,595			—			(2,067	)
Distributions to noncontrolling interests		—			(117,890	)		54,335			(63,555	)
Dividend payment on common stock		(88,617	)		—			—			(88,617	)
Increase in cash held on behalf of noncontrolling interest holders and other		73,730			11,064			(21,732	)		63,062
Net cash used in financing activities		(22,299	)		(123,915	)		34,188			(112,026	)
Effect of exchange rate changes on cash		—			196			—			196
Net increase (decrease) in cash		(14,595	)		50			—			(14,545	)
Cash at the beginning of the period		42,025			7,410			—			49,435
Cash at the end of the period	$	27,430		$	7,460		$	—		$	34,890

F-49

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

				Non-Participating			Consolidation			Consolidated
Year Ended December 31, 2008 — Successor	Guarantor			Investees			Adjustments			Total
Cash flows from operating activities:
Net income	$	37,514		$	124,826		$	(69,688	)	$	92,652
Loss on discontinued operations		563			(3	)		—			560
Changes in operating and intercompany assets and liabilities and noncash items included in net income		12,306			28,855			11,213			52,374
Net cash provided by operating activities		50,383			153,678			(58,475	)		145,586
Cash flows from investing activities:
Purchases of property and equipment, net		(4,189	)		(26,974	)		—			(31,163	)
Purchases of new businesses and equity interests, net		(64,192	)		(107	)		—			(64,299	)
Other items, net		(5,202	)		(3,084	)		2,411			(5,875	)
Net cash used in investing activities		(73,583	)		(30,165	)		2,411			(101,337	)
Cash flows from financing activities:
Long-term borrowings, net		28,700			(13,455	)		1,527			16,772
Purchases and sales of noncontrolling interests, net		(26,430	)		—			—			(26,430	)
Distributions to noncontrolling interests		—			(113,462	)		56,948			(56,514	)
Other items, net		(3,759	)		770			(2,411	)		(5,400	)
Net cash provided by (used in) financing activities		(1,489	)		(126,147	)		56,064			(71,572	)
Net cash provided by discontinued operations		49			—			—			49
Effect of exchange rate changes on cash		—			(49	)		—			(49	)
Net decrease in cash		(24,640	)		(2,683	)		—			(27,323	)
Cash at the beginning of the period		66,665			10,093			—			76,758
Cash at the end of the period	$	42,025		$	7,410		$	—		$	49,435

			Non-Participating			Consolidation			Consolidated
Period from April 19 through December 31, 2007 — Successor	Guarantors		Investees			Adjustments			Total
Cash flows from operating activities:
Net income	$	8,729	$	93,735		$	(48,560	)	$	53,904
Loss from discontinued operations		2,190		(36	)		—			2,154
Changes in operating and intercompany assets and liabilities and noncash items included in net income (loss)		24,239		27,120			2,519			53,878
Net cash provided by (used in) operating activities		35,158		120,819			(46,041	)		109,936

F-50

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

				Non-Participating			Consolidation			Consolidated
Period from April 19 through December 31, 2007 — Successor	Guarantors			Investees			Adjustments			Total
Cash flows from investing activities:
Purchases of property and equipment, net		(3,733	)		(7,990	)		—			(11,723	)
Purchases and sales of new businesses and equity interests, net		(41,211	)		—			—			(41,211	)
Other items, net		18,967			12,104			(20,244	)		10,827
Net cash (used in) provided by investing activities		(25,977	)		4,114			(20,244	)		(42,107	)
Cash flows from financing activities:
Long-term borrowings, net		703,031			(20,104	)		2,265			685,192
Net equity contributions from USPI Group Holdings, Inc.		779,279			—			—			779,279
Payments to repurchase common stock		(1,430,879	)		—			—			(1,430,879	)
Purchases and sales of noncontrolling interests, net		(31,837	)		—			—			(31,837	)
Distributions to noncontrolling interests		—			(91,532	)		46,041			(45,491	)
Other items, net		(43,308	)		(5,875	)		17,979			(31,204	)
Net cash provided by (used in) financing activities		(23,714	)		(117,511	)		66,285			(74,940	)
Net cash provided by discontinued operations		742			—			—			742
Effect of exchange rate changes on cash		—			(70	)		—			(70	)
Net increase (decrease) in cash		(13,791	)		7,352			—			(6,439	)
Cash at the beginning of the period		80,456			2,741			—			83,197
Cash at the end of the period	$	66,665		$	10,093		$	—		$	76,758

F-51

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

				Non-Participating			Consolidation			Consolidated
Period from January 1 through April 18, 2007 — Predecessor	Guarantors			Investees			Adjustments			Total
Cash flows from operating activities:
Net income (loss)	$	(7,149	)	$	36,951		$	(18,403	)	$	11,399
Loss from discontinued operations		251			207			—			458
Changes in operating and intercompany assets and liabilities and noncash items included in net income (loss)		35,420			17,480			(17,452	)		35,448
Net cash provided by operating activities		28,522			54,638			(35,855	)		47,305
Cash flows from investing activities:
Purchases of property and equipment, net		(575	)		(5,597	)		—			(6,172	)
Purchases and sales of new businesses and equity interests, net		(21,772	)		—			—			(21,772	)
Other items, net		(4,491	)		(8,410	)		4,373			(8,528	)
Net cash used in investing activities		(26,838	)		(14,007	)		4,373			(36,472	)
Cash flows from financing activities:
Long-term borrowings, net		(511	)		9,688			4,083			13,260
Purchases and sales of noncontrolling interests, net		10,983			—			—			10,983
Distributions to noncontrolling interests		—			(55,096	)		35,842			(19,254	)
Proceeds from issuance of common stock		6,135			—			—			6,135
Change in cash held on behalf of unconsolidated affiliates		22,513			(175	)		(8,443	)		13,895
Other items, net		15,822			—			—			15,822
Net cash provided by (used in) financing activities		54,942			(45,583	)		31,482			40,841
Net cash used in discontinued operations		(104	)		—			—			(104	)
Effect of exchange rate changes on cash		—			(113	)		—			(113	)
Net increase (decrease) in cash		56,522			(5,065	)		—			51,457
Cash at the beginning of the period		23,934			7,806			—			31,740
Cash at the end of the period	$	80,456		$	2,741		$	—		$	83,197

(20)   New Accounting Pronouncements

In June 2009, the FASB Accounting Standards Update No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (ASU 2009-17). ASU 2009-17 changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar) interests should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities that most significantly impact the other entity’s economic performance. ASU 2009-17 requires a number of additional disclosures about an entity’s involvement with variable interest entities and any significant changes in risk exposure due to that involvement. ASU 2009-17 applies to the Company on January 1, 2010. The Company does not expect these changes to have a material impact on its consolidated financial statements and disclosures.

F-52

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(21)   Selected Quarterly Financial Data (Unaudited)

	2009 Quarters
	First			Second			Third			Fourth
Net revenues	$	157,139		$	156,367		$	152,381		$	156,478
Income from continuing operations		21,982			32,857			53,511			25,038
Net income attributable to noncontrolling interests		(16,295	)		(16,105	)		(14,807	)		(16,515	)
Net income attributable to USPI’s common stockholder		5,687			16,752			38,704			8,523

	2008 Quarters
	First			Second			Third			Fourth
Net revenues	$	165,400		$	162,902		$	153,663		$	160,258
Income from continuing operations		23,072			21,360			19,361			29,419
Net income attributable to noncontrolling interests		(15,406	)		(13,952	)		(11,911	)		(13,869	)
Net income attributable to USPI’s common stockholder		7,721			6,463			7,441			15,889

Quarterly operating results are not necessarily representative of operations for a full year for various reasons, including case volumes, interest rates, acquisitions, changes in contracts, the timing of price changes, and financing activities. In addition, the Company has completed acquisitions and opened new facilities throughout 2008 and 2009, all of which significantly affect the comparability of net income from quarter to quarter.

F-53

(2) Financial Statement Schedule

The following financial statement schedule is filed as part of this Form 10-K:

Schedule II — Valuation and Qualifying Accounts

SCHEDULE II:  VALUATION AND QUALIFYING ACCOUNTS

Allowance for Doubtful Accounts

	Balance at		Additions Charged to:										Balance at
	Beginning of		Costs and		Other					Other			End of
	Period		Expenses		Accounts		Deductions(2)			Items(3)			Period
					(In thousands)
Period from January 1 through April 18, 2007 (Predecessor)(1)	$	9,955		3,324		—		(2,269	)		383		$	11,393
Period from April 19 through December 31, 2007 (Successor)(1)		11,393		7,769		—		(7,946	)		1,505			12,721
Year ended December 31, 2008 (Successor)(1)		12,721		7,568		—		(9,063	)		318			11,544
Year ended December 31, 2009 (Successor)(1)		11,544		8,958		—		(10,149	)		(2,193	)		8,160

Valuation allowance for deferred tax assets

	Balance at			Additions Charged to:											Balance at
	Beginning of			Costs and		Other						Other			End of
	Period			Expenses		Accounts(4)			Deductions(5)			Items			Period
						(In thousands)
Period from January 1 through April 18, 2007 (Predecessor)		$	2,460		1,323		—			—			—		$	3,783
Period from April 19 through December 31, 2007 (Successor)			3,783		5,121		28,918			—			—			37,822
Year ended December 31, 2008 (Successor)			37,822		1,332		(596	)		—			—			38,558
Year ended December 31, 2009 (Successor)			38,558		—		—			(31,193	)		(4,082	)		3,283

(1)	Includes amounts related to companies disposed of in 2007 through 2009.
(2)	Accounts written off.
(3)	Primarily beginning balances for purchased businesses and entities that were deconsolidated.
(4)	Recorded to goodwill
(5)	Reversal of deferred tax asset allowance (Note 14), recorded as a reduction of income tax expense.

All other schedules are omitted because they are not applicable or not required or because the required information is included in the consolidated financial statements or notes thereto.

S-1

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Consolidated Financial Statements
Years Ended June 30, 2009 and 2008
(With Independent Auditors’ Report Thereon)

1

REPORT OF INDEPENDENT AUDITORS

To The Board of Managers

Texas Health Ventures Group, L.L.C.:

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of changes in members’ equity, and of cash flows present fairly, in all material respects, the financial position of Texas Health Ventures Group, L.L.C and Subsidiaries (the “Company”) at June 30, 2009, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

The consolidated financial statements of the Company as of June 30, 2008 and for the year then ended were audited by other auditors whose report dated October 17, 2008 expressed an unqualified opinion on those statements.

/s/  PricewaterhouseCoopers LLP

October 28, 2009

2

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2009 AND 2008

	2009		2008
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash	$	8,315	$	3,527
Patient receivables, net of allowance for doubtful accounts of $9,097 and $10,448 at June 30, 2009 and 2008, respectively		41,489		45,417
Due from affiliate (Note 8)		70,370		30,676
Supplies		7,570		7,337
Prepaid and other current assets		2,120		1,728
Total current assets		129,864		88,685
PROPERTY AND EQUIPMENT, net (Note 2)		141,603		148,411
OTHER LONG-TERM ASSETS:
Investments in unconsolidated affiliates (Note 4)		1,687		1,618
Goodwill and intangible assets, net (Note 5)		137,303		131,319
Other		633		652
Total assets	$	411,090	$	370,685
LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	13,063	$	18,013
Accrued expenses and other		14,316		13,687
Due to affiliates (Note 8)		3,119		3,216
Current portion of long-term obligations (Note 6)		12,856		12,057
Total current liabilities		43,354		46,973
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION (Note 6)		120,357		123,646
OTHER LIABILITIES		13,376		10,238
Total liabilities		177,087		180,857
MINORITY INTERESTS		39,412		29,910
COMMINTMENTS AND CONTINGENCIES(Notes 7, 8, and 9)
MEMBERS’ EQUITY (Note 3)		194,591		159,918
Total liabilities and members’ equity	$	411,090	$	370,685

3

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED JUNE 30, 2009 AND 2008

	2009			2008
	(In thousands)
REVENUES:
Net patient service revenue	$	424,071		$	348,203
Management and royalty fee income (note 8)		588			600
Other income		532			469
Total revenues		425,191			349,272
EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES (note 4)		977			1,059
OPERATING EXPENSES:
Salaries, benefits, and other employee costs		92,664			82,316
Medical services and supplies		98,270			78,203
Management and royalty fees (note 8)		17,021			14,546
Professional fees		3,880			5,714
Other operating expenses		59,491			52,434
Provision for doubtful accounts		12,420			13,646
Depreciation and amortization		18,898			17,706
Total operating expenses		302,644			264,565
Operating income		123,524			85,766
NONOPERATING EXPENSES:
Interest expense		(13,251	)		(13,570	)
Interest income (note 8)		640			1,445
Other expense, net		(252	)		(61	)
Income before minority interests and income taxes		110,661			73,580
MINORITY INTERESTS IN INCOME OF CONSOLIDATED SUBSIDIARIES		(56,760	)		(34,341	)
Income before income taxes		53,901			39,239
INCOME TAXES		(2,888	)		(3,673	)
Net income	$	51,013		$	35,566

4

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY

FOR THE YEARS ENDED JUNE 30, 2009 AND 2008

	Contributed Capital								Retained Earnings
	USP			BHS			BUMC		USP			BHS			BUMC			Total
	(In thousands)
Balance at June 30, 2007	$	45,748		$	45,932		$	—	$	21,335		$	21,420		$	—		$	134,435
Net income		—			—			—		17,747			17,819			—			35,566
Contributions		14,381			7,457			4,092		—			—			—			25,930
Distributions to members		—			—			—		(17,971	)		(18,042	)		—			(36,013	)
Assign BUMC 49% of BHS’ 50.1% interest in THVG, effective June 30, 2008		—			(52,983	)		52,983		—			(20,731	)		20,731			—
Transfer of equity in accordance with L.L.C. agreement		(1,442	)		888			554		—			—			—			—
Balance at June 30, 2008		58,687			1,294			57,629		21,111			466			20,731			159,918
Net income		—			—			—		25,434			604			24,975			51,013
Distributions to members		—			(43	)		—		(8,132	)		(179	)		(7,986	)		(16,340	)
Assign remaining BHS 1.1% interest in THVG to BUMC, effective June 30, 2009		—			(1,251	)		1,251		—			(891	)		891			—
Balance at June 30, 2009	$	58,687		$	—		$	58,880	$	38,413		$	—		$	38,611		$	194,591

5

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 2009 AND 2008

	2009			2008
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	51,013		$	35,566
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts		12,420			13,646
Depreciation and amortization		18,898			17,706
Amortization of debt issue costs		3			3
Equity in earnings of unconsolidated affiliates, net of distributions received		(94	)		(230	)
Minority interests in income of consolidated subsidiaries, net of distributions paid		3,875			2,280
Changes in operating assets and liabilities, net of acquisitions
Patient receivables		(7,988	)		(26,173	)
Due from (to) affiliates, net		(97	)		743
Supplies, prepaids, and other assets		(437	)		(1,704	)
Accounts payable and accrued expenses		(3,828	)		4,295
Net cash provided by operating activities		73,765			46,132
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of new businesses and equity interests, net of cash received of $1,762 and $291 for 2009 and 2008, respectively		(5,554	)		(9,476	)
Sale of equity interests		9,048			952
Purchases of property and equipment		(6,612	)		(18,301	)
Sales of property and equipment		45			26
Cash collections on notes receivable from affiliates		—			1,338
Change in cash management balances with affiliate		(39,660	)		7,692
Net cash used in investing activities		(42,733	)		(17,769	)

6

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — continued

FOR THE YEARS ENDED JUNE 30, 2009 AND 2008

	2009			2008
	(In thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt	$	3,534		$	19,798
Payments on long-term obligations		(13,164	)		(14,089	)
Returns of capital to minority interest holders		(274	)		(817	)
Distributions to Company members		(16,340	)		(36,013	)
Net cash used in financing activities		(26,244	)		(31,121	)
INCREASE (DECREASE) IN CASH		4,788			(2,758	)
CASH, beginning of period		3,527			6,285
CASH, end of period	$	8,315		$	3,527
SUPPLEMENTAL INFORMATION:
Cash paid for interest	$	13,441		$	12,814
Cash paid for income taxes		2,365			2,375
Noncash transactions:
Noncash assets contributed by Members (note 3)		—			25,930
Asset acquired under capital leases		2,675			1,840

7

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

FOR THE YEARS ENDED JUNE 30, 2009 AND 2008

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Texas Health Ventures Group, L.L.C. and subsidiaries (THVG or the Company), a Texas limited liability company, was formed on January 21, 1997 for the primary purpose of developing, acquiring, and operating ambulatory surgery centers and related entities. Prior to June 29, 2008, Baylor Health Services (BHS), a Texas nonprofit corporation that is a controlled affiliate of Baylor Health Care System (BHCS), a Texas nonprofit corporation, owned 50.1% interest in THVG. On June 29, 2008, BHS distributed 49% of its existing 50.1% interest in THVG to Baylor University Medical Center (BUMC), a Texas nonprofit corporation whose sole member is BHCS. THVG is ultimately a subsidiary of BHCS through the combined ownership by BUMC and BHS (collectively referred to herein as Baylor). USP North Texas, Inc. (USP), a Texas corporation and subsidiary of United Surgical Partners International, Inc. (USPI), owns 49.9% of THVG. On June 30, 2009, BHS assigned its 1.1% remaining interest to BUMC. THVG’s fiscal year ends June 30. THVG’s subsidiaries’ fiscal years end December 31; however, the financial information of these subsidiaries included in these consolidated financial statements is as of and for the twelve months ended June 30, 2009 and 2008.

THVG owns equity interests in and operates ambulatory surgery centers, surgical hospitals, and related businesses in the Dallas/Fort Worth, Texas, metropolitan area. At June 30, 2009, THVG operated twenty-three facilities (the Facilities) under management contracts, twenty-two of which are consolidated for financial reporting purposes, and one of which is accounted for under the equity method. In addition, THVG holds equity method investments in two partnerships that each own the real estate used by two of the Facilities.

THVG has been funded by capital contributions from its members and by cash distributions from the Facilities. The board of managers, which is controlled by Baylor, initiates requests for capital contributions. The Facilities’ operating agreements provide that cash flows available for distribution will be distributed at least quarterly to THVG and other owners of the Facilities.

THVG’s operating agreement provides that the board of managers determine, on at least a quarterly basis, if THVG should make a cash distribution based on a comparison of THVG’s excess cash on hand versus current and anticipated needs, including, without limitation, needs for operating expenses, debt service, acquisitions, and a reasonable contingency reserve. The terms of THVG’s operating agreement provide that any distributions, whether driven by operating cash flows or by other sources, such as the distribution of noncash assets or distributions in the event THVG liquidates, are to be shared according to each member’s overall ownership level in THVG. Those ownership levels were 50.1% for BUMC and 49.9% for USP as of June 30, 2009, and 49% for BUMC, 1.1% for BHS and 49.9% for USP as of June 30, 2008.

Basis of Accounting

THVG maintains its books and records on the accrual basis of accounting, and the consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.

Principles of Consolidation

The consolidated financial statements include the financial statements of THVG and its wholly owned subsidiaries and other entities THVG controls. THVG consolidates the results of North Central Surgical Center, L.L.P. (North Central) as a result of owning a controlling, majority interest in University Surgical Partners of Dallas, L.L.P., which in turn owns a controlling, majority interest in North Central. All significant intercompany balances and transactions have been eliminated in consolidation.

8

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management of THVG to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements,” or SFAS 157, which became effective for fiscal years beginning after November 15, 2007. This statement provides a single definition of fair value, establishes a framework for measuring fair value, and expanded disclosures concerning fair value measurements. In February 2008, the FASB agreed to a one-year deferral of the effective date for non-financial assets and liabilities that are recognized or disclosed at fair values in the consolidated financial statements on a nonrecurring basis. THVG adopted the provisions of SFAS 157 on July 1, 2008 for financial assets and liabilities. The adoption did not have a material impact on THVG’s consolidated financial position or results of operations. THVG does not expect that the adoption of the provisions for non-financial assets or liabilities will have a material impact on its results of operations or financial position.

In February 2007, the Financial Accounting Standards Board issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” or SFAS 159, which became effective for fiscal years beginning after November 15, 2007, with early adoption permitted. The statement permits entities to choose to measure many financial instruments and certain other items at fair value. The unrealized gains and losses on items for which the fair value option has been elected would be reported in earnings. The objective of SFAS 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. THVG adopted SFAS 159 on July 1, 2008. Since THVG has not utilized the fair value option for any allowable items, the adoption of SFAS 159 did not have an impact on THVG’s consolidated financial position or results of operations. However, in the future, THVG may elect to measure certain financial instruments at fair value in accordance with this standard.

In May 2009, the Financial Accounting Standards Board issued SFAS No. 165, “Subsequent Events,” or SFAS 165, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, and specifically requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. SFAS 165 is effective for THVG for the year ended June 30, 2009 and will be applied prospectively.

Recently Issued Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board issued SFAS No. 141R, “Business Combinations,” or SFAS 141R, which broadens the guidance of SFAS No. 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. It broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations; and stipulates that acquisition related costs be expensed rather than included as part of the basis of the acquisition. SFAS 141R expands required disclosures to improve the ability to evaluate the nature and financial effects of business combinations. SFAS 141R is effective for business combinations entered into on or after July 1, 2009. THVG has not evaluated all of the provisions of SFAS 141R, however the impact of this new standard will be driven by the level of transactions and acquisitions entered into by THVG subsequent to the effective date.

9

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

In December 2008, the Financial Accounting Standards Board issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements — an amendment of ARB No. 51,” or SFAS 160, which is effective for fiscal years beginning on or after December 15, 2009. SFAS 160 requires a company to clearly identify and present ownership interests in subsidiaries held by parties other than the company in the financial statements within the equity section but separate from the company’s equity. It also requires the amounts of consolidated net income attributable to the parent and to the non-controlling interest to be clearly identified and presented on the face of the consolidated statement of income; changes in ownership interest to be accounted for as equity transactions; and when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary must be measured at fair value. THVG has not evaluated all of the provisions of SFAS 160, and therefore has not determined the impact on the consolidated financial position or results of operations from the adoption of SFAS 160.

In June 2009, the Financial Accounting Standards Board concurrently issued SFAS No. 166, “Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140,” or SFAS 166, and Statement No. 167, “Amendments to FASB Interpretation No. 46(R),” or SFAS 167, that change the way entities account for securitizations and other transfers of financial instruments. In addition to increased disclosure, these standards eliminate the concept of qualifying special purpose entities and change the test for consolidation of variable interest entities. These standards are effective for annual reporting periods beginning after November 15, 2009. THVG has not evaluated all of the provisions of these standards, but does not anticipate a material impact on the consolidated financial position or results of operations from the adoption of SFAS 166 or SFAS 167.

In June 2009, the Financial Accounting Standards Board issued SFAS No. 168, “The FASB Accounting Standards Codification^tm and the Hierarchy of Generally Accepted Accounting Principles (a replacement of FASB Statement No. 162.” or SFAS 168, that establishes the FASB Accounting Standards Codification^tm (Codification) as the single source of authoritative US GAAP. The Codification does not create any new GAAP standards but incorporates existing accounting and reporting standards into a new topical structure. The Codification is effective for THVG on July 1, 2009, and beginning with the financial statements for the year ending June 30, 2010, a new referencing system will be used to identify authoritative accounting standards.

Cash Equivalents

For purposes of the consolidated financial statements, THVG considers all highly liquid instruments with original maturities when purchased of three months or less to be cash equivalents. There were no cash equivalents at June 30, 2009 or 2008.

Patient Receivables

Patient receivables are stated at estimated net realizable value. Significant concentrations of patient receivables at December 31, 2009 and 2008 include:

	2009			2008
Commercial and managed care providers		65	%		69	%
Government-related programs		16	%		18	%
Self-pay patients		19	%		13	%
		100	%		100	%

Receivables from government-related programs (i.e. Medicare and Medicaid) represent the only concentrated groups of credit risk for THVG and management does not believe that there is any credit risks associated with these receivables. Commercial and managed care receivables consist of receivables from various payors involved in diverse activities and subject to differing economic conditions, and do not represent any concentrated credit risk to THVG. THVG maintains allowances for uncollectible accounts for estimated losses resulting from the payors’

10

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

inability to make payments on accounts. THVG assesses the reasonableness of the allowance account based on historic write-offs, the aging of accounts and other current conditions. Furthermore, management continually monitors and adjusts the allowances associated with its receivables. Accounts are written off when collection efforts have been exhausted.

Supplies

Supplies, consisting primarily of pharmaceuticals and supplies inventories, are stated at cost, which approximates market value, and are expensed as used.

Property and Equipment

Property and equipment are stated at cost or, when acquired as part of a business combination, at fair value at the date of acquisition. Depreciation is calculated on the straight line method over the estimated useful lives of the assets. Upon retirement or disposal of assets, the asset and accumulated depreciation accounts are adjusted accordingly, and any gain or loss is reflected in earnings or loss of the respective period. Maintenance costs and repairs are expensed as incurred; significant renewals and betterments are capitalized. Assets held under capital leases are classified as property and equipment and amortized using the straight line method over the shorter of the useful lives or the lease terms, and the related obligations are recorded as debt. Amortization of property and equipment held under capital leases and leasehold improvements is included in depreciation and amortization expense. THVG records operating lease expense on a straight-line basis unless another systematic and rational allocation is more representative of the time pattern in which the leased property is physically employed. THVG amortizes leasehold improvements, including amounts funded by landlord incentives or allowances, for which the related deferred rent is amortized as a reduction of lease expense, over the shorter of their economic lives or the lease term.

Investments in Unconsolidated Affiliates

Investments in unconsolidated affiliates in which THVG exerts significant influence, but has less than a controlling ownership are accounted for under the equity method. THVG exerts significant influence in the operations of its unconsolidated affiliates through representation on the governing bodies of the investees and additionally, with respect to the Facilities, through contracts to manage the operations of the investee.

Intangible Assets and Goodwill

Intangible assets consist of costs in excess of net assets acquired (goodwill), costs associated with the purchase of management service contract rights, and other intangibles. Most of these assets have indefinite lives. Accordingly, these assets are not amortized but are instead tested for impairment annually or more frequently if changing circumstances warrant. Any decrease in fair value identified in a test for impairment would be recorded as an impairment loss in the consolidated statements of income. No such impairment was identified in 2009 or 2008. THVG amortizes intangible assets with definite useful lives over their respective useful lives to the estimated residual values and reviews them for impairment in the same manner as long-lived assets, discussed below.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, or related groups of assets, may not be fully recoverable from estimated future cash flows. In the event of impairment, measurement of the amount of impairment may be based on appraisal, fair values of similar assets or estimates of future discounted cash flows resulting from use and ultimate disposition of the asset. No such impairment was identified in 2009 or 2008.

11

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants to sell the asset or transfer the liability. In accordance with SFAS 157, the Company uses fair value measurements based on quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2) or unobservable inputs (Level 3), depending on the nature of the item being valued. The Company does not have financial assets and liabilities measured at fair value on a recurring basis at June 30, 2009. The carrying amounts of cash, accounts receivable, and accounts payable approximate fair value because of the short maturity of these instruments.

The fair value of the Company’s long-term debt is determined by estimation of the discounted future cash flows of the debt at rates currently quoted or offered to the Company for similar debt instruments of comparable maturities by its lenders. At June 30, 2009, the aggregate carrying amount and estimated fair value of long-term debt were $41,500,000 and $40,900,000, respectively. At June 30, 2008, the aggregate carrying amount and estimated fair value of long-term debt were $43,700,000 and $44,600,000, respectively.

Revenue Recognition

THVG has agreements with third-party payors that provide for payments to THVG at amounts different from its established rates. Payment arrangements include prospectively-determined rates per discharge, reimbursed costs, discounted charges, and per diem payments. Net patient service revenue is reported at the estimated net realizable amount from patients, third-party payors, and others for services rendered, including estimated contractual adjustments under reimbursement agreements with third party payors. Contractual adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined. These contractual adjustments are related to the Medicare and Medicaid programs, as well as managed care contracts.

Net patient service revenue from the Medicare and Medicaid programs accounted for approximately 9% and 8% of total net patient service revenue in 2009 and 2008, respectively.

Net patient service revenue from managed care contracts accounted for approximately 89% and 85% of net patient service revenue in 2009 and 2008, respectively.

Net patient service revenue from private payors and charity care programs accounted for approximately 2% and 7% of total net patient service revenue in 2009 and 2008, respectively.

For facilities licensed as hospitals, federal regulations require the submission of annual cost reports covering medical costs and expenses associated with services provided to program beneficiaries. Medicare and Medicaid cost report settlements are estimated in the period services are provided to beneficiaries.

Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. As a result, there is a reasonable possibility that recorded estimates with respect to the five THVG facilities licensed as hospitals may change by a material amount as interpretations are clarified. These initial estimates are revised as needed until final cost reports are settled.

Equity in Earnings of Unconsolidated Affiliates

Equity in earnings of unconsolidated affiliates consists of THVG’s share of the profits and losses generated from its noncontrolling equity investments. Because these operations are central to THVG’s business strategy, equity in earnings of unconsolidated affiliates is classified as a component of operating income in the accompanying consolidated statements of income. THVG has contracts to manage these facilities, which results in THVG having an active role in the operations of these facilities.

12

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Income Taxes

No amounts for federal income taxes have been reflected in the accompanying consolidated financial statements because the federal tax effects of THVG’s activities accrue to the individual members.

The Texas franchise tax now applies to all THVG entities for any tax reports filed on or after January 1, 2008 and is reflected in the accompanying consolidated statements of income. Under the revised law, the tax is calculated on a margin base and is therefore reflected in THVG’s consolidated statements of income for the years ended June 30, 2008 and 2009 as income tax expense.

FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109, Accounting for Income Taxes,” (FIN 48), prescribes a single model to address uncertainty in tax positions and clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. Prior to FIN 48, the determination of when to record a liability for a tax exposure was based on whether a liability was considered probable and reasonably estimable in accordance with FASB Statement No. 5,“Accounting for Contingencies.” On July 1, 2007, THVG adopted FIN 48 with no material impact on THVG’s consolidated financial statements.

As of June 30, 2009 and 2008, THVG had no gross unrecognized tax benefits. THVG files a partnership income tax return in the U.S. federal jurisdiction and a franchise tax return in the state of Texas. THVG is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2005. THVG has identified Texas as a “major” state taxing jurisdiction. THVG does not expect or anticipate a significant increase over the next twelve months in the unrecognized tax benefits.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

2.   PROPERTY AND EQUIPMENT

At June 30, 2009 and 2008, property and equipment and related accumulated depreciation and amortization consisted of the following (in thousands):

	Estimated
	Useful Lives		2009			2008
Buildings and leasehold improvements		5-25 years	$	114,414		$	110,629
Equipment		3-15 years		70,405			68,405
Furniture and fixtures		5-15 years		10,190			8,880
Construction in progress				1,536			124
				196,545			188,038
Less accumulated depreciation and amortization				(54,942	)		(39,627	)
Net property and equipment			$	141,603		$	148,411

13

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

At June 30, 2009 and 2008, assets recorded under capital lease arrangements included in property and equipment consisted of the following (in thousands):

	2009			2008
Buildings	$	81,271		$	81,112
Equipment and furniture		16,591			16,163
		97,862			97,275
Less accumulated amortization		(20,584	)		(15,823	)
Net property and equipment under capital leases	$	77,278		$	81,452

3.   CAPITAL CONTRIBUTIONS BY MEMBERS

As discussed in Note 1, THVG receives part of its funding through cash and capital contributions from its members. During 2008, THVG received noncash capital contributions consisting primarily of investments in partnerships that operate surgery centers in the Dallas/Fort Worth area.

These noncash capital contributions, including THVG’s ownership in the investee, are as follows (in thousands):

	Ownership			Net Assets
Investee	Percentage			Contributed		Effective Date
Arlington Surgicare Partners, Ltd. (Arlington)		50.1	%	$	12,683		July 1, 2007
Rockwall Ambulatory Surgery Center, L.L.P.		50.1	%		3,766		July 1, 2007
(Rockwall)
Metroplex Surgicare Partners, Ltd. (Metroplex)		50.1	%		9,438		June 30, 2008

USP and Baylor previously owned the assets (noted in the table above) through another company they operate, THVG/HealthFirst (HealthFirst), which is a subsidiary of USP. On the effective dates listed above, HealthFirst, which held the assets and managed the facilities, distributed the assets to USP and Baylor, who in turn recontributed the majority of the assets to THVG. THVG recorded the contribution from Baylor at Baylor’s carrying value, as this was a contribution between a parent and subsidiary. THVG recorded the contribution from USP at fair value, based on an appraisal, as USP is a non-controlling member. Using these different bases is appropriate under generally accepted accounting principles and causes USP’s capital account to be greater than 49.9% of THVG’s total capital. However, any distributions of THVG’s assets continue to be allocated according to overall ownership levels, which are 50.1% to Baylor and 49.9% to USP as of June 30, 2009 and 2008, respectively. Accordingly, the impact of the difference has been reallocated on the accompanying consolidated statements of members’ equity to ensure that the capital account balances of THVG’s members correspond to the proportions at which net assets would be distributed. Concurrent with the contributions, THVG began managing the operations of the facility. The results of these transactions are included in THVG’s consolidated results of operations from the date of contribution.

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14

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

The assets acquired and liabilities assumed resulting from the above contributions are summarized as follows (in thousands):

	Arlington		Rockwall		Metroplex
Current assets	$	2,955	$	1,250	$	2,002
Property and equipment		4,196		805		1,436
Goodwill		11,912		8,254		8,424
Other noncurrent assets		164		20		25
Total assets acquired		19,227		10,329		11,887
Current liabilities		2,360		905		1,172
Long-term debt		3,412		5,606		267
Other noncurrent liabilities		—		8		—
Total liabilities assumed		5,772		6,519		1,439
Minority interests		772		44		1,010
Net assets acquired	$	12,683	$	3,766	$	9,438

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TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

4.   INVESTMENTS IN SUBSIDIARIES AND UNCONSOLIDATED AFFILIATES

THVG’s investments in consolidated subsidiaries and unconsolidated affiliates consisted of the following:

			Percentage Owned
			June 30,			June 30,
Legal Name	Facility	City	2009			2008
Consolidated subsidiaries(1):
Bellaire Outpatient Surgery Center, L.L.P.	Bellaire Surgery Center	Fort Worth		50.1	%		50.1	%
Dallas Surgical Partners, L.L.P.	Baylor Surgicare	Dallas		62.6			56.9
Dallas Surgical Partners, L.L.P.	Texas Surgery Center	Dallas		62.6			56.9
Dallas Surgical Partners, L.L.P.	Physicians Day Surgery Center	Dallas		62.6			56.9
Denton Surgicare Partners, Ltd.	Baylor Surgicare at Denton	Denton		50.1			50.1
Frisco Medical Center, L.L.P.	Baylor Medical Center at Frisco	Frisco		50.1			50.1
Garland Surgicare Partners, Ltd.	Baylor Surgicare at Garland	Garland		50.1			50.1
Grapevine Surgicare Partners, Ltd.	Baylor Surgicare at Grapevine	Grapevine		50.3			50.1
Lewisville Surgicare Partners, Ltd.	Baylor Surgicare at Lewisville	Lewisville		53.1			52.8
MSH Partners, L.P.	Mary Shiels Hospital	Dallas		42.4			56.9
North Central Surgical Center, L.L.P.	North Central Surgery Center	Dallas		32.2			28.9
North Garland Surgery Center, L.L.P.	North Garland Surgery Center	Garland		52.4			52.4
Rockwall/Heath Surgery Center, L.L.P.	Baylor Surgicare at Heath	Heath		50.1			50.1
Trophy Club Medical Center, L.P.	Trophy Club Medical Center	Fort Worth		52.5			50.5
Valley View Surgicare Partners, Ltd.	Baylor Surgicare at Valley View	Dallas		50.1			50.1
Baylor Surgical Hospital of Fort Worth Surgicare Partners, Ltd.	Fort Worth	Fort Worth		50.2			50.1
Arlington Surgicare Partners, Ltd.	Surgery Center of Arlington	Arlington		50.1			50.1
Rockwall Ambulatory Surgery Center, L.L.P.	Rockwall Surgery Center	Rockwall		50.1			50.1
Baylor Surgicare at Plano, L.L.C.	Baylor Surgicare at Plano	Plano		50.1			50.1
Metroplex Surgicare Partners, Ltd.	Metroplex Surgicare	Bedford		50.1			50.1
Arlington Orthopedic and Spine Hospitals, LLC	Arlington Hospital	Arlington		50.1			50.1
Baylor Surgicare at Granbury, LLC	Granbury Surgical Plaza	Granbury		50.6			—
Unconsolidated affiliates:
Denton Surgicare Real Estate, Ltd.	(2)	n/a		49.0			49.0
Irving-Coppell Surgical Hospital, L.L.P.	Irving-Coppell Surgical Hospital	Irving		18.3			18.4
MCSH Real Estate Investors, Ltd.	(2)	n/a		2.0			2.0

(1) List excludes holding companies, which are wholly owned by the Company and hold the Company’s investments in the Facilities.

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TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(2) These entities are not surgical facilities and do not have ownership in any surgical facilities.

Additionally, in the ordinary course of business, THVG engages in purchases and sales of individual partnership units with physicians who invest in the Facilities and invests cash in projects under development. These transactions are summarized as follows:

•  Net payments made for the year ended June 30, 2008 for the purchase of additional interests in University Surgical Partners of Dallas, L. L. P. (USPD) totaling approximately $3,774,000. USPD consists of the following facilities: Baylor Surgicare, Texas Surgery Center, and Physicians Day Surgery Center.

•  Net proceeds received for the year ended June 20, 3009 from sales of additional interests in MSH Partners, L.P. (Mary Shiels Hospital) totaling approximately $1,983,000.

•  Payments made of $3,579,000 and proceeds received of $5,306,000 for the year ended June 30, 2009, and payments made of $1,538,000 and proceeds received of $952,000 for the year ended June 30, 2008, related to other transactions, primarily purchases and sales of individual partnership units with physicians who invest in the facilities.

Effective February 1, 2009, THVG acquired 50.63 membership units, a 50.63% equity interest, in Granbury Surgical Plaza (Granbury), for a purchase price of $805,000. Granbury, like the other facilities in which THVG invests, is operated by Baylor and USP through THVG, as described in Note 8.

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TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

The following table summarizes the recorded values of Granbury’s assets acquired and liabilities assumed at the date of acquisition, as determined by internal and third-party valuations (in thousands):

	Granbury Surgical Plaza
Current assets	$	2,454
Property and equipment		2,847
Goodwill		3,916
Long-term assets		14
Total assets acquired		9,231
Current liabilities		882
Long-term liabilities		1,776
Long-term debt		5,768
Total liabilities assumed		8,426
Net assets acquired	$	805

The acquisition of Granbury was accounted for using the purchase method of accounting and accordingly, the purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed based on the estimated fair values at the date of acquisition. Some of those estimates are preliminary and subject to further adjustment. The results of the acquisition are included in THVG’s consolidated results of operations from the date of acquisition.

5.   GOODWILL AND INTANGIBLE ASSETS

At June 30, 2009 and 2008, goodwill and intangible assets, net of accumulated amortization, consisted of the following (in thousands):

	2009		2008
Goodwill	$	136,119	$	130,137
Other intangible assets		1,184		1,182
Total	$	137,303	$	131,319

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TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

The following is a summary of changes in the carrying amount of goodwill for the years ended June 30, 2009 and 2008 (in thousands):

Balance, July 1, 2007	$	92,332
Additions:
Contribution of Arlington (note 3)		11,912
Contribution of Rockwall (note 3)		8,254
Contribution of Metroplex (note 3)		8,317
Acquisition of Plano		4,299
Purchase of additional interests in USPD		3,360
Other		1,663
Balance, June 30, 2008		130,137
Additions:
Acquisition of Granbury		3,916
Purchase of additional interests in USPD		1,121
Additional contribution from BHS for the Metroplex acquisition		107
Other		838
Balance, June 30, 2009	$	136,119

Intangible assets with definite useful lives are amortized over their respective estimated useful lives. THVG records interest expense for intangible debt issue costs on a straight-line basis over the term of the debt obligation, which approximates the effective interest method. The agreements underlying THVG’s management contract assets have no determinable termination date and, consequently, the related intangible assets have indefinite useful lives. Goodwill and intangible assets with indefinite useful lives are not amortized but instead are tested for impairment at least annually. No impairment was recorded in 2009 or 2008.

The following is a summary of intangible assets at June 30, 2009 and 2008 (in thousands):

	June 30, 2009
	Gross Carrying		Accumulated
	Amount		Amortization			Total
Definite useful lives:
Debt issue costs	$	84	$	(50	)	$	34
Indefinite useful lives:
Management contracts		1,150		—			1,150
Total intangible assets	$	1,234	$	(50	)	$	1,184

	June 30, 2008
	Gross Carrying		Accumulated
	Amount		Amortization			Total
Definite useful lives:
Debt issue costs	$	79	$	(47	)	$	32
Indefinite useful lives:
Management contracts		1,150		—			1,150
Total intangible assets	$	1,229	$	(47	)	$	1,182

19

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Amortization of debt issue costs in the amount of $3,000 is included in interest expense for both years ended June 30, 2009 and 2008.

6.   LONG TERM OBLIGATIONS

At June 30, 2009 and 2008, long-term obligations consisted of the following (in thousands):

	2009			2008
Capital lease obligations (Note 7)	$	91,679		$	92,044
Notes payable to financial institutions		41,534			43,659
Total long-term obligations		133,213			135,703
Less current portion		(12,856	)		(12,057	)
Long-term obligations, less current portion	$	120,357		$	123,646

The aggregate maturities of long-term obligations for each of the five years subsequent to June 30, 2009 and thereafter are as follows (in thousands):

2010	$	10,015
2011		9,667
2012		8,751
2013		4,368
2014		3,103
Thereafter		5,630
Total long-term obligations	$	41,534

Capital lease obligations are collateralized by underlying real estate or equipment and have interest rates ranging from 3.50% to 12.66%.

The Facilities have notes payable to financial institutions which mature at various dates through 2016 and accrue interest at fixed and variable rates ranging from 3.11% to 9.5%. Each note is collateralized by certain assets of the respective Facility.

7.   LEASES

The Facilities lease various office equipment, medical equipment, and office space under a number of operating lease agreements, which expire at various times through the year 2029. Such leases do not involve contingent rentals, nor do they contain significant renewal or escalation clauses. Office leases generally require the Facilities to pay all executory costs (such as property taxes, maintenance and insurance).

20

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Minimum future payments under noncancelable leases with remaining terms in excess of one year as of June 30, 2009 are as follows (in thousands):

	Capital			Operating
	Leases			Leases
Year ending June 30:
2010	$	13,069		$	10,272
2011		12,517			8,996
2012		12,124			8,925
2013		11,922			8,259
2014		11,671			8,007
Thereafter		151,961			74,057
Total minimum lease payments		213,264		$	118,516
Amount representing interest		(121,585	)
Total principal payments	$	91,679

Total rent expense under operating leases was approximately $13,149,000 and $12,163,000 for the years ended June 30, 2009 and 2008, respectively, and is included in other operating expenses in the accompanying consolidated statements of income.

8.   RELATED-PARTY TRANSACTIONS

THVG operates the facilities under management and royalty contracts, and THVG in turn is managed by Baylor and USP, resulting in THVG incurring management and royalty fee expense payable to Baylor and USP in amounts equal to the management and royalty fee income THVG receives from the Facilities. THVG’s management and royalty fee income from the facilities it consolidates for financial reporting purposes eliminates in consolidation with the facilities’ expense and therefore is not included in THVG’s consolidated revenues. THVG’s management and royalty fee income from facilities which are not consolidated was approximately $588,000 and $600,000 for the years ended June 30, 2009 and 2008, respectively, and is included in the consolidated revenues of THVG.

The management and royalty fee expense to Baylor and USP was $17,021,000 and $14,546,000 for the years ended June 30, 2009 and 2008, respectively, and is reflected in operating expenses in THVG’s consolidated statements of income. Of the total, 64.3% and 34.0% represent management fees payable to USP and Baylor, respectively, and 1.7% represents royalty fees payable to Baylor.

Under the management and royalty agreements, the Facilities pay THVG an amount ranging from 4.5% to 7% of their net patient service revenue less provision for doubtful accounts annually, subject, in some cases, to an annual cap. Management and royalty fees and other reimbursable costs owed by THVG and its Facilities to USP and Baylor totaled $3,119,000 and $3,216,000 at June 30, 2009 and 2008, respectively, and are included in due to affiliates in the accompanying consolidated balance sheets.

In addition, a subsidiary of USPI frequently pays bills on behalf of THVG and has custody of substantially all of THVG’s excess cash, paying THVG and the Facilities interest income on the net balance at prevailing market rates. Amounts held by USPI on behalf of THVG and the facilities totaled $70,370,000 and $30,676,000 at June 30, 2009 and 2008, respectively. The interest income amounted to $604,000 and $1,306,000 for the years ended June 30, 2009 and 2008, respectively.

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TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

9.   COMMITMENTS AND CONTINGENCIES

Financial Guarantees

As of June 30, 2009, THVG issued guarantees of portions of the indebtedness of its investees to third-parties, which could potentially require THVG to make maximum aggregate payments totaling approximately $10,100,000. Of the total, $7,500,000 relates to the obligations of four consolidated subsidiaries, whose obligations are included in THVG’s consolidated balance sheet and related disclosures, and the remaining $2,600,000 relates to the obligations of unconsolidated affiliated companies, whose obligations are not included in THVG’s consolidated balance sheet and related disclosures. These arrangements (a) consist of guarantees of real estate and equipment financing, (b) are collateralized by all or a portion of the investees’ assets, (c) require payments by THVG in the event of a default by the investee primarily obligated under the financing, (d) expire as the underlying debt matures at various dates through 2021, or earlier if certain performance targets are met, and (e) provide no recourse for THVG to recover any amounts from third-parties. The fair value of the guarantee liability was not material to the consolidated financial statements and, therefore, no amounts were recorded at June 30, 2009 related to these guarantees. When THVG incurs guarantee obligations that are disproportionately greater than the guarantees provided by the investee’s other owners, THVG charges the investee a fair market value fee based on the value of the contingent liability THVG is assuming.

Litigation and Professional Liability Claims

In their normal course of business, the facilities are subject to claims and lawsuits relating to patient treatment. THVG believes that its liability for damages resulting from such claims and lawsuits is adequately covered by insurance or is adequately provided for in its consolidated financial statements. USPI, on behalf of THVG and each of the Facilities, maintains professional liability insurance that provides coverage on a claims-made basis of $1,000,000 per incident and $11,000,000 in annual aggregate amount with retroactive provisions upon policy renewal. Certain of THVG’s insurance policies have deductibles and contingent premium arrangements. THVG believes that the expense recorded through June 30, 2009, which was estimated based on historical claims, adequately provides for its exposure under these arrangements. Additionally, from time to time, THVG may be named as a party to other legal claims and proceedings in the ordinary course of business. THVG is not aware of any such claims or proceedings that have more than a remote chance of having a material adverse impact on THVG.

10.   SUBSEQUENT EVENTS

THVG regularly engages in exploratory discussions or enters into letters of intent with various entities regarding possible joint venture, development, or other transactions. These possible joint ventures, developments of new facilities, or other transactions are in various stages of negotiation.

THVG has performed an evaluation of subsequent events thru October 28, 2009, which is the date the consolidated financials statements were available to be issued.

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TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Consolidated Financial Statements
Years Ended June 30, 2008 and 2007
(With Independent Auditors’ Report Thereon)

23

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Managers

Texas Health Ventures Group, L.L.C.

We have audited the accompanying consolidated balance sheets of Texas Health Ventures Group, L.L.C. and subsidiaries (the Company) as of June 30, 2008 and 2007, and the related consolidated statements of income, members’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Texas Health Ventures Group, L.L.C. and subsidiaries at June 30, 2008 and 2007, and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

/s/  Ernst & Young LLP

October 17, 2008

Dallas, Texas

24

TEXAS HEALTH VENTURES GROUP, L.L.C.
AND SUBSIDIARIES

Consolidated Balance Sheets
June 30, 2008 and 2007

	2008		2007
	(In thousands, except per share amounts)
ASSETS
CURRENT ASSETS:
Cash	$	3,527	$	6,285
Patient receivables, net of allowance for doubtful accounts of $10,448,000 and $6,384,000 at June 30, 2008 and 2007, respectively		45,417		29,293
Due from affiliate (note 9)		30,676		35,606
Inventories of supplies		7,337		5,376
Current portion of notes receivable (note 6)		—		389
Prepaid and other current assets		1,728		1,204
Total current assets		88,685		78,153
PROPERTY AND EQUIPMENT, net (note 2)		148,411		135,571
OTHER LONG-TERM ASSETS:
Investments in unconsolidated affiliates (note 4)		1,618		1,316
Goodwill and intangible assets, net (notes 4 and 5)		131,319		93,516
Notes receivable, net of current portion (note 6)		—		949
Other		652		1,164
Total assets	$	370,685	$	310,669
LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	18,013		13,595
Accrued expenses and other		13,687		9,737
Due to affiliates (notes 6 and 9)		3,216		2,199
Current portion of long-term obligations (note 7)		12,057		7,767
Total current liabilities		46,973		33,298
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION (note 7)		123,646		109,908
OTHER LIABILITIES		10,238		7,326
Total liabilities		180,857		150,532
MINORITY INTERESTS (note 4)		29,910		25,702
COMMINTMENTS AND CONTINGENCIES(Notes 3, 7, 8 and 10)
MEMBERS’ EQUITY (note 3)		159,918		134,435
Total liabilities and members’ equity	$	370,685	$	310,669

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TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

	2008			2007
	(In thousands)
REVENUES:
Net patient service revenue	$	348,203		$	259,716
Management and royalty fee income (note 9)		600			600
Other income		469			120
Total revenues		349,272			260,436
EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES		1,059			686
OPERATING EXPENSES:
Salaries, benefits, and other employee costs		82,316			57,051
Medical services and supplies		78,203			58,972
Management and royalty fees (note 9)		14,546			11,657
Professional fees		5,714			1,314
Other operating expenses		52,434			38,918
Provision for doubtful accounts		13,646			8,197
Depreciation and amortization		17,706			13,418
Total operating expenses		264,565			189,527
Operating income		85,766			71,595
NONOPERATING EXPENSES:
Interest expense		(13,570	)		(7,585	)
Interest income (note 9)		1,445			2,199
Other expense, net		(61	)		(85	)
Income before minority interests and income tax		73,580			66,124
MINORITY INTERESTS IN INCOME OF CONSOLIDATED SUBSIDIARIES		(34,341	)		(31,711	)
Income before income taxes		39,239			34,413
INCOME TAX		(3,673	)		(903	)
Net income	$	35,566		$	33,510

See accompanying notes to consolidated financial statements.

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TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY

FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

	Contributed Capital								Retained Earnings
	USP			BHS			BUMC		USP			BHS			BUMC		Total
									(In thousands)
Balance at July 1, 2007	$	35,889		$	36,033		$	—	$	18,160		$	18,233		$	—	$	108,315
Net income		—			—			—		16,721			16,789			—		33,510
Contribution of capital		11,168			8,590			—		—			—			—		19,758
Distributions of earnings		—			—			—		(13,546	)		(13,602	)		—		(27,148	)
Transfer of equity in accordance with L.L.C. agreement		(1,309	)		1,309			—		—			—			—		—
Balance at June 30, 2007		45,748			45,932			—		21,335			21,420		$	—		134,435
Net income		—			—			—		17,747			17,819			—		35,566
Contributions of capital		14,381			7,457			4,092		—			—			—		25,930
Distributions of earnings		—			—			—		(17,971	)		(18,042	)		—		(36,013	)
Assign BUMC 49% of BHS’ 50.1% interest in THVG, effective 6/29/08		—			(52,983	)		52,983		—			(20,731	)		20,731		—
Transfer of equity in accordance with L.L.C. agreement		(1,442	)		888			554		—			—			—		—
Balance at June 30, 2008	$	58,687		$	1,294		$	57,629	$	21,111		$	466		$	20,731	$	159,918

See accompanying notes to consolidated financial statements.

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TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

	2008			2007
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	35,566		$	33,510
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts		13,646			8,197
Depreciation and amortization		17,706			13,418
Amortization of debt issue costs		3			71
Equity in earnings of unconsolidated affiliates, net of distributions received		(230	)		201
Minority interests in income of consolidated subsidiaries, net of distributions paid		2,280			2,199
Changes in operating assets and liabilities, net of acquisitions
Patient receivables		(26,173	)		(13,008	)
Due from (to) affiliates, net		743			(229	)
Inventories of supplies, prepaids, and other assets		(1,704	)		(1,249	)
Accounts payable and accrued expenses		4,295			6,111
Net cash provided by operating activities		46,132			49,221
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equity interests, net of cash received of 291,000 and 11,000 for 2008 and 2007, respectively		(9,476	)		(4,427	)
Sale of equity interests		952			1,417
Purchases of property and equipment		(18,301	)		(18,010	)
Sales of property and equipment		26			27
Cash collections on notes receivable from affiliates		1,338			361
Change in cash management balances with affiliate		7,692			(7,890	)
Net cash used in investing activities		(17,769	)		(28,522	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt	$	19,798		$	11,215
Payments on long-term obligations		(14,089	)		(6,417	)
Returns of capital to minority interest holders		(817	)		(502	)
Distributions to Company members		(36,013	)		(27,148	)
Net cash used in financing activities		(31,121	)		(22,852	)
DECREASE IN CASH		(2,758	)		(2,153	)
CASH, beginning of period		6,285			8,438
CASH, end of period	$	3,527		$	6,285
SUPPLEMENTAL INFORMATION:
Cash paid for interest	$	12,814		$	7,463
Cash paid for taxes		2,375			—
Noncash transactions:
Noncash settlement of note receivable (note 4)		—			4,135
Noncash assets contributed by Members (note 3)		25,930			19,758
Asset acquired under capital leases		1,840			49,817

28

TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Texas Health Ventures Group, L.L.C. and subsidiaries (THVG or the Company), a Texas limited liability company, was formed on January 21, 1997 for the primary purpose of developing, acquiring, and operating ambulatory surgery centers and related entities. Prior to June 29, 2008, Baylor Health Services (BHS), a Texas nonprofit corporation that is a controlled affiliate of Baylor Health Care System (BHCS), a Texas nonprofit corporation, owned 50.1% interest in THVG. On June 29, 2008, BHS distributed 49% of its existing 50.1% interest in THVG to Baylor University Medical Center (BUMC), a Texas nonprofit corporation whose sole member is BHCS. THVG is ultimately a subsidiary of BHCS through the combined ownership by BUMC and BHS (collectively referred to herein as Baylor). USP North Texas, Inc. (USP), a Texas corporation and subsidiary of United Surgical Partners International, Inc. (USPI), owns 49.9% of THVG. THVG’s fiscal year ends June 30. THVG’s subsidiaries’ fiscal years end December 31; however, the financial information of these subsidiaries included in these consolidated financial statements is as of and for the twelve months ended June 30, 2008 and 2007.

THVG owns equity interests in and operates ambulatory surgery centers, surgical hospitals, and related businesses in the Dallas/Fort Worth, Texas, metropolitan area. At June 30, 2008, THVG operated twenty-one facilities (the Facilities) under management contracts, twenty of which are consolidated for financial reporting purposes, and one of which is accounted for under the equity method. In addition, THVG holds equity method investments in two partnerships that each own the real estate used by two of the Facilities.

THVG has been funded by capital contributions from its members and by cash distributions from the Facilities. The board of managers, which is controlled by Baylor, initiates requests for capital contributions. The Facilities’ operating agreements provide that cash flow available for distribution will be distributed at least quarterly to THVG and other owners of the Facilities.

THVG’s operating agreement provides that the board of managers determine, on at least a quarterly basis, if THVG should make a cash distribution based on a comparison of THVG’s excess cash on hand versus current and anticipated needs, including, without limitation, needs for operating expenses, debt service, acquisitions, and a reasonable contingency reserve. The terms of THVG’s operating agreement provide that any distributions, whether driven by operating cash flows or by other sources, such as the distribution of noncash assets or distributions in the event THVG liquidates, are to be shared according to each member’s overall ownership level in THVG, which is 49% for BUMC, 1.1% for BHS and 49.9% for USP as of June 30, 2008.

Basis of Accounting

THVG maintains its books and records on the accrual basis of accounting, and the financial statements are prepared in accordance with U.S. generally accepted accounting principles.

Principles of Consolidation

The consolidated financial statements include the financial statements of THVG and its wholly owned subsidiaries and other entities THVG controls. THVG consolidates the results of North Central Surgical Center, L.L.P. (North Central) as a result of owning a controlling, majority interest in University Surgical Partners of Dallas, L.L.P., which in turn owns a controlling, majority interest in North Central. All significant intercompany balances and transactions have been eliminated in consolidation.

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Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management of THVG to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 141(R), Business Combinations (SFAS 141(R)). SFAS 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree and recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase. SFAS 141(R) also sets forth disclosures required to be made in the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after fiscal years beginning after December 15, 2008. Accordingly, SFAS 141(R) will be applied by the Company to business combinations occurring on or after July 1, 2009.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS 160). SFAS 160 establishes accounting and reporting standards that require noncontrolling interests to be reported as a separate component of equity, and net income attributable to the parent and to the non-controlling interest to be separately identified in the income statement. SFAS 160 also requires changes in a parent’s ownership interest while the parent retains its controlling interest to be accounted for as equity transactions, and any retained noncontrolling equity investment upon the deconsolidation of a subsidiary to be initially measured at fair value. SFAS 160 applies prospectively and is effective for fiscal years beginning after December 15, 2008. The Company is evaluating the impact that SFAS 160 will have on its financial statements upon its adoption fiscal year 2010.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS 157 does not require any new fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the impact that SFAS 157 will have on its consolidated financial position, results of operations, and cash flows upon its adoption in fiscal year 2009.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS 159), which permits entities to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact that SFAS 159 will have on its consolidated financial position, results of operations, and cash flows upon its adoption in fiscal year 2009.

Cash Equivalents

For purposes of the consolidated statements of cash flows, THVG considers all highly liquid instruments with original maturities when purchased of three months or less to be cash equivalents. There were no cash equivalents at June 30, 2008 or 2007.

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Inventories of Supplies

Inventories of supplies, consisting primarily of pharmaceuticals and supplies, are stated at cost, which approximates market value, and are expensed as used.

Property and Equipment

Property and equipment are stated at cost or, when acquired as part of a business combination, at fair value at the date of acquisition. Depreciation is calculated on the straight line method over the estimated useful lives of the assets. Upon retirement or disposal of assets, the asset and accumulated depreciation accounts are adjusted accordingly, and any gain or loss is reflected in earnings or loss of the respective period. Maintenance costs and repairs are expensed as incurred; significant renewals and betterments are capitalized. Assets held under capital leases are classified as property and equipment and amortized using the straight line method over the shorter of the useful lives or the lease terms, and the related obligations are recorded as debt. Amortization of property and equipment held under capital leases and leasehold improvements is included in depreciation and amortization expense. THVG records operating lease expense on a straight-line basis unless another systematic and rational allocation is more representative of the time pattern in which the leased property is physically employed. THVG amortizes leasehold improvements, including amounts funded by landlord incentives or allowances, for which the related deferred rent is amortized as a reduction of lease expense, over the shorter of their economic lives or the lease term.

Investments in Unconsolidated Affiliates

Investments in unconsolidated affiliates in which THVG exerts significant influence, but has less than a controlling ownership, are accounted for under the equity method. THVG exerts significant influence in the operations of its unconsolidated affiliates through representation on the governing bodies of the investees and additionally, with respect to the Facilities, through contracts to manage the operations of the investee.

Intangible Assets and Goodwill

Intangible assets consist of costs in excess of net assets acquired (goodwill), costs associated with the purchase of management service contract rights, and other intangibles. Most of these assets have indefinite lives. Accordingly, these assets are not amortized but are instead tested for impairment annually or more frequently if changing circumstances warrant. Any decrease in fair value identified in a test for impairment would be recorded as an impairment loss in the consolidated statements of income. No such impairment was identified in 2008 or 2007. THVG amortizes intangible assets with definite useful lives over their respective useful lives to the estimated residual values and reviews them for impairment in the same manner as long-lived assets, discussed below.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, or related groups of assets, may not be fully recoverable from estimated future cash flows. In the event of impairment, measurement of the amount of impairment may be based on appraisal, market values of similar assets or estimates of future discounted cash flows resulting from use and ultimate disposition of the asset. No such impairment was identified in 2008 or 2007.

Fair Value of Financial Instruments

The carrying amounts of cash, patient receivables, current portion of notes receivable, current portion of long-term debt, and accounts payable approximate fair value because of the short maturity of these instruments. The carrying amounts of the non-current portion of notes receivable and long-term debt approximate fair value.

Revenue Recognition

Revenues are recognized as services are performed and consist primarily of net patient service revenues, which are based on the Facilities’ established billing rates less allowances and discounts, principally for patients covered

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under contractual programs with private insurance companies. The allowances that THVG records for these revenues, including allowances for doubtful accounts, are based on THVG’s best estimates of expected actual reimbursement based primarily on historical collections for similar transactions. During the year ended June 30, 2008, approximately 72%, 19%, and 1% of the cases performed at THVG’s consolidated Facilities were paid by commercial insurers, Medicare, and Medicaid, respectively. The remaining 8% of cases consisted primarily of work-related injuries and services directly paid for by the patients. During the year ended June 30, 2007, approximately 71%, 19%, and 1% of the cases performed at THVG’s consolidated Facilities were paid by commercial insurers, Medicare, and Medicaid, respectively. The remaining 9% of cases for the year ended June 30, 2007 consisted primarily of work-related injuries and services directly paid for by the patients.

The Facilities are subject to changes in government legislation that could impact Medicare and Medicaid reimbursement levels and are also subject to increased levels of managed care penetration and changes in payor patterns that may impact the level and timing of payments for services rendered.

Equity in Earnings of Unconsolidated Affiliates

Equity in earnings of unconsolidated affiliates consists of THVG’s share of the profits and losses generated from its noncontrolling equity investments. Because these operations are central to THVG’s business strategy, equity in earnings of unconsolidated affiliates is classified as a component of operating income in the accompanying consolidated statements of income. THVG has contracts to manage these facilities, which results in THVG having an active role in the operations of these facilities.

Income Taxes

No amounts for federal income taxes have been reflected in the accompanying consolidated financial statements because the federal tax effects of THVG’s activities accrue to the individual members. THVG is subject to the Texas state franchise tax, which is reflected in the accompanying consolidated statements of income.

During May 2006, significant changes were made to the current Texas franchise tax, including but not limited to, modifications to the tax base and tax rate which now applies to most legal entities including partnerships. The Texas franchise tax now applies to all THVG entities for any tax reports filed on or after January 1, 2008. Under the revised law, the tax is calculated on a margin base and is therefore reflected in THVG’s statements of income for the year ended June 30, 2008 as income tax expense.

In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109, Accounting for Income Taxes,” or FIN 48, which is effective for the fiscal years beginning after December 15, 2006. FIN 48 creates a single model to address uncertainty in tax positions and clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. Under the requirements of FIN 48, tax-exempt organizations could be required to record an obligation as the result of a tax position they have historically taken on various tax exposure items. Prior to FIN 48, the determination of when to record a liability for a tax exposure was based on whether a liability was considered probable and reasonably estimable in accordance with FASB Statement No. 5, “Accounting for Contingencies.” On July 1, 2007, THVG adopted FIN 48. The adoption of FIN 48 did not have a material impact on THVG’s financial statements.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

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2.   PROPERTY AND EQUIPMENT

At June 30, 2008 and 2007, property and equipment and related accumulated depreciation and amortization consisted of the following (in thousands):

	Estimated
	Useful Lives		2008			2007
Buildings and leasehold improvements		5-25 years	$	110,629		$	96,034
Equipment		3-15 years		68,405			56,563
Furniture and fixtures		5-15 years		8,880			3,859
Construction in progress				124			3,251
				188,038			159,707
Less accumulated depreciation and amortization				(39,627	)		(24,136	)
Net property and equipment			$	148,411		$	135,571

At June 30, 2008 and 2007, assets recorded under capital lease arrangements included in property and equipment consisted of the following (in thousands):

	2008			2007
Buildings	$	81,112		$	82,434
Equipment and furniture		16,163			13,001
		97,275			95,435
Less accumulated amortization		(15,823	)		(8,483	)
Net property and equipment under capital leases	$	81,452		$	86,952

3.   CAPITAL CONTRIBUTIONS BY MEMBERS

As discussed in note 1, THVG receives part of its funding through cash and capital contributions from its members. During 2008 and 2007, THVG received noncash capital contributions consisting primarily of investments in partnerships that operate surgery centers and a surgical hospital in the Dallas/Fort Worth area and a partnership that owns the real estate used by the surgical hospital.

These noncash capital contributions, including THVG’s ownership in the investee, are as follows (in thousands):

	Ownership			Net Assets
Investee	Percentage			Contributed		Effective Date
Fort Worth Surgicare Partners, Ltd. (Fort Worth)		50.1	%	$	19,670		July 1, 2006
MCSH Real Estate Investment, Ltd. (MCSH)		2.0	%		88		July 1, 2006
Arlington Surgicare Partners, Ltd. (Arlington)		50.1	%		12,683		July 1, 2007
Rockwall Ambulatory Surgery Center, L.L.P. (Rockwall)		50.1	%		3,766		July 1, 2007
Metroplex Surgicare Partners, Ltd. (Metroplex)		50.1	%		9,481		June 30, 2008

USP and Baylor previously owned the assets (noted in the table above) through another company they operate, THVG/HealthFirst (HealthFirst), which is a subsidiary of USP. On the effective date listed above, HealthFirst, which held the assets and managed the facilities, distributed the assets to USP and Baylor, who in turn recontributed the majority of the assets to THVG. THVG recorded the contribution from Baylor at Baylor’s carrying value, as this was a contribution between a parent and subsidiary. THVG recorded the contribution from USP at fair value, based on an appraisal, as USP is a non-controlling member. Using these different bases is appropriate under U.S. generally accepted accounting principles and causes USP’s capital account to be greater than 49.9% of THVG’s total capital. However, any distributions of THVG’s assets continue to be allocated according to overall ownership levels, which are 50.1% to Baylor and 49.9% to USP as of June 30, 2008 and 2007, respectively. Accordingly, the impact of the

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difference has been reallocated on the accompanying consolidated statements of members’ equity to ensure that the capital account balances of THVG’s members correspond to the proportions at which net assets would be distributed. Concurrent with the contributions, THVG began managing the operations of the facility. The results of these transactions are included in THVG’s consolidated statements of income from the date of contribution.

The assets acquired and liabilities assumed resulting from the above contributions are summarized as follows (in thousands):

	Fort Worth
	and MCSH		Arlington		Rockwall		Metroplex
Current assets	$	7,015	$	2,955	$	1,250	$	2,302
Investments in unconsolidated affiliates		88		—		—		—
Property and equipment		12,642		4,196		805		1,436
Goodwill		18,320		11,912		8,254		8,317
Other noncurrent assets		212		164		20		25
Total assets acquired		38,277		19,227		10,329		12,080
Current liabilities		5,293		2,360		905		1,172
Long-term debt		11,838		3,412		5,606		267
Other noncurrent liabilities		42		—		8		—
Total liabilities assumed		17,173		5,772		6,519		1,439
Minority interests payable		1,346		772		44		1,160
Net assets acquired	$	19,758	$	12,683	$	3,766	$	9,481

4.   INVESTMENTS IN SUBSIDIARIES AND UNCONSOLIDATED AFFILIATES

THVG’s investments in consolidated subsidiaries and unconsolidated affiliates consisted of the following:

			Percentage Owned
			June 30,			June 30,
Legal Name	Facility	City	2008			2007
Consolidated subsidiaries(1):
Bellaire Outpatient Surgery Center, L.L.P.	Bellaire Surgery Center	Fort Worth		50.1	%		50.1	%
Dallas Surgical Partners, L.L.P.	Baylor Surgicare	Dallas		56.9			50.1
Dallas Surgical Partners, L.L.P.	Texas Surgery Center	Dallas		56.9			50.1
Dallas Surgical Partners, L.L.P.	Physicians Day Surgery Center	Dallas		56.9			50.1
Denton Surgicare Partners, Ltd.	Baylor Surgicare at Denton	Denton		50.1			50.1
Frisco Medical Center, L.L.P.	Baylor Medical Center at Frisco	Frisco		50.1			50.1
Garland Surgicare Partners, Ltd.	Baylor Surgicare at Garland	Garland		50.1			50.1
Grapevine Surgicare Partners, Ltd.	Baylor Surgicare at Grapevine	Grapevine		50.1			50.1
Lewisville Surgicare Partners, Ltd.	Baylor Surgicare at Lewisville	Lewisville		52.8			51.1
MSH Partners, L.P.	Mary Shiels Hospital	Dallas		56.9			50.1
North Central Surgical Center, L.L.P.	North Central Surgery Center	Dallas		28.9			25.5
North Garland Surgery Center, L.L.P.	North Garland Surgery Center	Garland		52.4			51.1
Rockwall/Heath Surgery Center, L.L.P.	Baylor Surgicare at Heath	Heath		50.1			50.1
Trophy Club Medical Center, L.P.	Trophy Club Medical Center	Fort Worth		50.5			50.1
Valley View Surgicare Partners, Ltd.	Baylor Surgicare at Valley View	Dallas		50.1			50.1
	Baylor Surgical Hospital of

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			Percentage Owned
			June 30,			June 30,
Legal Name	Facility	City	2008			2007
Fort Worth Surgicare Partners, Ltd.	Fort Worth	Fort Worth		50.1			50.1
Arlington Surgicare Partners, Ltd.	Surgery Center of Arlington	Arlington		50.1			—
Rockwall Ambulatory Surgery Center, L.L.P.	Rockwall Surgery Center	Rockwall		50.1			—
Baylor Surgicare at Plano, L.L.C.	Baylor Surgicare at Plano	Plano		50.1			—
Metroplex Surgicare Partners, Ltd.	Metroplex Surgicare	Bedford		50.1			—
Arlington Orthopedic and Spine Hospitals, LLC	Arlington Hospital	Arlington		50.1			—
Unconsolidated affiliates:
Denton Surgicare Real Estate, Ltd.	(2)	n/a		49.0	%		49.0	%
Irving-Coppell Surgical Hospital, L.L.P.	Irving-Coppell Surgical Hospital	Irving		18.4			17.8
MCSH Real Estate Investors, Ltd.	(2)	n/a		2.0			2.0

(1)	List excludes holding companies, which are wholly owned by the Company and hold the Company’s investments in the Facilities.
(2)	These entities are not surgical facilities and do not have ownership in any surgical facilities.

The final determination of the purchase price for Trophy Club Medical Center, L.P. (Trophy Club) was completed and settled in November 2006. The amount was determined to be $7,717,680 and was based on the facility’s financial performance through May 31, 2006. Of this amount, $3,582,465 was paid in cash and $4,135,215 was used to settle a note receivable from the sellers.

Additionally, in the ordinary course of business, THVG engages in purchases and sales of individual partnership units with physicians who invest in the Facilities, invests cash in projects under development, and makes additional payments to former owners of the Facilities as certain contingencies are resolved or financial targets met. These transactions are summarized as follows:

•  Net payments made for the year ended June 30, 2008 for the purchase of noncontrolling interests in University Surgical Partners of Dallas, L. L. P. (USPD) totaling $3,774,215.

•  Payments made of $1,538,222 and proceeds received of $952,201 for the year ended June 30, 2008, and payments made of $845,150 and proceeds received of $1,417,136 for the year ended June 30, 2007, related to other transactions, primarily purchases and sales of individual partnership units with physicians who invest in the facilities.

Effective October 1, 2007, THVG acquired 501 membership units, a 50.1% equity interest, in Baylor Surgicare at Plano, L. L. C. (Plano), a Texas limited liability company, for a purchase price of $4,163,849. Plano, like the other facilities in which THVG invests, is operated by Baylor and USP through THVG, as described in note 9.

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The following table summarizes the recorded values of Plano’s assets acquired and liabilities assumed at the date of acquisition, as determined by internal and third-party valuations (in thousands):

	Baylor
	Surgicare at
	Plano, L.L.C
Current assets	$	372
Property and equipment		923
Goodwill		4,299
Total assets acquired		5,594
Current liabilities		857
Long-term debt		461
Total liabilities assumed		1,318
Minority interests payable		112
Net assets acquired		4,164

The acquisition of Plano was accounted for using the purchase method of accounting, and, accordingly, the purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed based on the estimated fair values at the date of acquisition. Some of those estimates are preliminary and subject to further adjustment. The results of the acquisition are included in THVG’s consolidated statements of income from the date of acquisition.

5.   GOODWILL AND INTANGIBLE ASSETS

At June 30, 2008 and 2007, goodwill and intangible assets, net of accumulated amortization, consisted of the following (in thousands):

	2008		2007
Goodwill	$	130,137	$	92,332
Other intangible assets		1,182		1,184
Total	$	131,319	$	93,516

The following is a summary of changes in the carrying amount of goodwill for the years ended June 30, 2008 and 2007 (in thousands):

Balance, June 30, 2006	$	69,803
Additions:
Contribution of Fort Worth and MCSH		18,320
Trophy Club purchase price finalization		4,160
Other		49
Balance, June 30, 2007	$	92,332
Additions:
Contribution of Arlington (note 3)		11,912
Contribution of Rockwall (note 3)		8,254
Contribution of Metroplex (note 3)		8,317
Acquisition of Plano		4,299
Purchase of noncontrolling interests in USPD		3,360
Other		1,663
Balance, June 30, 2008	$	130,137

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Intangible assets with definite useful lives are amortized over their respective estimated useful lives. THVG records interest expense for intangible debt issue costs on a straight-line basis over the term of the debt obligation, which approximates the effective interest method. The agreements underlying THVG’s management contract assets have no determinable termination date and, consequently, the related intangible assets have indefinite useful lives. Goodwill and intangible assets with indefinite useful lives are not amortized but instead are tested for impairment at least annually.

No impairment was recorded in 2008 or 2007.  The following is a summary of intangible assets at June 30, 2008 and 2007 (in thousands):

	June 30, 2008
	Gross Carrying		Accumulated
	Amount		Amortization			Total
Definite useful lives:
Debt issue costs	$	79	$	(47	)	$	32
Indefinite useful lives:
Management contracts		1,150		—			1,150
Total intangible assets	$	1,229	$	(47	)	$	1,182

	June 30, 2007
	Gross Carrying		Accumulated
	Amount		Amortization			Total
Definite useful lives:
Debt issue costs	$	79	$	(45	)	$	34
Indefinite useful lives:
Management contracts		1,150		—			1,150
Total intangible assets	$	1,229	$	(45	)	$	1,184

The carrying amount of debt issue costs, net of accumulated amortization, decreased $63,347 during the year ended June 30, 2007 resulting from the retirement of debt at one of the Facilities. This net decrease is reflected in interest expense. Additionally, amortization of debt issue costs in the amounts of $2,518 and $8,278 are included in interest expense for the years ended June 30, 2008 and 2007, respectively.

6.   NOTES RECEIVABLE

THVG had a promissory note receivable from the Irving-Coppell facility, which accrued interest at 7.5% per annum and provided for sixty monthly principal and interest payments maturing on August 1, 2010. The outstanding principal balance under this agreement was $1,338,324 as of June 30, 2007. THVG collected the outstanding balance on this note during March 2008.

7.   LONG TERM OBLIGATIONS

At June 30, 2008 and 2007, long-term obligations consisted of the following (in thousands):

	2008			2007
Capital lease obligations (note 8)	$	92,044		$	90,669
Notes payable to financial institutions		43,659			27,006
Total long-term obligations		135,703			117,675
Less current portion		(12,057	)		(7,767	)
Long-term obligations, less current portion	$	123,646		$	109,908

Debt increased in 2008 primarily as a result of a conversion of the North Central facility from a surgery center to a hospital and the contribution/acquisition of Arlington, Rockwall and Metroplex as discussed in note 3. The

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aggregate maturities of long-term obligations for each of the five years subsequent to June 30, 2008 and thereafter are as follows (in thousands):

2009	$	12,057
2010		11,153
2011		10,064
2012		8,679
2013		4,808
Thereafter		88,942
Total long-term obligations	$	135,703

Capital lease obligations are secured by underlying real estate or equipment and have interest rates ranging from 4.86% to 12.66% (note 2).

The Facilities have notes payable to financial institutions which mature at various dates through 2015 and accrue interest at fixed and variable rates ranging from 4.71% to 9.5%. Each note is secured by certain assets of the respective Facility.

8.   LEASES

The Facilities lease various office equipment, medical equipment, and office space under a number of operating lease agreements, which expire at various times through the year 2029. Such leases do not involve contingent rentals, nor do they contain significant renewal or escalation clauses. Office leases generally require the Facilities to pay all executory costs (such as property taxes, maintenance and insurance).

Minimum future payments under noncancelable leases with remaining terms in excess of one year as of June 30, 2008 are as follows (in thousands):

	Capital			Operating
	Leases			Leases
Year ending June 30:
2009	$	12,784		$	9,959
2010		12,253			8,369
2011		11,820			8,088
2012		11,555			8,056
2013		11,573			7,573
Thereafter		163,545			75,559
Total minimum lease payments	$	223,530		$	117,604
Amount representing interest		(131,486	)
Present value of minimum lease payments	$	92,044

Total rent expense under operating leases was $12,163,419 and $9,302,204 for the years ended June 30, 2008 and 2007, respectively, and is included in other operating expenses in the accompanying consolidated statements of income.

9.   RELATED-PARTY TRANSACTIONS

THVG operates the Facilities under management and royalty contracts, and THVG in turn is managed by Baylor and USP, resulting in THVG incurring management and royalty fee expense payable to Baylor and USP in amounts equal to the management and royalty fee income THVG receives from the Facilities. THVG’s management and royalty fee income from the facilities it consolidates for financial reporting purposes eliminates in consolidation with the facilities’ expense and therefore is not included in THVG’s consolidated revenues. THVG’s management

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and royalty fee income from facilities which are not consolidated was $600,000 and $600,000 for the years ended June 30, 2008 and 2007, respectively, and is included in the consolidated revenues of THVG.

The management and royalty fee expense payable to Baylor and USP was $14,545,612 and $11,656,497 for the years ended June 30, 2008 and 2007, respectively, and is reflected as expense in THVG’s consolidated statements of income for all the Facilities. Of the total, 64.3% and 34.0% represent management fees payable to USP and Baylor, respectively, and 1.7% represents royalty fees payable to Baylor.

Under the management and royalty agreements, the Facilities pay THVG an amount ranging from 4.5% to 7% of their net patient service revenue less provision for doubtful accounts annually, subject, in some cases, to an annual cap. Management and royalty fees and other reimbursable costs owed by THVG and its Facilities to USP and Baylor totaled $3,216,032 and $2,199,392 at June 30, 2008 and 2007, respectively, and are included in due to affiliates in the accompanying consolidated balance sheets.

In addition, a subsidiary of USPI frequently pays bills on behalf of THVG and has custody of substantially all of THVG’s excess cash, paying THVG and the Facilities interest income on the net balance at prevailing market rates. Amounts held by USPI on behalf of THVG totaled $30,676,180 and $35,605,498 at June 30, 2008 and 2007, respectively. The interest income amounted to $1,306,276 and $1,905,255 for the years ended June 30, 2008 and 2007, respectively. As discussed in note 6, THVG also had a note receivable from one of its unconsolidated investees at June 30, 2007 that was received during 2008.

10.   COMMITMENTS AND CONTINGENCIES

Financial Guarantees

As of June 30, 2008, THVG issued guarantees of portions of the indebtedness of its investees to third-parties, which could potentially require THVG to make maximum aggregate payments totaling approximately $8.5 million. Of the total, $5.8 million relates to the obligations of two consolidated subsidiaries, whose obligations are included in THVG’s consolidated balance sheet and related disclosures, and the remaining $2.7 million relates to the obligations of unconsolidated affiliated companies, whose obligations are not included in THVG’s consolidated balance sheet and related disclosures. These arrangements (a) consist of guarantees of real estate and equipment financing, (b) are secured by all or a portion of the investees’ assets, (c) require payments by THVG in the event of a default by the investee primarily obligated under the financing, (d) expire as the underlying debt matures at various dates through 2021, or earlier if certain performance targets are met, and (e) provide no recourse for THVG to recover any amounts from third-parties. The fair value of the guarantee liability was not material to the consolidated financial statements and, therefore, no amounts were recorded at June 30, 2008 related to these guarantees. When THVG incurs guarantee obligations that are disproportionately greater than the guarantees provided by the investee’s other owners, THVG charges the investee a fair market value fee based on the value of the contingent liability THVG is assuming.

Litigation and Professional Liability Claims

In their normal course of business, the Facilities are subject to claims and lawsuits relating to patient treatment. THVG believes that its liability for damages resulting from such claims and lawsuits is adequately covered by insurance or is adequately provided for in its consolidated financial statements. THVG and each of the Facilities maintain professional liability insurance that provides coverage on a claims-made basis of $1.0 million per incident and $7.5 million in annual aggregate amount with retroactive provisions upon policy renewal. Certain of THVG’s insurance policies have deductibles and contingent premium arrangements. THVG believes that the expense recorded through June 30, 2008, which was estimated based on historical claims, adequately provides for its exposure under these arrangements. Additionally, from time to time, THVG may be named as a party to other legal claims and proceedings in the ordinary course of business. THVG is not aware of any such claims or proceedings that have more than a remote chance of having a material adverse impact on THVG.

39

11.   SUBSEQUENT EVENTS

THVG has entered into letters of intent with various entities regarding possible joint venture, development, or other transactions. These possible joint ventures, developments of new facilities, or other transactions are in various stages of negotiation.

40

(4) Exhibits:

Exhibit
Number			Description
	2	.1	Agreement and Plan of Merger dated as of January 27, 2006, by and among United Surgical Partners International, Inc., Peak ASC Acquisition Corp. and Surgis, Inc. (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 31, 2006 and incorporated herein by reference).(1)
	2	.2	Agreement and Plan of Merger, dated as of January 7, 2007, by and among the Company, UNCN Holdings, Inc. and UNCN Acquisition Corp. (previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 8, 2007 and incorporated herein by reference).(1)
	3	.1	Amended and Restated Certificate of Incorporation (previously filed as Exhibit 3.1(A) to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)
	3	.2	Amended and Restated Bylaws (previously filed as Exhibit 3.1(B) to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)
	4	.1	Indenture governing 87/8% Senior Subordinated Note due 2017 and 91/4%/10% Senior Subordinated Toggle Note due 2017, among the Company, the Guarantors named therein and U.S. Bank National Association, as trustee. (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)
	4	.2	Form of 87/8% Senior Subordinated Note due 2017 and 91/4%/10% Senior Subordinate Toggle Note due 2017 (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)
	10	.1	Credit Agreement, dated as of April 19, 2007, among USPI Holdings, Inc., the Company, as Borrower, the Lenders party thereto, Citibank, N.A., as Administrative Agent and Collateral Agent, Lehman Brothers, Inc., as Syndication Agent, and Bear Stearns Corporate Lending., Inc. and UBS Securities LLC, as Co-Documentation Agents.(2)
	10	.2	Amendment No. 1 to that certain Credit Agreement dated as of April 19, 2007, among United Surgical Partners International, Inc., USPI Holdings, Inc., as Borrower, the Lenders party thereto, Citibank, N.A., as Administrative Agent and Collateral Agent, Lehman Brothers, Inc., as Syndication Agent, and Bear Stearns Corporate Lending, Inc. and UBS Securities LLC, as Co-Documentation Agents (previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Commission on August 4, 2009 and incorporated herein by reference).(1)
	10	.3	Guarantee and Collateral Agreement, dated as of April 19, 2007, among USPI Holdings, Inc., the Company, the subsidiaries of the Company identified therein and Citibank, N.A., as Collateral Agent.(2)
	10	.4	Employment Agreement, dated as of April 19, 2007, by and between the Company and Donald E. Steen (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)(3)
	10	.5	Employment Agreement, dated as of April 19, 2007, by and between the Company and William H. Wilcox (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)(3)
	10	.6	Employment Agreement, dated as of April 19, 2007, by and between the Company and Brett P. Brodnax (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)(3)
	10	.7	Employment Agreement, dated as of April 19, 2007, by and between the Company and Niels P. Vernegaard (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)(3)
	10	.8	Employment Agreement, dated as of April 19, 2007, by and between the Company and Mark A. Kopser (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)(3)
	10	.9	Employment Agreement, dated as of April 19, 2007, by and between the Company and John J. Wellik (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)(3)

IV-1

Exhibit
Number			Description
	10	.10	USPI Group Holdings, Inc. 2007 Equity Incentive Plan (previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q (No. 333-144337) and incorporated herein by reference).(1)(3)
	10	.11	First Amendment to the USPI Group Holdings, Inc. 2007 Equity Incentive Plan (previously filed as an exhibit to the Company’s Current Report on Form 10-K filed with the Commission on February 26, 2009 and incorporated herein by reference).(1)(3)
	10	.12	Amended and Restated Deferred Compensation Plan (previously filed as an exhibit to the Company’s Current Report on Form 10-K filed with the Commission on February 26, 2009 and incorporated herein by reference).(1)(3)
	10	.13	Form of Indemnification Agreement between United Surgical Partners International, Inc. and its directors and officers (previously filed as an exhibit to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (No. 333-55442) and incorporated herein by reference).(1)(3)
	21	.1	List of the Company’s subsidiaries.(2)
	24	.1	Power of Attorney — Donald E. Steen(2)
	24	.2	Power of Attorney — Joel T. Allison(2)
	24	.3	Power of Attorney — Michael E. Donovan(2)
	24	.4	Power of Attorney — John C. Garrett, M.D.(2)
	24	.5	Power of Attorney — D. Scott Mackesy(2)
	24	.6	Power of Attorney — James Ken Newman(2)
	24	.7	Power of Attorney — Boone Powell, Jr.(2)
	24	.8	Power of Attorney — Paul B. Queally(2)
	24	.9	Power of Attorney — Raymond A. Ranelli(2)
	31	.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(2)
	31	.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(2)
	32	.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(2)
	32	.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(2)

(1)	Previously filed.
(2)	Filed herewith.
(3)	Management contract or compensatory plan or arrangement in which a director or executive officer participates.

IV-2

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

United Surgical Partners International, Inc.

By:  /s/  William H. Wilcox

William H. Wilcox

President, Chief Executive Officer and Director

Date: February 23, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in capacities and on the dates indicated.

Signature	Title	Date
* Donald E. Steen	Chairman of the Board	February 23, 2010
/s/  William H. Wilcox William H. Wilcox	President, Chief Executive Officer and Director (Principal Executive Officer)	February 23, 2010
/s/  Mark A. Kopser Mark A. Kopser	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	February 23, 2010
/s/  J. Anthony Martin J. Anthony Martin	Vice President, Corporate Controller And Chief Accounting Officer (Principal Accounting Officer)	February 23, 2010
* Joel T. Allison	Director	February 23, 2010
* Michael E. Donovan	Director	February 23, 2010
* John C. Garrett, M.D.	Director	February 23, 2010
* D. Scott Mackesy	Director	February 23, 2010
* James Ken Newman	Director	February 23, 2010
* Boone Powell, Jr.	Director	February 23, 2010

IV-3

Signature	Title	Date
* Paul B. Queally	Director	February 23, 2010
* Raymond A. Ranelli	Director	February 23, 2010

*  John J. Wellik, by signing his name hereto, does hereby sign this Annual Report on Form 10-K on behalf of each of the above-named directors and officers of the Company on the date indicated below, pursuant to powers of attorney executed by each of such directors and officers and contemporaneously filed herewith with the Commission.

By:  /s/  John J. Wellik

John J. Wellik

Attorney-in-fact

Date: February 23, 2010

IV-4

INDEX TO EXHIBITS

Exhibit
Number			Description
	2	.1	Agreement and Plan of Merger dated as of January 27, 2006, by and among United Surgical Partners International, Inc., Peak ASC Acquisition Corp. and Surgis, Inc. (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 31, 2006 and incorporated herein by reference).(1)
	2	.2	Agreement and Plan of Merger, dated as of January 7, 2007, by and among the Company, UNCN Holdings, Inc. and UNCN Acquisition Corp. (previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 8, 2007 and incorporated herein by reference).(1)
	3	.1	Amended and Restated Certificate of Incorporation (previously filed as Exhibit 3.1(A) to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)
	3	.2	Amended and Restated Bylaws (previously filed as Exhibit 3.1(B) to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)
	4	.1	Indenture governing 87/8% Senior Subordinated Note due 2017 and 91/4%/10% Senior Subordinated Toggle Note due 2017, among the Company, the Guarantors named therein and U.S. Bank National Association, as trustee. (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)
	4	.2	Form of 87/8% Senior Subordinated Note due 2017 and 91/4%/10% Senior Subordinate Toggle Note due 2017 (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)
	10	.1	Credit Agreement, dated as of April 19, 2007, among USPI Holdings, Inc., the Company, as Borrower, the Lenders party thereto, Citibank, N.A., as Administrative Agent and Collateral Agent, Lehman Brothers, Inc., as Syndication Agent, and Bear Stearns Corporate Lending., Inc. and UBS Securities LLC, as Co-Documentation Agents.(2)
	10	.2	Amendment No. 1 to that certain Credit Agreement dated as of April 19, 2007, among United Surgical Partners International, Inc., USPI Holdings, Inc., as Borrower, the Lenders party thereto, Citibank, N.A., as Administrative Agent and Collateral Agent, Lehman Brothers, Inc., as Syndication Agent, and Bear Stearns Corporate Lending, Inc. and UBS Securities LLC, as Co-Documentation Agents (previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Commission on August 4, 2009 and incorporated herein by reference).(1)
	10	.3	Guarantee and Collateral Agreement, dated as of April 19, 2007, among USPI Holdings, Inc., the Company, the subsidiaries of the Company identified therein and Citibank, N.A., as Collateral Agent.(2)
	10	.4	Employment Agreement, dated as of April 19, 2007, by and between the Company and Donald E. Steen (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)(3)
	10	.5	Employment Agreement, dated as of April 19, 2007, by and between the Company and William H. Wilcox (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)(3)
	10	.6	Employment Agreement, dated as of April 19, 2007, by and between the Company and Brett P. Brodnax (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)(3)
	10	.7	Employment Agreement, dated as of April 19, 2007, by and between the Company and Niels P. Vernegaard (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)(3)
	10	.8	Employment Agreement, dated as of April 19, 2007, by and between the Company and Mark A. Kopser (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)(3)
	10	.9	Employment Agreement, dated as of April 19, 2007, by and between the Company and John J. Wellik (previously filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-144337) and incorporated herein by reference).(1)(3)

IV-5

Exhibit
Number			Description
	10	.10	USPI Group Holdings, Inc. 2007 Equity Incentive Plan (previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q (No. 333-144337) and incorporated herein by reference).(1)(3)
	10	.11	First Amendment to the USPI Group Holdings, Inc. 2007 Equity Incentive Plan (previously filed as an exhibit to the Company’s Current Report on Form 10-K filed with the Commission on February 26, 2009 and incorporated herein by reference ).(1)(3)
	10	.12	Amended and Restated Deferred Compensation Plan (previously filed as an exhibit to the Company’s Current Report on Form 10-K filed with the Commission on February 26, 2009 and incorporated herein by reference).(1)(3)
	10	.13	Form of Indemnification Agreement between United Surgical Partners International, Inc. and its directors and officers (previously filed as an exhibit to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (No. 333-55442) and incorporated herein by reference).(1)(3)
	21	.1	List of the Company’s subsidiaries.(2)
	24	.1	Power of Attorney — Donald E. Steen(2)
	24	.2	Power of Attorney — Joel T. Allison(2)
	24	.3	Power of Attorney — Michael E. Donovan(2)
	24	.4	Power of Attorney — John C. Garrett, M.D.(2)
	24	.5	Power of Attorney — D. Scott Mackesy(2)
	24	.6	Power of Attorney — James Ken Newman(2)
	24	.7	Power of Attorney — Boone Powell, Jr.(2)
	24	.8	Power of Attorney — Paul B. Queally(2)
	24	.9	Power of Attorney — Raymond A. Ranelli(2)
	31	.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(2)
	31	.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(2)
	32	.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(2)
	32	.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(2)

(1)	Previously filed.
(2)	Filed herewith.
(3)	Management contract or compensatory plan or arrangement in which a director or executive officer participates.

IV-6

EX-10.1

Exhibit 10.1

Execution Copy

CREDIT AGREEMENT

dated as of

April 19, 2007

among

USPI HOLDINGS, INC.,
as Holdings

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.,
as the Borrower

The Lenders Party Hereto from Time to Time

CITIBANK, N.A.,
as Administrative Agent and Collateral Agent

LEHMAN BROTHERS INC.,
as Syndication Agent

and

BEAR STEARNS CORPORATE LENDING INC.,
SUNTRUST BANK
and
UBS SECURITIES LLC,
as Co-Documentation Agents

CITIGROUP GLOBAL MARKETS INC.
and
LEHMAN BROTHERS INC.,
as Joint Lead Arrangers and Joint Bookrunners

and

BEAR, STEARNS & CO. INC.
and
UBS SECURITIES LLC,
as Joint Bookrunners

Cahill Gordon & Reindel llp
80 Pine Street
New York, NY 10005

TABLE OF CONTENTS

		Page
ARTICLE I
Definitions
SECTION 1.01.	Defined Terms		2
SECTION 1.02.	Classification of Loans and Borrowings		33
SECTION 1.03.	Terms Generally		33
SECTION 1.04.	Accounting Terms; GAAP		33
SECTION 1.05.	Pro Forma Calculations		33
ARTICLE II
The Credits
SECTION 2.01.	Commitments		34
SECTION 2.02.	Loans and Borrowings		34
SECTION 2.03.	Requests for Borrowings		35
SECTION 2.04.	Swingline Loans		35
SECTION 2.05.	Letters of Credit		36
SECTION 2.06.	Funding of Borrowings		40
SECTION 2.07.	Interest Elections		40
SECTION 2.08.	Termination and Reduction of Commitments		41
SECTION 2.09.	Repayment of Loans; Evidence of Debt		42
SECTION 2.10.	Amortization of Term Loans		43
SECTION 2.11.	Prepayment of Loans		44
SECTION 2.12.	Fees		46
SECTION 2.13.	Interest		47
SECTION 2.14.	Alternate Rate of Interest		47
SECTION 2.15.	Increased Costs		48
SECTION 2.16.	Break Funding Payments		48
SECTION 2.17.	Taxes		49
SECTION 2.18.	Payments Generally; Pro Rata Treatment; Sharing of Setoffs		50
SECTION 2.19.	Mitigation Obligations; Replacement of Lenders		52
SECTION 2.20.	Incremental Extensions of Credit		52
ARTICLE III
Representations and Warranties
SECTION 3.01.	Organization; Power		54
SECTION 3.02.	Authorization; Enforceability		54
SECTION 3.03.	Governmental Approvals; No Conflicts		54
SECTION 3.04.	Financial Condition; No Material Adverse Change		55
SECTION 3.05.	Properties		55
SECTION 3.06.	Litigation		56
SECTION 3.07.	Compliance with Laws and Agreements		56

-i-

		Page
SECTION 3.08.	Investment Company Status		56
SECTION 3.09.	Taxes		56
SECTION 3.10.	ERISA		56
SECTION 3.11.	Disclosure		56
SECTION 3.12.	Subsidiaries		57
SECTION 3.13.	Insurance		57
SECTION 3.14.	Labor Matters		57
SECTION 3.15.	Solvency		57
SECTION 3.16.	SEnior Indebtedness		57
SECTION 3.17.	Reimbursement from Third Party Payors		57
SECTION 3.18.	Fraud and Abuse; Licenses		58
SECTION 3.19.	Margin Regulations		59
SECTION 3.20.	Patriot Act		59
SECTION 3.21.	Intellectual Property; Licenses, Etc.		59
SECTION 3.22.	SEcurity Documents		60
SECTION 3.23.	Environmental Compliance		61
ARTICLE IV
Conditions
SECTION 4.01.	Effective Date		62
SECTION 4.02.	Each Credit Event		64
ARTICLE V
Affirmative Covenants
SECTION 5.01.	Financial Statements and Other Information		65
SECTION 5.02.	Notices of Material Events		67
SECTION 5.03.	Information Regarding Collateral		67
SECTION 5.04.	Existence; Conduct of Business		68
SECTION 5.05.	Payment of Obligations		68
SECTION 5.06.	Maintenance of Properties		68
SECTION 5.07.	Insurance		68
SECTION 5.08.	Casualty and Condemnation		68
SECTION 5.09.	Books and Records; Inspection and Audit Rights		69
SECTION 5.10.	Compliance with Laws		69
SECTION 5.11.	Use of Proceeds and Letters of Credit		69
SECTION 5.12.	Additional Subsidiaries		69
SECTION 5.13.	Further Assurances		69
SECTION 5.14.	Environmental Matters		70
SECTION 5.15.	Designation of Subsidiaries		70
ARTICLE VI
Negative Covenants
SECTION 6.01.	Indebtedness; Certain Equity Securities		72
SECTION 6.02.	Liens		75

-ii-

		Page
SECTION 6.03.	Fundamental Changes		77
SECTION 6.04.	Investments, Loans, Advances, Guarantees and Acquisitions		77
SECTION 6.05.	Asset Sales		80
SECTION 6.06.	Sale and Leaseback Transactions		81
SECTION 6.07.	Swap Agreements		81
SECTION 6.08.	Restricted Payments; Certain Payments of Indebtedness		82
SECTION 6.09.	Transactions with Affiliates		84
SECTION 6.10.	Restrictive Agreements		86
SECTION 6.11.	Amendment of Material Documents		86
SECTION 6.12.	SEcured Leverage Ratio		87
SECTION 6.13.	Fiscal Year		87
ARTICLE VII
Events of Default
SECTION 7.01.	Events of Default		87
SECTION 7.02.	Borrower’s Right to Cure		90
SECTION 7.03.	Exclusion of Immaterial Subsidiaries		90
ARTICLE VIII
The Agents
SECTION 8.01.	The Agents		90
ARTICLE IX
Miscellaneous
SECTION 9.01.	Notices		93
SECTION 9.02.	Waivers; Amendments		94
SECTION 9.03.	Expenses; Indemnity; Damage Waiver		97
SECTION 9.04.	Successors and Assigns		98
SECTION 9.05.	Survival		101
SECTION 9.06.	Counterparts; Integration; Effectiveness		101
SECTION 9.07.	SEverability		101
SECTION 9.08.	Right of Setoff		101
SECTION 9.09.	Governing Law; Jurisdiction; Consent to Service of Process		102
SECTION 9.10.	WAIVER OF JURY TRIAL		102
SECTION 9.11.	Headings		103
SECTION 9.12.	Confidentiality		103
SECTION 9.13.	Interest Rate Limitation		103
SECTION 9.14.	USA Patriot Act		104
SECTION 9.15.	Release of Collateral		104

-iii-

SCHEDULES:

Schedule 1.01(a)	— Existing Letters of Credit
Schedule 1.01(b)	— St. Louis Investments
Schedule 1.01(c)	— Specified Subsidiaries
Schedule 2.01	— Commitments
Schedule 3.05	— Real Property
Schedule 3.03	— No Conflicts
Schedule 3.06	— Litigation
Schedule 3.12	— Subsidiaries
Schedule 3.13	— Insurance
Schedule 4.01	— Local Counsel Jurisdictions
Schedule 6.01	— Existing Indebtedness
Schedule 6.02	— Existing Liens
Schedule 6.04	— Existing Investments
Schedule 6.09	— Existing Transactions with Affiliates
Schedule 6.10	— Existing Restrictions

EXHIBITS:

Exhibit A	— Form of Assignment and Assumption
Exhibit B	— Form of Opinion of Ropes & Gray LLP
Exhibit C	— Form of Collateral Agreement
Exhibit D	— Form of Perfection Certificate
Exhibit E	— Form of Borrowing Request
Exhibit F	— Form of Interest Election Request
Exhibit G-1	— Form of Term Loan Note
Exhibit G-2	— Form of Revolving Credit Note

-iv-

          CREDIT AGREEMENT dated as of April 19, 2007, among UNITED SURGICAL PARTNERS INTERNATIONAL, INC., a Delaware corporation (the “Borrower”), USPI HOLDINGS, INC., a Delaware corporation (“Holdings”), the LENDERS party hereto from time to time, CITIBANK, N.A., as Administrative Agent, CITIGROUP GLOBAL MARKETS INC. and LEHMAN BROTHERS INC., as joint lead arrangers and joint bookrunners, BEAR, STEARNS & CO. INC. and UBS SECURITIES, LLC, as joint bookrunners, LEHMAN BROTHERS INC., as Syndication Agent, and BEAR STEARNS CORPORATE LENDING INC., SUNTRUST BANK and UBS SECURITIES LLC, as Co-Documentation Agents.

          Pursuant to the Agreement and Plan of Merger dated as of January 7, 2007 (the “Merger Agreement”), by and among the Borrower, Holdings and UNCN Acquisition Corp., a Delaware corporation (“Acquisition Corp.”), Acquisition Corp. will merge with and into the Borrower (the “Merger”), with the Borrower surviving the Merger.

          Immediately prior to or substantially concurrently with the consummation of the Merger, (a) the Permitted Investors will contribute cash to Holdings (the “Equity Contributions”) in an aggregate amount that together with the value of the equity of Holdings held by members of management (the “Rollover Equity”) will be equal to at least 35% of the consolidated capitalization of Holdings and its subsidiaries after giving effect to the Transactions, and Holdings will contribute to the Borrower the portion of such cash contributions not used to pay Transaction Expenses; (b) the Borrower will cause the repayment of, and terminate all commitments under and all liens in connection with, the Existing Credit Facilities (the “Repayment”); (c) the Borrower will issue the Senior Subordinated Notes; and (d) Subsidiaries of the Borrower will enter into and borrow under the UK Facility.

          The Borrower has requested that the Lenders extend credit in the form of (a) Delayed Draw Term Loans from time to time during the Delayed Draw Availability Period in an aggregate principal amount not to exceed $100,000,000; (b) Tranche B Term Loans on the Effective Date in an aggregate principal amount not to exceed $430,000,000 and (c) Revolving Loans, Swingline Loans and Letters of Credit at any time and from time to time during the Revolving Availability Period, in an aggregate principal amount at any time outstanding not to exceed $100,000,000.

          The proceeds of the Tranche B Term Loans and any Revolving Loans borrowed on the Effective Date will be used by the Borrower on the Effective Date, solely (i) first, to pay the Transaction Costs, (ii) second, to pay all principal, interest, fees and other amounts outstanding under the Existing Credit Facilities and (iii) third, together with the Equity Contributions, to pay the merger consideration (the “Merger Consideration”) required by the Merger Agreement. The proceeds of Revolving Loans borrowed after the Effective Date, Swingline Loans and Letters of Credit will be used by the Borrower for working capital and general corporate purposes (including Permitted Acquisitions).

          The proceeds of the Delayed Draw Term Loans will be used by the Borrower to finance the St. Louis Investments.

          The Lenders are willing to extend such credit to the Borrower, and the Issuing Bank is willing to issue Letters of Credit for the account of the Borrower, on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

         SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

          “ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

          “Acquisition Corp.” has the meaning set forth in the preamble to this Agreement.

          “Acquisition Documents” means the Merger Agreement, the other agreements to be entered into in connection with the Merger, all schedules, exhibits and annexes to each of the foregoing and all side letters, instruments and agreements affecting the terms of any of the foregoing or entered into in connection therewith.

          “Additional Lender” has the meaning set forth in Section 2.20.

          “Additional Subordinated Debt” means unsecured Indebtedness of the Borrower (that may be guaranteed by Holdings and those Subsidiaries that are Loan Parties) that (a) does not have a stated maturity date prior to the date that is 90 days after the Tranche B Maturity Date, (b) does not require any scheduled payment of principal (including pursuant to a sinking fund obligation) or amortization prior to the date that is 90 days after the Tranche B Maturity Date, (c) is (and all guarantees with respect thereto are) subordinated to the Obligations on terms no less favorable to the Lenders than the terms of the Senior Subordinated Notes, (d) contains non-pricing terms (including covenants, events of default, remedies, redemption provisions and sinking fund provisions) no less favorable to the Lenders than the terms of the Senior Subordinated Notes and (e) bears a market rate of interest as determined by the Borrower’s Board of Directors.

          “Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

          “Administrative Agent” means Citibank, N.A., in its capacity as administrative agent for the Lenders under the Loan Documents.

          “Administrative Questionnaire” means an administrative questionnaire in a form supplied by the Administrative Agent.

          “Affiliate” means, with respect to a specified Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the Person specified.

          “Agent Affiliates” has the meaning set forth in Section 8.01.

          “Agents” means the Administrative Agent, the Collateral Agent, the Syndication Agent and the Documentation Agents.

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          “Agreement” means this Credit Agreement, as the same may be renewed, extended, modified, supplemented or amended from time to time.

          “Alternate Base Rate” means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

          “Anti-Terrorism Laws” has the meaning set forth in Section 3.20.

          “Applicable Percentage” means, with respect to any Revolving Lender, the percentage of the aggregate Revolving Commitments represented by such Lender’s Revolving Commitment. If the Revolving Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Revolving Commitments most recently in effect, giving effect to any assignments that occur thereafter.

          “Applicable Rate” means, for any day with respect to (a) any ABR Loan or Eurodollar Loan that is a Revolving Loan or (b) the commitment fees payable hereunder in respect of the Revolving Commitments, as applicable, the applicable rate per annum set forth below under the caption “Revolving Loan ABR Spread”, “Revolving Loan Eurodollar Spread” or “Revolving Commitment Fee Rate”, as applicable, in each case, based upon the Leverage Ratio as of the most recent determination date, provided that prior to the date of delivery to the Administrative Agent, pursuant to Section 5.01, of the Borrower’s consolidated financial information for the Borrower’s first full fiscal quarter ending at least three months after the Effective Date, the “Applicable Rate” for purposes of clauses (a) and (b) above shall be the applicable rate per annum set forth below in Category 1:

				Revolving
	Revolving			Loan			Revolving
	Loan ABR			Eurodollar			Commitment
Leverage Ratio	Spread			Spread			Fee Rate
Category 1 ≥ 5.00x		1.25	%		2.25	%		0.500	%
Category 2 ≥ 4.50x and < 5.00x		1.00	%		2.00	%		0.500	%
Category 3 ≥ 4.00x and < 4.50x		0.75	%		1.75	%		0.375	%
Category 4 ≥ 3.50x and < 4.00x		0.50	%		1.50	%		0.375	%
Category 5 < 3.50x		0.25	%		1.25	%		0.375	%

          The Applicable Rate for Term Loans shall at all times be 2.00% per annum for Eurodollar Loans and 1.00% per annum for ABR Loans.

          For purposes of the foregoing, (a) the Leverage Ratio shall be determined on a Pro Forma Basis as of the end of each fiscal quarter of the Borrower based upon the Borrower’s consolidated financial statements delivered pursuant to Section 5.01(a) or (b), and (b) each change in the Applicable Rate resulting from a change in the Leverage Ratio shall be effective during the period commencing on and

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including the date of delivery to the Administrative Agent of such consolidated financial statements indicating such change and ending on the date immediately preceding the effective date of the next such change, provided that the Leverage Ratio, for purposes of determining the Applicable Rate, shall be deemed to be in Category 1 (i) at any time that an Event of Default pursuant to Section 7.01(a), (b), (h) or (i) has occurred and is continuing or (ii) at the option of the Administrative Agent or at the request of the Required Revolving Lenders if the Borrower fails to deliver the consolidated financial statements required to be delivered by it pursuant to Section 5.01(a) or (b), during the period from the expiration of the time for delivery thereof until such consolidated financial statements are delivered. The Administrative Agent shall notify the Borrower upon any change in the Applicable Rate in accordance with the proviso in the immediately preceding sentence.

          “Approved Electronic Communications” means each notice, demand, communication, information, document and other material that any Loan Party is obligated to, or otherwise chooses to, provide to the Administrative Agent pursuant to any Loan Document or the transactions contemplated therein, including (a) any supplement, joinder or amendment to the Security Documents and any other written contractual obligation delivered or required to be delivered in respect of any Loan Document or the transactions contemplated therein and (b) any financial statement, financial and other report, notice, request, certificate and other information material.

          “Approved Electronic Platform” has the meaning set forth in Section 8.01.

          “Approved Fund” has the meaning set forth in Section 9.04(b).

          “Arrangers” means Citigroup Global Markets Inc. and Lehman Brothers Inc.

          “Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04) and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.

          “Available Amount” means, the sum, without duplication, of:

     (a) 50% of Cumulative Consolidated Net Income (or, in the case Cumulative Consolidated Net Income at the time of determination is a deficit, minus 100% of such deficit, provided that the amount in this clause (a) shall only be available if immediately prior to and after giving effect on a Pro Forma Basis to any Investment, Restricted Payment or prepayment, redemption or repurchase actually made pursuant to Section 6.04(xv), 6.08(a)(ix) or 6.08(b)(iii), the Borrower could incur $1.00 of Indebtedness under Section 6.01(a)(xi), plus

     (b) the amount of Net Proceeds actually received by the Borrower from the issuance of any Equity Interests other than Disqualified Equity Interests (or capital contribution in respect thereof or otherwise) after the Effective Date that was not otherwise applied pursuant to Section 6.08(b)(ii) or Section 7.02 or to repay Revolving Exposure to comply with Section 6.12, plus

     (c) the amount of Net Proceeds actually received by the Borrower from the issuance after the Effective Date of Qualified Holdings Debt that was not otherwise applied pursuant to Section 6.08(b)(ii) or to repay Revolving Exposure to comply with Section 6.12, plus

     (d) an amount equal to any returns (including dividends, interest, distributions, returns of principal and profits on sale) actually received by the Borrower or any of the Restricted

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Subsidiaries in cash in respect of any Investments made after the Effective Date pursuant to Section 6.04(xv), minus

     (e) the sum of (i) the aggregate amount of Investments made after the Effective Date pursuant to Section 6.04(xv), (ii) the aggregate amount of Restricted Payments made after the Effective Date pursuant to Section 6.08(a)(ix) and (iii) the aggregate amount of payments made after the Effective Date pursuant to Section 6.08(b)(iii).

          “Board” means the Board of Governors of the Federal Reserve System of the United States of America.

          “Board of Directors” shall mean, with respect to any Person, (i) in the case of any corporation, the board of directors of such Person, (ii) in the case of any limited liability company, the board of managers of such Person, (iii) in the case of any partnership, the board of directors or board of managers of the general partner of such Person and (iv) in any other case, the functional equivalent of the foregoing.

          “Borrower” has the meaning set forth in the preamble to this Agreement.

          “Borrowing” means (a) Loans of the same Class and Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, or (b) a Swingline Loan.

          “Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03, provided that a written Borrowing Request shall be substantially in the form of Exhibit E, or such other form as shall be approved by the Administrative Agent.

          “Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed, provided that when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

          “Calculation Date” means the date on which any event for which the calculation of the Fixed Charge Coverage Ratio, the Secured Leverage Ratio, the Leverage Ratio or Facility-Level EBITDA is required occurs.

          “Capital Expenditures” means, for any period (and without duplication), (a) the additions to property, plant and equipment and other capital expenditures of the Borrower and any of the Restricted Subsidiaries that are (or would be) set forth in a consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP and (b) Capital Lease Obligations incurred by the Borrower and the Restricted Subsidiaries during such period.

          “Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

          “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as subsequently amended.

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          “CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.

          “Change in Control” means:

     (a) prior to an IPO, the Borrower ceasing to be a direct or indirect wholly owned subsidiary of Holdings,

     (b) prior to an IPO, the failure by the Permitted Investors to own, directly or indirectly, beneficially or of record, Equity Interests in Holdings representing a majority of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in Holdings,

     (c) after an IPO, (i) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934, as amended, and the rules of the SEC thereunder as in effect on the date hereof) of Equity Interests in Holdings representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in Holdings and (ii) the ownership, directly or indirectly, beneficially or of record, by the Permitted Investors of Equity Interests in Holdings representing in the aggregate a lesser percentage of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in Holdings than such Person or group,

     (d) occupation of a majority of the seats (other than vacant seats) on the Board of Directors of Holdings by Persons who were not (i) nominated by the Board of Directors of Holdings, (ii) appointed by directors so nominated or (iii) nominated by the Permitted Investors or

     (e) the occurrence of a “Change of Control”, as defined in any Material Indebtedness.

          “Change in Law” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

          “Charges” has the meaning set forth in Section 9.13.

          “Class”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Tranche B Term Loans, Delayed Draw Term Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, a Tranche B Commitment or a Delayed Draw Commitment.

          “CLO” has the meaning set forth in Section 9.04(b).

          “Code” means the Internal Revenue Code of 1986 and the rules and regulations promulgated thereunder, as amended from time to time.

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          “Collateral” means any and all “Collateral”, as defined in any applicable Security Document (which shall include the Mortgaged Properties) and all other property of whatever kind subject or purported to be subject from time to time to a Lien under any Security Document.

          “Collateral Agent” means Citibank, N.A. in its capacity as collateral agent for the Lenders under this Agreement and any Security Document.

          “Collateral Agreement” means the Guarantee and Collateral Agreement among the Loan Parties and the Collateral Agent, substantially in the form of Exhibit C.

          “Collateral and Guarantee Requirement” means the requirement that:

     (a) the Collateral Agent shall have received from each Loan Party either (i) a counterpart of the Collateral Agreement duly executed and delivered on behalf of such Loan Party or (ii) in the case of any Person that becomes a Loan Party after the Effective Date, a supplement to the Collateral Agreement, in the form specified therein, duly executed and delivered on behalf of such Loan Party;

     (b) all outstanding Equity Interests (other than Equity Interests of any Restricted Subsidiary pledged to secure Indebtedness permitted under Section 6.01(a)(vii)) of (i) the Borrower and (ii) each wholly owned Restricted Subsidiary owned directly by any Loan Party shall have been pledged pursuant to the Collateral Agreement (except that the Loan Parties (i) shall not be required to pledge more than 65% of the outstanding voting Equity Interests of any first-tier Foreign Subsidiary and (ii) shall not be required to pledge or otherwise grant security interests in any assets of a Foreign Subsidiary) and the Collateral Agent shall have received certificates or other instruments (if any) representing all such Equity Interests, together with undated stock powers or other instruments of transfer with respect thereto endorsed in blank;

     (c) all Indebtedness of a Loan Party that is owing to any other Loan Party shall be evidenced by a promissory note and shall have been pledged pursuant to the Collateral Agreement, and the Collateral Agent shall have received all such promissory notes and other promissory notes required to be delivered pursuant to the Collateral Agreement, together with undated instruments of transfer with respect thereto;

     (d) all documents and instruments, including Uniform Commercial Code financing statements and control agreements, required by law or reasonably requested by the Collateral Agent to be executed, filed, registered or recorded to create the Liens intended to be created by the Collateral Agreement and perfect such Liens to the extent required by the Collateral Agreement, shall have been executed, filed, registered or recorded or delivered to the Collateral Agent for filing, registration or recording;

     (e) the Collateral Agent shall have received (i) counterparts of a Mortgage with respect to each Mortgaged Property duly executed and delivered by the record owner of such Mortgaged Property, (ii) a policy or policies of title insurance issued by a nationally recognized title insurance company, in an amount not to exceed 105% of the Fair Market Value of such Mortgaged Property, insuring the Lien of each such Mortgage as a valid first-priority Lien on the Mortgaged Property described therein, free of any other Liens except as expressly permitted by Section 6.02, together with such customary endorsements, coinsurance and reinsurance in such amount as the Collateral Agent or the Required Lenders may reasonably request, and such surveys, appraisals, legal opinions (excluding zoning and land use opinions if the title insurance policy includes a zoning endorsement), completed Federal Emergency Management Agency Stan-

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dard Flood Hazard Determination with respect to each Mortgaged Property and other documents as the Collateral Agent or the Required Lenders may reasonably request with respect to any such Mortgage or Mortgaged Property; and

     (f) each Loan Party shall have obtained all material consents and approvals required to be obtained by it in connection with the execution and delivery of all Security Documents to which it is a party, the performance of its obligations thereunder and the granting by it of the Liens thereunder.

Notwithstanding anything to the contrary in this Agreement or any Security Document, no Loan Party shall be required to pledge or grant security interests in particular assets if, in the reasonable judgment of the Administrative Agent or the Collateral Agent, the costs of creating or perfecting such pledges or security interests in such assets (including any mortgage, stamp, intangibles or other tax) are excessive in relation to the benefits to the Lenders therefrom. The Administrative Agent may grant extensions of time for the perfection of security interests in or the obtaining of title insurance or surveys with respect to particular assets (including extensions beyond the Effective Date for the perfection of security interests in the assets of the Loan Parties on such date) where it reasonably determines, in consultation with the Borrower, that perfection cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required by this Agreement or the Security Documents. Notwithstanding the foregoing provisions of this definition or anything in this Agreement or any other Loan Document to the contrary, Liens required to be granted from time to time pursuant to the Collateral and Guarantee Requirement shall be subject to exceptions and limitations set forth in the Security Documents.

          “Commitment” means a Revolving Commitment, a Tranche B Commitment, a Delayed Draw Commitment, a Commitment in respect of an Incremental Extension of Credit (if any) or any combination thereof (as the context requires).

          “Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus

     (a) without duplication and to the extent deducted in determining such Consolidated Net Income for such period, the sum of: (i) consolidated interest expense (and solely for purposes of calculating the Fixed Charge Coverage Ratio, other Fixed Charges) of the Borrower and its Restricted Subsidiaries for such period and, to the extent not reflected in such total interest expense, increased by payments made in respect of hedging obligations or other derivative instruments entered into for the purpose of hedging interest rate risk, minus any payments received in respect of such hedging obligations or other derivative instruments, (ii) consolidated tax expense of the Borrower and its Restricted Subsidiaries based on income, profits or capital, including state, franchise, capital and similar taxes and withholding taxes paid or accrued during such period, (iii) all amounts attributable to depreciation and amortization expense of the Borrower and its Restricted Subsidiaries for such period, (iv) any Non-Cash Charges for such period, (v) Transaction Costs made or incurred by the Borrower and its Restricted Subsidiaries in connection with the Transactions that are paid, accrued or reserved for within 365 days of the consummation of the Transactions, (vi) any non-recurring fees, cash charges and other cash expenses (A) made or incurred by the Borrower and its Restricted Subsidiaries in connection with any Permitted Acquisition, including severance, relocation and facilities closing costs, that are paid, accrued or reserved for within 365 days of such transaction or (B) incurred in connection with the issuance of Equity Interests or Indebtedness or the extinguishment of Indebtedness, (vii) cash expenses incurred during such period in connection with a Permitted Acquisition to the extent that such expenses are reimbursed in cash during such period pursuant to indemnification provisions

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of any agreement relating to such transaction, (viii) fees paid to any Sponsor or Sponsor Affiliate under Section 6.09(i) and (ix) cash expenses incurred during such period in connection with extraordinary casualty events to the extent such expenses are reimbursed in cash by insurance during such period minus

     (b) without duplication and to the extent included in determining such Consolidated Net Income, (i) any cash payments made during such period in respect of Non-Cash Charges described in clause (a)(iv) taken in a prior period or taken in such period and (ii) any non-cash items of income for such period, all determined on a consolidated basis in accordance with GAAP, and

     (c) (without duplication) plus unrealized losses and minus unrealized gains in each case in respect of Swap Agreements, as determined in accordance with GAAP.

The Borrower’s Consolidated EBITDA for the fiscal quarters ended September 30, 2006, December 31, 2006 and March 31, 2007 shall be $40.492 million, $41.661 million and $45.147 million, respectively (subject to adjustment on a Pro Forma Basis for transactions other than the Transactions); provided that if the Borrower’s financial statements with respect to any of the foregoing periods shall be restated or otherwise amended, Consolidated EBITDA shall be adjusted for such periods to the extent necessary to give effect to such restatement or amendment.

          For the purpose of the definition of Consolidated EBITDA, “Non-Cash Charges” means (a) losses on asset sales, disposals or abandonments, (b) any impairment charge or asset write-off or write-down related to intangible assets, long-lived assets, and investments in debt and equity securities pursuant to GAAP, (c) all losses from investments recorded using the equity method, (d) stock-based awards compensation expense, and (e) other non-cash charges (provided that if any non-cash charges, expenses and write-downs referred to in this clause (e) represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period).

          “Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the Net Income of such specified Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that:

     (1) the Net Income (but not loss) of any other Person that is not a Restricted Subsidiary of such specified Person or that is accounted for by the equity method of accounting will be excluded; provided that Consolidated Net Income of the Borrower will be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) or Permitted Investments to the Borrower or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein;

     (2) solely for purposes of determining the “Available Amount”, the Net Income for such period of any Restricted Subsidiary (other than any Guarantor) shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination wholly permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; provided that, Consolidated Net Income of the Borrower shall be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the ex-

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tent converted into cash) or Permitted Investments to the Borrower or a Qualified Restricted Subsidiary in respect of such period, to the extent not already included therein;

     (3) the cumulative effect of a change in accounting principles will be excluded;

     (4) the amortization of any premiums, fees or expenses incurred in connection with the Transactions or any amounts required or permitted by Accounting Principles Board Opinions Nos. 16 (including non-cash write-ups and non-cash charges relating to inventory and fixed assets, in each case arising in connection with the Transactions) and 17 (including non-cash charges relating to intangibles and goodwill), in each case in connection with the Transactions, will be excluded;

     (5) any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with: (a) any sales of assets out of the ordinary course of business; or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries will be excluded;

     (6) any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss will be excluded;

     (7) income or losses attributable to discontinued operations (including, without limitation, operations disposed during such period whether or not such operations were classified as discontinued) will be excluded;

     (8) any non-cash charges (i) attributable to applying the purchase method of accounting in accordance with GAAP, (ii) resulting from the application of FAS 142 or FAS 144, and (iii) relating to the amortization of intangibles resulting from the application of FAS 141, will be excluded;

     (9) all non-cash charges relating to employee benefit or other management or stock compensation plans of the Borrower or a Restricted Subsidiary (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense incurred in a prior period) will be excluded to the extent that such non-cash charges are deducted in computing such Consolidated Net Income; provided, further, that if the Borrower or any Restricted Subsidiary of the Borrower makes a cash payment in respect of such non-cash charge in any period, such cash payment will (without duplication) be deducted from the Consolidated Net Income of the Borrower for such period; and

     (10) all unrealized gains and losses relating to hedging transactions and mark-to-market of Indebtedness denominated in foreign currencies resulting from the application of FAS 52 shall be excluded.

          “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

          “Cumulative Consolidated Net Income” means, as of any date of determination, Consolidated Net Income of the Borrower and its Restricted Subsidiaries for the period (taken as one accounting period) commencing on April 1, 2007 and ending on the last day of the most recent fiscal quarter for which financial statements required to be delivered pursuant to Section 5.01(a) or (b) have been received

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by the Administrative Agent; provided that the amount of Consolidated Net Income from the final fiscal quarter of any fiscal year shall only be included in such calculation to the extent that Section 2.11(d) has been complied with for such fiscal year.

          “Default” means any event or condition that constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

          “Delayed Draw Availability Period” means the period commencing on the Effective Date and ending on December 31, 2008.

          “Delayed Draw Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make a Delayed Draw Term Loan hereunder from time to time during the Delayed Draw Availability Period, expressed as an amount representing the maximum principal amount of the Delayed Draw Term Loan to be made by such Lender hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Delayed Draw Commitment is set forth on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Delayed Draw Commitment, as applicable. The initial aggregate amount of the Lenders’ Delayed Draw Commitments is $100,000,000.

          “Delayed Draw Commitment Fee Rate” means 1.25% per annum, with such rate increasing by 0.25% at the beginning of each fiscal quarter starting at the beginning of the third fiscal quarter ending after the Effective Date up to a maximum of 1.75% per annum.

          “Delayed Draw Lender” means a Lender with a Delayed Draw Commitment or an outstanding Delayed Draw Term Loan.

          “Delayed Draw Maturity Date” means the seventh anniversary of the Effective Date.

          “Delayed Draw Term Loan” means a Loan made pursuant to Section 2.01(b).

          “Designation Date” has the meaning set forth in Section 5.15(a).

          “Disqualified Equity Interests” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case, at the option of the holder of the Equity Interest), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Equity Interest, in whole or in part, other than in each case solely in exchange for Qualified Equity Interests, on or prior to the date that is 90 days after the Tranche B Maturity Date. Notwithstanding the preceding sentence, (x) any Equity Interest that would constitute Disqualified Equity Interests solely because the holders of the Equity Interest have the right to require the Borrower or the Subsidiary that issued such Equity Interest to repurchase such Equity Interest upon the occurrence of a change of control or an asset sale will not constitute Disqualified Equity Interests if the terms of such Equity Interest provide that the Borrower may not repurchase such Equity Interest unless the Borrower would be permitted to do so in compliance with Section 6.08, (y) any Equity Interest that would constitute Disqualified Equity Interests solely as a result of any redemption feature that is conditioned upon, and subject to, compliance with Section 6.08 will not constitute Disqualified Equity Interests and (z) any Equity Interest issued to any plan for the benefit of employees will not constitute Disqualified Equity Interests solely because it may be required to be repurchased by the Borrower or the Subsidiary that issued such Equity Interest in order to satisfy applicable statutory or regulatory obligations. The amount of Disqualified Equity Interests deemed to be outstanding at any time for purposes of this Agreement will be the maximum amount

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that the Borrower and its Restricted Subsidiaries may become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Equity Interests, exclusive of accrued dividends.

          “Documentation Agents” means Bear Stearns Corporate Lending Inc., SunTrust Bank and UBS Securities LLC, as Co-Documentation Agents.

          “dollars” or “$” refers to lawful money of the United States of America.

          “Domestic Subsidiary” means any Subsidiary incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia.

          “Effective Date” means April 19, 2007.

          “Environmental Laws” means all laws (including the common law), rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the presence, management, Release or threatened Release of any Hazardous Material, or to health and safety matters.

          “Environmental Liability” means liabilities, obligations, damages, claims, actions, suits, judgments, orders, fines, penalties, fees, expenses and costs (including administrative oversight costs, natural resource damages and medical monitoring, investigation or remediation costs), whether contingent or otherwise, arising out of or relating to (a) compliance or non-compliance with any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

          “Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

          “Equity Contributions” has the meaning set forth in the preamble to this Agreement.

          “Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest from the issuer thereof.

          “ERISA” means the Employee Retirement Income Security Act of 1974 and the regulations promulgated thereunder, as amended from time to time.

          “ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414 of the Code.

          “ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30 day notice period is waived), (b) the failure to satisfy the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, whether or not waived, (c) the failure to make by its due date a required installment under Section 412(m) of the Code (or Section 430(j) of the Code, as amended by the Pension Protection Act of 2006) with respect to any Plan or the failure to make any required contribution to a

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Multiemployer Plan, (d) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan, (e) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, with respect to the termination of any Plan, (f) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, (g) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan, (h) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA, (i) the “substantial cessation of operations” within the meaning of Section 4062(e) of ERISA with respect to a Plan, (j) the making of any amendment to any Plan which could directly result in the imposition of a lien or the posting of a bond or other security; or (k) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which, individually or in the aggregate, is reasonably likely to result in a Material Adverse Effect.

          “Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

          “Event of Default” has the meaning set forth in Section 7.01.

          “Excess Cash Flow” means, for any fiscal year, the sum (without duplication) of:

     (a) Consolidated Net Income for such fiscal year, adjusted to exclude any gains or losses attributable to Prepayment Events; plus

     (b) depreciation, amortization and other non-cash charges or losses (including deferred income taxes) deducted in determining such Consolidated Net Income for such fiscal year; plus

     (c) the amount, if any, by which Net Working Capital decreased during such fiscal year (except as a result of reclassification of items from short-term to long-term); minus

     (d) the sum of (i) any non-cash gains or non-cash items of income included in determining Consolidated Net Income for such fiscal year plus (ii) the amount, if any, by which Net Working Capital increased during such fiscal year (except as a result of reclassification of items from long-term to short-term); minus

     (e) the amount of cash Capital Expenditures of the Borrower and its Restricted Subsidiaries in such fiscal year financed with Internally Generated Funds; minus

     (f) the aggregate principal amount of Long-Term Indebtedness repaid or prepaid by the Borrower and its Restricted Subsidiaries during such fiscal year, excluding (i) Indebtedness in respect of Revolving Loans, Swingline Loans and Letters of Credit (unless there is a corresponding reduction in the aggregate Revolving Commitments), (ii) Tranche B Term Loans prepaid pursuant to Section 2.11(a), (c) or (d), and (iii) repayments or prepayments of Long-Term Indebtedness financed other than with Internally Generated Funds; minus

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     (g) the amount of Restricted Payments made by a Loan Party in such fiscal year pursuant to Sections 6.08(a)(iii) or (vii) financed with Internally Generated Funds; minus

     (h) cash Taxes paid in such fiscal year that did not reduce Consolidated Net Income for such fiscal year; minus

     (i) cash payments financed with Internally Generated Funds made during such period in respect of long-term liabilities other than Indebtedness; minus

     (j) without duplication of amounts deducted pursuant to clause (k) below in prior fiscal years, the amount of Investments and acquisitions made during such period pursuant to Section 6.04 financed with Internally Generated Funds (other than any Investment in Holdings, the Borrower or any Restricted Subsidiary); minus

     (k) the amount of Restricted Payments paid during such period pursuant to Section 6.08(a)(viii), Section 6.08(a)(ix) or Section 6.08(b)(iii) financed with Internally Generated Funds; minus

     (l) Transaction Costs made or incurred by the Borrower and its Restricted Subsidiaries in connection with the Transactions that are paid, accrued or reserved for within 365 days of the consummation of the Transactions; minus

     (m) any non-recurring fees, cash charges and other cash expenses financed with Internally Generated Funds (A) made or incurred by the Borrower and its Restricted Subsidiaries in connection with any Permitted Acquisition, including severance, relocation and facilities closing costs, that are paid, accrued or reserved for within 365 days of such transaction or (B) incurred in connection with the issuance of Equity Interests or Indebtedness or the extinguishment of Indebtedness; minus

     (n) without duplication of amounts deducted from Excess Cash Flow in prior periods, the aggregate consideration required to be paid in cash by the Company or any of the Restricted Subsidiaries pursuant to binding contracts (the “Contract Consideration”) entered into prior to or during such period relating to Permitted Acquisitions or Capital Expenditures to be consummated or made during the period of four consecutive fiscal quarters of the Company following the end of such period, provided that to the extent the aggregate amount of internally generated cash actually utilized to finance such Permitted Acquisitions during such period of four consecutive fiscal quarters is less than the Contract Consideration, the amount of such shortfall shall be added to the calculation of Excess Cash Flow at the end of such period of four consecutive fiscal quarters; minus

     (o) cash payments made during such fiscal year in respect of non-cash charges that increased Excess Cash Flow in any prior fiscal year.

          “Excess Net Proceeds” has the meaning set forth in Section 2.11(c).

          “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by

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any other jurisdiction described in clause (a) above, (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.19(b)), any withholding tax that is in effect and would apply to amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to any withholding tax pursuant to Section 2.17(a), (d) any withholding tax that is attributable to a Lender’s failure to comply with Section 2.17(e), and (e) any penalty or interest that is attributable to the foregoing taxes.

          “Executive Order” has the meaning set forth in Section 3.20.

          “Existing Credit Facilities” means the Existing Revolving Facility and the Existing Term Facility.

          “Existing Extensions of Credit” has the meaning set forth in Section 2.20(c).

          “Existing Issuing Bank” means SunTrust Bank.

          “Existing Lender” has the meaning set forth in Section 2.20.

          “Existing Letters of Credit” means those letters of credit outstanding on the Effective Date and listed on Schedule 1.01(a).

          “Existing Revolving Facility” means that certain Credit Agreement dated as of February 21, 2006, as amended, among USP Domestic Holdings Inc., as Borrower, the lenders and other parties from time to time party thereto, and SunTrust Bank, as Administrative Agent.

          “Existing Term Facility” means that certain Credit Agreement dated as of August 7, 2006, as amended, among USP Domestic Holdings Inc., as Borrower, the lenders and other parties from time to time party thereto, Bear Stearns Corporate Lending Inc., as Administrative Agent, and SunTrust Bank, as Collateral Agent and Documentation Agent.

          “Facility-Level EBITDA” means, for any period, the sum of (a) Consolidated EBITDA of the Borrower and its Restricted Subsidiaries, plus (b) minority interest in income of consolidated Subsidiaries, plus (c) corporate level general and administrative expenses, minus (d) equity in unconsolidated Affiliates, in each case for such period on a consolidated basis determined in accordance with GAAP.

          “Fair Market Value” means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party, determined in good faith by the Board of Directors, chief executive officer or chief financial officer of the Borrower.

          “Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

          “Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower, in each case in his or her capacity as such.

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          “Financial Performance Covenant” means the covenant of the Borrower set forth in Section 6.12.

          “Fixed Charge Coverage Ratio” means the ratio of (a) Consolidated EBITDA for the most recent period of four consecutive fiscal quarters of the Borrower for which internal financial statements are available ended prior to any applicable date to (b) the Fixed Charges of the Borrower and its Restricted Subsidiaries for such period.

          “Fixed Charges” means, with respect to any specified Person for any period, the sum, without duplication, of:

     (1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, net of interest income, whether paid or accrued, including, without limitation, original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all cash payments made or received pursuant to hedging obligations in respect of interest rates, and excluding amortization of deferred financing costs; plus

     (2) any interest on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, but only to the extent that such Guarantee or Lien is called upon; plus

     (3) the product of (A) all cash dividends paid on any series of preferred stock of such Person or any of its Restricted Subsidiaries (other than to any Loan Party or a Qualified Restricted Subsidiary of the Borrower), in each case, determined on a consolidated basis in accordance with GAAP multiplied by (B) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of the Borrower and its Restricted Subsidiaries expressed as a decimal.

          “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

          “Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

          “GAAP” means generally accepted accounting principles in the United States of America, as in effect from time to time.

          “Government Programs” means (i) the Medicare and Medicaid Programs, (ii) the United States Department of Defense Civilian Health Program for Uniformed Services and (iii) other similar foreign or domestic Federal, state or local reimbursement or governmental health care programs.

          “Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

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          “Guarantee” of or by any Person (the “Guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party or applicant in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation, provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which the Guarantee is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee.

          “Hazardous Materials” means all explosive, radioactive, infectious, chemical, biological, medical or toxic materials, and all other chemicals, materials, substances, wastes, pollutants or contaminants in any form, including petroleum or petroleum byproducts, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas and all other materials, substances or wastes of any nature regulated pursuant to any Environmental Law.

          “Holdings” has the meaning set forth in the preamble to this Agreement.

          “Inactive Subsidiary” means a wholly owned Domestic Subsidiary that (a) conducts no business operations, (b) has total assets with a Fair Market Value of not more than $500,000 individually and not more than $5,000,000 in the aggregate and (c) has no Indebtedness outstanding.

          “Incremental Extensions of Credit” has the meaning set forth in Section 2.20.

          “Incremental Facility Amendment” has the meaning set forth in Section 2.20.

          “Incremental Facility Closing Date” has the meaning set forth in Section 2.20.

          “Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business), (f) all obligations of others secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, but limited, in the event such secured obligations are nonrecourse to such Person, to the fair value of such property, (g) all Guarantees by such Person of the Indebtedness of any other Person, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party or applicant in respect of letters of credit and letters of guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances and (k) all obligations of such Person in respect of Disqualified Equity Interests. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general

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partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. Notwithstanding the foregoing, the term “Indebtedness” shall not include post-closing payment adjustments, earn-outs or non-compete payments to which the seller in any Permitted Acquisition is or may become entitled or amounts that any member of management, the employees or consultants of Holdings, the Borrower or any of the Subsidiaries may become entitled to under any cash incentive plan in existence from time to time.

          “Indemnified Taxes” means Taxes other than Excluded Taxes.

          “Indemnitee” has the meaning set forth in Section 9.03(b).

          “Information” has the meaning set forth in Section 9.12.

          “Information Memorandum” means the Confidential Information Memorandum dated March 2007, relating to Holdings, the Borrower, its subsidiaries and the Transactions.

          “Insurance Subsidiary” means a Subsidiary of the Borrower established for the sole purpose of providing insurance benefits to the Borrower and its Subsidiaries.

          “Interest Election Request” means a request by the Borrower to convert or continue a Revolving Borrowing or a Term Borrowing in accordance with Section 2.07, provided that a written Interest Election Request shall be substantially in the form of Exhibit F, or such other form as shall be approved by the Administrative Agent.

          “Interest Payment Date” means (a) with respect to any ABR Loan (including a Swingline Loan), the last day of each March, June, September and December and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.

          “Interest Period” means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter (or nine or twelve months thereafter if, at the time of the relevant Borrowing, all Lenders participating therein agree to make an interest period of such duration available), as the Borrower may elect, provided that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

          “Internally Generated Funds” means any amount expended by the Borrower and its Restricted Subsidiaries and not representing (i) the proceeds of Capital Lease Obligations or Long-Term Indebtedness (other than Indebtedness under a revolving line of credit, including the Revolving Loans), (ii) the proceeds of the issuance of Equity Interests (or capital contributions in respect thereof) or (iii) Net

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Proceeds from a Prepayment Event or other credit received from a disposition, sale or other transfer or exchange of assets outside the ordinary course of business.

          “Investment” has the meaning set forth in Section 6.04.

          “IPO” means a bona fide underwritten initial public offering of Equity Interests of Holdings, the Borrower or a Parent after the Effective Date.

          “IP Rights” has the meaning set forth in Section 3.21.

          “Issuing Bank” means Citibank, N.A. or such other Lender designated as an “Issuing Bank” pursuant to Section 2.05(k) and, with respect to each Existing Letter of Credit, the Existing Issuing Bank. The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

          “LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter of Credit.

          “LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the aggregate LC Exposure at such time.

          “Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption or an Incremental Facility Amendment, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term “Lenders” includes the Swingline Lender.

          “Letter of Credit” means any letter of credit issued pursuant to this Agreement or any Existing Letter of Credit.

          “Leverage Ratio” means, on any date, the ratio of (a) Total Indebtedness on such date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of the Borrower ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter of the Borrower most recently ended prior to such date).

          “LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits for a comparable amount and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

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          “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset or other arrangement to provide priority or preference with respect to such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset or (c) in the case of securities, any purchase option, call or similar right of a third party (other than customary rights of first refusal and tag, drag and similar rights in joint venture agreements (other than any such agreement in respect of any Subsidiary)) with respect to such securities.

          “Limitation” means a revocation, suspension, termination, impairment, probation, limitation, nonrenewal, forfeiture, declaration of ineligibility, loss of status as a participating provider in any Third Party Payor Arrangement, and the loss of any other rights.

          “Loan Documents” means this Agreement, the promissory notes, if any, executed and delivered pursuant to Section 2.09(e), any Incremental Facility Amendment, the Collateral Agreement and the other Security Documents.

          “Loan Parties” means Holdings (other than for purposes of Article VI and terms used therein), the Borrower and the Subsidiary Loan Parties.

          “Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement or an Incremental Facility Amendment.

          “Long-Term Indebtedness” means any Indebtedness that, in accordance with GAAP, constitutes (or, when incurred, constituted) a long-term liability.

          “Material Adverse Effect” means a material adverse effect on (a) the business, operations, assets, properties, contingent liabilities or condition (financial or otherwise) of Holdings, the Borrower and its Restricted Subsidiaries, taken as a whole, (b) the ability of any Loan Party to perform any obligation under any Loan Document or (c) the rights of or benefits available to the Lenders and Agents under any Loan Document or the ability of the Agent and the Lenders to enforce the Loan Documents.

          “Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of Holdings, the Borrower and the Restricted Subsidiaries in an aggregate principal amount, individually or in the aggregate, exceeding $20,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or any Restricted Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Restricted Subsidiary would be required to pay if such Swap Agreement were terminated at such time.

          “Maximum Rate” has the meaning set forth in Section 9.13.

          “Medicare and Medicaid Programs” means the programs established under Title XVIII and XIX of the Social Security Act and any successor programs performing similar functions.

          “Merger” has the meaning set forth in the preamble to this Agreement.

          “Merger Agreement” has the meaning set forth in the preamble to this Agreement.

          “Merger Consideration” has the meaning set forth in the preamble to this Agreement.

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          “Moody’s” means Moody’s Investors Service, Inc.

          “Mortgage” means a mortgage, deed of trust, assignment of leases and rents or other security document granting a Lien on any Mortgaged Property to secure the Obligations. Each Mortgage shall be reasonably satisfactory in form and substance to the Collateral Agent.

          “Mortgaged Property” means each parcel of or other interests in real property owned by a Loan Party and improvements thereto owned by a Loan Party with respect to which a Mortgage is granted pursuant to Section 4.01, 5.12 or 5.13. In no event shall Mortgaged Property include, or shall any Loan Party be obligated to grant a Mortgage with respect to, any leasehold.

          “Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions.

          “Net Income” means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends.

          “Net Proceeds” means, with respect to any event, (a) the cash proceeds received in respect of such event including (i) any cash received in respect of any non-cash proceeds (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but excluding any interest payments), but only as and when received, (ii) in the case of a casualty, insurance proceeds and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, net of (b) the sum of (i) all reasonable fees and out-of-pocket expenses paid to third parties (other than Affiliates) in connection with such event, (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a sale and leaseback transaction or a casualty or a condemnation or similar proceeding), (X) the amount of all payments required to be made as a result of such event to repay Indebtedness (other than Loans) secured by such asset or otherwise subject to mandatory prepayment as a result of such event and, in the case of any such sale, transfer or other disposition of an asset of a Subsidiary that is not a Guarantor, the amount of any repayments of Indebtedness of such Subsidiary other than intercompany Indebtedness made with the proceeds of such sale, transfer or other disposition and (Y) in the event that a Restricted Subsidiary makes a pro rata payment of dividends to all of its stockholders from any cash proceeds, the amount of dividends paid to any stockholder other than the Borrower or any other Restricted Subsidiary, provided that any cash proceeds of a sale, transfer or other disposition of an asset by a Subsidiary that is not a Subsidiary Loan Party that are subject to legal or contractual restrictions on repatriation to the Borrower will not be considered Net Proceeds for so long as such proceeds are subject to such restrictions; provided however that any such contractual restrictions on repatriation were not entered into in contemplation of such sale, transfer or other disposition of assets and (iii) the amount of all taxes paid (or reasonably estimated to be payable) and the amount of any reserves established to fund liabilities reasonably estimated to be payable, in each case during the year that such event occurred or the next succeeding year and that are directly attributable to such event (as determined reasonably and in good faith by a Financial Officer), provided that no net proceeds calculated in accordance with the foregoing of less than $500,000 realized in a single transaction or series of related transactions shall constitute Net Proceeds.

          “Net Working Capital” means, at any date, (a) the consolidated current assets of the Borrower and its Restricted Subsidiaries as of such date (excluding cash and Permitted Investments and current deferred tax assets) minus (b) the consolidated current liabilities of the Borrower and its Restricted Subsidiaries as of such date (excluding current liabilities in respect of Indebtedness and current deferred tax liabilities). Net Working Capital at any date may be a positive or negative number. Net Working

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Capital increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative.

          “Non-Cash Charges” has the meaning specified in the definition of the term “Consolidated EBITDA.”

          “Non-Consenting Lender” has the meaning set forth in Section 9.02(b).

          “Non-Consolidated Entity” means each of the operating partnerships, limited liability companies, limited liability partnerships, joint ventures or similar entities in which the Borrower or its Restricted Subsidiaries, directly or indirectly, own Equity Interests, other than Subsidiaries.

          “NPL” means the National Priorities List under CERCLA.

          “Obligations” has the meaning set forth in the Collateral Agreement.

          “OFAC” has the meaning set forth in Section 3.20.

          “Other Taxes” means any and all present or future recording, stamp, documentary, excise, transfer, sales, property or similar Taxes, charges or levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or from the filing or recording of or otherwise with respect to the exercise by the Administrative Agent or the Lenders of their rights under, any Loan Document.

          “Parent” means any direct or indirect parent of which Holdings is a wholly owned subsidiary.

          “Participant” has the meaning set forth in Section 9.04(c).

          “Participant Register” has the meaning set forth in Section 9.04(c).

          “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

          “Perfection Certificate” means a certificate in the form of Exhibit D or any other form approved by the Collateral Agent.

          “Permitted Acquisitions” means any acquisition by the Borrower or any Qualified Restricted Subsidiary of Equity Interests in, all or substantially all the assets of, or all or substantially all the assets constituting a division or line of business of, a Person (that in the case of an acquisition of Equity Interests, is or becomes a Qualified Restricted Subsidiary) if (a) such acquisition was not preceded by, or consummated pursuant to, a hostile offer (including a proxy contest), (b) no Default has occurred and is continuing or would result therefrom, (c) such acquisition and all transactions related thereto are consummated in accordance in all material respects with all applicable laws, (d) any Person or assets or division as acquired in accordance herewith shall be in similar lines of business or lines of business related to or incidental to those businesses in which the Borrower and/or its Restricted Subsidiaries are engaged as of the Effective Date, (e) the Borrower is in compliance with the Financial Performance Covenant (such covenant to be applied even if no Revolving Loan or Swingline Loan and less than $7.5 million of LC Exposure is outstanding) on a Pro Forma Basis after giving effect to such Permitted Acquisition and (f) the Borrower has delivered to the Administrative Agent an officer’s certificate to the effect set forth in

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clauses (a), (b), (c), (d) and (e) above, together with, if such acquisition exceeds $1,000,000 in aggregate consideration, all relevant financial information for the Person or assets to be acquired.

          “Permitted Encumbrances” means:

     (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.05;

     (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, construction contractors and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or that are being contested in good faith;

     (c) (i) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations and (ii) pledges and deposits in the ordinary course of business securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to Holdings, the Borrower or any Restricted Subsidiary;

     (d) deposits to secure the performance of bids, trade contracts, government contracts, leases, statutory obligations, surety, stay, customs and appeal bonds, performance bonds and other obligations of a like nature (including those to secure health, safety and environmental obligations);

     (e) judgment liens in respect of judgments that do not constitute an Event of Default under Section 7.01(k);

     (f) easements, zoning restrictions, rights-of-way, encroachments, protrusions, minor defects or irregularities of title and other similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not either detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Restricted Subsidiary, in each case in any material respect;

     (g) landlords’ and lessors’ and other like Liens in respect of rent not in default;

     (h) any Liens shown on the title insurance policies in favor of the Collateral Agent insuring the Liens of the Mortgages;

     (i) leases or subleases which are subordinate in all respects to the Lien of any Mortgage and, in the case of any lease or sublease entered into after the Effective Date affecting any Mortgaged Property, such lease or sublease shall also be entered into in compliance with the provisions of the applicable Mortgage and (ii) do not, individually or in the aggregate, (A) interfere in any material respect with the ordinary conduct of the business of the Borrower or any Restricted Subsidiary or (B) materially impair the use (for its intended purposes) or the value of the assets or property subject thereto; and

     (j) Liens securing the Obligations;

provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

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          “Permitted Investments” means:

     (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

     (b) investments in commercial paper maturing within 365 days from the date of acquisition thereof and having, at such date of acquisition, a credit rating from S&P or Moody’s of at least A2 or P2, respectively;

     (c) investments in certificates of deposit, banker’s acceptances and time deposits maturing within 365 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000;

     (d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and

     (e) investments in money market funds that comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (d) above.

          “Permitted Investors” means (i) the Sponsor and its Sponsor Affiliates (including any investment partnership under common Control with the Sponsor), (ii) any officer, director, employee, partner, member of stockholder of the manager or general partner of the foregoing persons, and (iii) any Related Parties with respect to any of the foregoing persons.

          “Permitted Payment Restriction” means any consensual encumbrance or restriction (each, a “restriction”) on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Equity Interest to the Borrower or a Restricted Subsidiary or pay any Indebtedness owed to the Borrower or a Restricted Subsidiary or (b) make any loans or advances to the Borrower or a Restricted Subsidiary, which restriction satisfies all of the following conditions: (i) (A) such restriction becomes effective only upon the occurrence of (x) specified events under its charter or (y) a default by such Restricted Subsidiary in the payment of principal of or interest, a bankruptcy default, a default on any financial covenant or any other material default, in each case on Indebtedness that was incurred by such Restricted Subsidiary in compliance with Section 6.01 or (B) such restriction is permitted under the UK Facility as in effect on the Effective Date and (ii) such restriction would not materially impair the Borrower’s ability to make scheduled payments of cash interest and to make required principal payments on the Loans, as determined in good faith by the Board of Directors whose determination shall be conclusive.

          “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

          “Plan” means any employee pension benefit plan subject to the provisions of Title IV or Section 302 of ERISA or Section 412 of the Code, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

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          “Prepayment Event” means:

     (a) any sale, transfer or other disposition (excluding pursuant to a sale and leaseback transaction permitted under Section 6.06) of any property or asset of Holdings, the Borrower or any Restricted Subsidiary resulting in Net Proceeds in excess of $250,000 (in any single transaction or series of related transactions), other than dispositions described in clauses (a)(i), (b), (c), (d), (h), (i), (j) and (k) of Section 6.05; or

     (b) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of Holdings, the Borrower or any Restricted Subsidiary resulting in Net Proceeds in excess of $1,000,000; or

     (c) the incurrence by Holdings, the Borrower or any Restricted Subsidiary of any Indebtedness, other than Indebtedness permitted under Section 6.01 or, in the case of Holdings, Section 6.03(c), or permitted by the Required Lenders pursuant to Section 9.02;

     provided that any Prepayment Event at a UK Subsidiary shall only constitute a Prepayment Event after the terms of the UK Facility have been complied with.

          “Prime Rate” means the rate of interest per annum publicly announced from time to time by Citibank, N.A. as its base rate in effect for dollars at its principal office in New York, New York; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

          “Pro Forma Basis” means, for purposes of calculating the Fixed Charge Coverage Ratio, the Secured Leverage Ratio, the Leverage Ratio or Facility-Level EBITDA (the “Relevant Calculation”) for any period, in the event that the Borrower or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases, redeems, defeases or otherwise discharges any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock or Disqualified Equity Interests subsequent to the commencement of the period for which the Relevant Calculation is being calculated and on or prior to the date on which the event for which the Relevant Calculation is made, then the Relevant Calculation will be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment, repurchase, redemption, defeasance or other discharge of Indebtedness, or such issuance, repurchase or redemption of preferred stock or Disqualified Equity Interests, and the use of the proceeds therefrom, as if the same had occurred at the beginning of the applicable four-quarter reference period.

          In addition, for purposes of the Relevant Calculation:

     (1) Investments, acquisitions, mergers, consolidations and dispositions that have been made by the Borrower or any of its Restricted Subsidiaries, or any Person or any of its Restricted Subsidiaries acquired by, merged or consolidated with the Borrower or any of its Restricted Subsidiaries, and including any related financing transactions and including increases in ownership of Restricted Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date will be given pro forma effect, including giving effect to Pro Forma Cost Savings, as if they had occurred on the first day of the four-quarter reference period;

     (2) the Consolidated EBITDA attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded;

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     (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the Borrower or any of its Restricted Subsidiaries following the Calculation Date;

     (4) any Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period;

     (5) any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period; and

     (6) if any Indebtedness bears a floating rate of interest, the interest expense on such Indebtedness will be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Swap Agreement applicable to such Indebtedness).

          For purposes of this definition, whenever pro forma effect is given to a transaction, the pro forma calculations shall be made in good faith by a Financial Officer. For purposes of determining whether any Indebtedness constituting a Guarantee may be incurred, the interest on the Indebtedness to be guaranteed shall be included in calculating the Fixed Charge Coverage Ratio on a Pro Forma Basis. Interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a Financial Officer to be the rate of interest implicit in such Capital Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Borrower may designate.

          “Pro Forma Cost Savings” means, with respect to any period, the reduction in net costs and related adjustments that (i) were directly attributable to an acquisition, merger, consolidation or disposition that occurred during the four-quarter reference period or subsequent to the four-quarter reference period and on or prior to the Calculation Date and calculated on a basis that is consistent with Regulation S-X under the Securities Act of 1933 as in effect and applied as of the Effective Date, (ii) were actually implemented by the business that was the subject of any such acquisition, merger, consolidation or disposition within 12 months after the date of the acquisition, merger, consolidation or disposition and prior to the Calculation Date that are supportable and quantifiable by the underlying accounting records of such business or (iii) for all purposes other than determining the “Applicable Rate”, relate to the business that is the subject of any such acquisition, merger, consolidation or disposition and that the Borrower reasonably determines are probable based upon specifically identifiable actions to be taken within 12 months of the date of the acquisition, merger, consolidation or disposition and, in the case of each of (i), (ii) and (iii), are described in a certificate signed by a Financial Officer, as if all such reductions in costs had been effected as of the beginning of such period.

          “Proposed Change” has the meaning set forth in Section 9.02(b).

          “Qualified Equity Interests” means any Equity Interests that are not Disqualified Equity Interests.

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          “Qualified Holdings Debt” means unsecured Indebtedness of Holdings or a Parent that (a) is not subject to any Guarantee by the Borrower or any Subsidiary, (b) does not mature prior to the date that is 180 days after the Tranche B Maturity Date, (c) has no scheduled amortization or payments of principal prior to such 180th day (it being understood that such Indebtedness may have mandatory prepayment, repurchase or redemption provisions satisfying the requirements of clause (d) hereof), (d) has mandatory prepayment, repurchase or redemption, covenant, default and remedy provisions customary for senior notes of an issuer that is the parent of a borrower under senior secured credit facilities and in any event, with respect to default and remedy provisions, not materially more restrictive than those set forth in the Senior Subordinated Notes, taken as a whole (other than provisions customary for senior notes of a holding company) and (e) if applicable, has subordination provisions and other non-pricing terms and conditions that are no less favorable to the Lenders than the analogous provisions of the Senior Subordinated Notes.

          “Qualified Restricted Subsidiary” means any Restricted Subsidiary that satisfies all of the following requirements: (1) except for Permitted Payment Restrictions, there are no restrictions, directly or indirectly, on the ability of such Restricted Subsidiary to pay dividends or make distributions to the holders of its Equity Interests; (2) except to the extent restricted pursuant to a Permitted Payment Restriction, such Restricted Subsidiary customarily declares and pays regular monthly, quarterly or semi-annual dividends or distributions to the holders of its Equity Interests in an amount equal to substantially all of the available cash flow of such Restricted Subsidiary for such period, as determined in good faith by the board of directors, board of governors or such other individuals performing similar functions, subject to such ordinary and customary reserves and other amounts as, in the good faith judgment of such individuals, may be necessary so that the business of such Restricted Subsidiary may be properly and advantageously conducted at all times, and the Borrower intends to cause such Restricted Subsidiary to continue to declare and pay such regular dividends or distributions in the manner set forth above; and (3) the Equity Interests of such Restricted Subsidiary consist solely of (A) Equity Interests owned by the Borrower and its Qualified Restricted Subsidiaries, (B) Equity Interests owned by Strategic Investors and (C) directors’ qualifying shares.

          “Register” has the meaning set forth in Section 9.04(b).

          “Reimbursement Approvals” means, with respect to all Government Programs, any and all certifications, provider numbers, provider agreements, participation agreements, accreditations and any other similar agreements with or approvals by any Governmental Authority or other Person.

          “Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents, trustees and advisors of such Person and such Person’s Affiliates.

          “Release” means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment or within or upon any building, structure, facility or fixture.

          “Repayment” has the meaning set forth in the preamble to this Agreement.

          “Required Lenders” means, at any time, Lenders having Revolving Exposures, Term Loans, Loans in respect of Incremental Extensions of Credit (if any) and unused Commitments representing more than 50% of the aggregate Revolving Exposures, outstanding Term Loans, outstanding Loans in respect of Incremental Extensions of Credit (if any) and unused Commitments at such time.

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          “Required Revolving Lenders” means, at any time, Revolving Lenders having Revolving Exposures and unused Revolving Commitments representing more than 50% of the aggregate Revolving Exposures and unused Revolving Commitments at such time.

          “Requirement of Law” means, with respect to any Person, (i) the charter, articles or certificate of organization or incorporation and bylaws or other organizational or governing documents of such Person and (ii) any statute, law, treaty, rule, regulation, order, decree, writ, injunction or determination of any arbitrator or court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

          “Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in Holdings, the Borrower or any Subsidiary, or any payment thereon (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests in Holdings, the Borrower or any Subsidiary or any option, warrant or other right to acquire any such Equity Interests in Holdings, the Borrower or any Subsidiary.

          “Restricted Subsidiary” means any Subsidiary of the Borrower other than an Unrestricted Subsidiary.

          “Revolving Availability Period” means the period from and including the Effective Date to but excluding the earlier of (a) the Revolving Maturity Date and (b) the date of termination of the Revolving Commitments.

          “Revolving Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum possible aggregate amount of such Lender’s Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Revolving Commitment is set forth on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Revolving Commitment, as applicable. The initial aggregate amount of the Lenders’ Revolving Commitments is $100,000,000.

          “Revolving Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Revolving Loans and its LC Exposure and Swingline Exposure at such time.

          “Revolving Lender” means a Lender with a Revolving Commitment or, if the Revolving Commitments have terminated or expired, a Lender with Revolving Exposure.

          “Revolving Loan” means a Loan made pursuant to Section 2.01(c).

          “Revolving Maturity Date” means the sixth anniversary of the Effective Date.

          “Rollover Equity” has the meaning set forth in the preamble to this Agreement.

          “S&P” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.

          “St. Louis Investments” means Investments relating to (x) those certain ambulatory surgery centers located in St. Louis, Missouri (or Investments in Persons owning such assets) that are owned

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by the Borrower or a Restricted Subsidiary on the Effective Date and listed on Schedule 1.01(b) or (y) one additional surgery center located in St. Louis, Missouri (or Investments in Persons owning such assets) to be acquired by the Borrower or a Restricted Subsidiary after the Effective Date.

          “SEC” means the Securities and Exchange Commission or any Governmental Authority succeeding to any of its principal functions.

          “Secured Leverage Ratio” means, on any date, the ratio of (a) Total Secured Indebtedness on such date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of the Borrower ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter of the Borrower most recently ended prior to such date).

          “Security Documents” means the Collateral Agreement, the Perfection Certificate, the Mortgages and each other security agreement or other instrument or document executed and delivered pursuant to Section 5.12 or 5.13 to secure any of the Obligations.

          “Senior Subordinated Notes” means the 8.875% Senior Subordinated Notes due 2017 in the aggregate principal amount of $240,000,000 and the 9.25%/10% Senior Subordinated Toggle Notes due 2017 in the aggregate principal amount of $200,000,000, each issued by the Borrower on the Effective Date, and the Indebtedness represented thereby.

          “Senior Subordinated Notes Documents” means the indenture dated as of April 19, 2007, among the Borrower, the Restricted Subsidiaries listed therein and U.S. Bank Trust National Association, as trustee, in respect of the Senior Subordinated Notes and all other instruments, agreements and other documents evidencing or governing the Senior Subordinated Notes or providing for any Guarantee or other right in respect thereof.

          “Specified Subsidiary” means (i) American Endoscopy Services, Inc., (ii) each wholly owned Domestic Subsidiary listed on Schedule 1.01(c) (provided that if any such Subsidiary has not been legally dissolved within 180 days after the Effective Date and no Equity Interests therein are owned by Strategic Investors 180 days after the Effective Date, such Subsidiary shall no longer constitute a Specified Subsidiary) and (iii) any Qualified Restricted Subsidiary that is a wholly owned Domestic Subsidiary formed or acquired after the Effective Date if a Financial Officer or the Chief Development Officer or General Counsel of the Borrower represents in writing to the Administrative Agent that the Borrower intends in good faith to syndicate the Equity Interests to Strategic Investors within 180 days of such formation or acquisition (provided that if no Equity Interests of such Subsidiary have been syndicated to Strategic Investors within 180 days after such formation or acquisition, such Subsidiary shall no longer constitute a Specified Subsidiary); provided that any Specified Subsidiary shall cease to be a Specified Subsidiary if the Borrower has opted for it to satisfy the Collateral and Guarantee Requirement.

          “Sponsor” means Welsh, Carson, Anderson & Stowe X, L.P.

          “Sponsor Affiliate” means (i) each Affiliate of the Sponsor that is neither an operating company nor a company controlled by an operating company, (ii) each partner, officer, director, principal or member of the Sponsor or any Sponsor Affiliate and (iii) any spouse, parent or lineal descendant (including by adoption) of any of the foregoing who are natural persons and any trust for the benefit of such persons.

          “Sponsor Management Agreement” means the Management Agreement between the Borrower and WCAS Management Corporation dated as of the date hereof, as in effect on the date hereof.

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          “Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the bank serving as the Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

          “Strategic Investors” means physicians, hospitals, health systems, other healthcare providers, other healthcare companies and other similar strategic joint venture partners which joint venture partners are actively involved in the day-to-day operations of providing surgical care and surgery-related services, or, in the case of physicians, that have retired therefrom, individuals who are former owners or employees of surgical care facilities purchased by the Borrower or any of its Restricted Subsidiaries, and consulting firms that receive common Equity Interests solely as consideration for consulting services performed.

          “Subordinated Indebtedness” means Indebtedness of Holdings, the Borrower or any Subsidiary that is contractually subordinated to the Obligations.

          “subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date.

          “Subsidiary” means any subsidiary of the Borrower.

          “Subsidiary Loan Party” means any Domestic Subsidiary that is a Restricted Subsidiary (other than (a) any Subsidiary that is not a wholly owned Subsidiary, (b) any Subsidiary that is prohibited by applicable law from guaranteeing the Obligations, (c) any Domestic Subsidiary that is a Subsidiary of a Foreign Subsidiary, (d) any Inactive Subsidiary for which the Borrower has not opted to satisfy the Collateral and Guarantee Requirement, (e) any Insurance Subsidiary, (f) any Restricted Subsidiary that is acquired pursuant to a Permitted Acquisition financed with secured Indebtedness incurred pursuant to Section 6.01(a)(vii) and each Restricted Subsidiary thereof that guarantees such Indebtedness if the terms of such Indebtedness or guarantee prohibit such Person from becoming a Subsidiary Loan Party; provided that each such Restricted Subsidiary shall cease to be an excluded Subsidiary under this clause (f) if such secured Indebtedness is repaid or becomes unsecured or if such Restricted Subsidiary ceases to guarantee such secured Indebtedness or if such Indebtedness or guarantee ceases to prohibit such Person from becoming a Subsidiary Loan Party, as applicable, (g) any Specified Subsidiary and (h) any other Subsidiary with respect to which, in the reasonable judgment of the Administrative Agent (confirmed in writing by notice to the Borrower), the cost or other consequences (including any adverse tax consequences) of providing a Guarantee shall be excessive in view of the benefits to be obtained by the Lenders therefrom).

          “Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions, provided that no phantom stock or similar plan providing for payments

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only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Swap Agreement.

          “Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be its Applicable Percentage of the aggregate Swingline Exposure at such time.

          “Swingline Lender” means Citibank, N.A., in its capacity as lender of Swingline Loans hereunder.

          “Swingline Loan” means a Loan made pursuant to Section 2.04.

          “Syndication Agent” means Lehman Brothers Inc.

          “Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

          “Term Lender” means a Tranche B Lender or a Delayed Draw Lender.

          “Term Loan” means a Tranche B Term Loan or a Delayed Draw Term Loan.

          “Third Party Payor” means any Government Program and any quasipublic agency, Blue Cross, Blue Shield and any managed care plans and organizations, including health maintenance organizations and preferred provider organizations and private commercial insurance companies and any similar third party arrangements, plans or programs for payment or reimbursement in connection with health care services, products or supplies.

          “Third Party Payor Arrangement” means any arrangement, plan or program for payment or reimbursement by any Third Party Payor in connection with the provision of healthcare services, products or supplies.

          “Total Assets” means the total assets of the Borrower and its Restricted Subsidiaries on a consolidated basis as shown on the most recent balance sheet of the Borrower required to be delivered pursuant to Section 5.01(a) or (b) (it being understood that if such required balance sheet is not delivered Total Assets shall be deemed to be zero until such balance sheet is delivered).

          “Total Indebtedness” means, as of any date, the aggregate principal amount of Indebtedness of the Borrower and the Restricted Subsidiaries outstanding as of such date, in the amount that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP, minus the amount of unrestricted cash and Permitted Investments that is not subject to any Lien (other than any Lien under the Loan Documents or Liens permitted by clauses (vi), (x) and (xi) of Section 6.02) held, on such date, by the Borrower and the Subsidiary Loan Parties.

          “Total Secured Indebtedness” means, as of any date, the aggregate principal amount of (x) Indebtedness of any Loan Party (other than Holdings) that is secured by a Lien on the assets of any such Loan Party and (y) Indebtedness of any Restricted Subsidiary that is not a Loan Party, in each case, outstanding as of such date, in the amount that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP plus the aggregate principal amount of all Guarantees by any Restricted Subsidiary that is not a Loan Party of the Indebtedness of any other Person to the extent not already included in such amount, minus the amount of unrestricted cash and Permitted Investments that is not subject to any Lien (other than any Lien under the Loan Documents or Liens permitted

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by clauses (vi), (x) and (xi) of Section 6.02) held, on such date, by the Borrower and the Subsidiary Loan Parties.

          “Tranche B Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make a Tranche B Term Loan hereunder on the Effective Date, expressed as an amount representing the maximum principal amount of the Tranche B Term Loan to be made by such Lender hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Tranche B Commitment is set forth on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Tranche B Commitment, as applicable. The initial aggregate amount of the Lenders’ Tranche B Commitments is $430,000,000.

          “Tranche B Lender” means a Lender with a Tranche B Commitment or an outstanding Tranche B Term Loan.

          “Tranche B Maturity Date” means the seventh anniversary of the Effective Date.

          “Tranche B Term Loan” means a Loan made pursuant to Section 2.01(a).

          “Transaction Costs” means the payment of fees, expenses and other costs in connection with the items described in clauses (a)-(f) of the definition of Transactions.

          “Transactions” means (a) the Merger and the other transactions contemplated by the Acquisition Documents, (b) the Equity Contributions and the rollover of the Rollover Equity, (c) the Repayment, (d) the execution, delivery and performance by each Loan Party of the Loan Documents to which it is to be a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder on the Effective Date, (e) the issuance of the Senior Subordinated Notes, (f) the execution, delivery, performance of, and the borrowings (and use of proceeds thereof) under, the UK Facility and (g) payment of the Transaction Costs on the Effective Date.

          “Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

          “UK Facility” means that certain Amended and Restated Agreement dated April 12, 2007, by and among certain UK Subsidiaries and The Governor and Company of the Bank of Scotland, as amended, restated, modified, renewed, refunded, replaced or refinanced (including by means of sales of debt securities and including any amendment, restatement, modification, renewal, refunding, replacement or refinancing that increases the amount to be borrowed thereunder or extends the maturity thereof) from time to time.

          “UK Facility Debt” has the meaning set forth in Section 6.08(b).

          “UK Subsidiaries” means any Subsidiary organized under the laws of the United Kingdom.

          “Unrestricted Subsidiary” means any Subsidiary of the Borrower designated by the Board of Directors of the Borrower as an Unrestricted Subsidiary pursuant to Section 5.15(a) subsequent to the date hereof.

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          “USA Patriot Act” has the meaning set forth in Section 3.20.

          “wholly owned” means with respect to any Person, a subsidiary of such Person all the outstanding Equity Interests of which (other than (x) directors’ qualifying shares and (y) shares issued to foreign nationals to the extent required by applicable law) are owned by such Person and/or by one or more wholly owned subsidiaries of such Person.

          “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in ERISA.

          SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a “Eurodollar Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or by Class and Type (e.g., a “Eurodollar Revolving Borrowing”).

          SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

          SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP as in effect from time to time, provided that if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision (including any definition) hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision (including any definition) hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

          SECTION 1.05. Pro Forma Calculations. Notwithstanding anything to the contrary herein, the calculation of the Fixed Charge Coverage Ratio, the Secured Leverage Ratio, the Leverage Ratio and Facility-Level EBITDA on any Calculation Date for any purpose under this Agreement shall be made on a Pro Forma Basis.

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ARTICLE II

The Credits

          SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees (a) to make a Tranche B Term Loan to the Borrower on the Effective Date in a principal amount not exceeding its Tranche B Commitment; (b) to make a Delayed Draw Term Loan to the Borrower from time to time, but on no more than seven (7) occasions, during the Delayed Draw Availability Period in a principal amount not exceeding its Delayed Draw Commitment; and (c) to make Revolving Loans to the Borrower from time to time during the Revolving Availability Period in an aggregate principal amount that will not result in such Lender’s Revolving Exposure exceeding such Lender’s Revolving Commitment; provided that no more than $5.0 million of Revolving Loans may be made on the Effective Date. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. Amounts repaid or prepaid in respect of the Term Loans may not be reborrowed.

          SECTION 2.02. Loans and Borrowings.

          (a) Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder, provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

          (b) Subject to Section 2.14, each Revolving Borrowing and Term Loan Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith, provided that all Borrowings made on the Effective Date must be made as ABR Borrowings. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan, provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

          (c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000; provided, that, notwithstanding the foregoing each Swingline Loan shall be not less than $250,000 and if greater than such amount shall be in an amount that is an integral multiple of $100,000. Borrowings of more than one Type and Class may be outstanding at the same time. There shall not at any time be more than a total of ten Eurodollar Borrowings outstanding. Notwithstanding anything to the contrary herein, an ABR Revolving Borrowing or Swingline Loan may be in an aggregate amount, subject in the case of Swingline Loans to the limitations on the amounts thereof set forth in Section 2.04(a), (i) that is equal to the entire unused balance of the aggregate Revolving Commitments or (ii) that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e).

          (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Maturity Date, the Delayed Draw Maturity Date or the Tranche B Maturity Date, as applicable.

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          SECTION 2.03. Requests for Borrowings. To request a Revolving Borrowing or Term Loan Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 1:00 p.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

     (i) whether the requested Borrowing is to be a Revolving Borrowing, a Delayed Draw Term Loan Borrowing or a Tranche B Term Loan Borrowing;

     (ii) the aggregate amount of such Borrowing;

     (iii) the date of such Borrowing, which shall be a Business Day;

     (iv) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

     (v) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and

     (vi) the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06.

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section 2.03, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

          SECTION 2.04. Swingline Loans.

          (a) Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrower from time to time during the Revolving Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $20,000,000 or (ii) the aggregate Revolving Exposures exceeding the aggregate Revolving Commitments, provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans.

          (b) To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than 1:00 p.m., New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the general deposit account of the Borrower maintained with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section

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2.05(e), by remittance to the Issuing Bank) by 3:00 p.m., New York City time, on the requested date of such Swingline Loan.

          (c) The Swingline Lender may by written notice given to the Administrative Agent not later than 2:00 p.m., New York City time, on any Business Day require the Revolving Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Revolving Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Revolving Lender, specifying in such notice such Lender’s Applicable Percentage of such Swingline Loan or Swingline Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender’s Applicable Percentage of such Swingline Loan or Swingline Loans. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Revolving Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Revolving Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear, provided that any such payment so remitted shall be repaid to the Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.

          SECTION 2.05. Letters of Credit.

          (a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters of Credit for its own account (or for the account of any of its Restricted Subsidiaries so long as the Borrower is a co-applicant), in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the Revolving Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. All Existing Letters of Credit shall be deemed to be issued hereunder and shall constitute Letters of Credit subject to the terms hereof and, to the extent previously issued for the account of a Restricted Subsidiary of the Borrower, shall constitute an obligation of the Borrower pursuant to this Agreement.

          (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if

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arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with Section 2.05(c)), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, (i) the LC Exposure shall not exceed $20,000,000 and (ii) the aggregate Revolving Exposures shall not exceed the aggregate Revolving Commitments.

          (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date that is one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Revolving Maturity Date; provided that at the option of the Issuing Bank any Letter of Credit may provide for renewal periods so long as such renewal period does not exceed one year and does not end after the date described in clause (ii).

          (d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in Section 2.05(e), or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

          (e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on (i) the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, New York City time, on the Business Day that the Borrower receives such notice, if such notice is received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that, if such LC Disbursement is not less than $2,000,000, the Borrower may, subject to the conditions to borrowing set forth herein, request (and, if the Borrower fails to reimburse such LC Disbursement when due, the Borrower shall be deemed to have requested) in accordance with Section 2.04 that such LC Disbursement be financed with a Swingline Loan in an equivalent amount and, to the extent

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so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting Swingline Loan. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Revolving Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Revolving Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Revolving Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

          (f) Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as provided in Section 2.05(e) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.05, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank, provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential or punitive damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

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          (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder, provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement in accordance with Section 2.05(e).

          (h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving Loans, provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to Section 2.05(e), then Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to Section 2.05(e) to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.

          (i) Replacement of the Issuing Bank. The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of the Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

          (j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Lenders with LC Exposure representing greater than 50% of the aggregate LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Collateral Agent, in the name of the Collateral Agent and for the benefit of the Lenders, an amount in cash equal to 105% the LC Exposure as of such date plus any accrued and unpaid interest thereon, provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in Section 7.01(h) or (i). The Borrower also shall deposit cash collateral pursuant to this paragraph as and to the extent required by Section 2.11(b). Each such deposit shall be held by the Collateral Agent as collateral for the payment and performance of the Obligations of the Borrower under this Agreement. The Collateral Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been

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reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Lenders with LC Exposure representing greater than 50% of the aggregate LC Exposure), be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.

          (k) Additional Issuing Banks. The Borrower may at any time, and from time to time, designate one or more additional Lenders to act as an issuing bank under this Agreement with the consent of the Administrative Agent (which consent shall not be unreasonably withheld) and such Lender. Any Lender designated as an issuing bank pursuant to this Section 2.05(k) shall be deemed to be and shall have all the rights and obligations of an “Issuing Bank” hereunder.

          SECTION 2.06. Funding of Borrowings.

          (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders, provided that Swingline Loans shall be made as provided in Section 2.04. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in New York City and designated by the Borrower in the applicable Borrowing Request, provided that ABR Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be remitted by the Administrative Agent to the Issuing Bank.

          (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.06(a) and may, in reliance upon such assumption and in its sole discretion, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.

          SECTION 2.07. Interest Elections.

          (a) Each Revolving Borrowing and Term Loan Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request or as designated by Section 2.03. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.07. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a

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separate Borrowing. This Section 2.07 shall not apply to Swingline Borrowings, which may not be converted or continued.

          (b) To make an election pursuant to this Section 2.07, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request signed by the Borrower.

          (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

     (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

     (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

     (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

     (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

          (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

          (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing.

          (f) Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing, (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

          SECTION 2.08. Termination and Reduction of Commitments.

          (a) Unless previously terminated, (i) the Tranche B Commitments shall terminate at 5:00 p.m., New York City time, on the Effective Date, (ii) the Delayed Draw Commitments shall termi-

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nate at 5:00 p.m., New York City time, on the last day of the Delayed Draw Availability Period and (iii) the Revolving Commitments shall terminate at the start of the Revolving Maturity Date.

          (b) The Borrower may at any time terminate, or from time to time reduce, the Commitments of any Class, provided that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $500,000 and not less than $1,000,000 and (ii) the Borrower shall not terminate or reduce the Revolving Commitments if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.11, the aggregate Revolving Exposures would exceed the aggregate Revolving Commitments.

          (c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under Section 2.08(b) at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.08 shall be irrevocable, provided that a notice of termination of the Revolving Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class.

          SECTION 2.09. Repayment of Loans; Evidence of Debt.

          (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan of such Lender on the Revolving Maturity Date, (ii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Delayed Draw Term Loan of such Lender as provided in Section 2.10, (iii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Tranche B Term Loan of such Lender as provided in Section 2.10 and (iv) the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Maturity Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least two Business Days after such Swingline Loan is made; provided that on each date that a Revolving Borrowing is made, the Borrower shall repay all Swingline Loans then outstanding.

          (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

          (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

          (d) The entries made in the accounts maintained pursuant to Section 2.09(b) and (c) shall be prima facie evidence of the existence and amounts of the obligations recorded therein, provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.

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          (e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

          SECTION 2.10. Amortization of Term Loans.

          (a) Subject to adjustment pursuant to Section 2.10(d), the Borrower shall repay Tranche B Term Loan Borrowings on each date set forth below in the aggregate principal amount set forth opposite such date (as adjusted from time to time pursuant to Section 2.10(d)):

Date	Amount
June 30, 2007	$	1,075,000
September 30, 2007	$	1,075,000
December 31, 2007	$	1,075,000
March 30, 2008	$	1,075,000
June 30, 2008	$	1,075,000
September 30, 2008	$	1,075,000
December 31, 2008	$	1,075,000
March 31, 2009	$	1,075,000
June 30, 2009	$	1,075,000
September 30, 2009	$	1,075,000
December 31, 2009	$	1,075,000
March 31, 2010	$	1,075,000
June 30, 2010	$	1,075,000
September 30, 2010	$	1,075,000
December 31, 2010	$	1,075,000
March 31, 2011	$	1,075,000
June 30, 2011	$	1,075,000
September 30, 2011	$	1,075,000
December 31, 2011	$	1,075,000
March 31, 2012	$	1,075,000
June 30, 2012	$	1,075,000
September 30, 2012	$	1,075,000
December 31, 2012	$	1,075,000
March 31, 2013	$	1,075,000
June 30, 2013	$	1,075,000
September 30, 2013	$	1,075,000
December 31, 2013	$	1,075,000
Tranche B Maturity Date	$	400,975,000

          (b) Subject to adjustment pursuant to Section 2.10(d), the Borrower shall repay Delayed Draw Term Loan Borrowings in quarterly installments equal to 0.25% per quarter on the last day of each quarter after the end of the Delayed Draw Availability Period with the balance payable on the Delayed Draw Maturity Date (as adjusted from time to time pursuant to Section 2.10(d)).

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          (c) To the extent not previously paid, all Tranche B Term Loans shall be due and payable on the Tranche B Maturity Date and all Delayed Draw Term Loans shall be due and payable on the Delayed Draw Maturity Date.

          (d) Any mandatory prepayment of a Term Loan Borrowing shall be applied to reduce, in the direct order of maturity, the scheduled repayments of the Term Loan Borrowings to be made pursuant to this Section 2.10 on the scheduled payment dates next following the date of such prepayment, unless and until each such scheduled repayment has been eliminated as a result of reductions hereunder. Any optional prepayment of a Term Loan Borrowing shall be applied as directed by the Borrower to do one of the following: (i) to reduce in the direct order of maturity the scheduled repayments of the Term Loan Borrowings to be made pursuant to this Section 2.10, (ii) to reduce in the inverse order of maturity the scheduled repayments of the Term Loan Borrowings to be made pursuant to this Section 2.10 or (iii) to reduce ratably the remaining scheduled repayments of the Term Loan Borrowings.

          SECTION 2.11. Prepayment of Loans.

          (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section 2.11.

          (b) In the event and on such occasion that the aggregate Revolving Exposures exceeds the aggregate Revolving Commitments, the Borrower shall prepay Revolving Borrowings or Swingline Borrowings (or, if no such Borrowings are outstanding, deposit cash collateral in an account with the Collateral Agent pursuant to Section 2.05(j)) in an aggregate amount equal to such excess.

          (c) In the event and on each occasion that any Net Proceeds are received by or on behalf of Holdings, the Borrower or any Restricted Subsidiary in respect of any Prepayment Event, the Borrower shall, promptly after such Net Proceeds are received by Holdings, the Borrower or such Restricted Subsidiary (and in any event not later than the fifth Business Day after such Net Proceeds are received), prepay Term Loan Borrowings in an aggregate amount equal to 100% of such Net Proceeds; provided that in the case of any event described in clause (a) or (b) of the definition of the term “Prepayment Event”, if the Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer to the effect that the Borrower and the Restricted Subsidiaries intend to apply the Net Proceeds from such event (or a portion thereof specified in such certificate), within 360 days after receipt of such Net Proceeds, to acquire or replace real property, equipment or other tangible assets (excluding inventory) to be used in the business of the Borrower and the Restricted Subsidiaries, and certifying that no Default has occurred and is continuing, then no prepayment shall be required pursuant to this paragraph in respect of the Net Proceeds specified in such certificate, except to the extent that the aggregate amount of such Net Proceeds that have not been so applied or contractually committed in writing by the end of such 360-day period (and, if so contractually committed in writing but not applied prior to the end of such 360-day period, applied within 180 days of the end of such period) exceeds $10,000,000 (“Excess Net Proceeds”), promptly after which time a prepayment shall be required in an amount equal to such Excess Net Proceeds.

          (d) Following the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 2008, the Borrower shall prepay Borrowings in an aggregate amount equal to:

     (x) the excess of (A) 50% of Excess Cash Flow over (B) prepayments of Loans under Section 2.11(a) during such fiscal year (other than prepayments funded with the proceeds of incurrences of Indebtedness and in the case of prepayments of Revolving Loans only so long as

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the corresponding Commitments are reduced permanently) for any fiscal year for which the Leverage Ratio at the end of such fiscal year is greater than 5.25 to 1.00,

     (y) the excess of (A) 25% of Excess Cash Flow over (B) prepayments of Loans under Section 2.11(a) during such fiscal year for any fiscal year (other than prepayments funded with the proceeds of incurrences of Indebtedness and in the case of prepayments of Revolving Loans only so long as the corresponding Commitments are reduced permanently) for which the Leverage Ratio at the end of such fiscal year is less than or equal to 5.25 to 1.00 and greater than 4.00 to 1.00 and

     (z) none of Excess Cash Flow for any fiscal year for which the Leverage Ratio at the end of such fiscal year is less than or equal to 4.00 to 1.00.

          Each prepayment pursuant to this paragraph shall be made within five Business Days of the date on which financial statements are delivered pursuant to Section 5.01 with respect to the fiscal year for which Excess Cash Flow is being calculated (and in any event within 95 days after the end of such fiscal year).

          (e) Prior to any optional or mandatory prepayment of Borrowings hereunder, the Borrower shall determine in accordance with Section 2.10(d) the Borrowing or Borrowings to be prepaid and shall specify such determination in the notice of such prepayment pursuant to Section 2.11(f).

          (f) The Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 2:00 p.m., New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment, provided that, if a notice of optional prepayment is given in connection with a conditional notice of termination of the Revolving Commitments as contemplated by Section 2.08, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.08. Promptly following receipt of any such notice (other than a notice relating solely to Swingline Loans), the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13 but shall in no event include premium or penalty. All prepayments of Term Loans under this Section 2.11 shall be made pro rata amongst the Tranche B Term Loans and the Delayed Draw Term Loans outstanding at the time of such prepayment and then with respect to such Term Loans, in accordance with Section 2.10(d).

          (g) All Swap Agreements, if any, between Borrower and any of the Lenders or their respective affiliates are independent agreements governed by the written provisions of said Swap Agreements, which will remain in full force and effect, unaffected by any repayment, prepayment, acceleration, reduction, increase or change in the terms of the Loans, except as otherwise expressly provided in said written Swap Agreements, and any payoff statement from the Lenders relating to the Loans shall not apply to said Swap Agreements except as otherwise expressly provided in such payoff statement.

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          SECTION 2.12. Fees.

          (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at (i) the Applicable Rate on the average daily unused amount of each Revolving Commitment and (ii) the Delayed Draw Commitment Fee Rate on the average daily unused amount of each Delayed Draw Commitment of such Lender during the period from and including the Effective Date to but excluding the date on which the aggregate Revolving Commitments and Delayed Draw Commitments, as applicable, terminate. Accrued commitment fees shall be payable in arrears in respect of the Revolving Commitments on the last Business Day of March, June, September and December of each year and on the date on which the Revolving Commitments terminate, commencing on the first such date to occur after the date hereof. Accrued commitment fees shall be payable in arrears in respect of the Delayed Draw Commitments on the last Business Day of March, June, September and December of each year and on the date on which the Delayed Draw Commitments terminate if all Loans are repaid and all Commitments terminate on such date, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing commitment fees with respect to Revolving Commitments, a Revolving Commitment of a Lender shall be deemed to be used to the extent of the outstanding Revolving Loans and LC Exposure of such Lender (and the Swingline Exposure of such Lender shall be disregarded for such purpose).

          (b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Rate used to determine the interest rate applicable to Eurodollar Revolving Loans on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender’s Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at a rate equal to 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Revolving Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank’s standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees shall be payable on the last Business Day of March, June, September and December of each year, commencing on the first such date to occur after the Effective Date, provided that all such fees shall be payable on the date on which the Revolving Commitments terminate and any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

          (c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent.

          (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances.

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          SECTION 2.13. Interest.

          (a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.

          (b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.

          (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section 2.13 or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Revolving Loans as provided in Section 2.13(a).

          (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Revolving Commitments, provided that (i) interest accrued pursuant to Section 2.13(c) shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Revolving Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

          (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

          SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

     (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or

     (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

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          SECTION 2.15. Increased Costs.

          (a) If any Change in Law shall:

     (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or

     (ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or the Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as applicable, for such additional costs incurred or reduction suffered.

          (b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

          (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as applicable, as specified in Section 2.15(a) or (b) shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank, as applicable, the amount shown as due on any such certificate within 10 days after receipt thereof.

          (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section 2.15 shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section 2.15 for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or the Issuing Bank, as applicable, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor, provided, further, that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.

          SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (in-

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cluding as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan or Term Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(f) and is revoked in accordance therewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate that such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.16 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. Notwithstanding the foregoing, no additional amounts shall be due and payable pursuant to this Section 2.16 to the extent that on the relevant due date the Borrower deposits in a Prepayment Account an amount equal to any payment of Eurodollar Loans otherwise required to be made on a date that is not the last day of the applicable Interest Period; provided that on the last day of the applicable Interest Period, the Administrative Agent shall be authorized, without any further action by or notice to or from the Borrower or any other Loan Party, to apply such amount to the prepayment of such Eurodollar Loans. For purposes of this Agreement, the term “Prepayment Account” shall mean a non-interest bearing account established by the Borrower with the Administrative Agent and over which the Administrative Agent shall have exclusive dominion and control, including the right of withdrawal for application in accordance with this Section 2.16. Anything to the contrary contained herein notwithstanding, no Lender nor any Participant is required to match fund any Obligation and the provisions of this Section shall apply as if match funding had occurred by acquiring Eurodollar deposits for each Interest Period in the amount of the applicable Eurodollar Loans.

          SECTION 2.17. Taxes.

          (a) Any and all payments by or on account of any obligation of any Loan Party hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes, provided that if any Loan Party shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.17) the Administrative Agent, Lender or Issuing Bank (as applicable) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Loan Party shall make such deductions and (iii) such Loan Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

          (b) In addition, the applicable Loan Party shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

          (c) The applicable Loan Party shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 30 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as

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applicable, on or with respect to any payment by or on account of any obligation of the Borrower hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.17) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error.

          (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by any Loan Party to a Governmental Authority, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, if any, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

          (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the United States, or any treaty to which the United States is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), on or prior to the Effective Date in the case of each Foreign Lender that is a signatory hereto, and on the date of assignment pursuant to which it becomes a Lender in the case of each other Lender and from time to time thereafter as reasonably requested by either of the Borrower or the Administrative Agent, such properly completed, original and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. Each Lender who is a U.S. Person within the meaning of Section 7701(a)(30) of the Code on or prior to the date of its execution and delivery of this Agreement, on or prior to the date on which it becomes a Lender, in the case of an assignee, and from time to time thereafter if requested in writing by the Borrower or the Administrative Agent, shall provide the Borrower and the Administrative Agent with duplicate executed originals of Internal Revenue Service Form W-9, or any successor form, certifying that such Lender is entitled to exemption from United States backup withholding tax.

          (f) If the Administrative Agent or a Lender determines, in its sole discretion, that it has received a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.17 with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This Section 2.17 shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

          SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Setoffs.

          (a) The Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to the time expressly

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required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 3:00 p.m., New York City time), on the date when due, in immediately available funds, without setoff or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 2 Penns Way, Suite 100, New Castle, DE 19720, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars.

          (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

          (c) If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans, Tranche B Term Loans, Delayed Draw Term Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans, Tranche B Term Loans, Delayed Draw Term Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans, Tranche B Term Loans, Delayed Draw Term Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans, Tranche B Term Loans, Delayed Draw Term Loans and participations in LC Disbursements and Swingline Loans, provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

          (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent

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may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption and in its sole discretion, distribute to the Lenders or the Issuing Bank, as applicable, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as applicable, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

          (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(a), 2.18(d) or 9.03(c), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

          SECTION 2.19. Mitigation Obligations; Replacement of Lenders.

          (a) If any Lender requests compensation under Section 2.15, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as applicable, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

          (b) If any Lender requests compensation under Section 2.15, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and if a Revolving Commitment is being assigned, the Issuing Bank and the Swingline Lender), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a material reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

          SECTION 2.20. Incremental Extensions of Credit. At any time during the Revolving Availability Period, subject to the terms and conditions set forth herein, the Borrower may at any time and from time to time, by notice to the Administrative Agent (whereupon the Administrative Agent shall

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promptly deliver a copy to each of the Lenders), request to add additional term loans or additional revolving commitments (together, the “Incremental Extensions of Credit”) in minimum principal amounts of $5,000,000; provided that such amount may be less than $5,000,000 if such amount represents all the remaining availability under the aggregate principal amount set forth below; provided, further, that (x) immediately prior to and after giving effect to any Incremental Facility Amendment (as defined below), no Default has occurred or is continuing or shall result therefrom and (y) the Borrower shall be in compliance on a Pro Forma Basis with the Financial Performance Covenant (such covenant to be applied even if no Revolving Loan or Swingline Loan and less than $7.5 million of LC Exposure is outstanding). The Incremental Extensions of Credit:

     (a) shall be in an aggregate principal amount not exceeding $150,000,000 since the Effective Date,

     (b) shall rank pari passu in right of payment and right of security with the Revolving Loans and Term Loans in respect of the Collateral, and

     (c) other than amortization, pricing or maturity date, shall have the same terms as the Term Loans or Revolving Commitments, as applicable, existing immediately prior to the effectiveness of such Incremental Facility Amendment (the “Existing Extensions of Credit”);

provided that (i) the Incremental Extensions of Credit in the form of term loans shall not have a final maturity date earlier than the Tranche B Maturity Date, (ii) the Incremental Extensions of Credit in the form of revolving loans shall not have a final maturity date earlier than the Revolving Maturity Date, (iii) the Incremental Extensions of Credit in the form of term loans shall not have a weighted average life that is shorter than that of the then-remaining weighted average life of the Existing Extensions of Credit that are Tranche B Term Loans (without giving effect to any reductions of such weighted average life caused by voluntary or mandatory prepayments of Tranche B Term Loans pursuant to Section 2.11) and (v) the Incremental Extensions of Credit shall be, in the case of revolving loan extensions, on the terms and pursuant to the documentation applicable to the Revolving Loans. The Borrower shall by written notice offer each Lender providing Existing Extensions of Credit (an “Existing Lender”) the opportunity for no less than ten (10) Business Days after delivery of the notice to commit to provide its pro rata portion (based on the amount of its outstanding Tranche B Term Loans or outstanding Revolving Loans and unused Revolving Commitments, as applicable, on the date of such notice) of any requested Incremental Extension of Credit, provided that no Existing Lender shall be obligated to provide any Incremental Extension of Credit unless it so agrees. Any additional bank, financial institution, Existing Lender or other Person that elects to extend Incremental Extensions of Credit shall be reasonably satisfactory to the Borrower and the Administrative Agent and, in the case of Incremental Extensions of Credit in the form of revolving loans, the Issuing Bank (any such bank, financial institution, Existing Lender or other Person being called an “Additional Lender”) and shall become a Lender under this Agreement pursuant to an amendment (an “Incremental Facility Amendment”) to this Agreement giving effect to the modifications permitted by this Section 2.20 and, as appropriate, the other Loan Documents and executed by the Borrower, each Additional Lender and the Administrative Agent. Commitments in respect of Incremental Extensions of Credit shall be Commitments under this Agreement. An Incremental Facility Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the opinion of the Administrative Agent, to effect the provisions of this Section 2.20 (including voting provisions applicable to the Additional Lenders comparable to the provisions of clause (B) of the second proviso of Section 9.02(b)). The effectiveness of any Incremental Facility Amendment shall be subject to the satisfaction on the date thereof (each, an “Incremental Facility Closing Date”) of each of the conditions set forth in Section 4.02 (it being understood that all references to “the date of such Borrowing” in such Section 4.02 shall be deemed to refer to the Incremental

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Facility Closing Date). The proceeds of the Incremental Extensions of Credit shall be used for working capital and general corporate purposes (including Permitted Acquisitions).

ARTICLE III

Representations and Warranties

          The Borrower and Holdings represent and warrant to the Lenders that:

          SECTION 3.01. Organization; Power. Each of Holdings, the Borrower and the Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority and all governmental rights, qualifications, approvals, authorizations, permits, accreditations, Reimbursement Approvals, licenses and franchises material to the business of the Borrower and the Subsidiaries taken as a whole that are necessary to own its assets, to carry on its business as now conducted and as proposed to be conducted and to execute, deliver and perform its obligations under each Loan Document to which it is a party and (c) except where the failure to do so, individually or in the aggregate, is not reasonably likely to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

          SECTION 3.02. Authorization; Enforceability. The Transactions to be entered into by each Loan Party have been duly authorized by all necessary corporate or other action and, if required, stockholder action. This Agreement has been duly executed and delivered by each of Holdings and the Borrower and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of Holdings, the Borrower or such Loan Party, as applicable, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

          SECTION 3.03. Governmental Approvals; No Conflicts. Except as set forth in Schedule 3.03 the Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except those that are required or permitted to be obtained following consummation of the Transactions, the absence of which individually or in the aggregate are not reasonably likely to result in a Material Adverse Effect and filings necessary to perfect Liens created under the Loan Documents, (b) will not violate any Requirement of Law applicable to Holdings, the Borrower or any of the Subsidiaries, as applicable, (c) will not violate or result in a default under any indenture or other material agreement or instrument binding upon Holdings, the Borrower or any of the Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by Holdings, the Borrower or any of the Subsidiaries or give rise to a right of, or result in, termination, cancellation or acceleration of any material obligation thereunder, (d) will not result in a Limitation on any right, qualification, approval, permit, accreditation, authorization, Reimbursement Approval, license or franchise or authorization granted by any Governmental Authority, Third Party Payor or other Person applicable to the business, operations or assets of the Borrower or any of the Subsidiaries or adversely affect the ability of the Borrower or any of the Subsidiaries to participate in any Third Party Payor Arrangement except for Limitations, individually or in the aggregate, that are not material to the business of the Borrower and the Restricted Subsidiaries, taken as a whole, and (e) will not result in the creation or imposition of any Lien on any asset of Holdings, the Borrower or any of the Subsidiaries, except Liens created under the Loan Documents. There is no pending or, to the knowledge of the Borrower, threatened Limitation by any Governmental Authority,

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Third Party Payor or any other Person of any right, qualification, approval, permit, authorization, accreditation, Reimbursement Approval, license or franchise of the Borrower, or any Subsidiary, except for such Limitations, individually or in the aggregate, as are not reasonably likely to result in a Material Adverse Effect. No certifications by any Governmental Authority or any Third Party Payor are required for operation of the business of the Borrower and the Subsidiaries that are not in place, except for such certifications or agreements, the absence of which do not materially and adversely affect the operation of the business.

          SECTION 3.04. Financial Condition; No Material Adverse Change.

          (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows as of and for the fiscal years ended December 31, 2004, December 31, 2005, and December 31, 2006, reported on by KPMG LLP, independent public accountants. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its subsidiaries as of such dates and for such periods in accordance with GAAP consistently applied.

          (b) The Borrower has heretofore furnished to the Lenders its pro forma consolidated balance sheet as of December 31, 2006 prepared giving effect to the Transactions as if the Transactions had occurred on such date. Such pro forma consolidated balance sheet (i) has been prepared in good faith based on assumptions (which are believed by the Borrower to be reasonable), (ii) accurately reflects all adjustments necessary to give effect to the Transactions and (iii) presents fairly, in all material respects, the pro forma financial position of the Borrower and its subsidiaries as of December 31, 2006 as if the Transactions had occurred on such date.

          (c) Except for (i) liabilities reflected in or reserved against in the financial statements referred to above or the notes thereto, (ii) liabilities incurred in the ordinary course of business and (iii) liabilities incurred in connection with the Transactions, after giving effect to the Transactions, none of Holdings, the Borrower or its subsidiaries has, as of the Effective Date, any liabilities that are, individually or in the aggregate, reasonably likely to result in a Material Adverse Effect.

          (d) No event, change, condition or state of facts has occurred that has resulted in, or is reasonably likely to result in, individually or in the aggregate, a Material Adverse Effect since December 31, 2006.

          SECTION 3.05. Properties.

          (a) Each of Holdings, the Borrower and the Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, free and clear of all Liens, except for Liens expressly permitted pursuant to Section 6.02.

          (b) Each of Holdings, the Borrower and the Subsidiaries owns, licenses or possesses the right to use all trademarks, trade names, copyrights, patents and other intellectual property material to its business, and the use thereof by Holdings, the Borrower and the Subsidiaries does not, to the knowledge of Holdings and the Borrower, infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, are not reasonably likely to result in a Material Adverse Effect.

          (c) Schedule 3.05 sets forth the address of each real property owned, leased or otherwise held by any of the Loan Parties as of the Effective Date after giving effect to the Transactions.

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          (d) No Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards within the meaning of the National Flood Insurance Act of 1968 unless flood insurance available under such Act has been obtained in accordance with Section 5.07 unless waived by the Administrative Agent in its sole discretion.

          SECTION 3.06. Litigation.

Except as set forth on Schedule 3.06, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of Holdings and the Borrower, threatened against or affecting Holdings, the Borrower or any Subsidiary that would reasonably be likely to, individually or in the aggregate, (i) result in a Material Adverse Effect or (ii) adversely affect in any material respect the ability of the Loan Parties to consummate the Transactions or the other transactions contemplated hereby.

          SECTION 3.07. Compliance with Laws and Agreements. Except as is not reasonably likely to result in, individually or in the aggregate, a Material Adverse Effect, each of Holdings, the Borrower and the Subsidiaries is in compliance with all Requirements of Law applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property.

          SECTION 3.08. Investment Company Status. Neither Holdings, the Borrower nor any Subsidiary is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.

          SECTION 3.09. Taxes. Each of Holdings, the Borrower and the Subsidiaries has timely filed or caused to be filed all Federal and other material Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) any Taxes that are being contested in good faith by appropriate proceedings and for which Holdings, the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so is not reasonably likely, individually or in the aggregate, to result in a Material Adverse Effect.

          SECTION 3.10. ERISA. No ERISA Event has occurred, or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, is reasonably likely, individually or in the aggregate, to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair value of the assets of such Plan. Except as would not be reasonably likely to result in, individually or in the aggregate, a Material Adverse Effect, each employee benefit plan maintained or contributed to by the Borrower or any Subsidiary and each Plan is in compliance with the applicable provisions of ERISA and the Code. Using actuarial assumptions and computation methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of each ERISA Affiliate to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Multiemployer Plan, are not reasonably likely, individually or in the aggregate, to result in a Material Adverse Effect.

          SECTION 3.11. Disclosure. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other information furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by other information so furnished and taken as a whole) contains any material misstatement of fact or omits to

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state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided that the foregoing shall not apply to any projected financial information other than the projected financial information included in the Information Memorandum, and with respect to such projected financial information, Holdings and the Borrower represent only that such information was prepared in good faith based upon assumptions believed by them to be reasonable at the time delivered and as of the Effective Date.

          SECTION 3.12. Subsidiaries. After giving effect to the Merger, as of the Effective Date, Holdings does not have any subsidiaries other than the Borrower and the Subsidiaries and Inactive Subsidiaries listed on Schedule 3.12. Schedule 3.12 sets forth the name of, and the ownership or beneficial interest of Holdings in, each subsidiary, including the Borrower, and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Effective Date.

          SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of all insurance maintained by or on behalf of Holdings, the Borrower and the Subsidiaries as of the Effective Date. As of the Effective Date, all premiums in respect of such insurance have been paid. Holdings and the Borrower believe that the insurance maintained by or on behalf of the Borrower and the Subsidiaries is adequate.

          SECTION 3.14. Labor Matters. As of the Effective Date, there are no strikes, lockouts or slowdowns against Holdings, the Borrower or any Subsidiary pending or, to the knowledge of Holdings and the Borrower, threatened. The hours worked by and payments made to employees of the Borrower and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters. All payments due from Holdings, the Borrower or any Subsidiary, or for which any claim may be made against Holdings, the Borrower or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of Holdings, the Borrower or such Subsidiary. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which Holdings, the Borrower or any Subsidiary is bound.

          SECTION 3.15. Solvency. Immediately after the consummation of the Transactions to occur on the Effective Date, (a) the fair value of the assets of the Loan Parties, taken as a whole, at a fair valuation, will exceed their debts and liabilities, subordinated, contingent or otherwise, (b) the present fair saleable value of the property of the Loan Parties, taken as a whole, will be greater than the amount that will be required to pay the probable liability of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured, (c) the Loan Parties, taken as a whole, will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, and (d) the Loan Parties, taken as a whole, will not have unreasonably small capital with which to conduct the business in which they are engaged as such business is now conducted and is proposed to be conducted following the Effective Date, in each case after giving effect to any rights of indemnification, contribution or subrogation arising among the Subsidiary Loan Parties pursuant to the Collateral Agreement or by law.

          SECTION 3.16. Senior Indebtedness. The Obligations constitute “Senior Debt” under and as defined in the Senior Subordinated Notes Documents.

          SECTION 3.17. Reimbursement from Third Party Payors. The accounts receivable of Holdings, the Borrower and the Subsidiaries have been and will continue to be adjusted to reflect the reimbursement policies required by all applicable Requirements of Law and other Third Party Payor Arrangements to which Holdings, the Borrower or such Subsidiary is subject, and do not exceed in any material respect amounts the Borrower or such Subsidiary is entitled to receive under any capitation ar-

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rangement, fee schedule, discount formula, cost-based reimbursement or other adjustment or limitation to usual charges. To the knowledge of the Borrower and Holdings, all billings by Holdings, the Borrower and each Subsidiary pursuant to any Third Party Payor Arrangements have been made in compliance with all applicable Requirements of Law, except where failure to comply would not, individually or in the aggregate, be reasonably likely to result in a Material Adverse Effect. To the knowledge of the Borrower and Holdings, there has been no intentional or material over-billing or over-collection by the Borrower or any Subsidiary pursuant to any Third Party Payor Arrangements, other than as created by routine adjustments and disallowances made in the ordinary course of business by the Third Party Payors with respect to such billings.

          SECTION 3.18. Fraud and Abuse; Licenses. To the knowledge of the Borrower and Holdings, none of Holdings, the Borrower or any Subsidiary, nor any of their respective partners, members, stockholders, officers or directors, acting on behalf of Holdings, the Borrower or any Subsidiary, have engaged on behalf of Holdings, the Borrower or any Subsidiary in any activities that are prohibited under 42 U.S.C. § 1320a-7, 42 U.S.C. § 1320a-7a, 42 U.S.C. § 1320a-7b, 42 U.S.C. § 1395nn, 31 U.S.C. § 3729 et seq., or the regulations promulgated thereunder, or related Requirements of Law, or under any similar state law or regulation, or that are prohibited by binding rules of professional conduct, including (a) knowingly and willfully making or causing to be made a false statement or misrepresentation of a material fact in any application for any benefit or payment, (b) knowingly and willfully making or causing to be made any false statement or misrepresentation of a material fact for use in determining rights to any benefit or payment, (c) failing to disclose knowledge by a claimant of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with intent to secure such benefit or payment fraudulently, (d) knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, or offering to pay or receive such remuneration (i) in return for referring an individual to a Person for the furnishing or arranging for the furnishing of any item or service for which payment may be made, in whole or in part, pursuant to any Third Party Payor Arrangement to which the foregoing rules and regulations apply or (ii) in return for purchasing, leasing or ordering or arranging for or recommending purchasing, leasing or ordering any good, facility, service or item for which payment may be made, in whole or in part, pursuant to any Third Party Payor Arrangement to which the foregoing rules and regulations apply and (e) making any prohibited referral for designated health services, or presenting or causing to be presented a claim or bill to any individual, Third Party Payor or other entity for designated health services furnished pursuant to a prohibited referral. Neither Holdings, the Borrower nor any Subsidiary shall be considered to be in breach of this Section 3.18 so long as (a) it shall have taken such actions (including implementation of appropriate internal controls) as may be reasonably necessary to prevent such prohibited actions and (b) such prohibited actions as have occurred, individually or in the aggregate, are not reasonably likely result in a Material Adverse Effect.

          The facilities operated by the Borrower and its Subsidiaries are qualified for participation in the Government Programs in which they participate, and comply in all material respects with the conditions of participation in all Government Programs in which they participate or have participated, except for the fact that facilities newly developed by any such Person may from time to time be awaiting an initial Medicare certification and/or initial Medicare or Medicaid provider number in accordance with customary processing and certification timeframes of such Government Programs. There is no pending or, to the Borrower’s and Holdings’ knowledge, threatened proceeding or investigation by any of the Government Programs with respect to (i) the Borrower’s or any Subsidiary’s qualification or right to participate in any Government Program in which it participates or has participated, (ii) the compliance or non-compliance by any such Person with the terms or provisions of any Government Program in which it participates or has participated, or (iii) the right of any such Person to receive or retain amounts received or due or to become due from any Government Program in which it participates or has participated, which

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proceeding or investigation, together with all other such proceedings and investigations, would be reasonably likely to result in a Material Adverse Effect.

          SECTION 3.19. Margin Regulations. The Borrower is not engaged nor will it engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board), or extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Borrowings or drawings under any Letter of Credit will be used for any purpose that violates Regulation U.

          SECTION 3.20. Patriot Act.

          (a) Neither Holdings, the Borrower nor any Subsidiary nor, to the knowledge of Borrower or Holdings, any Non-Consolidated Entity, is in violation of any requirement of applicable Law relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (the “USA Patriot Act”).

          (b) Neither Holdings, the Borrower nor any Subsidiary nor, to the knowledge of Borrower or Holdings, any Non-Consolidated Entity or broker or other agent of Holdings, the Borrower or any of its Subsidiaries acting or benefiting in any capacity in connection with the Loans is any of the following:

     (i) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

     (ii) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

     (iii) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

     (iv) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or

     (v) a Person that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) at its official website or any replacement website or other replacement official publication of such list.

          (c) Neither the Holdings, the Borrower nor any of its Subsidiaries and, to the knowledge of the Borrower and Holdings, no broker or other agent of the Holdings, the Borrower or any of its Subsidiaries acting in any capacity in connection with the Loans (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in Section 3.20(b) above, (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order, or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

          SECTION 3.21. Intellectual Property; Licenses, Etc. Holdings, the Borrower and each of its Subsidiaries own, license or possess the right to use, all of the trademarks, service marks, trade

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names, domain names, copyrights, patents, patent rights, licenses, technology, software, know-how database rights, design rights and other intellectual property rights (collectively, “IP Rights”) that are reasonably necessary for the operation of their respective businesses as currently conducted, and, without conflict with the rights of any Person, except to the extent such conflicts, either individually or in the aggregate, are not reasonably likely to result in a Material Adverse Effect. Holdings, the Borrower and its Subsidiaries in the operation of their respective businesses as currently conducted do not infringe upon any rights held by any Person except for such infringements, individually or in the aggregate, which are not reasonably likely to result in a Material Adverse Effect. No claim or litigation regarding any of the IP Rights, owned by Holdings, the Borrower and each of its Subsidiaries, is pending or, to the knowledge of the Borrower and Holdings, threatened against Holdings, the Borrower or any of its Subsidiaries, which, either individually or in the aggregate, is reasonably likely to result in a Material Adverse Effect.

          Except pursuant to licenses and other user agreements entered into by each Loan Party in the ordinary course of business, on and as of the date hereof (i) each Loan Party owns and possesses the right to use, and has done nothing to authorize or enable any other Person to use, any copyright, patent or trademark listed in Schedule 9(a) or 9(b) to the Perfection Certificate and (ii) all registrations listed in Schedule 9(a) or 9(b) to the Perfection Certificate are valid and in full force and effect, except, in each case, to the extent failure to own or possess such right to use or of such registrations to be valid and in full force and effect is not reasonably likely, individually or in the aggregate, to result in a Material Adverse Effect.

          SECTION 3.22. Security Documents.

          (a) Security Agreement. The Security Documents are effective to create in favor of the Collateral Agent for the benefit of the Lenders, legal, valid and enforceable Liens on, and security interests in, the Collateral described therein to the extent intended to be created thereby and (i) when financing statements and other filings in appropriate form are filed in the offices specified on Schedule 7 to the Perfection Certificate and (ii) upon the taking of possession or control by the Collateral Agent of such Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent possession or control by the Collateral Agent is required by the Security Documents), the Liens created by the Security Documents shall constitute fully perfected Liens on, and security interests in (to the extent intended to be created thereby), all right, title and interest of the grantors in such Collateral to the extent perfection can be obtained by filing financing statements or possession or control, as applicable, in each case subject to no Liens other than Liens permitted hereunder.

          (b) PTO Filing; Copyright Office Filing. When the Collateral Agreement or a short form thereof is properly filed in the United States Patent and Trademark Office and the United States Copyright Office, the Liens created by the Collateral Agreement shall, to the extent allowed by law, constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors thereunder (to the extent intended to be created thereby) in Patents and Trademarks (each as defined in the Collateral Agreement) registered or applied for with the United States Patent and Trademark Office or Copyrights (as defined in the Collateral Agreement) registered or applied for with the United States Copyright Office, as the case may be, in each case subject to no Liens other than Liens permitted hereunder (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered Patents, Trademarks and Copyrights acquired by the grantors thereof after the Effective Date).

          (c) Valid Liens. Each Security Document delivered pursuant to Sections 5.12 and 5.13 will, upon execution and delivery thereof, be effective to create in favor of the Collateral Agent, for

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the benefit of the Lenders, legal, valid and enforceable Liens on, and security interests in (to the extent intended to be created thereby), all of the Loan Parties’ right, title and interest in and to the Collateral thereunder and (i) when all appropriate filings, recordings, registrations or notifications are made as may be required under applicable law and (ii) upon the taking of possession or control by the Collateral Agent of such Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent required by any such Security Document), such Security Document will constitute fully perfected Liens on, and security interests in (to the extent intended to be created thereby), all right, title and interest of the Loan Parties in such Collateral to the extent perfection can be obtained by filing financing statements or possession or control, in each case subject to no Liens other than Liens permitted hereunder.

          (d) Each Mortgage is effective to create, in favor of the Collateral Agent, for the benefit of the Lenders, legal, valid and enforceable first priority Liens on, and security interests in, all of the Loan Parties’ right, title and interest in and to the Mortgaged Properties thereunder and the proceeds thereof, subject only to Permitted Encumbrances or other Liens acceptable to the Collateral Agent, and when the Mortgages are filed in the applicable offices (or, in the case of any Mortgage executed and delivered after the date hereof in accordance with the provisions of Sections 5.12 and 5.13, when such Mortgage is filed in the offices specified in the local counsel opinion delivered with respect thereto in accordance with the provisions of Sections 5.12 and 5.13), the Mortgages shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the Loan Parties in the Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other Person, other than Liens permitted by such Mortgage.

          SECTION 3.23. Environmental Compliance.

          (a) Except with respect to any other matters that, individually or in the aggregate, are not reasonably likely to result in a Material Adverse Effect, neither Holdings, the Borrower nor any Subsidiary (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any Environmental Permit or to provide any notification required under any Environmental Law or has become subject to any Environmental Liability or is conducting or financing any investigation, response or corrective action pursuant to any Environmental Law at any location; or (ii) knows of any basis for Environmental Liability. There are no claims, actions, suits, or proceedings alleging potential liability or violation of, or otherwise relating to, any Environmental Law that are, individually or in the aggregate, reasonably likely to result in a Material Adverse Effect.

          (b) Except as not reasonably likely to result in, individually or in the aggregate, a Material Adverse Effect, (i) none of the properties currently or formerly owned, leased or operated by Holdings, the Borrower or any of its Subsidiaries is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property; (ii) there are no and never have been any underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned, leased or operated by Holdings, the Borrower or any of its Subsidiaries or, to the Borrower’s and Holdings’ knowledge, on any property formerly owned or operated by Holdings, the Borrower or any of its Subsidiaries; (iii) there is no asbestos or asbestos-containing material at or on any facility, equipment or property currently owned or operated by Holdings, the Borrower or any of its Subsidiaries; and (iv) there has been no Release of Hazardous Materials by any Person on any property currently or formerly owned, leased or operated by Holdings, the Borrower or any of its Subsidiaries and there has been no Release of Hazardous Materials by Holdings, the Borrower or any of its Subsidiaries at any other location.

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          (c) The properties owned, leased or operated by Holdings, the Borrower and its Subsidiaries do not contain any Hazardous Materials in amounts or concentrations which (i) constitute, or constituted a violation of, (ii) require remedial action under, or (iii) could give rise to liability under, Environmental Laws, which violations, remedial actions and liabilities, individually or in the aggregate, are reasonably likely to result in a Material Adverse Effect.

          (d) Holdings, the Borrower and its Subsidiaries are not conducting or financing, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened Release of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law except for such investigation or assessment or remedial or response action that, individually or in the aggregate, is not reasonably likely to result in a Material Adverse Effect.

          (e) All Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by Holdings, the Borrower or any of its Subsidiaries have been disposed of in a manner not reasonably likely to result in, individually or in the aggregate, a Material Adverse Effect.

          (f) Except as would not be reasonably likely to result in, individually or in the aggregate, a Material Adverse Effect, neither Holdings, the Borrower nor any of its Subsidiaries has contractually assumed any liability or obligation under or relating to any Environmental Law.

ARTICLE IV

Conditions

          SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived):

     (a) The Administrative Agent shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.

     (b) The Administrative Agent shall have received a written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of each of (i) Ropes & Gray LLP, counsel for Holdings and the Borrower, substantially in the form of Exhibit B, (ii) the General Counsel of the Borrower in form satisfactory to the Administrative Agent and (iii) local counsel in each jurisdiction specified on Schedule 4.01 in form satisfactory to the Administrative Agent, and, in the case of each such opinion required by this paragraph, covering such matters relating to the Loan Parties, the Loan Documents or the Transactions as the Administrative Agent shall reasonably request.

     (c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of the Transactions and any other legal matters relating to the Loan Parties, the Loan Documents or the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent.

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     (d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by a Financial Officer, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02 (other than, with respect to Section 4.02(a), the representation and warranty set forth in Section 3.04(d), which representation and warranty need not be made on the Effective Date).

     (e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses (including fees, charges and disbursements of counsel) required to be reimbursed or paid by any Loan Party hereunder or under any other Loan Document.

     (f) The Collateral and Guarantee Requirement shall have been satisfied and the Administrative Agent shall have received a completed Perfection Certificate dated the Effective Date and signed by a Financial Officer and a legal officer of the Borrower, together with all attachments contemplated thereby, including the results of a search of the Uniform Commercial Code (or equivalent) filings made with respect to the Loan Parties in the jurisdictions contemplated by the Perfection Certificate and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Administrative Agent that the Liens indicated by such financing statements (or similar documents) are permitted by Section 6.02 or have been released, provided that the Collateral Agent may, in its reasonable judgment, grant extensions of time for compliance with the Collateral and Guarantee Requirement by any Loan Party.

     (g) The Administrative Agent shall have received evidence that the insurance required by Section 5.07 is in effect.

     (h) The Lenders shall have received a pro forma consolidated balance sheet of Borrower as of the date of the most recent consolidated balance sheet delivered pursuant to Section 4.01(k)(ii), reflecting all pro forma adjustments (in accordance with Regulation S-X and such other adjustments as shall be agreed between the Borrower and the Arrangers) as if the Transactions had been consummated on such date, and such pro forma consolidated balance sheet shall be consistent in all material respects with the forecasts and other information previously provided to the Lenders. After giving effect to the Transactions, none of Holdings, the Borrower or any Subsidiary shall have outstanding any preferred stock or any Indebtedness, other than (i) Indebtedness incurred under the Loan Documents, (ii) the Senior Subordinated Notes and (iii) Indebtedness set forth on Schedule 6.01. The Borrower shall have delivered its most recent projections through the 2014 fiscal year.

     (i) All obligations under or relating to the Existing Credit Facilities (other than customary indemnification obligations) and all liens, guarantees and security interests granted in respect thereof (including all adequate protection obligations related thereto) shall have been discharged, and the terms and conditions of such discharge shall be satisfactory to the Administrative Agent. The Administrative Agent shall have received payoff and release letters with respect to the Existing Credit Facilities in form and substance reasonably satisfactory to the Administrative Agent.

     (j) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by a Financial Officer, confirming that since September 30, 2006, there has not been any change, event, condition, circumstance or state of facts, individually or in the aggregate, that has had or could reasonably be expected to have a Company Material Adverse Effect (as defined in the Merger Agreement as in effect on January 7, 2007).

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     (k) The Lenders shall have received (i) audited consolidated and consolidating (between US and UK operations) balance sheets and related statements of income, stockholders’ equity and cash flows of the Borrower for the three most recently completed fiscal years ended at least 90 days prior to the Effective Date (without any qualified audit opinion thereon) and (ii) unaudited consolidated and consolidating (between US and UK operations) balance sheets and related statements of income, stockholders’ equity and cash flows of the Borrower for each subsequently completed fiscal quarter since the date of such audited financial statements ended at least 45 days prior to the Effective Date and (iii) to the extent made available by the Borrower to Holdings prior to the Effective Date, each fiscal month after the most recent fiscal period for which financial statements were received by the Lenders as described above and ended at least 30 days prior to the Effective Date (to be in the form provided by the Borrower to Holdings), which financial statements described in clauses (a) and (b) shall be prepared in accordance with GAAP.

     (l) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the president or a vice president of the Borrower or a Financial Officer, in form and substance reasonably satisfactory to the Administrative Agent, together with such other evidence reasonably requested by the Lenders, confirming the solvency of the Loan Parties on a consolidated basis after giving effect to the Transactions.

     (m) The Transactions shall have been consummated or shall be consummated simultaneously with the Effective Date in accordance with applicable law, the Merger Agreement and all other related documentation (in each case without giving effect to any amendments, modifications or waivers to or of such documents that are materially adverse to the Lenders not approved by the Arrangers).

     (n) The Equity Contributions shall have been made.

     (o) The consummation of the Transactions shall comply in all respects with the terms of the Senior Subordinated Notes and the UK Facility and the Senior Subordinated Notes shall have been issued and all the conditions precedent to borrowing under the UK Facility shall have been met.

The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding.

          SECTION 4.02. Each Credit Event. The obligation of each Lender to make any Loan and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to receipt of the request therefor in accordance herewith and to the satisfaction of the following conditions:

     (a) The representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects (except to the extent any such representation or warranty is qualified by “materially”, “Material Adverse Effect” or a similar term, in which case such representation and warranty shall be true and correct in all respects) on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects (except to the extent any such representation or warranty is qualified by “materially”, “Material Adverse Effect” or a similar term, in which case such representation and warranty shall be true and correct in all respects) as of such earlier date); provided that the only representations relating to the Borrower or its Subsidiaries and their businesses, the accuracy of

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which shall be a condition to availability on the Effective Date shall be those in Sections 3.01, 3.02, 3.08, 3.16, 3.19 and 3.20.

     (b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default or Event of Default shall have occurred and be continuing; provided that the only representations relating to the Borrower or its Subsidiaries and their businesses, the accuracy of which shall be a condition to availability on the Effective Date shall be those in Sections 3.01, 3.02, 3.08, 3.16, 3.19 and 3.20.

Each Borrowing (provided that a conversion or continuation of a Borrowing shall not constitute a “Borrowing” for purposes of this Section 4.02) and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by Holdings and the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section 4.02.

ARTICLE V

Affirmative Covenants

          Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees, expenses and other amounts payable under any Loan Document shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, each of Holdings and the Borrower covenants and agrees with the Lenders that:

          SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent (for distribution to each Lender):

          (a) within 90 days (or such shorter period as the SEC shall specify for the filing of annual reports on Form 10-K) after the end of each fiscal year of the Borrower commencing with the fiscal year ended December 31, 2007, (i) its audited consolidated and consolidating (between Loan Parties and entities that are not loan parties and which may be in the form of footnote disclosure) balance sheet and consolidated and consolidating (between Loan Parties and entities that are not loan parties and which may be in the form of footnote disclosure) statements of operations and comprehensive income, stockholders’ equity and cash flows as of the end of and for such fiscal year, and the related notes thereto, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and the Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, and (ii) if at any time the Borrower is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that describes the financial condition and results of operations of the Borrower and its consolidated Subsidiaries;

          (b) within 45 days (or such shorter period as the SEC shall specify for the filing of quarterly reports on Form 10-Q) after the end of each of the first three fiscal quarters of each fiscal year of the Borrower commencing with the fiscal quarter ending March 31, 2007, (i) its consolidated and consolidating (between Loan Parties and entities that are not loan parties and which may be in the form of footnote disclosure) balance sheet and consolidated and consolidating (between Loan Parties and entities that are not loan parties and which may be in the form of footnote disclosure) statements of operations and comprehensive income, stockholders’ equity and cash flows as of the end of and for such fiscal quar-

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ter and the then-elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by a Financial Officer as presenting fairly in all material respects the financial condition and results of operations of the Borrower and the Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes, and (ii) if at any time the Borrower is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that describes the financial condition and results of operations of the Borrower and its consolidated Subsidiaries;

          (c) concurrently with any delivery of financial statements under Section 5.01(a) or (b), a certificate of a Financial Officer (i) certifying as to whether a Default or Event of Default has occurred and, if a Default or Event of Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth (A) reasonably detailed calculations demonstrating compliance (if necessary) with Section 6.12 (including any exercise of the rights set forth in Section 7.02), showing a detailed calculation of the Available Amount including changes therein from the prior reporting period, the Fair Market Value of the assets of Inactive Subsidiaries and showing a calculation of the Leverage Ratio for purposes of determining the Applicable Rate and (B) in the case of financial statements delivered under Section 5.01(a), reasonably detailed calculations of Excess Cash Flow for the applicable period, (iii) certifying as to the calculation of Consolidated EBITDA on a Pro Forma Basis for the four fiscal quarter period ending on the date of such financial statements and accompanied by reasonably detailed supporting evidence, and (iv) certifying as to the applicable Secured Leverage Ratio, Fixed Charge Coverage Ratio or Facility-Level EBITDA, at the time of each event for which compliance with a Secured Leverage Ratio, Fixed Charge Coverage Ratio or Facility-Level EBITDA threshold is expressly required (i.e. the requirement is not solely that no Default or Event of Default exist on a Pro Forma Basis) during the period covered by the applicable financial statements being delivered under Section 5.01(a) or (b), accompanied by reasonably detailed supporting evidence; it being understood that each of the calculations described in this Section 5.01(c) shall provide a reconciliation to the financial statements delivered under Sections 5.01(a) and (b);

          (d) concurrently with any delivery of financial statements under Section 5.01(a), a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default or Event of Default and, if such knowledge has been obtained, describing such Default or Event of Default (which certificate may be limited to the extent required by accounting rules or guidelines);

          (e) within 30 days after the commencement of each fiscal year of the Borrower, a detailed consolidated budget for such fiscal year (including a projected consolidated balance sheet and consolidated statements of projected operations and cash flows as of the end of and for such fiscal year) and, promptly when available, any significant revisions of such budget;

          (f) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the SEC or with any national securities exchange, as applicable;

          (g) simultaneously with the delivery of each set of consolidated financial statements referred to in Sections 5.01(a) and 5.01(b) above, the related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such consolidated financial statements; and

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          (h) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Holdings, the Borrower or any Subsidiary or any Plan, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request.

          SECTION 5.02. Notices of Material Events. Holdings and the Borrower will furnish to the Administrative Agent (for distribution to each Lender), through the Administrative Agent, written notice of the following promptly after obtaining knowledge thereof:

     (a) the occurrence of any Default or Event of Default;

     (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting Holdings, the Borrower or any Subsidiary that, if adversely determined, is reasonably likely to result in a Material Adverse Effect;

     (c) the occurrence of any ERISA Event that alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and the Restricted Subsidiaries in an aggregate amount exceeding $10,000,000;

     (d) the receipt by Holdings, the Borrower or any Subsidiary of (i) any notice of any loss of any governmental right, qualification, permit, accreditation, approval, authorization, Reimbursement Approval, license or franchise or (ii) any notice, compliance order or adverse report issued by any Governmental Authority or Third Party Payor that, if not promptly complied with or cured, could result in (A) the suspension or forfeiture of any material governmental right, qualification, permit, accreditation, approval, authorization, Reimbursement Approval, license or franchise necessary for the Borrower or any Restricted Subsidiary to carry on its business as now conducted or as proposed to be conducted or (B) any other material Limitation imposed upon the Borrower or any Restricted Subsidiary;

     (e) any Change in Law of the type described in clause (a) or (b) of such definition relating to any Third Party Payor Arrangement that could reasonably be expected to have a material and adverse effect on the ability of the Borrower or any Restricted Subsidiary to carry on its business as now conducted or as proposed to be conducted; and

     (f) any other development that results in, or is reasonably likely, individually or in the aggregate, to result in, a Material Adverse Effect.

Each notice delivered under this Section 5.02 shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

          SECTION 5.03. Information Regarding Collateral.

          (a) The Borrower will furnish to the Collateral Agent prompt written notice (but in no event later than 60 days) of any change (i) in any Loan Party’s corporate name, (ii) in the jurisdiction of incorporation or organization of any Loan Party or (iii) in any Loan Party’s organizational identification number. The Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. The Borrower also agrees promptly to notify the Collateral Agent if any material portion of the Collateral is damaged or destroyed.

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          (b) Each year, at the time of delivery of annual financial statements pursuant to Section 5.01(a), the Borrower shall deliver to the Collateral Agent a certificate executed by a Financial Officer and the chief legal officer of the Borrower setting forth the information required pursuant to the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Effective Date or the date of the most recent certificate delivered pursuant to this Section (it being understood that with such updates to the Perfection Certificate the Borrower need not conduct additional lien or other database searches or list any filing offices or give the information required by Section 3 thereof).

          SECTION 5.04. Existence; Conduct of Business. Each of Holdings and the Borrower will, and will cause each of the Restricted Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, qualifications, permits, approvals, accreditations, authorizations, Reimbursement Approvals, licenses, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03.

          SECTION 5.05. Payment of Obligations. Each of Holdings and the Borrower will, and will cause each of the Restricted Subsidiaries to, pay its Tax liabilities, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) Holdings, the Borrower or such Restricted Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (c) such contest effectively suspends the enforcement of any Lien securing such obligation and (d) the failure to make payment pending such contest is not reasonably likely to, individually or in the aggregate, result in a Material Adverse Effect.

          SECTION 5.06. Maintenance of Properties. Each of Holdings and the Borrower will, and will cause each of the Restricted Subsidiaries to, keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear and fire or other casualty excepted.

          SECTION 5.07. Insurance. Each of Holdings and the Borrower will, and will cause each of the Restricted Subsidiaries to, maintain, with financially sound and reputable insurance companies (which may include self-insurance), (a) insurance in such amounts (with no greater risk retention) and against such risks as are customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations and (b) all insurance required to be maintained pursuant to the Security Documents; each insurance policy maintained pursuant to this sentence shall name the Collateral Agent as additional insured or loss payee if permitted by law and shall provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days after receipt by the Collateral Agent of written notice thereof. The Borrower will furnish to the Lenders, upon request of the Administrative Agent, information in reasonable detail as to the insurance so maintained. Unless otherwise waived by the Administrative Agent in its sole discretion, with respect to each Mortgaged Property, obtain flood insurance in such total amount as the Administrative Agent or the Required Lenders may from time to time reasonably require, if at any time the area in which any improvements located on any Mortgaged Property is designated a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as amended from time to time.

          SECTION 5.08. Casualty and Condemnation. The Borrower (a) will furnish to the Administrative Agent and the Lenders prompt written notice of any casualty or other insured damage to

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any material portion of the Collateral or the commencement of any action or proceeding for the taking of any material portion of the Collateral or interest therein under power of eminent domain or by condemnation or similar proceeding and (b) will ensure that the Net Proceeds of any such event (whether in the form of insurance proceeds, condemnation awards or otherwise) are collected and applied in accordance with the applicable provisions of this Agreement and the Security Documents.

          SECTION 5.09. Books and Records; Inspection and Audit Rights. Each of Holdings and the Borrower will, and will cause each of the Restricted Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. Each of Holdings and the Borrower will, and will cause each of the Restricted Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties during normal business hours, to examine and make extracts from its books and records, including any information relating to actual or potential compliance with or liability under Environmental Laws, and to discuss its affairs, finances and condition with its officers and independent accountants (provided that the Borrower shall be provided the opportunity to participate in any such discussions with its independent accountants), all at such reasonable times and as often as reasonably requested.

          SECTION 5.10. Compliance with Laws. Each of Holdings and the Borrower will, and will cause each of the Restricted Subsidiaries to comply with all Requirements of Law, including ERISA and Environmental Laws, and all requirements of Government Programs even if not Requirements of Law, applicable to it, its operations and all property owned, operated and leased by any of them, except where the failure to do so, individually or in the aggregate, is not reasonably likely to result in a Material Adverse Effect.

          SECTION 5.11. Use of Proceeds and Letters of Credit. The proceeds of the Tranche B Term Loans and any Revolving Loans borrowed on the Effective Date will be used by the Borrower on the Effective Date solely for (a) first, the payment of the Transaction Costs, (b) second, the payment of all principal, interest, fees and other amounts outstanding under the Existing Credit Facilities, and (c) third, together with the Equity Contributions and cash on hand of the Borrower, the payment of the Merger Consideration. The proceeds of the Delayed Draw Term loans will be used solely to finance the St. Louis Investments. The proceeds of the Revolving Loans (except as described above), Swingline Loans and Letters of Credit will be used only for working capital and for other general corporate purposes. No part of the proceeds of any Loan and no Letter of Credit will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.

          SECTION 5.12. Additional Subsidiaries. If any additional Subsidiary is formed or acquired after the Effective Date (or if any Inactive Subsidiary or Specified Subsidiary that is not a Subsidiary Loan Party ceases to qualify as an Inactive Subsidiary or Specified Subsidiary, as applicable) the Borrower will, promptly and in any event within 30 days of such event, notify the Collateral Agent and the Administrative Agent thereof and cause the Collateral and Guarantee Requirement to be satisfied with respect to such Subsidiary (if it is a Subsidiary Loan Party) and with respect to any Equity Interest in such Subsidiary owned by or on behalf of any Loan Party; provided that the Collateral Agent may, in its reasonable judgment, grant extensions of time for compliance, or exceptions from compliance, with the provisions of this paragraph by any Loan Party.

          SECTION 5.13. Further Assurances.

          (a) Holdings and the Borrower will, and will cause each Subsidiary Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages,

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deeds of trust and other documents), which may be required under any applicable law, or which the Administrative Agent or the Required Lenders may reasonably request, to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the expense of the Loan Parties. Each of Holdings and the Borrower also agrees to provide to the Collateral Agent, from time to time upon reasonable request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents (including legal opinions).

          (b) If any material assets (including any real property (other than any leased real property) or improvements thereto or any interest therein, other than any real property with a fair value of less than $2,500,000) are acquired by the Borrower or any Subsidiary Loan Party after the Effective Date (other than assets constituting Collateral under the Collateral Agreement that become subject to the Lien in favor of the Collateral Agent upon acquisition thereof), the Borrower will promptly notify the Administrative Agent and the Lenders thereof and, if requested by the Administrative Agent or the Required Lenders, the Borrower will cause such assets to be subjected to the Lien of the Security Documents securing the Obligations and will take, and cause the Subsidiary Loan Parties to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect such Liens, including actions described in Section 5.13(a), all at the expense of the Loan Parties, all within 90 days of such request, provided that the Collateral Agent may, in its reasonable judgment, grant extensions of time for compliance or exceptions with the provisions of this paragraph by any Loan Party. Notwithstanding anything to the contrary in this Agreement or any Security Document, no Loan Party shall be required to pledge or grant security interests in particular assets if, in the reasonable judgment of the Administrative Agent or the Collateral Agent, the costs of creating or perfecting such pledges or security interests in such assets (including any mortgage, stamp, intangibles or other tax) are excessive in relation to the benefits to the Lenders therefrom.

          SECTION 5.14. Environmental Matters. Except, in each case, to the extent that the failure to do so is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect, Holdings and the Borrower will comply, and take all reasonable actions to cause all lessees and other Persons operating or occupying its properties to comply with all applicable Environmental Laws and Environmental Permits; obtain and renew all Environmental Permits necessary for its operations and properties; and, in each case to the extent Holdings, the Borrower or any Restricted Subsidiary is required by Environmental Laws, conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials at, on, under or emanating from any affected property, in accordance with the requirements of all Environmental Laws.

          SECTION 5.15. Designation of Subsidiaries.

          (a) The Borrower may at any time after the Effective Date designate any Restricted Subsidiary of the Borrower as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) immediately before and after such designation on a Pro Forma Basis, no Default shall have occurred and be continuing, (ii) immediately after giving effect to such designation, the Borrower shall be in compliance, on a Pro Forma Basis, with the Financial Performance Covenant assuming that the Financial Performance Covenant is applicable (it being understood that as a condition precedent to the effectiveness of any such designation, the Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer setting forth in reasonable detail the calculations demonstrating such compliance), (iii) no Subsidiary may be designated as an Unrestricted Subsidiary or continue as an Unrestricted Subsidiary if (i) it is a “Restricted Subsidiary” for the purpose of the Senior Subordinated Notes or any other Indebtedness of Holdings or the Borrower or (ii) the Borrower or any Restricted Subsidiary provides any Guarantee or credit support of any kind, including any undertaking, Guarantee, indemnity, agreement or instrument that would constitute Indebtedness (other than the pledge of Equity Interests of

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Unrestricted Subsidiaries) of any Indebtedness of such Unrestricted Subsidiary or is directly or indirectly liable on such Indebtedness, as a guarantor or otherwise or any Indebtedness of such Unrestricted Subsidiary contains a default that would permit, upon notice, lapse of time or both, any holder of any Indebtedness of Borrower or any Restricted Subsidiary to declare a default under such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity, (iv) no Restricted Subsidiary may be designated an Unrestricted Subsidiary if it was previously designated an Unrestricted Subsidiary and (v) if a Restricted Subsidiary is being designated as an Unrestricted Subsidiary hereunder, the sum of (A) the assets of such Subsidiary as of such date of designation (the “Designation Date”), as set forth on such Subsidiary’s most recent balance sheet, plus (B) the aggregate amount of assets of all Unrestricted Subsidiaries designated as Unrestricted Subsidiaries pursuant to this Section 5.15(a) prior to the Designation Date (in each case measured as of the date of each such Unrestricted Subsidiary’s designation as an Unrestricted Subsidiary), together with the amount of all Investments outstanding pursuant to the proviso to Section 6.04(vi) and Section 6.04(xvi), as of the Designation Date shall not exceed 15.0% of the Total Assets as of the Designation Date on a pro forma basis for such designation. The designation of any Subsidiary as an Unrestricted Subsidiary after the Effective Date shall constitute an Investment by the Borrower therein at the date of designation in an amount equal to the net book value of the Borrower’s or its Subsidiary’s (as applicable) investment therein. The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute (i) the incurrence at the time of designation of any Investment, Indebtedness or Liens of such Subsidiary existing at such time and (ii) a return on any Investment by the Borrower in Unrestricted Subsidiaries pursuant to the preceding sentence in an amount equal to the Fair Market Value at the date of such designation of the Borrower’s or its Subsidiary’s (as applicable) Investment in such Subsidiary.

          (b) If, at any time, a Restricted Subsidiary would fail to meet the requirements set forth in the definition of “Qualified Restricted Subsidiary”, it will thereafter cease to be a Qualified Restricted Subsidiary for purposes of this Agreement and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary that is not a Qualified Restricted Subsidiary as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 6.01 the Borrower will be in default of such covenant. The Board of Directors of the Borrower may at any time designate any Restricted Subsidiary not to be a Qualified Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by such Restricted Subsidiary of any outstanding Indebtedness of such Restricted Subsidiary, and such designation will only be permitted if (1) such Indebtedness is permitted under Section 6.01 and (2) no Default or Event of Default would be in existence following such designation. In the event (x) a Restricted Subsidiary fails to meet the requirements to be a Qualified Restricted Subsidiary or (y) the Board of Directors designates a Qualified Restricted Subsidiary not to be a Restricted Subsidiary, then all Investments in such Subsidiary since the Effective Date shall be deemed to be an incurrence under Section 6.04(xvi) and to consequently reduce amounts available under Section 5.15(a)(v), the proviso to Section 6.04(vi) and Section 6.04(xvi). The Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer setting forth any such designation as a condition precedent to such designation.

ARTICLE VI

Negative Covenants

          Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees, expenses and other amounts payable under any Loan Document have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, each of Holdings and the Borrower covenants and agrees with the Lenders that:

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          SECTION 6.01. Indebtedness; Certain Equity Securities.

          (a) Borrower will not, nor will it permit any Restricted Subsidiary to, directly or indirectly create, incur, issue, guarantee or assume or otherwise become directly or indirectly liable for any Indebtedness, contingently or otherwise, except:

     (i) Indebtedness created under the Loan Documents;

     (ii) the Senior Subordinated Notes and any notes issued in exchange or substitution therefor pursuant to a registration rights agreement so long as the aggregate principal amount thereof is not increased;

     (iii) Indebtedness existing on the Effective Date and set forth in Schedule 6.01 and extensions, renewals and replacements of any such Indebtedness, provided that such extending, renewal or replacement Indebtedness (A) shall not be in a principal amount that exceeds the principal amount of the Indebtedness being extended, renewed or replaced (plus accrued interest and premium thereon), (B) shall not have an earlier maturity date or a decreased weighted average life than the Indebtedness being extended, renewed or replaced, (C) if applicable, shall be subordinated to the Obligations on the same terms (or, from a Lender’s perspective, better terms) as the Indebtedness being extended, renewed or replaced, and (D) there is no obligor of such Indebtedness that is not an obligor of such Indebtedness on the Effective Date;

     (iv) Indebtedness of the Borrower owed to any Qualified Restricted Subsidiary and of any Qualified Restricted Subsidiary owed to the Borrower or any other Qualified Restricted Subsidiary;

     (v) Guarantees by the Borrower of Indebtedness of any Qualified Restricted Subsidiary and by any Qualified Restricted Subsidiary of Indebtedness of the Borrower or any other Qualified Restricted Subsidiary, provided that the Indebtedness so Guaranteed is permitted by this Section 6.01;

     (vi) (A) so long as no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis, Indebtedness of the Borrower or any Restricted Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations, and any Indebtedness assumed by the Borrower or any Restricted Subsidiary in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof; provided that (i) such Indebtedness is incurred prior to or within 270 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this clause (vi) ((A) and (B)) shall not, together with Indebtedness incurred pursuant to clauses (x) and (y) of the second proviso of Section 6.01(a)(vii) and Section 6.01(a) (xiv) then outstanding, exceed the greater of (I) $150.0 million and (II) (a) 1.25x Facility-Level EBITDA for the latest four consecutive fiscal quarters for which financial statements have been delivered pursuant to Section 5.01 on a Pro Forma Basis less (b) the aggregate principal amount of Indebtedness of the Restricted Subsidiaries outstanding on the Effective Date (other than under the Loan Documents or the Senior Subordinated Notes Documents) and any refinancing Indebtedness in respect thereof permitted under this Agreement net of prepayments thereof funded other than with the proceeds of Indebtedness; provided further that after giving effect to the incurrence of Indebtedness under this clause (A) the Borrower is in compliance with the Financial Performance Covenant (such covenant to be applied even if no Revolving Loan or Swingline Loan and less than $7.5 million of LC Exposure is outstanding) on a Pro Forma Basis and no Default has occurred and is continuing or would result

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therefrom on a Pro Forma Basis, and (B) extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (including the principal and any accrued but unpaid interest or premium in respect thereof);

     (vii) (A) so long as no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis, Indebtedness of any Person that becomes a Restricted Subsidiary after the date hereof, provided that such Indebtedness exists at the time such Person becomes a Restricted Subsidiary and is not created in contemplation of or in connection with such Person becoming a Restricted Subsidiary, provided further that if (1) (x) such Indebtedness is secured by a Lien on the assets of or Equity Interests in such Restricted Subsidiary or (y) such Restricted Subsidiary is not a Loan Party, then (I) the Borrower must be in compliance with the Financial Performance Covenant on a Pro Forma Basis (such covenant to be applied even if no Revolving Loan or Swingline Loan and less than $7.5 million of LC Exposure is outstanding) and (II) the aggregate amount of such Indebtedness (together with refinancings, renewals and replacements thereof pursuant to clause (B) below) shall not, together with Indebtedness incurred pursuant to Sections 6.01(a)(vi) and (xiv) then outstanding, exceed the greater of (i) $150.0 million and (ii) (a) 1.25x Facility-Level EBITDA for the latest four consecutive fiscal quarters for which financial statements have been delivered pursuant to Section 5.01 on a Pro Forma Basis less (b) the aggregate principal amount of Indebtedness of the Restricted Subsidiaries outstanding on the Effective Date (other than under the Loan Documents or the Senior Subordinated Notes Documents) and any refinancing Indebtedness in respect thereof permitted under this Agreement net of prepayments thereof funded other than with the proceeds of Indebtedness and (2) such Indebtedness is unsecured and such Qualified Restricted Subsidiary is a Loan Party then immediately prior to and after giving effect to the incurrence of such Indebtedness on a Pro Forma Basis, the Borrower must be able to incur $1.00 of Indebtedness under Section 6.01(a)(xi), and (B) any refinancings, renewals and replacements of any such Indebtedness pursuant to the preceding clause (A) that do not increase the outstanding principal amount (plus accrued interest and premium) thereof;

     (viii) Indebtedness owed to any Person (including obligations in respect of letters of credit for the benefit of such Person) providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance pursuant to reimbursement or indemnification obligations to such Person, in each case incurred in the ordinary course of business;

     (ix) Indebtedness of the Borrower or any Restricted Subsidiary in respect of performance bonds, bid bonds, appeal bonds, surety bonds, performance and completion guarantees and similar obligations, in each case provided in the ordinary course of business;

     (x) Indebtedness of any Loan Party pursuant to Swap Agreements permitted by Section 6.07;

     (xi) so long as no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis, Indebtedness of a Loan Party may be incurred so long as the Fixed Charge Coverage Ratio is at least 2.0 to 1.0 on a Pro Forma Basis;

     (xii) Indebtedness representing deferred compensation to employees of the Borrower and the Restricted Subsidiaries incurred in the ordinary course of business;

     (xiii) Indebtedness in respect of promissory notes issued to physicians, consultants, employees or directors or former employees, consultants or directors in connection with repurchases of Equity Interests permitted by Section 6.08(a)(iii);

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     (xiv) so long as no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis, Indebtedness of Restricted Subsidiaries not to exceed at any time outstanding, together with Indebtedness incurred pursuant to Section 6.01(a)(vi) and clauses (x) and (y) the second proviso of Section 6.01(a)(vii) then outstanding, the greater of (I) $150.0 million and (II) (a) 1.25x Facility-Level EBITDA for the latest four consecutive fiscal quarters for which financial statements have been delivered pursuant to Section 5.01 on a Pro Forma Basis less (b) the aggregate principal amount of Indebtedness of the Restricted Subsidiaries outstanding on the Effective Date (other than under the Loan Documents or the Senior Subordinated Notes Documents) and any refinancing Indebtedness in respect thereof permitted under this Agreement net of prepayments thereof funded other than with the proceeds of Indebtedness; provided that the Borrower is in compliance with the Financial Performance Covenant on a Pro Forma Basis (such covenant to be applied even if no Revolving Loan or Swingline Loan and less than $7.5 million of LC Exposure is outstanding);

     (xv) Guarantees by any Loan Party of Indebtedness of a Non-Consolidated Entity in compliance with Section 6.04(xvi);

     (xvi) Additional Subordinated Debt in an aggregate principal amount not to exceed $200,000,000 at any time outstanding incurred to finance Permitted Acquisitions; provided that after giving effect to the incurrence of such Additional Subordinated Debt on a Pro Forma Basis the Borrower is in compliance with the Financial Performance Covenant (such covenant to be applied even if no Revolving Loan or Swingline Loan and less than $7.5 million of LC Exposure is outstanding) and no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis;

     (xvii) Indebtedness of Foreign Subsidiaries that are Qualified Restricted Subsidiaries in an aggregate principal amount not to exceed $25,000,000 at any time outstanding; provided that after giving effect to the incurrence of such Additional Subordinated Debt on a Pro Forma Basis the Borrower is in compliance with the Financial Performance Covenant (such covenant to be applied even if no Revolving Loan or Swingline Loan and less than $7.5 million of LC Exposure is outstanding) and no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis;

     (xviii) Additional Subordinated Debt in an aggregate principal amount not to exceed $100,000,000 at any time outstanding; provided that after giving effect to the incurrence of such Additional Subordinated Debt on a Pro Forma Basis the Borrower is in compliance with the Financial Performance Covenant (such covenant to be applied even if no Revolving Loan or Swingline Loan and less than $7.5 million of LC Exposure is outstanding) and no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis; and

     (xix) (A) so long as no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis, Indebtedness of the Borrower or any Restricted Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations, and any Indebtedness assumed by the Borrower or any Restricted Subsidiary in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof; provided that (i) such Indebtedness is incurred prior to or within 270 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this clause (xix) shall not exceed $75.0 million; provided further that after giving effect to the incurrence of Indebtedness under this clause (A) the Borrower is in compliance with the Financial Performance Covenant (such

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covenant to be applied even if no Revolving Loan or Swingline Loan and less than $7.5 million of LC Exposure is outstanding) on a Pro Forma Basis and no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis, and (B) extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (including the principal and any accrued but unpaid interest or premium in respect thereof).

          (b) All Indebtedness incurred pursuant to this Section 6.01 of any Loan Party owed to any Subsidiary or Non-Consolidated Entity that is not a Loan Party shall be subordinated to the Obligations on terms reasonably satisfactory to the Administrative Agent; provided that, notwithstanding the foregoing, such Indebtedness shall only be subordinated to the extent permitted by applicable laws or regulations. Guarantees incurred after the Effective Date pursuant to this Section 6.01 by a Loan Party of Indebtedness of a Restricted Subsidiary or Non-Consolidated Entity that is not a Loan Party shall be subordinated to the Obligations of the Loan Party. Notwithstanding anything in Section 6.01(a) to the contrary, (x) no Subsidiary that is a Specified Subsidiary under clauses (ii) or (iii) of the definition thereof may incur any Indebtedness on or after the Effective Date and (y) the principal amount of any Indebtedness secured by a Lien against the assets of a Loan Party listed on Schedule 6.02 shall not be increased after the Effective Date.

          SECTION 6.02. Liens. The Borrower will not, nor will it permit any Restricted Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

     (i) Liens created by the Loan Documents;

     (ii) Permitted Encumbrances;

     (iii) any Lien on any property or asset of the Borrower or any Restricted Subsidiary existing on the Effective Date and set forth in Schedule 6.02; provided that (A) such Lien shall not apply to any other property or asset of the Borrower or any Restricted Subsidiary and (B) such Lien shall secure only those obligations which it secures on the Effective Date and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof (plus accrued interest and premium thereon);

     (iv) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Restricted Subsidiary or existing on any property or asset or Equity Interests of any Person that becomes a Restricted Subsidiary after the date hereof prior to the time such Person becomes a Restricted Subsidiary; provided that (A) such Lien secures Indebtedness permitted by Section 6.01(a)(vii) and such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Restricted Subsidiary, as applicable, (B) such Lien shall not apply to any other property or asset of the Borrower or any Restricted Subsidiary and (C) such Lien shall secure only those obligations that it secures on the date of such acquisition or the date such Person becomes a Restricted Subsidiary, as applicable, and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof (plus accrued interest and premium thereon);

     (v) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Restricted Subsidiary, provided that (A) such security interests secure Indebtedness permitted by Sections 6.01(a)(vi) or 6.01(a)(xix), (B) such security interests and the Indebtedness secured thereby are incurred prior to or within 270 days after such acquisition or the completion

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of such construction or improvement and (C) such security interests shall not apply to any other property or assets of the Borrower or any Restricted Subsidiary;

     (vi) Liens of a collecting bank arising in the ordinary course of business under Section 4-208 of the Uniform Commercial Code in effect in the relevant jurisdiction covering only the items being collected upon;

     (vii) Liens arising out of sale and leaseback transactions permitted by Section 6.06;

     (viii) Liens granted by a Subsidiary that is not a Loan Party in favor of the Borrower or another Loan Party in respect of Indebtedness owed by such Subsidiary;

     (ix) licenses or sublicenses granted to others not interfering in any material respect with the business of the Borrower or any Subsidiary;

     (x) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

     (xi) Liens that are contract rights of set-off (i) relating to the establishment of depositary relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Borrower or any Restricted Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower and the Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Borrower or any Restricted Subsidiary in the ordinary course of business;

     (xii) Liens solely on any cash earned money deposits made by the Borrower or any Restricted Subsidiary in connection with any letter of intent or purchase agreement permitted hereunder;

     (xiii) Liens in favor of a Loan Party securing Indebtedness permitted under Sections 6.01(a)(iv) and (v);

     (xiv) Liens on assets securing Indebtedness (and related obligations) permitted by Section 6.01(a)(xiv) so long as the Borrower is in compliance with the Financial Performance Covenant (such covenant to be applied even if no Revolving Loan or Swingline Loan and less than $7.5 million of LC Exposure is outstanding) on a Pro Forma Basis at the time such Lien is incurred;

     (xv) Liens on assets of the Borrower or the Restricted Subsidiaries not otherwise permitted by this Section 6.02, so long as neither (i) the aggregate outstanding principal amount of the obligations secured thereby nor (ii) the aggregate fair value (determined as of the date such Lien is incurred) of the assets subject thereto exceeds at any time outstanding the greater of (x) $15,000,000 and (y) 1.00% of Total Assets on a pro forma basis;

     (xvi) Permitted Payment Restrictions; and

     (xvii) Liens on the assets of Foreign Subsidiaries securing Indebtedness permitted under Section 6.01(a)(xvii) so long as such Liens solely relate to assets of Foreign Subsidiaries that are obligors under the applicable Indebtedness;

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provided that in no event shall any Restricted Subsidiary create, incur, assume or permit to exist any consensual Lien on (A) any Collateral (other than (i) Liens created under the Loan Documents, (ii) Liens (permitted under Section 6.02(iv) and (iii) Liens listed on Schedule 6.02) pledged to secure Indebtedness permitted under Section 6.01(a)(vii) incurred by Persons that become Restricted Subsidiaries after the Effective Date) or (B) any Equity Interests (including of Non-Consolidated Entities) owned by them (other than (i) Liens created under the Loan Documents, (ii) Liens (permitted under Section 6.02(iv)) on any Equity Interests of a Restricted Subsidiary pledged to secure Indebtedness permitted under Section 6.01(a)(vii) and (iii) Liens listed on Schedule 6.02).

          SECTION 6.03. Fundamental Changes.

          (a) The Borrower will not, nor will it permit any Restricted Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing, (i) any Person may merge into the Borrower in a transaction in which the surviving entity is a Person organized or existing under the laws of the United States of America, any State thereof or the District of Columbia and, if such surviving entity is not the Borrower, such Person expressly assumes, in writing, all the obligations the Borrower under the Loan Documents, (ii) any Person may merge into any Restricted Subsidiary in a transaction in which the surviving entity is a Restricted Subsidiary and, if any party to such merger is a Subsidiary Loan Party or a Qualified Restricted Subsidiary, is or becomes a Subsidiary Loan Party and/or Qualified Restricted Subsidiary, as applicable, concurrently with such merger, (iii) any Restricted Subsidiary (other than a Subsidiary Loan Party) may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders and (iv) any asset sale permitted by Section 6.05(g) may be effected through the merger of a subsidiary of the Borrower with a third party, provided that any such merger referred to in clauses (i), (ii) or (iv) above involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.04.

          (b) The Borrower will not, will not permit any Restricted Subsidiary to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and the Restricted Subsidiaries on the Effective Date and businesses reasonably related or incidental thereto.

          (c) Holdings will not engage in any business or activity other than the ownership of all the outstanding shares of capital stock of the Borrower (but no other subsidiaries) and engaging in corporate and administrative functions and other activities incidental thereto. Holdings will not own or acquire any assets (other than any cash on hand as of the Effective Date not otherwise contributed to the Borrower in connection with the Transactions, Equity Interests of the Borrower and the cash proceeds of any Restricted Payments permitted by Section 6.08) or incur any liabilities (other than liabilities reasonably incurred in connection with its maintenance of its existence and activities incidental thereto); provided that (i) Holdings may incur Qualified Holdings Debt and retain, dividend or contribute to the Borrower the proceeds thereof; provided that other than with respect to any additional principal amounts resulting from the accrual of pay-in-kind interest, no Default has occurred and is continuing or would result therefrom, and (ii) Holdings may issue ordinary common stock and other Qualified Equity Interests and retain, dividend or contribute to the Borrower the proceeds thereof.

          SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. The Borrower will not, nor will it permit any Restricted Subsidiary to, purchase or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any Equity Interests in or evidences of indebtedness or other securities (including any option, warrant or other right

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to acquire any of the foregoing) of, make any loans or advances to, Guarantee any obligations of, or make any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any Person or assets or division constituting a business unit (collectively, “Investments”), except:

     (i) Permitted Acquisitions;

     (ii) Permitted Investments;

     (iii) Investments set forth on Schedule 6.04;

     (iv) Investments by the Borrower and the Restricted Subsidiaries in Equity Interests in Qualified Restricted Subsidiaries (other than an Insurance Subsidiary);

     (v) loans or advances made by the Borrower to any Qualified Restricted Subsidiary (other than an Insurance Subsidiary) and made by any Restricted Subsidiary to the Borrower or any Qualified Restricted Subsidiary (other than an Insurance Subsidiary), provided that any such loans and advances made by a Loan Party shall be evidenced by a promissory note pledged pursuant to the Collateral Agreement;

     (vi) Guarantees (other than of Indebtedness of an Insurance Subsidiary) constituting Indebtedness permitted by Section 6.01; provided that if at the time of and after giving effect to any Guarantee (and without limiting the foregoing) the aggregate principal amount of Indebtedness of Restricted Subsidiaries that are not Qualified Restricted Subsidiaries that is Guaranteed by the Borrower or any Qualified Restricted Subsidiary (together with the amount of Investments permitted under Section 5.15(a)(v) and Section 6.04(xvi)) exceeds 15.0% of Total Assets (in each case determined without regard to any write-downs or write-offs) on a pro forma basis such Guarantee shall not be permitted and that any such Guarantees shall only be permitted so long as no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis; provided further that (i) substantially all of the business activities of any such Restricted Subsidiary that is not a Qualified Restricted Subsidiary whose Indebtedness is so Guaranteed consists of owning or operating surgical facilities and (ii) a majority of the voting stock of such Person is owned by the Borrower, its Restricted Subsidiaries and/or other Persons that are not Affiliates of the Borrower;

     (vii) receivables or other trade payables owing to the Borrower or any Restricted Subsidiary if created or acquired in the ordinary course of business consistent with past practice and payable or dischargeable in accordance with customary trade terms, provided that such trade terms may include such concessionary trade terms as the Borrower or any such Restricted Subsidiary deems reasonable under the circumstances;

     (viii) Investments consisting of Equity Interests, obligations, securities or other property received in settlement of delinquent accounts of and disputes with customers and suppliers in the ordinary course of business and owing to the Borrower or any Restricted Subsidiary or in satisfaction of judgments;

     (ix) Investments by the Borrower or any Restricted Subsidiary in payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;

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     (x) loans or advances by the Borrower or any Restricted Subsidiary to employees (a) made for reasonable and customary business-related travel, entertainment, relocation and analogous ordinary business purposes and (b) otherwise not exceeding $2,500,000 in the aggregate at any time outstanding (determined without regard to any write-downs or write-offs of such loans or advances);

     (xi) Investments in the form of Swap Agreements permitted by Section 6.07;

     (xii) Investments of any Person existing at the time such Person becomes a Restricted Subsidiary of the Borrower or consolidates or merges with the Borrower or any of the Restricted Subsidiaries (including in connection with a Permitted Acquisition) so long as such investments were not made in contemplation of such Person becoming a Restricted Subsidiary or of such consolidation or merger;

     (xiii) Investments received in connection with the dispositions of assets permitted by Section 6.05;

     (xiv) Investments constituting deposits described in clauses (c) and (d) of the definition of the term “Permitted Encumbrances”;

     (xv) so long as no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis, Investments by the Borrower or any Restricted Subsidiary in an aggregate amount, as valued at cost at the time each such Investment is made and including all related commitments for future advances, not exceeding the Available Amount immediately prior to the time of the making of any such Investment;

     (xvi) so long as no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis, Investments in joint ventures, Restricted Subsidiaries that are not Qualified Restricted Subsidiaries and Unrestricted Subsidiaries by the Borrower or any Qualified Restricted Subsidiary in an aggregate amount not to exceed at the time of such Investment on a pro forma basis, together with the amount of Investments permitted under Section 5.15(a)(v) and the proviso to Section 6.04(vi), 15.0% of Total Assets on a pro forma basis; provided that (i) substantially all of the business activities of any such joint venture, Restricted Subsidiary that is not a Qualified Restricted Subsidiary, or Unrestricted Subsidiary consists of owning or operating surgical facilities and (ii) a majority of the voting stock of such Person is owned by the Borrower, its Restricted Subsidiaries and/or other Persons that are not Affiliates of the Borrower;

     (xvii) Guarantees by the Borrower or any Restricted Subsidiary of leases (other than Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business;

     (xviii) advances to Non-Consolidated Entities in the ordinary course of business, which when made are expected to be repaid within sixty days of such advance;

     (xix) Investments, loans and advances by the Borrower or any Restricted Subsidiary to any Insurance Subsidiary in amounts equal to (i) the capital required under the applicable laws or regulations of the jurisdiction in which such Insurance Subsidiary is formed or determined by in dependent actuaries as prudent and necessary capital to operate such Insurance Subsidiary and (ii) any reasonable corporate overhead expenses of such Insurance Subsidiary;

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     (xx) St. Louis Investments in an aggregate principal amount not to exceed $100.0 million; and

     (xxi) sales of interests in joint ventures to Strategic Investors or contributions of the St. Louis Investments to joint ventures with Strategic Investors; provided that the Borrower is in compliance with the Financial Performance Covenant (such covenant to be applied even if no Revolving Loan or Swingline Loan and less than $7.5 million of LC Exposure is outstanding) on a Pro Forma Basis after giving effect to any such sale or contribution.

          SECTION 6.05. Asset Sales. The Borrower will not, nor will it permit any Restricted Subsidiary to, sell, transfer, lease or otherwise dispose of any asset, including any Equity Interest owned by it, nor will the Borrower permit any Restricted Subsidiary to issue any additional Equity Interest in such Restricted Subsidiary (other than to the Borrower or another Restricted Subsidiary in compliance with Section 6.04), except:

     (a) sales, transfers and dispositions of (i) inventory in the ordinary course of business and (ii) used, obsolete, worn out or surplus equipment or property in the ordinary course of business;

     (b) sales, transfers and dispositions to the Borrower or any Subsidiary, provided that any such sales, transfers or dispositions from a Loan Party to a Subsidiary that is not a Loan Party or from the Borrower or a Restricted Subsidiary to an Unrestricted Subsidiary or from a Qualified Restricted Subsidiary to a Restricted Subsidiary that is not a Qualified Restricted Subsidiary are permitted under Section 6.04;

     (c) sales, transfers and dispositions of accounts receivable in connection with the compromise, settlement or collection thereof consistent with past practice;

     (d) sales, transfers and dispositions of property to the extent such property constitutes an investment permitted by Sections 6.04(ii), (viii) or (xii);

     (e) sale and leaseback transactions permitted by Section 6.06;

     (f) dispositions resulting from any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of the Borrower or any Restricted Subsidiary;

     (g) sales, transfers and other dispositions of assets that are not permitted by any other paragraph of this Section 6.05, provided that the aggregate Fair Market Value of all assets sold, transferred or otherwise disposed of in reliance upon this clause (g) (excluding (i) any single transaction or series of related transactions that involves assets having a Fair Market Value of less than $250,000 and (ii) any sales of assets or Equity Interests of the UK Subsidiaries) shall not exceed 5.0% of Total Assets during any fiscal year (measured as of the start of such fiscal year);

     (h) exchanges of property for similar replacement property for fair value;

     (i) Investments in compliance with Section 6.04;

     (j) leases or subleases that constitute a Permitted Encumbrance; and

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     (k) the sale of Equity Interests in a Qualified Restricted Subsidiary to a Strategic Investor in connection with the resyndication of such Equity Interests within one (1) year of the purchase thereof from another Strategic Investor;

provided that all sales, transfers, leases and other dispositions permitted hereby (other than those permitted by paragraphs (b), (c), (f) and (j) above) shall be made for fair value and (other than those permitted by paragraphs (b), (h), (i) and (j) above) for at least 75% cash consideration (it being understood that the following shall constitute cash consideration: an aggregate additional amount of non-cash consideration in the amount of the sum of (x) 2.5% of Total Assets at any time outstanding net of any non-cash consideration previously counted under this clause since the Effective Date that was not subsequently counted as Net Proceeds and (y) in the case of any sale or contribution of assets by the Borrower or a Restricted Subsidiary to a joint venture with a Strategic Investor, any non-cash consideration received by the Borrower or such Restricted Subsidiary; provided that (A) the case of each of clause (x) and (y), any such non-cash consideration that is converted into cash or Permitted Investments shall be treated as Net Proceeds in accordance with Section 2.11(c) and (B) in the case of clause (y), in the event such non-cash consideration is other than in the form of a note, such non-cash consideration shall be deemed to have been incurred as an Investment under Section 6.04(xvi) and to consequently reduce amounts available under Section 5.15(a)(v), the proviso to Section 6.04(vi) and Section 6.04(xvi) and, in the case of each of clause (x) and (y), that after giving effect to such sales, transfers, leases and other dispositions permitted hereby the Borrower shall be in compliance with the Financial Performance Covenant on a Pro Forma Basis (such covenant to be applied even if no Revolving Loan or Swingline Loan and less than $7.5 million of LC Exposure is outstanding)) (it being understood that for purposes of clause (a) above, accounts receivable received in the ordinary course and any property received in exchange for used, obsolete, worn out or surplus equipment or property and any non-cash consideration that was actually converted into cash within 6 months following the applicable sale, transfer, lease or other disposition by the Borrower or any of its Restricted Subsidiaries shall be deemed to constitute cash consideration and to the extent actually cash, Net Proceeds).

          SECTION 6.06. Sale and Leaseback Transactions. The Borrower will not, nor will it permit any Restricted Subsidiary to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred, except for (x) any such sale of any fixed or capital assets of the Borrower or any Restricted Subsidiary which sale is made for cash consideration in an amount not less than the fair value of such fixed or capital asset and is consummated within 270 days after the Borrower or such Restricted Subsidiary acquires or completes the construction of such fixed or capital asset, (y) sale and leaseback transactions with respect to real properties (including improvements and other related assets) owned by the UK Subsidiaries or (z) sale and leaseback transactions with respect to properties acquired after the Effective Date, where the Fair Market Value of such properties in the aggregate does not to exceed $10,000,000.

          SECTION 6.07. Swap Agreements. The Borrower will, nor it permit any Restricted Subsidiary to, enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks to which the Borrower or any Restricted Subsidiary has actual exposure (other than those in respect of Equity Interests of the Borrower or any of the Restricted Subsidiaries) and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of the Borrower or any Restricted Subsidiary.

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          SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness.

          (a) The Borrower will not, nor will they permit any Restricted Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except:

     (i) the Borrower may declare and pay dividends with respect to its common stock payable solely in additional shares of its common stock, and, with respect to its preferred stock, payable solely in additional shares of such preferred stock or in shares of its common stock;

     (ii) Restricted Subsidiaries may declare and pay dividends ratably with respect to their capital stock, membership or partnership interests or other similar Equity Interests;

     (iii) Borrower may declare and pay dividends or make other distributions to Holdings, the proceeds of which are used by Holdings or a Parent to (i) purchase or redeem Equity Interests of Holdings or a Parent acquired by employees, consultants or directors of Holdings, the Borrower or any Restricted Subsidiary upon such Person’s death, disability, retirement or termination of employment or (ii) pay principal or interest on promissory notes that were issued in lieu of cash payments for the repurchase, retirement or other acquisition or retirement for value of such Equity Interests, provided that the aggregate amount of such dividends or other distributions under this clause (iii) shall not exceed in any calendar year the lesser of (x) the sum of $500,000 and the aggregate amount of Restricted Payments permitted (but not made) in prior years pursuant to this clause (iii) and (y) $2,500,000; provided that any cancellation of Indebtedness owing to the Borrower in connection with and as consideration for a repurchase of Equity Interests of Holdings (or a Parent) shall not be deemed to constitute a Restricted Payment for purposes of this clause (iii); provided further that such amount in any calendar year may be increased by an amount not to exceed (1) the cash proceeds of key man life insurance policies received by Holdings (to the extent such proceeds are contributed to the Borrower) or any Borrower or any Restricted Subsidiary after the Effective Date (provided that the Borrower may elect to apply all or any portion of the aggregate increase contemplated by clause (1) above in any calendar year) less (2) the amount of any Restricted Payments previously made pursuant to clause (1) of this clause (iii);

     (iv) the Borrower may make Restricted Payments to Holdings to be used by Holdings solely to pay (or to make Restricted Payments to allow a Parent to pay) its franchise taxes and other fees required to maintain its corporate existence and to pay for general corporate and overhead expenses (including salaries and other compensation of employees) incurred by Holdings or a Parent in the ordinary course of its business, provided that such Restricted Payments shall not exceed $3,000,000 in any calendar year;

     (v) the Borrower may make Restricted Payments to Holdings in an amount necessary to enable Holdings to pay (or make Restricted Payments to allow a Parent to pay) the Taxes directly attributable to (or arising as a result of) the operations of a Parent, Holdings, the Borrower and the Restricted Subsidiaries, provided that (A) the amount of such Restricted Payments shall not exceed the lesser of (x) the tax liabilities that the Borrower and the Restricted Subsidiaries would be required to pay in respect of Federal, state and local taxes were the Borrower and the Restricted Subsidiaries to pay such Taxes as stand-alone taxpayers less any tax payable directly by the Borrower or any Restricted Subsidiary or (y) the actual liabilities of the Parent group on a consolidated or combined basis and (B) all Restricted Payments made to Holdings or a Parent pursuant to this clause (v) are used by Holdings or a Parent for the purposes specified herein within 20 days of the receipt thereof;

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     (vi) the Borrower may make Restricted Payments to Holdings to pay management, consulting and advisory fees to any Sponsor or Sponsor Affiliate to the extent permitted by Section 6.09(i);

     (vii) the Borrower may make Restricted Payments to Holdings in an amount necessary to permit Holdings to pay (or to make Restricted Payments to allow a Parent to pay) interest in cash (including interest previously paid “in kind” or added to the principal amount thereof after the Effective Date) on Qualified Holdings Debt, but only to the extent the proceeds (together with a pro rata portion of related transaction expenses paid from such proceeds) of such Qualified Holdings Debt were used to make Capital Expenditures by Borrower or a Qualified Restricted Subsidiary, prepay Tranche B Term Loans, make Investments by Borrower or a Qualified Restricted Subsidiary pursuant to Section 6.04(xvi) or repay, redeem, defease or otherwise refinance any Qualified Holdings Debt previously issued hereunder but only to the extent the proceeds of such Qualified Holdings Debt were used to make Capital Expenditures by Borrower or a Qualified Restricted Subsidiary, prepay Tranche B Term Loans or make Investments by Borrower or a Qualified Restricted Subsidiary pursuant to Section 6.04); provided that (A) the Borrower has made all prepayments required pursuant to Section 2.11(d) prior to or contemporaneously with any such payment of interest, (B) no Default or Event of Default shall have occurred and be continuing at the time of any such payment or would result therefrom on a Pro Forma Basis, (C) all Restricted Payments made pursuant to this clause (viii) are used by Holdings or a Parent for the purposes specified herein within 20 days of receipt thereof and (D) both before and after giving effect to any Restricted Payment under this clause (viii), the Borrower could incur $1.00 of Indebtedness under Section 6.01(a)(xi) (counting all interest expense (including non-cash interest expense) on Qualified Holdings Debt during the applicable period as Fixed Charges of the Borrower);

     (viii) the Borrower and the Restricted Subsidiaries may make additional Restricted Payments (and Holdings may make Restricted Payments with such amounts received from the Borrower) in an aggregate amount throughout the term of this Agreement not exceeding the greater of (x) $35,000,000 and (y) 2% of Total Assets (it being understood that if Total Assets should decrease, Restricted Payments already made in compliance with this clause shall not constitute a Default);

     (ix) the Borrower and the Restricted Subsidiaries may make additional Restricted Payments (and Holdings may make Restricted Payments with such amounts received from the Borrower) in an aggregate amount not exceeding the Available Amount immediately prior to the time of the making of such Restricted Payment; provided that immediately prior to and after giving effect to such Restricted Payment on a Pro Forma Basis, the Borrower could incur $1.00 of Indebtedness under Section 6.01(a)(xi) and no Default has occurred and is continuing;

     (x) the Borrower may make Restricted Payments to Holdings to pay any non-recurring fees, cash charges and cost expenses incurred in connection with the issuance of Equity Interests or Indebtedness, in each case only to the extent that such transaction is not consummated;

     (xi) payments to former stockholders of the Borrower in connection with the exercise of appraisal rights under applicable law;

     (xii) the Merger Consideration paid on or promptly following the Effective Date;

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     (xiii) Investments in non-wholly owned Subsidiaries or Non-Consolidated Entities permitted by Section 6.04; and

     (xiv) the purchase, redemption or other acquisition or retirement for value of Equity Interests of a Qualified Restricted Subsidiary owned by a Strategic Investor if such purchase, redemption or other acquisition or retirement for value is made for consideration not in excess of the Fair Market Value of such Equity Interests.

          (b) The Borrower will not nor will it permit any Restricted Subsidiary to, make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of, any Subordinated Indebtedness (other than intercompany loans among Subsidiaries and the Borrower) or Indebtedness under the UK Facility (collectively, “UK Facility Debt”), except:

     (i) payment of regularly scheduled interest and principal payments as and when due in respect of any Subordinated Indebtedness or UK Facility Debt, other than as prohibited by the subordination provisions thereof;

     (ii) the conversion or exchange of any Subordinated Indebtedness or UK Facility Debt into, or redemption, repurchase, prepayment, defeasance or other retirement of any such Indebtedness with the Net Proceeds of the issuance by Holdings or a Parent of, (A) Equity Interests (or capital contributions in respect thereof) after the Effective Date to the extent not Otherwise Applied or (B) Qualified Holdings Debt, plus any fees and expenses in connection with such conversion, exchange, redemption, repurchase, prepayment, defeasance or other retirement;

     (iii) so long as no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis, the prepayment, redemption, defeasance, repurchase or other retirement of Senior Subordinated Notes for an aggregate purchase price since the Effective Date not to exceed the Available Amount; and

     (iv) any redemption, repurchase, prepayment, defeasance or other retirement of any UK Facility Debt so long as no Default has occurred and is continuing or would result therefrom on a Pro Forma Basis and after giving effect to such extension, renewal or replacement the Borrower shall be in compliance with the Financial Performance Covenant on a Pro Forma Basis (such covenant to be applied even if no Revolving Loan or Swingline Loan and less than $7.5 million of LC Exposure is outstanding).

          SECTION 6.09. Transactions with Affiliates. The Borrower will not, nor will it permit any Restricted Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except

     (a) transactions that are at prices and on terms and conditions not less favorable to the Borrower or such Restricted Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties,

     (b) (i) transactions between or among the Borrower and the Subsidiary Loan Parties, (ii) transactions between or among Qualified Restricted Subsidiaries that are not Subsidiary Loan

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Parties and (iii) transactions between or among the Borrower and its Restricted Subsidiaries consistent with past practice and made in the ordinary course,

     (c) any investment permitted under Section 6.04(iv), 6.04(v), 6.04(vii), 6.04(xiii) or 6.04(xvii),

     (d) any Indebtedness permitted under Section 6.01(a)(iv),

     (e) any Restricted Payment permitted under Section 6.08,

     (f) any sale, transfer or disposition permitted under Section 6.05,

     (g) loans or advances to employees permitted under Section 6.04,

     (h) any lease or sublease entered into between the Borrower or any Restricted Subsidiary, as lessee or sublessee, and any of the Affiliates (as of the Effective Date) of the Borrower or entity controlled by such Affiliates, as lessor or sublessor, which is approved in good faith by a majority of the disinterested members of the Board of Directors of the Borrower,

     (i) so long as no Default described in Section 7.01(b) and no Event of Default has occurred and is continuing, the Borrower may pay, or may pay cash dividends to enable Holdings to pay, customary management, consulting, monitoring or advisory fees to the Sponsor or any Sponsor Affiliates in an aggregate amount in any fiscal year not to exceed the amount permitted to be paid (including accrued amounts) pursuant to the Sponsor Management Agreement as in effect on the date hereof and related indemnities and reasonable expenses,

     (j) payments by Holdings, the Borrower or any of its Restricted Subsidiaries to the Sponsor and/or any Sponsor Affiliate for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures, which payments are approved by the majority of the members of the disinterested members of the Board of Directors of the Borrower, in good faith in an aggregate amount for all such fees not to exceed 2.00% of the aggregate transaction value in respect of which such services are rendered,

     (k) the payment of reasonable fees to directors of the Borrower or any Restricted Subsidiary who are not employees of the Borrower or any Restricted Subsidiary, and compensation and employee benefit arrangements paid to, and indemnities provided for the benefit of, directors, officers or employees of the Borrower or any Restricted Subsidiary in the ordinary course of business,

     (l) any issuances of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements, stock options and stock ownership plans approved by the Borrower’s Board of Directors,

     (m) transactions pursuant to agreements set forth on Schedule 6.09 and any amendments thereto to the extent such amendments are not materially less favorable to the Borrower or such Subsidiary Loan Party than those provided for in the original agreements,

     (n) employment and severance arrangements entered into in the ordinary course of business and approved by the Borrower’s Board of Directors between a Parent, Holdings, the Borrower or any Restricted Subsidiary and any employee thereof,

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     (o) all payments made or to be made in connection with the Transactions, including the payment of the Transaction Costs, and

     (p) payments by the Borrower or any of its Subsidiaries of reasonable insurance premiums to, and any borrowings or dividends received from, any Insurance Subsidiary.

          SECTION 6.10. Restrictive Agreements.

          (a) Subject to clauses (b) through (d) below, the Borrower will not, nor will they permit any Restricted Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (i) the ability of the Borrower or any Restricted Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets or (ii) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any Restricted Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary.

          (b) Section 6.10(a) shall not apply to restrictions and conditions (i) imposed by law or by any Loan Document or any Senior Subordinated Notes Document or any document governing Indebtedness of a Foreign Subsidiary permitted to be incurred under this Agreement (provided that such restrictions shall apply only to such Foreign Subsidiary), (ii) existing on the date hereof identified on Schedule 6.10 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) contained in agreements relating to the sale of a Restricted Subsidiary pending such sale, provided such restrictions and conditions apply only to the Restricted Subsidiary that is to be sold and such sale is permitted hereunder, (iv) imposed by law on any Insurance Subsidiary, (v) imposed by any customary provisions restricting assignment of any agreement entered into the ordinary course of business, (vi) imposed by any instrument or agreement governing Indebtedness of a Restricted Subsidiary acquired by the Borrower or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any such Person, other than the Person or any of its Subsidiaries, so acquired (provided that such Indebtedness was permitted by Section 6.01 to be incurred), (vi) imposed by any instrument or agreement governing Indebtedness (i) of any Foreign Subsidiary and (ii) of the Borrower or any Restricted Subsidiary that is incurred or issued subsequent to the Effective Date and is permitted pursuant to Section 6.01 (provided that the restrictions in such Indebtedness are not materially more restrictive in the aggregate than the restrictions contained in this Agreement, or in the case of subordinated Indebtedness, the Senior Subordinated Note Documents) or (vii) that are Permitted Payment Restrictions.

          (c) Section 6.10(a)(i) shall not apply to restrictions or conditions imposed by customary provisions in leases restricting the assignment thereof.

          (d) Section 6.10(a)(ii) shall not apply to customary provisions in joint venture agreements relating to purchase options, rights of first refusal or call or similar rights of a third party that owns Equity Interests in such joint venture.

          SECTION 6.11. Amendment of Material Documents. The Borrower will not, nor will it permit any Restricted Subsidiary to, amend, modify or waive any of its rights under (a) any Senior Subordinated Notes Document or any documentation governing any Subordinated Indebtedness or Additional Subordinated Debt or (b) its certificate of incorporation, by-laws or other organizational documents, in each case to the extent such amendment, modification or waiver would be materially adverse to the Lenders.

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          SECTION 6.12. Secured Leverage Ratio. If any Revolving Loan or Swingline Loan is outstanding or LC Exposure in excess of $7.5 million is outstanding, commencing with the fiscal quarter ending on June 30, 2007, the Borrower shall maintain a Secured Leverage Ratio of less than or equal to (i) 5.25 to 1.0 as of the last day of each of the first eight fiscal quarters ended after the Effective Date, (ii) 5.00 to 1.0 as of the last day of each of the next four fiscal quarters ended after the Effective Date, (iii) 4.75 to 1.0 as of the last day of each of the next four fiscal quarters ended after the Effective Date and (iv) 4.50 to 1.0 as of the last day of each other fiscal quarter ended after the Effective Date, unless:

     (a) the Required Revolving Lenders otherwise consent in writing; or

     (b) solely for the purpose of this Section 6.12, on the last day of the applicable fiscal quarter (or, if applicable, on the expiration of the tenth day subsequent to the date on which financial statements with respect to the fiscal period as of the end of which the Secured Leverage Ratio is being measured are required to be delivered pursuant to Section 5.01) there are no Revolving Loans or Swingline Loans outstanding and LC Exposure in the aggregate does not exceed $7.5 million.

          SECTION 6.13. Fiscal Year. The Borrower will not change its fiscal year-end to a date other than December 31.

ARTICLE VII

Events of Default

          SECTION 7.01. Events of Default. If any of the following events (any such event, an “Event of Default”) shall occur:

     (a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

     (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in Section 7.01(a)) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three Business Days;

     (c) any representation or warranty made or deemed made by or on behalf of Holdings, the Borrower or any Subsidiary in or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect (except to the extent any such representation or warranty is qualified by “materially”, “Material Adverse Effect” or a similar term, in which case such representation or warranty shall prove to have been incorrect in any respect) when made or deemed made;

     (d) Holdings or the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.04 (with respect to the existence of Holdings and the Borrower), 5.11 or in Article VI (provided that a breach of the Financial Performance Covenant shall not by itself constitute an Event of Default in the case of Term Loans);

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     (e) Holdings, the Borrower or any Subsidiary Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in Sections 7.01(a), (b) or (d)), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender);

     (f) Holdings, the Borrower or any Restricted Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable (after giving effect to any applicable grace period);

     (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity, provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets (to the extent not prohibited under this Agreement) securing such Indebtedness; provided further that a breach of the Financial Performance Covenant shall not by itself constitute an Event of Default in the case of Term Loans unless (i) the Borrower fails to obtain a waiver of the breach of the Financial Performance Covenant from the Revolving Lenders or otherwise remedy such breach within 45 days following notice thereof from the Administrative Agent to the Borrower or (ii) the Revolving Lenders exercise any remedies in accordance with this Section 7.01 with respect to the Revolving Loans or Revolving Commitments;

     (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of Holdings, the Borrower or any Restricted Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Restricted Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

     (i) Holdings, the Borrower or any Restricted Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Section 7.01(h), (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Restricted Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any formal action for the purpose of effecting any of the foregoing;

     (j) Holdings, the Borrower or any Restricted Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

     (k) one or more judgments for the payment of money (to the extent not paid or covered by insurance provided by a carrier that has acknowledged its obligation to pay such claim in

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writing and that has a credit rating of at least “A” by A.M. Best Company, Inc.) in an aggregate amount in excess of $20,000,000 shall be rendered against Holdings, the Borrower, any Restricted Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of Holdings, the Borrower or any Restricted Subsidiary to enforce any such judgment;

     (l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and the Restricted Subsidiaries in an aggregate amount exceeding $20,000,000 for all periods;

     (m) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected Lien on any material portion of the Collateral with the priority required by the applicable Security Document, except (i) as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents or (ii) as a result of the Administrative Agent’s failure to maintain possession of any stock certificates, promissory notes or other instruments delivered to it under the Collateral Agreement;

     (n) any Loan Document shall for any reason be asserted by any Loan Party not to be a legal, valid and binding obligation of any party thereto;

     (o) the Guarantees of the Obligations by Holdings and the Subsidiary Loan Parties pursuant to the Collateral Agreement shall cease to be in full force and effect (other than in accordance with the terms of the Loan Documents) or shall be asserted by Holdings, the Borrower or any Subsidiary Loan Party not to be in effect or not to be legal, valid and binding obligations;

     (p) the Senior Subordinated Notes or any Guarantees thereof shall cease, for any reason, to be validly subordinated to the Obligations or the obligations of Holdings and the Subsidiary Loan Parties in respect of their Guarantees under the Collateral Agreement, as applicable, as provided in the Senior Subordinated Notes Documents, or any Loan Party or the holders of at least 25% in aggregate principal amount of the Senior Subordinated Notes shall so assert; or

     (q) a Change in Control shall occur;

then, and in every such event (other than an event with respect to the Borrower described in Section 7.01(h) or (i)), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders (or in the case of a breach of the Financial Performance Covenant that does not result in an Event of Default with respect to the Term Loans at the request of the Required Revolving Lenders acting solely with respect to the Revolving Loans and Revolving Commitments) shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in Section 7.01(h) or (i), the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower ac-

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crued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

          SECTION 7.02. Borrower’s Right to Cure.

          (a) Notwithstanding anything to the contrary contained in Section 7.01, in the event that the Borrower fails to comply with the requirement of the Financial Performance Covenant, until the expiration of the tenth day subsequent to the date on which financial statements with respect to the fiscal period for which the Financial Performance Covenant is being measured are required to be delivered pursuant to Section 5.01, Holdings shall have the right to issue Qualified Equity Interests (the “Cure Right”), and upon the receipt by the Borrower of cash (such amount of cash being referred to as the “Cure Amount”) pursuant to the exercise by Holdings of such Cure Right, the Financial Performance Covenant shall be recalculated giving effect to the following pro forma adjustments:

     (i) Consolidated EBITDA shall be increased, solely for the purpose of determining the existence of a Default or Event of Default under the Financial Performance Covenant with respect to any period of four consecutive fiscal quarters that includes the fiscal quarter for which the Cure Right was exercised and not for any other purpose under this Agreement, by an amount equal to the Cure Amount; and

     (ii) if, after giving effect to the foregoing recalculations, the Borrower shall then be in compliance with the requirements of the Financial Performance Covenant (including for purposes of Section 4.02), the Borrower shall be deemed to have satisfied the requirements of the Financial Performance Covenant as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default of the Financial Performance Covenant that had occurred shall be deemed cured for the purposes of this Agreement.

          (b) Notwithstanding anything herein to the contrary, (a) in each four fiscal quarter period there shall be a period of at least two fiscal quarters in which no Cure Right is made, (b) all Cure Amounts shall be disregarded for purposes of determining any items in this Agreement (including basket sizes) dependent upon equity contributions or offerings and (c) the Cure Amount shall be no greater than the amount required to cause Borrower to be in compliance with the Financial Performance Covenant.

          SECTION 7.03. Exclusion of Immaterial Subsidiaries. Solely for the purposes of determining whether a Default has occurred under Section 7.01(h) or (i), any reference in any such clause to any Restricted Subsidiary shall be deemed not to include any Restricted Subsidiary affected by any event or circumstance referred to in any such clause that did not, as of the last day of the fiscal quarter of the Borrower most recently ended, have assets with a value in excess of 5% of the consolidated total assets of the Borrower and the Restricted Subsidiaries or 5% of the total revenues of the Borrower and the Restricted Subsidiaries as of such date; provided that if it is necessary to exclude more than one Restricted Subsidiary from Section 7.01(h) or (i) pursuant to this Section 7.03 in order to avoid an Event of Default thereunder, all excluded Restricted Subsidiaries shall be considered to be a single consolidated Restricted Subsidiary for purposes of determining whether the condition specified above is satisfied.

ARTICLE VIII

The Agents

          SECTION 8.01. The Agents. Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such

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actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. For purposes of this Article VIII, all references to the Administrative Agent shall be deemed to be references to both the Administrative Agent and the Collateral Agent.

          The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.

          The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 2.05(j) and Section 9.02), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Holdings, the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 2.05(j) or Section 9.02) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by Holdings, the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

          The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

          The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more subagents appointed by the Administrative Agent. The Administrative Agent and any such subagent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such subagent and to the Related Parties of each Administrative Agent and any such sub-

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agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

          Each of the Lenders, the Issuing Bank and the Loan Parties agree, that the Administrative Agent may subject to Section 9.01(b), but shall not be obligated to, make the Approved Electronic Communications available to the Lenders and the Issuing Bank by posting such Approved Electronic Communications on IntraLinks™ or a substantially similar electronic platform chosen by the Administrative Agent to be its electronic transmission system (the “Approved Electronic Platform”) and each of the Loan Parties agrees to make the Approved Electronic Communications available to the Administrative Agent in an acceptable soft copy or electronic format.

          Although the Approved Electronic Platform and its primary web portal are secured with generally-applicable security procedures and policies implemented or modified by the Administrative Agent from time to time (including, as of the Effective Date, a dual firewall and a User ID/Password Authorization System) and the Approved Electronic Platform is secured through a single-user-per-deal authorization method whereby each user may access the Approved Electronic Platform only on a deal-by-deal basis, each of the Lenders and the Issuing Bank and the Loan Parties acknowledge and agree that the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution. In consideration for the convenience and other benefits afforded by such distribution and for the other consideration provided hereunder, the receipt and sufficiency of which is hereby acknowledged, each of the Lenders, the Loan Parties and the Issuing Bank hereby approve distribution of the Approved Electronic Communications through the Approved Electronic Platform and understands and assumes the risks of such distribution.

          The Approved Electronic Communications and the Approved Electronic Platform are provided “as is” and “as available”. None of the Administrative Agent or any of its Affiliates or any of their respective officers, directors, employees, agents, advisors or representatives (the “Agent Affiliates”) warrant the accuracy, adequacy or completeness of the Approved Electronic Communications and the Approved Electronic Platform and each expressly disclaims liability for errors or omissions in the Approved Electronic Communications and the Approved Electronic Platform. No warranty of any kind, express, implied or statutory (including, without limitation, any warranty of merchantability, fitness for a particular purpose, noninfringement of third party rights or freedom from viruses or other code defects) is made by the Agent Affiliates in connection with the Approved Electronic Communications or the Approved Electronic Platform.

          Each of the Lenders, the Issuing Bank, and the Loan Parties agrees that the Administrative Agent may, but (except as may be required by applicable law) shall not be obligated to, store the Approved Electronic Communications on the Approved Electronic Platform in accordance with the Administrative Agent’s generally-applicable document retention procedures and policies.

          The Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Bor-

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rower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its subagents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

          Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder. The Lenders identified in this Agreement as the Syndication Agent and the Documentation Agents shall not have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders. Without limiting the foregoing, neither the Syndication Agent nor the Documentation Agents shall have or be deemed to have a fiduciary relationship with any Lender.

ARTICLE IX

Miscellaneous

          SECTION 9.01. Notices.

          (a) Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

     (i) if to the Borrower, to United Surgical Partners International, Inc., 15305 Dallas Parkway, Suite 1600-LB 28, Addison, Texas 75001, Attention: General Counsel (Telecopy No. (972) 767-0604) and Treasurer (Telecopy No. (972) 267-0084);

     (ii) if to the Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline Lender, to:

Citibank, N.A.
Citigroup Global Loans
2 Penns Way, Suite 100
New Castle, DE 19720
Attention: Kwase Bame
Telecopy: (212) 994-0961
Telephone: (302) 894-6073

with a copy to:

Global Portfolio Management
Citigroup Global Markets Inc.
390 Greenwich St., 1st floor
New York, NY 10013
Attention: Blake Gronich

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Telecopy: (866) 492-5915
Telephone: (212) 723-9402; and

     (iii) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

          (b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the Issuing Bank pursuant to Article II or of a Default if such Lender or the Issuing Bank, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication and provided that the Administrative Agent shall in any event also receive hard copies of the notices described in this proviso and, to the extent requested, any other documents delivered electronically under this Agreement. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. All such notices and other communications (i) sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement); provided that if not given during the normal business hours of the recipient, such notice or communication shall be deemed to have been given at the opening of business on the next Business Day for the recipient, and (ii) posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of any required notification that such notice or communication is available and identifying the website address therefor.

          (c) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the Administrative Agent (and, in the case of the Administrative Agent, by written notice to the Borrower). All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given as follows: notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier (with a send successful notice) shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient).

          SECTION 9.02. Waivers; Amendments.

          (a) No failure or delay by the Administrative Agent, the Issuing Bank, the Collateral Agent, the Swingline Lender or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Bank, the Collateral Agent, the Swingline Lender and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by Section 9.02(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of

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whether the Administrative Agent, any Lender, the Collateral Agent, the Swingline Lender or the Issuing Bank may have had notice or knowledge of such Default at the time.

          (b) Except as provided in Section 2.20 with respect to an Incremental Facility Amendment (or to give effect to any restatement of this Agreement, the substantive terms of which are otherwise permitted hereby), neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Holdings, the Borrower and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties that are parties thereto (and, if party thereto, the Collateral Agent), in each case with the consent of the Required Lenders; provided that no such agreement shall

     (i) increase the Commitment of any Lender without the written consent of such Lender,

     (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby,

     (iii) postpone the maturity of any Loan, or any scheduled date of payment of the principal amount of any Term Loan under Section 2.10, the required date of reimbursement of any LC Disbursement, or any date for the payment of any interest or fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby,

     (iv) change Section 2.18(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender,

     (v) change any of the provisions of this Section 9.02 or the percentage set forth in the definition of “Required Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (or each Lender of such Class, as applicable),

     (vi) release Holdings or any Subsidiary Loan Party from its Guarantee under the Collateral Agreement (except as provided in Section 7.13 or in the Collateral Agreement) or limit its liability in respect of such Guarantee, without the written consent of each Lender,

     (vii) release all or substantially all the Collateral from the Liens of the Security Documents (except as provided in Section 7.13 or in the Collateral Agreement), without the written consent of each Lender,

     (viii) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class, without the written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each adversely affected Class, or

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     (ix) modify the definition of “Interest Period” to allow periods of more than six months without regard to the agreement of all participating Lenders, without the written consent of each Lender.

provided, further, that (A) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Issuing Bank or the Swingline Lender without the prior written consent of the Administrative Agent, the Issuing Bank or the Swingline Lender, as applicable, (B) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of the Revolving Lenders (but not the Term Lenders), the Tranche B Lenders (but not the Revolving Lenders or the Delayed Draw Lenders), the Delayed Draw Lenders (but not the Revolving Lenders or the Tranche B Lenders) or the Term Lenders (but not the Revolving Lenders) may be effected by an agreement or agreements in writing entered into by Holdings, the Borrower and requisite percentage in interest of the affected Class(es) of Lenders that would be required to consent thereto under this Section 9.02(b) if such Class(es) of Lenders were the only Class(es) of Lenders hereunder at the time and (C) that notwithstanding anything to the contrary any amendment, waiver or modification of Section 6.12 (or terms or definitions that as amended, waived or modified only affect Section 6.12) shall only require the consent of the Required Revolving Lenders and shall not require the consent of any other Person. In connection with any proposed amendment, modification, waiver or termination (a “Proposed Change”) requiring the consent of all affected Lenders, if the consent of the Required Lenders (and, to the extent any Proposed Change requires the consent of Lenders holding Loans of any Class pursuant to Section 9.02(b)(viii), the consent of not less than a majority in interest of the outstanding Loans and unused Commitments of such Class) to such Proposed Change is obtained, but the consent to such Proposed Change of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained as described in this Section 9.02(b) being referred to as a “Non-Consenting Lender”), then, so long as the Lender that is acting as the Administrative Agent is not a Non-Consenting Lender, at the Borrower’s request, any assignee that is acceptable to the Administrative Agent shall have the right, with the Administrative Agent’s consent, to purchase from such Non-Consenting Lender, and such Non-Consenting Lender agrees that it shall, upon the Borrower’s request, sell and assign to such assignee, at no expense to such Non-Consenting Lender, all the Commitments, Term Loans and Revolving Exposure of such Non-Consenting Lender for an amount equal to the principal balance of all Term Loans and Revolving Loans (and funded participations in Swingline Loans and unreimbursed LC Disbursements) held by such Non-Consenting Lender and all accrued interest and fees with respect thereto through the date of sale (including amounts under Sections 2.15, 2.16 and 2.17) so long as such principal balance of all other Non-Consenting Lenders is similarly purchased, such purchase and sale to be consummated pursuant to an executed Assignment and Assumption in accordance with Section 9.04(b) (which Assignment and Assumption need not be signed by such Non-Consenting Lender).

          (c) Notwithstanding the provisions of Section 9.02(b), this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent, Holdings and the Borrower (i) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Term Loans and the Revolving Loans and the accrued interest and fees in respect thereof, and (ii) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders. In addition, this Agreement may be amended with the written consent of the Administrative Agent, Holdings, the Borrower and the Lenders providing the relevant Replacement Term Loans (as defined below) to permit the refinancing of all outstanding Tranche B Term Loans or Delayed Draw Term Loans (the “Refinanced Term Loans”) and, if applicable, related outstanding commitments, with a replacement term loan tranche hereunder (the “Replacement Term Loans”); provided that (i) the aggregate principal amount of such Replacement Term Loans shall not exceed the aggregate principal amount of such Refinanced Term

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Loans, (ii) the Applicable Rate for such Replacement Term Loans shall not be higher than the Applicable Rate for such Refinanced Term Loans, (iii) the weighted average life to maturity of such Replacement Term Loans shall not be shorter than the weighted average life to maturity of such Refinanced Term Loans at the time of such refinancing (except to the extent of nominal amortization for periods where amortization has been eliminated as a result of prepayment of the Refinanced Term Loans) and (iv) all other terms applicable to such Replacement Term Loans shall be substantially identical to, or less favorable to the Lenders providing such Replacement Term Loans than, those applicable to such Refinanced Term Loans, except to the extent necessary to provide for covenants and other terms applicable to any period after the latest final maturity of the Refinanced Term Loans in effect immediately prior to such refinancing.

          SECTION 9.03. Expenses; Indemnity; Damage Waiver.

          (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Agents and their respective Affiliates, including the reasonable fees, charges and disbursements of counsel for the Agents, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent, the Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section 9.03, or in connection with the Loans made or Letters of Credit issued hereunder, including all such reasonable out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

          (b) The Borrower shall indemnify the Administrative Agent, each Agent, the Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”), and hold each Indemnitee harmless, from and against any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any other agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or Release of Hazardous Materials on, at, under or emanating from any Mortgaged Property or any other property currently or formerly owned or operated by the Borrower or any of its Subsidiaries, or any actual or alleged Environmental Liability related in any way to the Borrower or any of its Subsidiaries or their respective properties or operations, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto or such litigation, claim, investigation or proceeding is brought by a third party or by the Borrower or its Affiliates, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are finally judicially determined by a non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of, or breach of the Loan Documents by, such Indemnitee.

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          (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, each Agent, the Issuing Bank or the Swingline Lender under Sections 9.03(a) or (b), each Lender severally agrees to pay to the Administrative Agent, such Agent, the Issuing Bank or the Swingline Lender, as applicable, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as applicable, was incurred by or asserted against the Administrative Agent, the Issuing Bank or the Swingline Lender in its capacity as such. For purposes hereof, a Lender’s “pro rata share” shall be determined based upon its share of the aggregate Revolving Exposures, outstanding Term Loans and unused Commitments at the time.

          (d) To the extent permitted by applicable law, neither Holdings nor the Borrower shall assert, and each hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

          (e) All amounts due under this Section 9.03 shall be payable not later than three days after written demand therefor.

          SECTION 9.04. Successors and Assigns.

          (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, express or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in Section 9.04(c)) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

          (b)

     (i) Subject to the conditions set forth in clause (b)(ii) below, any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:

     (1) the Borrower, provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund (as defined below) or, if an Event of Default under Section 7.01(a), (b), (h), (i) or (j) has occurred and is continuing, any other assignee;

     (2) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment of all or any portion of a Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund; and

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     (3) the Issuing Bank, provided that no consent of the Issuing Bank shall be required for an assignment of all or any portion of a Term Loan.

     (ii) Assignments shall be subject to the following conditions:

     (1) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 or, in the case of a Term Loan, $1,000,000, unless each of the Borrower and the Administrative Agent otherwise consents; provided that no such consent of the Borrower shall be required (x) for an assignment by a Lender to an Approved Fund of a Lender or (y) if an Event of Default has occurred and is continuing, and that contemporaneous assignments to Approved Funds related to the same Lender shall be aggregated when calculating such minimum assignment amounts;

     (2) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement; provided that this clause shall not be construed to prohibit assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of Commitments or Loans;

     (3) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and

     (4) the assignee, if it is not already a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

     For purposes of this Section 9.04(b):

     “Approved Fund” means (a) a CLO and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

     “CLO” means any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course and is administered or managed by a Lender or an Affiliate of such Lender.

          (iii) Subject to acceptance and recording thereof pursuant to Section 9.04(b)(iv), from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 9.04(c).

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          (iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Banks and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Banks and, with respect to itself, any Lender, at any reasonable time and from time to time upon reasonable prior notice.

          (v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in Section 9.04(b) and any written consent to such assignment required by Section 9.04(b), the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

          (c)

          (i) Any Lender may, without the consent of the Borrower, the Administrative Agent, the Issuing Banks or the Swingline Lender, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it), provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement, provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of Borrower, maintain a register on which it enters the name and address of each Participant and the principal and interest amounts of each Participant’s interest in the Loans held by it (the “Participant Register”). The entries in the Participant Register shall be conclusive, absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such Loan or other obligation hereunder for all purposes of this Agreement notwithstanding any notice to the contrary. Subject to Section 9.04(c)(ii), the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 9.04(b). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender.

          (ii) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant except to the extent that the entitlement to any greater payment results from any change in Requirement of Law after the participant becomes a Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would

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be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.17(e) as though it were a Lender.

          (iii) Any Lender may at any time pledge, assign or grant a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge, assignment or grant to secure obligations to a Federal Reserve Bank, and this Section 9.04 shall not apply to any such pledge, assignment or grant of a security interest, provided that no such pledge, assignment or grant of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledge or assignee for such Lender as a party hereto.

          SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall have independent significance and be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

          SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

          SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

          SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or

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demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The applicable Lender shall notify the Borrower and the Administrative Agent of such setoff or application, provided that any failure to give or any delay in giving such notice shall not affect the validity of any such setoff or application under this Section 9.08. The rights of each Lender under this Section 9.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

          SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.

          (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York.

          (b) Each of Holdings and the Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against Holdings, the Borrower or their respective properties in the courts of any jurisdiction.

          (c) Each of Holdings and the Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in Section 9.09(b). Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

          (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

          SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT

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BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10.

          SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

          SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Issuing Banks and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, trustees, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority or self-regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 9.12, to (i) any assignee or pledgee of or Participant in, or any prospective assignee or pledgee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 9.12 or (ii) becomes available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis from a source other than Holdings or the Borrower or any of their subsidiaries, provided that such source is not actually known by such disclosing party to be bound by an agreement containing provisions substantially the same as those contained in this Section 9.12. For the purposes of this Section 9.12, the term “Information” means all information received from Holdings or the Borrower relating to Holdings or the Borrower or its business, other than any such information that is available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by Holdings or the Borrower, provided that, in the case of information received from Holdings, the Borrower or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 9.12 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

          SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under applicable law (collectively, the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section 9.13 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

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          SECTION 9.14. USA Patriot Act. Each Lender, each Agent and the Issuing Bank hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Person to identify the Borrower in accordance with the USA Patriot Act.

          SECTION 9.15. Release of Collateral. Upon any sale or other transfer by any Loan Party of any Collateral that is permitted under this Agreement, or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.02 of this Agreement, the Mortgage or other security interest in such Collateral shall be automatically released and the Collateral Agent is authorized to, and shall, take any action to effect the foregoing, including, without limitation, executing and delivering to the Borrower, in recordable form, discharges and releases of such Mortgage or other security interest.

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

UNITED SURGICAL PARTNERS INTERNATIONAL, INC., as the Borrower
By:	/s/ William H. Wilcox
	Name:	William H. Wilcox
	Title:	President
USPI HOLDINGS, INC.
By:	/s/ William H. Wilcox
	Name:	William H. Wilcox
	Title:	President
CITIBANK, N.A., as a Lender and as Administrative Agent and Collateral Agent
By:	/s/ John Peruzzi
	Name:	John Peruzzi
	Title:	Vice President
LEHMAN COMMERCIAL PAPER INC., as a Lender
By:	/s/ Laurie Perper
	Name:	Laurie Perper
	Title:	Senior Vice President

LEHMAN BROTHERS INC., as Syndication Agent, Joint Lead Arranger and Joint Bookrunner
By:	/s/ Laurie Perper
	Name:	Laurie Perper
	Title:	Senior Vice President
BEAR STEARNS CORPORATE LENDING INC., as a Lender and as Co-Documentation Agent
By:	/s/ Victor Bulzacchelli
	Name:	Victor Bulzacchelli
	Title:	Authorized Agent
SUNTRUST BANK, as a Lender and as Co-Documentation Agent
By:	/s/ Helen C. Hartz
	Name:	Helen C. Hartz
	Title:	Vice President
UBS LOAN FINANCE LLC, as a Lender
By:	/s/ Mary E. Evans
	Name:	Mary E. Evans
	Title:	Associate Director

By:	/s/ David B. Julie
	Name:	David B. Julie
	Title:	Associate Director
UBS SECURITIES LLC, as Co-Documentation Agent
By:	/s/ Mary E. Evans
	Name:	Mary E. Evans
	Title:	Associate Director
By:	/s/ David B. Julie
	Name:	David B. Julie
	Title:	Associate Director
CITIGROUP GLOBAL MARKETS INC., as Joint Lead Arranger and Joint Bookrunner
By:	/s/ John Peruzzi
	Name:	John Peruzzi
	Title:	Managing Director
BEAR, STEARNS & CO. INC., as Joint Lead Arranger and Joint Bookrunner
By:	/s/ Victor Bulzacchelli
	Name:	Victor Bulzacchelli
	Title:	Authorized Agent

UBS SECURITIES LLC, as Joint Lead Arranger and Joint Bookrunner
By:	/s/ Mary E. Evans
	Name:	Mary E. Evans
	Title:	Associate Director
By:	/s/ David B. Julie
	Name:	David B. Julie
	Title:	Associate Director
AMEGY BANK NATIONAL ASSOCIATION, as a Lender
By:	/s/ Daniel L. Cox, Jr.
	Name:	Daniel L. Cox, Jr.
	Title:	Vice President
SOVEREIGN BANK, as a Lender
By:	/s/ Sarah J. Healy
	Name:	Sarah J. Healy
	Title:	Senior Vice President
WELLS FARGO FOOTHILL, INC., as a Lender
By:	/s/ Richard Kritsch
	Name:	Richard Kritsch
	Title:	Senior Vice President

SCHEDULES

Schedule 1.01(a) — Existing Letters of Credit

Schedule 1.01(b) — St. Louis Investments

Schedule 1.01(c) — Specified Subsidiaries

Schedule 2.01 — Commitments

Schedule 3.03 — Governmental Approvals; No Conflicts

Schedule 3.05 — Real Property

Schedule 3.06 — Litigation

Schedule 3.12 — Subsidiaries

Schedule 3.13 — Insurance

Schedule 4.01 — Local Counsel Jurisdictions

Schedule 6.01 — Existing Indebtedness

Schedule 6.02 — Existing Liens

Schedule 6.04 — Existing Investments

Schedule 6.09 — Existing Transactions with Affiliates

Schedule 6.10 — Existing Restrictions

Schedule 1.01(a)

Existing Letters of Credit

The following Letters of Credit have been issued by SunTrust Bank:

Issuance Date	Applicant	Beneficiary	AMOUNT		Actual Expiry
12/16/2002	USP Domestic Holdings, Inc.	Arden Westwood LLC		90,000	12/28/2007
11/14/2003	USP Domestic Holdings, Inc.	JACO-Sarasota, LLC		517,140	12/17/2007
2/15/2007	North Shore Same Day Surgery, L.L.C.	3725 Touhy LLC		1,052,100	3/31/2008
6/8/2006	United Surgical Partners International, Inc.	Blex Exchange IV LP		1,000,000	12/31/2007

Schedule 1.01(b)

St. Louis Investments

1.	Advanced Ambulatory Surgical Care, L.P. dba Advanced Surgical Care
2.	Chesterfield Ambulatory Surgery Center, L.P. dba Chesterfield Surgery Center
3.	Manchester Ambulatory Surgery Center, L.P. dba Manchester Surgery Center
4.	Mason Ridge Ambulatory Surgery Center, L.P. dba Mason Ridge Surgery Center
5.	Mid Rivers Ambulatory Surgery Center, L.P. dba Mid Rivers Surgery Center
6.	Olive Ambulatory Surgery Center, L.P. dba Olive Surgery Center
7.	Riverside Ambulatory Surgery Center, L.P. dba Riverside Surgery Center
8.	Sunset Hills Ambulatory Surgery Center, L.P. dba Sunset Hills Surgery Center
9.	Surgery Center of Columbia, L.P. dba Surgery Center of Columbia
10.	The Ambulatory Surgical Center of St. Louis, L.P. dba The Surgical Center of St. Louis
11.	Webster Ambulatory Surgery Center, L.P. dba Webster Surgery Center

Schedule 1.01(c)

Specified Subsidiaries

1.	CHW/SCD/USP Tracy Surgery Centers, L.L.C.
2.	CHW/USP Bakersfield GP, L.L.C.
3.	CHW/USP Bakersfield Surgery Centers, L.L.C.
4.	CHW/USP Fontana Surgery Centers, LLC
5.	Corpus Christi Holdings, LLC
6.	Surgicoe of Texas, Inc.
7.	Shoreline Real Estate Partnership, LLP
8.	USP Fontana, Inc.

Schedule 2.01

Commitments

	Tranche B		Revolving		Delayed Draw
Lender	Commitment		Commitment		Commitment
Citibank, N.A.	$	430,000,000	$	15,000,000	$	100,000,000
Lehman Commercial Paper Inc.				15,000,000
SunTrust Bank				15,000,000
Bear Stearns Corporate Lending Inc.				12,500,000
UBS Loan Finance LLC				12,500,000
Amegy Bank National Association				10,000,000
Wells Fargo Foothill, Inc.				10,000,000
Sovereign Bank				10,000,000
Total:	$	430,000,000	$	100,000,000	$	100,000,000

Schedule 3.03

Governmental Approvals; No Conflicts

1. The following employment agreements between the Company and the person listed below contain provisions regarding acceleration of equity awards upon a change of control:

a.	Donald E. Steen
b.	William H. Wilcox
c.	Brett P. Brodnax
d.	Niels P. Vernegaard
e.	Mark A. Kopser
f.	John J. Wellik
g.	Jonathan R. Bond
h.	Mark C. Garvin
i.	James Jackson
j.	Monica Cintado
k.	Andy Johnston
l.	Jason B. Cagle
m.	Patrick A. Murphy
n.	Jot Hollenbeck
o.	Luke Johnson
p.	David Zarin, M.D.
q.	Jeff Sapp

2.

The terms of the United Surgical Partners International, Inc. 2001 Equity-Based Compensation Plan and the United Surgical Partners International, Inc. 1998 Stock Option and Restricted Stock Award Plan, and the award agreements entered into in connection therewith, and the United Surgical Partners International, Inc. Employee Stock Purchase Plan contain provisions regarding the acceleration of equity awards upon a change of control.

3.

The terms of the United Surgical Partners International, Inc. Deferred Compensation Plan, dated to be effective January 1, 2005, provides that upon a change in control of the Company, each participant shall become fully vested in his or her account balance.

Schedule 3.05

Real Property

Owned Real Properties

None

Leased Real Properties

Lessee	Address	Lessor/Sublessor
OrthoLink Physicians Corporation	8 Cadillac Drive Suite 350 Brentwood, TN 37027	Duke Realty Limited Partnership
Ortholink Physicians Corporation	103 Powell Court Suite 200 Brentwood, TN 37027	Highwoods Properties
Ortholink Physicians Corporation	1150 Lake Hern Dr. Suite 650 Atlanta, GA 30342	Pavilion Partners, L.P.
Surgis, Inc.	37 North Orange Ave. Suite 500 Orlando, FL 32801	Execu-Suites, Inc.
Surgis, Inc.	3307 W. Davis Suite A Conroe, TX 77301	Beckendorf Investments
Surgis, Inc.	31244 Palos Verdes Dr. West Suite 241 Rancho Palos Verdes, CA 90275	Hunter Ent. as sublessor
United Surgical Partners International, Inc.	3050 Post Oak Boulevard Suite 620 Houston, TX 77056	DRA CRT Post Oak, L.P.
United Surgical Partners International, Inc.	241 Monmouth Road Suite 106 West Long Branch, NJ 07764	Meridian Health Realty Corporation as sublessor
USP Houston, Inc.	3534 Vista Boulevard Pasadena, TX 77504	KKT Realty II, LP
USP Sunset Hills, Inc.	10733 Sunset Office Dr. Suite 220 Sunset Hills, MO 63124	Lutheran Church Extension Fund — Missouri Synod
USP Texas, L.P.	15305 Dallas Parkway Suite 1600 Addison, TX 75001	Colonnade Realty Holding Limited Partnership (for 13th and 15th floors and lower level IT space)
		HQ Global Workplaces, Inc. as sublessor (USP Texas, L.P. subleases 16th floor)

Lessee	Address	Lessor/Sublessor
USP Texas, L.P.	790 East Colorado Boulevard Suite 705 Pasadena, CA 91101	CA-790 East Colorado L.P.

Schedule 3.06

Litigation

On January 8, 2007, John McMullen filed a class action petition in the 134th District Court of Dallas County, Texas against the Borrower, the Sponsor and the directors of the Borrower.

On January 9, 2007, Levy Instruments filed a derivative petition, in the 101st District Court of Dallas County, Texas on behalf of the Borrower, substantively, against the Sponsor, the directors of the Borrower and nominally against the Borrower.

Schedule 3.12

	Percentage of Ownership or Beneficial
Borrower	Interest held by Holdings
United Surgical Partners International, Inc.		100	%

	Percentage of Ownership or Beneficial
Subsidiary Guarantors	Interest held by Holdings
Georgia Musculoskeletal Network, Inc.		100.00	%
Health Horizons of Kansas City, Inc.		100.00	%
Health Horizons of Murfreesboro, Inc.		100.00	%
Health Horizons of Nashville, Inc.		100.00	%
Medcenter Management Services, Inc.		100.00	%
Ortho Excel, Inc.		100.00	%
OrthoLink ASC Corporation		100.00	%
OrthoLink Physicians Corporation		100.00	%
OrthoLink Radiology Services Corporation		100.00	%
OrthoLink/Georgia ASC, Inc.		100.00	%
OrthoLink/New Mexico ASC, Inc.		100.00	%
OrthoLink/TN ASC, Inc.		100.00	%
Physicians Data Professionals, Inc.		100.00	%
Specialty Surgicenters, Inc.		100.00	%
SSI Holdings, Inc.		100.00	%
Surginet of Northwest Houston, Inc.		100.00	%
Surginet of Rivergate, Inc.		100.00	%
Surginet, Inc.		100.00	%
Surgis Management Services, Inc.		100.00	%
Surgis of Chico, Inc.		100.00	%
Surgis of Pearland, Inc.		100.00	%
Surgis of Phoenix, Inc.		100.00	%
Surgis of Redding, Inc.		100.00	%
Surgis of Sand Lake, Inc.		100.00	%
Surgis of Sonoma, Inc.		100.00	%
Surgis of Victoria, Inc.		100.00	%
Surgis of Willowbrook, Inc.		100.00	%
Surgis, Inc.		100.00	%
United Surgical of Atlanta, Inc.		100.00	%
United Surgical Partners Holdings, Inc.		100.00	%
USP Alexandria, Inc.		100.00	%
USP Assurance Company		100.00	%
USP Austin, Inc.		100.00	%
USP Austintown, Inc.		100.00	%
USP Baltimore, Inc.		100.00	%
USP Baton Rouge, Inc.		100.00	%
USP Bridgeton, Inc.		100.00	%
USP Cedar Park, Inc		100.00	%
USP Central New Jersey, Inc.		100.00	%
USP Chesterfield, Inc.		100.00	%
USP Chicago, Inc.		100.00	%
USP Cleveland, Inc.		100.00	%

	Percentage of Ownership or Beneficial
Subsidiary Guarantors	Interest held by Holdings
USP Coast, Inc.		100.00	%
USP Columbia, Inc.		100.00	%
USP Corpus Christi, Inc.		100.00	%
USP Cottonwood, Inc.		100.00	%
USP Creve Coeur, Inc.		100.00	%
USP Decatur, Inc.		100.00	%
USP Des Peres, Inc.		100.00	%
USP Destin, Inc.		100.00	%
USP Domestic Holdings, Inc.		100.00	%
USP Florissant, Inc.		100.00	%
USP Fredericksburg, Inc.		100.00	%
USP Glendale, Inc.		100.00	%
USP Harbour View, Inc.		100.00	%
USP Houston, Inc.		100.00	%
USP Indiana, Inc.		100.00	%
USP International Holdings, Inc.		100.00	%
USP Kansas City, Inc.		100.00	%
USP Las Cruces, Inc.		100.00	%
USP Long Island, Inc.		100.00	%
USP Lyndhurst, Inc.		100.00	%
USP Mason Ridge, Inc.		100.00	%
USP Michigan, Inc.		100.00	%
USP Midwest, Inc.		100.00	%
USP Mission Hills, Inc.		100.00	%
USP Nevada, Inc.		100.00	%
USP New Jersey, Inc.		100.00	%
USP Newport News, Inc.		100.00	%
USP North Kansas City, Inc.		100.00	%
USP North Texas, Inc.		100.00	%
USP Oklahoma, Inc.		100.00	%
USP Olive, Inc.		100.00	%
USP Oxnard, Inc.		100.00	%
USP Phoenix, Inc.		100.00	%
USP Reading, Inc.		100.00	%
USP Richmond II, Inc.		100.00	%
USP Richmond, Inc.		100.00	%
USP Sacramento, Inc.		100.00	%
USP San Antonio, Inc.		100.00	%
USP San Gabriel, Inc.		100.00	%
USP Sarasota, Inc.		100.00	%
USP Securities Corporation		100.00	%
USP St. Peters, Inc.		100.00	%
USP Sunset Hills, Inc.		100.00	%
USP Tennessee, Inc.		100.00	%
USP Torrance, Inc.		100.00	%
USP Virginia Beach, Inc.		100.00	%
USP Webster Groves, Inc.		100.00	%
USP West Covina, Inc.		100.00	%
USP Westwood, Inc.		100.00	%
USP Winter Park, Inc.		100.00	%
USPI San Diego, Inc.		100.00	%

	Percentage of Ownership or Beneficial
Subsidiary Guarantors	Interest held by Holdings
ISS-Orlando, LLC		100.00	%
North MacArthur Surgery Center, LLC		100.00	%
Pasadena Holdings, LLC		100.00	%
Same Day Management, L.L.C.		100.00	%
Same Day Surgery, L.L.C.		100.00	%
Surgery Centers Holding Company, L.L.C.		100.00	%
Surgery Centers of America II, L.L.C.		100.00	%
USP Nevada Holdings, LLC		100.00	%
USP Texas Air, LLC		100.00	%
WHASA, L.C.		100.00	%
USP Texas, L.P.		100.00	%

	Percentage of Ownership or Beneficial
Other Subsidiaries	Interest held by Holdings
American Endoscopy Services, Inc.		100.00	%
CHW/SCD/USP Tracy Surgery Centers, L.L.C.		100.00	%
CHW/USP Bakersfield GP, L.L.C.		100.00	%
CHW/USP Bakersfield Surgery Centers, L.L.C.		100.00	%
CHW/USP Fontana Surgery Centers, LLC		100.00	%
Corpus Christi Holdings, LLC		100.00	%
Surgicoe of Texas, Inc.		100.00	%
Shoreline Real Estate Partnership, LLP		100.00	%
USP Fontana, Inc.		100.00	%
USP Torrance, Inc.		100.00	%
25 East Same Day Surgery, L.L.C.		45.57	%
Advanced Ambulatory Surgical Care, L.P.		33.00	%
Alamo Heights Surgicare, L.P.		57.17	%
Arlington Surgicare Partners, Ltd.		40.99	%
Austintown Surgery Center, LLC		68.50	%
Beaumont Surgical Affiliates, Ltd.		74.58	%
Central Virginia Surgi-Center, L.P.		78.90	%
Chesterfield Ambulatory Surgery Center, L.P.		33.00	%
Chico Surgery Center, LP		60.00	%
CHW/USP Phoenix II, LLC		51.00	%
Coast Surgery Center, L.P.		61.30	%
Court Street Surgery Center, L.P.		60.00	%
Creekwood Surgery Center, L.P.		62.00	%
Day-Op Center of Long Island, Inc.		0.00	%
Day-Op Surgery Consulting Company, LLC		89.90	%
Decatur Surgery Center, L.P.		64.00	%
Desoto Surgicare Partners, Ltd.		43.79	%
Doctors Outpatient Surgicenter, Ltd.		46.33	%
East West Surgery Center, L.P.		53.00	%
Elmwood Park Same Day Surgery, L.L.C.		37.70	%
ENH/USP Surgery Centers II, L.L.C.		50.10	%
Houston Ambulatory Surgical Associates, L.P.		50.48	%

	Percentage of Ownership or Beneficial
Other Subsidiaries	Interest held by Holdings
ICNU Rockford, L.L.C.		60.00	%
INTEGRIS/USP Surgery Centers II, L.L.C.		50.10	%
Lincolnwood Ambulatory Surgery Center, LLC		50.10	%
Madison Ambulatory Surgery Center, LLC		77.00	%
Manchester Ambulatory Surgery Center, L.P.		33.00	%
Mason Ridge Ambulatory Surgery Center, L.P.		32.88	%
Memorial Hermann/USP Surgery Centers II, LP		90.00	%
Metro Surgery Center, L.P.		74.00	%
Metroplex Surgicare Partners, Ltd.		43.13	%
Mid Rivers Ambulatory Surgery Center, L.P.		33.61	%
New Mexico Orthopaedic Surgery Center, L.P.		51.00	%
NKCH/USP Surgery Centers II, LLC		51.00	%
North Shore Same Day Surgery, L.L.C.		44.09	%
Northridge Surgery Center, L.P.		32.18	%
Northwest Surgery Center, Ltd.		48.95	%
Olive Ambulatory Surgery Center, L.P.		31.80	%
Orthopedic and Surgical Specialty Company, LLC		36.31	%
Pacific Endo-Surgical Center, L.P.		62.09	%
Park Cities Surgery Center, L.P.		41.25	%
Pearland Ambulatory Surgery Center, Ltd.		91.00	%
Physicians Pavilion, L.P.		50.18	%
Radsource, LLC		60.00	%
Reading Ambulatory Surgery Center, L.P.		57.28	%
Redding Surgery Center, LP		16.00	%
Resurgens Surgery Center, LLC		48.00	%
River North Same Day Surgery, L.L.C.		33.62	%
Riverside Ambulatory Surgery Center, L.P.		32.51	%
Rockwall Ambulatory Surgery Center, L.L.P.		48.19	%
Saint Thomas/USP Surgery Centers II, LLC		51.00	%
San Antonio Endoscopy, L.P.		53.45	%
San Gabriel Valley Surgical Center, L.P.		55.00	%
Sand Lake Surgery Center, L.P.		33.00	%
Shore Outpatient Surgicenter, L.L.C.		56.25	%
Shoreline Surgery Center, L.L.P.		50.76	%
Specialists Surgery Center, L.L.C.		36.49	%
St. Agnes Surgery Center of Ellicott City, L.L.L.P.		73.50	%
Suburban Endoscopy Services, LLC		51.00	%
Sunset Hills Ambulatory Surgery Center, L.P.		32.69	%
Surgery Center of Columbia, L.P.		30.10	%
Tamarac Surgery Center LLC		60.81	%
Templeton Surgery Center, LLC		63.92	%
Teton Outpatient Services, LLC		49.06	%
Texan Ambulatory Surgery Center, L.P.		60.00	%
Texas Health Venture Arlington, L.P.		75.00	%
Texas Health Venture Huguley, L.P.		75.00	%
Texas Health Venture Park Cities, L.P.		75.00	%

	Percentage of Ownership or Beneficial
Other Subsidiaries	Interest held by Holdings
Texas Health Venture Rockwall 2, L.P.		75.00	%
Texas Health Ventures Group Holdings, LLC		75.00	%
The Ambulatory Surgery Center of St. Louis, L.P.		33.00	%
The Center for Ambulatory Surgical Treatment, L.P.		63.54	%
The Surgery Center, an Ohio limited partnership		71.00	%
THVG Arlington GP, LLC		75.00	%
THVG Bedford GP, LLC		75.00	%
THVG Bedford, L.P.		75.00	%
THVG DeSoto GP, LLC		75.00	%
THVG DeSoto, L.P.		75.00	%
THVG Huguley GP, LLC		75.00	%
THVG Park Cities GP, LLC		75.00	%
THVG Rockwall 2 GP, LLC		75.00	%
THVG/HealthFirst Holdings, L.L.C.		75.00	%
THVG/HealthFirst, L.L.C.		75.00	%
TOPS Specialty Hospital, Ltd.		45.46	%
United Surgery Center — Southeast, Ltd.		40.95	%
University Surgery Center, Ltd.		40.00	%
Victoria Ambulatory Surgery Center, LP		58.55	%
Warner Park Surgery Center, L.P.		25.95	%
West Houston Ambulatory Surgical Associates, LP		50.98	%
Willowbrook Ambulatory Surgery Center, L.P.		67.00	%
KSF Orthopaedic Surgery Center, L.L.P.		49.09	%
Webster Ambulatory Surgery Center, L.P.		32.57	%

Schedule 3.13 — Insurance

Coverage	Limits		Deductible / Retention	Policy Term	Company	Policy Number
Commercial Property — Limits below are on a per occurrence basis	$	500,000,000	$10,000	9/30/06-9/30/07	Travelers Property Casualty Corporation of America	KTJ-CMB-0454C34-6-06
Blanket Buildings, Improvement & Betterments, & Business	$	250,000,000	Included in PD deductible
Personal Property/Contents *	$	20,000,000	$10,000
Business Income	$	10,000,000	$10,000
Accounts Receivables	$	50,000,000	$10,000
EDP Equipment & Media	$	20,000,000	2% of damage
Boiler & Machinery- Equipment Breakdown	$	5,000,000	2% of damage
EQ, Volcanic Eruption, Landslide, and Mine Subsidence except	$	2,500,000	5% of damage
EQ occurring in moderate hazard counties	$	20,000,000	$100,000
EQ occurring in California and high hazard counties	$	5,000,000	48 hours
Flood
Off Premises Power Failure
Valuation : Replacement Cost/Agreed Amount
Crime- Employee Dishonesty	$	3,000,000	$50,000	9/30/06-9/30/07	Illinois National Insurance Company	006724477
Money & Securities/Forgery/Computer Fraud	$	3,000,000	$50,000
Commercial Gen. Liability- Occurrence Form	$	1M/10,000,000	N/A	9/30/06-9/30/07	Lexington Insurance Company	6791518
Professional Liability- Claims Made- Retro Dates Vary	$	1M/10,000,000	N/A	9/30/06-9/30/07	Lexington Insurance Company	6791518
Employee Benefits Program Adm.- Claims Made	$	1M/1,000,000	N/A	9/30/06-9/30/07	Lexington Insurance Company	6791518
Automobile including Hired & Non Owned Automobile Liability	$	1,000,000	N/A	9/30/06-9/30/07	Travelers Property Casualty Co. of America	TJCAP488D1969
Hired Car Physical Damage	$	50,000	$500/$500	9/30/06-9/30/07	Travelers Property Casualty Co. of America	TJCAP488D1969
Umbrella- GL- Occurrence Form**	$	25,000,000	Primary Limits listed above	9/30/06-9/30/07	Lexington Insurance Company	6791526
Professional-Claims Made- Retro Dates Vary	Included in above		N/A
2nd Excess Umbrella	$	10,000,000	Primary plus umbrella limits	9/30/06-9/30/07	Steadfast Insurance Company	HPC913972900
Employment Practices Liability- Claims Made- Retro Dates Vary	$	5,000,000	$150,000/$500,000***	9/30/06-9/30/07	Illinois National Insurance Company	6737953
Private Directors & Officers/General Partnership- Claims Made	$	10,000,000	$250,000/$100,000******	4/19/07-4/19/08	National Union Fire Insurance Company	TBD
Primary Directors & Officers/General Partnership- Claims Made*****	$	10,000,000	$500,000/$250,000****	6/8/06-4/19/13	National Union Fire Insurance Company	006724433
Directors & Officers/General Partnership- 1st Layer- Claims Made*****	$	10,000,000	Primary Limits	6/8/06-4/19/13	Allied World Assurance Company, Inc.	AW6294301
Directors & Officers/General Partnership- 2nd Layer- Claims Made*****	$	10,000,000	Primary plus add’l layers	6/8/06-4/19/13	American Insurance Company	DOXG21661120002
Directors & Officers/General Partnership- 3rd Layer-Claims Made*****	$	5,000,000	Primary plus add’l layers	6/8/06-4/19/13	Axis Reinsurance Company	RCN714143012006
Directors & Officers/General Partnership- 4th Layer- Claims Made*****	$	5,000,0000	Primary plus add’l layers	6/8/06-4/19/13	Illinois National Insurance Company	006724685
Side A Management Liability	$	5,000,000	Primary plus add’l layers	6/8/06-4/19/13	XL Specialty Insurance Co.	ELU09290006
Pollution Liability- Claims Made	$	5,000,0000	$100,000	9/30/05-9/30/08	American Int’l Specialty Lines Ins. Co.	PLC1959055
Fiduciary Liability	$	5,000,000	$10,000	9/30/06-9/30/07	Illinois National Insurance Company	6737962
Workers Compensation- Large Deductible Policy		1M/1M/1M	$250,000 SIR	9/30/06-9/30/07	St. Paul Travelers Insurance Company	TC2KUB488D2966
Workers Compensation- Retro Policy for Arizona and Oregon		1M/1M/1M	None	9/30/06-9/30/07	St. Paul Travelers Insurance Company	TRJUB488D1957

*	Named Windstorm deductible is 5% in Florida and other hazardous areas 2%
**	Self Insured Retention applies when primary limits are exhausted
***	$150,000 on all claims except 3rd party at $500,000
****	$500,000 Securities Claims Each Loss/$250,000 All Other Claims Each Loss
*****	Public D & O policies went into run off effective date of private closing- 4/19/07
*******	$250,000 Securities Claims Each Loss/$100,000 All Other Claims Each Loss

Schedule 4.01

Local Counsel Jurisdictions

Jurisdiction	Contact Information
California	Ropes & Gray LLP 1211 Avenue of the Americas New York, NY 10036-8704 Attn: Steven R. Rutkovsky Phone: 212-841-5782
Delaware	Ropes & Gray LLP 1211 Avenue of the Americas New York, NY 10036-8704 Attn: Steven R. Rutkovsky Phone: 212-841-5782
Georgia	Powell Goldstein LLP One Atlantic Center Fourteenth Floor 1201 West Peachtree Street, NW Atlanta, GA 30309-3488 Attn: David M. Armitage, Esq. Phone: 404-572-6675
Oklahoma	Gable & Gotwals 1100 ONEOK Plaza 100 West 5th Street Tulsa, OK 74103-4217 Attn: Jeffrey D. Hassell, Esq. Phone: 918-595-4823
Tennessee	Trauger & Tuke The Southern Turf Building 222 Fourth Avenue North Nashville, TN 37219-2117 Attn: Robert D. Tuke, Esq. Phone: 615-256-8585
Texas	Akin Gump Strauss Hauer & Feld LLP 1700 Pacific Avenue, Suite 4100 Dallas, TX 75201 Attn: Alan Laves Phone: 214-969-2800

Schedule 6.01

Existing Indebtedness

NOTES PAYABLE
American Endoscopy Services, Inc,	$	1,434,155.84
Physicians Pavilion, L.P.		450,424.61
Northridge Surgery Center, L.P.		112,564.13
Decatur Surgery Center, L.P.		815,546.75
University Surgery Center, Ltd.		1,952,581.29
Tamarac Surgery Center, LLC		98,637.15
Desoto Surgicare Partners, Ltd.		3,874.54
Desoto Surgicare Partners, Ltd.		905,820.30
Metroplex Surgicare Partners, Ltd.		189,840.61
Arlington Surgicare Partners, Ltd.		8,004.48
Park Cities Surgery Center, L.P.		8,936.87
Shore Outpatient Surgicenter, L.L.C.		447,016.11
TOPS Specialty Hospital, Ltd.		78,355.12
Northwest Surgery Center, Ltd.		210,139.49
West Houston Ambulatory Surgical Associates, L.P.		3,287,696.74
Beaumont Surgical Affiliates, Ltd.		338,862.44
Willowbrook Ambulatory Surgery Center, LP		2,604,000.00
Warner Park Surgery Center, L.P.		18,833.11
Orthopedic and Surgical Specialty Company, LLC		4,932,920.15
Metro Surgery Center, L.P.		255,343.28
Doctors Outpatient Surgicenter, Ltd.		478,706.75
United Surgery Center — Southeast, Ltd.		392,936.10
East West Surgery Center, L.P.		1,537,668.11
New Mexico Orthopaedic Surgery Center, L.P.		39,881.08
San Gabriel Valley Surgical Center, L.P.		173,550.63
Central Virginia Surgi-Center, L.P.		651,556.68
The Center for Ambulatory Surgical Treatment, L.P.		1,004,640.20

Specialists Surgery Center, L.L.C.		45,138.54
Austintown Surgery Center, LLC		1,176,901.11
Shoreline Surgery Center, LLP		85,091.31
The Surgery Center (LP)		158,264.07
Alamo Heights Surgicare, L.P.		649,613.36
San Antonio Endoscopy, L.P.		763,000.13
Reading Ambulatory Surgery Center, L.P.		1,170,289.67
Elmwood Park Same Day Surgery, L.L.C.		112,771.83
25 East Same Day Surgery, L.L.C.		2,549.94
North Shore Same Day Surgery, L.L.C.		64,033.21
Advanced Ambulatory Surgical Care, L.P.		948,872.18
Chesterfield Ambulatory Surgery Center, L.P.		711,479.06
Mid Rivers Ambulatory Surgery Center, L.P.		839,398.74
Olive Ambulatory Surgery Center, L.P.		723,777.22
Sunset Hills Ambulatory Surgery Center, L.P.		791,284.13
Riverside Ambulatory Surgery Center, L.P.		1,114,727.33
Manchester Ambulatory Surgery Center, L.P.		1,864,012.52
Mason Ridge Ambulatory Surgery Center, L.P.		2,279,437.63
Webster Ambulatory Surgery Center, L.P.		2,412,321.11
Court Street Surgery Center, LP		97,451.38
Redding Surgery Center, L.P.		223,856.57
KSF Orthopaedic Surgery Center, LLP		461,077
CAPITAL LEASES
USP Texas, L.P.	$	46,996.48
American Endoscopy Services, Inc		72.55
Physicians Pavilion, L.P.		4,446,097.17
Northridge Surgery Center, L.P.		134,541.07
Creekwood Surgery Center, L.P.		371,629.86
Decatur Surgery Center, L.P.		38,967.60
Tamarac Surgery Center, LLC		108,857.29
Day-Op Surgery Consulting Company, LLC		4,100,000.00
Desoto Surgicare Partners, Ltd.		140,504.36
Arlington Surgicare Partners, Ltd.		3,725,829.26

Park Cities Surgery Center, L.P.	5,611,979.41
Rockwall Ambulatory Surgery Center, L.P.	1,495,385.05
Shore Outpatient Surgicenter, L.L.C.	86,410.76
TOPS Specialty Hospital, Ltd.	568,306.20
Northwest Surgery Center, Ltd.	57,316.19
West Houston Ambulatory Surgical Associates, L.P.	102,820.35
Victoria Ambulatory Surgery Center, L.P.	81,090.80
Warner Park Surgery Center, L.P.	537,161.63
Orthopedic and Surgical Specialty Company, LLC	11,567,857.93
Metro Surgery Center, L.P.	196,754.77
Doctors Outpatient Surgicenter, Ltd.	42,390.87
United Surgery Center — Southeast, Ltd.	49,106.67
San Gabriel Valley Surgical Center, L.P.	20,372.58
Central Virginia Surgi-Center, L.P.	499,916.77
Specialists Surgery Center, L.L.C.	183,196.19
Austintown Surgery Center, LLC	59,944.42
The Surgery Center (LP)	87,203.75
USP Houston, Inc	1,686,917.26
Pacific Endo-Surgical Center, L.P.	402,517.32
River North Same Day Surgery, L.L.C.	321,770.08
Elmwood Park Same Day Surgery, L.L.C.	66,634.46
25 East Same Day Surgery, L.L.C.	412,967.61
North Shore Same Day Surgery, L.L.C.	223,344.37
Advanced Ambulatory Surgical Care, L.P.	46,978.20
Chesterfield Ambulatory Surgery Center, L.P.	15,855.80
The Ambulatory Surgical Center of St. Louis, LP	1,497,386.70
Surgery Center of Columbia, L.P.	1,586,538.54
Riverside Ambulatory Surgery Center, L.P.	226,078.64
Chico Surgery Center, L.P.	42,499.65
Court Street Surgery Center, LP	102,735.51
Redding Surgery Center, L.P.	1,164,835.16
Templeton Surgery Center, LLC	2,906,804.13

				Guaranteed Party
Center Name	Borrower	Gty Amt		(Lender)	Guarantor
Destin	Destin Surgery Center Ltd.		301,333	Colonial Bank (Now First national)	United Surgical Partners International, Inc.
Desert Ridge	Desert Ridge Outpatient Surgery, LLC		1,700,000	Bank of America	United Surgical Partners International, Inc.
Manitowoc	Manitowoc Surgery Center, L.L.C.		494,824	CIT Healthcare, LLC	United Surgical Partners International, Inc.
St. Mary’s — Richmond	St. Mary’s Ambulatory Surgery Center, LLC		583,275	Citicorp Leasing, Inc.	United Surgical Partners International, Inc.
Memorial Hermann Southwest	Memorial Hermann Surgery Center Southwest, L.L.P.		1,800,000	Citicorp Leasing, Inc.	United Surgical Partners International, Inc.
Memorial Hermann — Sugarland	Memorial Hermann Surgery Center Sugarland, L.L.P.		180,000	CIT Healthcare, LLC	United Surgical Partners International, Inc.
Irving-Coppell (DFW)	Irving-Coppell Surgical Hospital, LLP		36,731	HPSC, Inc.	United Surgical Partners International, Inc.
Las Cruces	Las Cruces Surgical Center, LLC		878,331	State National Bank	United Surgical Partners International, Inc.
L.A. — San Gabriel ASC	San Gabriel Ambulatory Surgery Center, LP		1,011,485	CIT Group	United Surgical Partners International, Inc.
St. John’s — Oxnard, Ca.	St. John’s Outpatient Surgery Center, L.P.		1,921,781	Citicorp Vendor Finance, Inc.	United Surgical Partners International, Inc.
Liberty Surgery Center	Liberty Ambulatory Surgery Center, LLC		373,711	Commerce Bank	United Surgical Partners International, Inc.
OCOMS	Oklahoma Ctr. For Orthopaedic and Multi-Spclty Surgery, LLC		700,000	MidFirst Bank	USP Oklahoma, Inc.
Baton Rouge	Greater Baton Rouge Surgical Hospital, LLC		1,266,301	CIT Group	United Surgical Partners International, Inc.
Richmond ASC Leasing CO.	Richmond ASC Leasing Company, LLC		1,010,000	Citicorp Vendor Finance, Inc.	United Surgical Partners International, Inc.
Richmond	Memorial Ambulatory Surgery, LLC		312,500	Citicorp Vendor Finance, Inc.	United Surgical Partners International, Inc.
Alexandria RE	Alexandria Surgery Center Real Estate, L.L.C.		2,810,000	CIT Group	USP Domestic Holdings, Inc.
Lyndhurst	Zeeba Surgery Center, LP		837,600	DVI Financial Services Inc.	United Surgical Partners International, Inc.

				Guaranteed Party
Center Name	Borrower	Gty Amt		(Lender)	Guarantor
NE Ohio (SURGIS)	Northeast Ohio Surgery Center, LLC		200,000	Key Bank	Surgery Centers of America II, LLC
NE Ohio (SURGIS)	Northeast Ohio Surgery Center, LLC		43,750	Marcap Corporation	Surgery Centers of America II, LLC
Canfield (SURGIS)	Surgery Center of Canfield, LLC		331,000	First National	Surgery Centers of America II, LLC
Canfield (SURGIS)	Surgery Center of Canfield, LLC		250,000	First National	Surgery Centers of America II, LLC
Gilbert (SURGIS)	Surgery Center of Gilbert, LLC		324,000	Marcap	Surgery Centers of America II, LLC
Gulf Coast (SURGIS)	New Gulf Coast Surgery Center, LLC		350,000	Union Planters	Surginet, Inc.
New Horizons (SURGIS)	New Horizons Surgery Center, LLC		113,213	Fahey WC	Surgery Centers of America II, LLC
New Horizons (SURGIS)	New Horizons Surgery Center, LLC		160,185	Fahey WC	Surgery Centers of America II, LLC
Orlando (SURGIS)	Orlando Opthamology Surgery Center, LLC		33,116	Wachovia TI	ISS Orlando, LLC
Tri Cities (SURGIS)	Surgery Center at Tri-City Orthopaedic Clinic, LLC		33,585	Citicorp LOC	Surginet, Inc.
Idaho (SURGIS)	Idaho Surgery Center, LLC		245,831	Citicorp Vendor Finance, Inc.	Surginet, Inc.
Peoria (SURGIS)	Surgery Center of Peoria, LLC		951,401	Wells Fargo	Surgery Centers of America II, LLC
Scottsdale (SURGIS)	Surgery Center of Scottsdale		209,000	DVI	Surgery Centers of America II, LLC
Scottsdale (SURGIS)	Surgery Center of Scottsdale		181,481	Wells Fargo	Surgery Centers of America II, LLC
Redmond (SURGIS)	Redmond Surgery Center, LLC		2,130,996	Marcap	Surginet, Inc.
Northside-Cherokee/USP	Surgicoe Corporation, Surgicoe RE, LLC, The Surgery Center of Georgia, LLC.		4,306,476	AMRESCO Commercial Finance, Inc.	United Surgical Partners International, Inc.
Bagley Holdings, LLC	Bagley Holdings, LLC		959,846	U.S. Bank National Association	United Surgical Partners International, Inc.
Bagley Holdings, LLC	Bagley Holdings, LLC		253,301	Dollar Bank, Federal Savings Bank	United Surgical Partners International, Inc.

				Guaranteed Party
Center Name	Borrower	Gty Amt		(Lender)	Guarantor
Bagley Holdings, LLC	Bagley Holdings, LLC		66,386	U.S. Bank National Association	United Surgical Partners International, Inc.

Indebtedness outstanding on the Effective Date under the U.K. Facility.

Schedule 6.02

Existing Liens

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
25 East Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	US Bancorp	Leased equipment	06/17/2004	8810761
25 East Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	Alcon Laboratories, Inc.	Specific equipment	04/29/2005	9780467
25 East Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	American Express Business Finance Corporation	Leased equipment	05/31/2005	9876723
			Key Equipment Finance Inc.				07/11/2005	8770067
			(this is amended name)
25 East Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	General Electric Capital Corporation	Specific equipment	05/24/2005	9860746
25 East Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	General Electric Capital Corporation	Specific equipment	08/25/2005	10077443
25 East Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	CT Healthcare LLC	Specific equipment	09/29/2006	11388930
Advanced Ambulatory Surgical Care, L.P.	Missouri SOS	UCC-1	Citicorp Vendor Finance, Inc.	All assets	01/31/2006	20060012012F
Advanced Ambulatory Surgical Care, L.P.	Missouri SOS	UCC-1	Cardinal Health	All assets	03/15/2006	20060028522J
Alamo Heights Surgicare, L.P.	Texas SOS	UCC-1	The Frost National Bank	All equipment and furniture	12/29/2004	04-0092900579
Alamo Heights Surgicare, L.P.	Texas SOS	UCC-1	Alcon Laboratories, Inc.	Specific equipment	09/12/2005	05-0028364967
Arlington Surgicare Partners LTD	Texas SOS	UCC-1	HPSC, Inc.	Specific equipment	08/30/2002	02-0042583842
Arlington Surgicare Partners, LTD.	Texas SOS	UCC-1	HPSC, Inc.	Specific equipment	03/18/2003	03-0020930421

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
ARLINGTON SURGICARE PARTNERS, LTD.	Texas SOS	UCC-1	General Electric Capital Corporation	Specific equipment	11/30/2004	04-0089811425
ARLINGTON SURGICARE PARTNERS, LTD.	Texas SOS	UCC-1	De Lage Landen Financial Services, Inc.	Specific equipment	10/05/2005	05-0031013326
ARLINGTON SURGICARE PARTNERS, LTD.	Texas SOS	UCC-1	General Electric Capital Corporation	Specific equipment	09/19/2006	06-0031281415
Austintown Surgery Center, LLC	Ohio SOS	UCC-1	James Conti	All furniture, fixtures, machinery, equipment, etc.	05/10/2002	OH00049139404
Austintown Surgery Center, LLC	Ohio SOS	UCC-1	Alcon Laboratories, Inc.	Specific equipment	09/10/2003	OH00068321000
Austintown Surgery Center, LLC	Ohio SOS	UCC-1	Alcon Laboratories, Inc.	Specific equipment	08/27/2004	OH00080973744
Austintown Surgery Center, LLC	Ohio SOS	UCC-1	USBancorp	Specific equipment	12/29/2006	OH00110429748
Austintown Surgery Center, LLC	Ohio SOS	UCC-1	USBancorp	Specific equipment	01/30/2007	OH00111426612
Beaumont Surgical Affiliates, Ltd.	Texas SOS	UCC-1	U.S. Bank, N.A. as Custodian or Trustee	Specific equipment	02/14/2003	03-0017431504
Beaumont Surgical Affiliates, Ltd.	Texas SOS	UCC-1	U.S. Bank, N.A. as Custodian or Trustee	Specific equipment	02/14/2003	03-0017431726
Beaumont Surgical Affiliates, Ltd.	Texas SOS	UCC-1	U.S. Bank, N.A. as Custodian or Trustee	Leased equipment	02/14/2003	03-0017431837
Beaumont Surgical Affiliates, Ltd.	Texas SOS	UCC-1	U.S. Bank, N.A. as Custodian or Trustee	Leased equipment	02/18/2003	03-0017643044
Beaumont Surgical Affiliates, Ltd.	Texas SOS	UCC-1	U.S. Bank, N.A. as Custodian or Trustee	Leased equipment	02/18/2003	03-0017643377
Beaumont Surgical Affiliates, Ltd.	Texas SOS	UCC-1	U.S. Bank, N.A. as Custodian or Trustee	Leased equipment	02/18/2003	03-0017643488
Beaumont Surgical Affiliates, Ltd.	Texas SOS	UCC-1	U.S. Bank, N.A. as Custodian or Trustee	Specific equipment, leased equipment	02/18/2003	03-0017643600
Beaumont Surgical Affiliates, Ltd.	Texas SOS	UCC-1	U.S. Bank, N.A. as Custodian or Trustee	Leased equipment	02/18/2003	03-0017643711

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
Beaumont Surgical Affiliates, Ltd.	Texas SOS	UCC-1	U.S. Bank, N.A. as Custodian or Trustee	Specific equipment	02/18/2003	03-0017644843
Beaumont Surgical Affiliates, Ltd.	Texas SOS	UCC-1	U.S. Bank, N.A. as Custodian or Trustee	Specific equipment	02/18/2003	03-0017644954
Beaumont Surgical Affiliates, Ltd.	Texas SOS	UCC-1	Karl Storz Endoscopy America, Inc	Specific equipment	02/14/2005	05-0004872733
Beaumont Surgical Affiliates LTD	Texas SOS	UCC-1	Wachovia Bank	All assets	06/14/2005	05-0018591281
Beaumont Surgical Affiliates, Ltd.	Texas SOS	UCC-1	Wachovia Bank National Association	Specific equipment	02/15/2006	06-0005216979
Central Virginia Surgi-Center, L.P.	Virginia State Corporation Commission	UCC-1	General Electric Capital Corporation	All assets	02/07/2003	0302077162-3
Central Virginia Surgi-Center, L.P.	Virginia State Corporation Commission	UCC-1	Stryker Capital	Specific equipment	03/19/2004	0403197304-4
Central Virginia Surgi-Center, L.P.	Virginia State Corporation Commission	UCC-1	Smith & Nephew Capital	Leased equipment	06/01/2004	0406017508-5
Central Virginia Surgi-Center LP	Virginia State Corporation Commission	UCC-1	US Bancorp	Leased equipment	06/18/2004	0406187034-5
Central Virginia Surgi-Center LP	Virginia State Corporation Commission	UCC-1	Olympus America, Inc.	Specific equipment	07/12/2004	0407127181-6
		Adds collateral					08/06/2004	0408067070-0
Central Virginia Surgi-Center LP	Virginia State Corporation Commission	UCC-1	Olympus America, Inc.	Specific equipment	10/05/2004	0410057063-8
Central Virginia Surgi-Center, L.P.	Virginia State Corporation Commission	UCC-1	First-Citizens Bank & Trust Company	Specific equipment	06/22/2006	0606227223-9
Central Virginia Surgi-Center, L.P.	Virginia State Corporation Commission	UCC-1	Smith & Nephew Capital	Leased equipment	10/04/2006	0610047284-8

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
Chesterfield Ambulatory Surgery Center, L.P.	Missouri SOS	UCC-1	Cardinal Health	All goods, equipment, inventory, accounts and general intangibles	03/29/2006	20060033913J
Chico Surgery Center, L.P.	California SOS	UCC-1	General Electric Capital Corporation	Specific equipment	12/14/2006	06-7095593660
Coast Surgery Center, L.P.	California SOS	UCC-1	Smith & Nephew Finance	Specific equipment	12/09/2005	05-7051626123
Creekwood Surgery Center, L.P.	Missouri SOS	UCC-1	Sovereign Bank Network Capital Alliance Division	Specific equipment	10/01/2002	20020108815J
Creekwood Surgery Center, L.P.	Missouri SOS	UCC-1	General Electric Capital Corporation	Specific equipment	02/24/2006	20060020687B
Creekwood Surgery Center, L.P.	Missouri SOS	UCC-1	General Electric Capital Corporation	Specific equipment	11/17/2006	20060124689K
		Restates collateral					11/21/2006	20060125708B
Decatur Surgery Center, L.P.	Delaware SOS	UCC-1	Hitachi Capital America Corp.	Specific equipment	08/23/2005	52683416
Decatur Surgery Center, L.P.	Delaware SOS	UCC-1	General Electric Capital Corporation	Specific equipment	01/23/2006	60257915
Decatur Surgery Center, L.P.	Delaware SOS	UCC-1	Hitachi Capital America Corp.	Specific equipment	03/10/2006	60839779
Decatur Surgery Center, L.P.	Delaware SOS	UCC-1	Hitachi Capital America Corp.	Specific equipment	03/10/2006	60839787
Desoto Surgicare Partners, Ltd.	Texas SOS	UCC-1 Assignment Adds RA9 info Continuation	Fleet Bank, N.A. as Agent First Trust National Association (this is the assignee)	Specific equipment	04/15/1997	072555	07/01/1997 02/22/2002 02/22/2002	683747 02-00201420 02-00201435

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
Desoto Surgicare Partners, Ltd	Texas SOS	UCC-1 Continuation	First Trust National Associatio as Custodian or Trustee [sic]	Specific equipment	07/02/1997	154212	05/24/2002	02-00312410
Desoto Surgicare Partners, Ltd	Texas SOS	UCC-1 Adds RA9 info Continuation	First Trust National Association, as Custodian or Trustee	Specific equipment	08/01/1997	168596	06/07/2002 06/07/2002	02-00327666 02-00327668
Desoto Surgicare Partners, Ltd and North Texas Surgery Center	Texas SOS	UCC-1 Adds RA9 info Continuation	First Trust National Association, as Custodian or Trustee	Specific equipment	11/01/1997	237416	07/30/2002 07/30/2002	02-00387121 02-00387123
Desoto Surgicare Partners, Ltd.	Texas SOS	UCC-1 Adds RA9 info Continuation	First Trust National Association, as Custodian or Trustee	Specific equipment	02/17/1998	032382	08/08/2002 08/20/2002	02-00398457 02-00412428
Desoto Surgicare Partners, Ltd.	Texas SOS	UCC-1 Adds RA9 info Continuation	US Bank Trust N.A. as Custodian or Trustee	Specific equipment	06/23/1998	98-127960	10/22/2002 12/27/2002	03-00056575 03-00119937
Desoto Surgicare Partners, Ltd	Texas SOS	UCC-1 Adds RA9 info Continuation	DVI Financial Services Inc	Specific equipment	06/26/1998	98-129194	08/19/2002 01/03/2003	02-00410269 03-00126634
Desoto Surgicare Partners, Ltd.	Texas SOS	UCC-1 Adds RA9 info Continuation	US Bank Trust N.A. as Custodian or Trustee	Specific equipment	07/20/1998	98-147387	10/22/2002 01/24/2003	03-00056572 03-00149980

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
Desoto Surgicare Partners, Ltd.	Texas SOS	UCC-1	US Bank, N.A. as Custodian or Trustee	Specific equipment	10/02/2002	03-0003453503
Desoto Surgicare Partners, Ltd.	Texas SOS	UCC-1	US Bank, N.A. as Custodian or Trustee	Specific equipment	10/02/2002	03-0003453614
Desoto Surgicare Partners, Ltd.	Texas SOS	UCC-1	Baxter Healthcare Corporation	Leased equipment	03/24/2003	03-0021736527
Desoto Surgicare Partners, Ltd	Texas SOS	UCC-1	General Electric Capital Corporation	Specific equipment	11/16/2004	04-0088516345
Desoto Surgicare Partners, Ltd.	Texas SOS	UCC-1	The CIT Group/Equipment Financing, Inc.	Specific equipment	12/22/2005	05-0039006356
Desoto Surgicare Partners, Ltd.	Texas SOS	UCC-1	FPC Funding II, LLC	Leased equipment	07/05/2006	06-0022697961
Doctors Outpatient Surgicenter, Ltd	Texas SOS	UCC-1 Continuation	Alcon Laboritories [sic]	Specific equipment	09/14/2001	02-0003285858	06/01/2006	06-00185690
Doctors Outpatient Surgicenter, Ltd.	Texas SOS	UCC-1 Assignment Continuation Assignment	Leasing Associates of Barrington, Inc. Leasing Associates of Barrington, Inc. (this is the assignee)	Leased equipment	12/27/2001	02-0014005537	02/19/2002 06/27/2006 10/30/2006	02-00196852 06-00218140 06-00359379
Doctors Outpatient Surgicenter, LTD.	Texas SOS	UCC-1	MedCash Financial Services, LLC	All accounts purchased by the secured party	06/06/2002	02-0032622643
Doctors Outpatient Surgicenter, Ltd.	Texas SOS	UCC-1	Olympus America, Inc.	Specific equipment	07/25/2002	02-0038442790
Doctors Outpatient Surgicenter, LTD	Texas SOS	UCC-1 Assignment	Smith & Nephew Finance DVI Strategic Partner Group, a division of DVI Financial Services Inc. (this is the assignee)	Leased equipment	10/11/2002	03-0004547497	12/27/2002	03-00123466

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
Doctors Outpatient Surgicenter, Ltd.	Texas SOS	UCC-1	General Electric Capital Corporation	Leased equipment	10/15/2002	03-0004885129
Doctors Outpatient Surgicenter, Ltd.	Texas SOS	UCC-1	Leasing Associates of Barrington, Inc.	Leased equipment	10/28/2002	03-0006294337
Doctors Outpatient Surgicenter, Ltd.	Texas SOS	UCC-1	Alcon Laboratories	Specific equipment	08/10/2004	04-0077929149
Doctors Outpatient Surgicenter, Ltd.	Texas SOS	UCC-1	Citicorp Vendor Finance, Inc.	Specific equipment	02/21/2006	06-0005807783
East West Surgery Center, L.P.	Georgia, Cobb County	UCC-1	OrthoLink Physicians Corporation	All assets	08/05/2002	033200208567
East West Surgery Center, L.P.	Georgia, Cobb County	UCC-1	OrthoLink Physicians Corporation	All assets	08/05/2002	033200208568
East West Surgery Center, L.P.	Georgia, Cobb County	UCC-1	Fleet Capital Leasing Healthcare Finance, a division of Fleet Business Credit, LLC	Leased equipment	07/16/2003	033200306834
East West Surgery Center, L.P.	Georgia, Cobb County	UCC-1	SunTrust Bank	All assets	04/18/2006	0332006-02788
East West Surgery Center, L.P.	Georgia, Cobb County	UCC-1	SunTrust Bank	All assets	04/19/2006	0332006-02818
Elmwood Park Same Day Surgery, L.L.C.	Illinois SOS	UCC-1 Continuation	BankOne, N.A successor to American National Bank and Trust Company of Chicago	All assets	02/18/1999	3991109	08/27/2003	7479697
Elmwood Park Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	General Electric Capital Corporation	Specific equipment	08/08/2005	10077427
Elmwood Park Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	Smith & Nephew Capital	Leased equipment	01/13/2006	10556503
Elmwood Park Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	Alcon Laboratories, Inc.	Specific equipment	07/13/2006	11147453
Elmwood Park Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	Smith & Nephew Capital	Leased equipment	12/18/2005	11632157

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
Mason Ridge Surgery Center, L.P.	Missouri SOS	UCC-1 Amends debtor name	Midwest BankCentre	All inventory, chattel paper etc.	02/15/2006	20060017592C	12/08/2006	20060131564K
Mason Ridge Ambulatory Surgery Center, L.P.
(this is the amended name)
Metro Surgery Center, L.P.	Delaware SOS	UCC-1	Marcap Corporation	Specific equipment	03/08/2007	20070885110
Metro Surgery Center, LP	Delaware SOS	UCC-1	The Fifth Third Leasing Company	Leased equipment	05/17/2005	51513390
Metroplex Surgicare Partners, Ltd.	Texas SOS	UCC-1 Continuation	Citicorp Vendor Finance, Inc.	Specific equipment	11/26/2001	02-0010836050	06/16/2006	06-00205725
Metroplex Surgicare Partners, Ltd.	Texas SOS	UCC-1	Baxter Healthcare Corporation	Leased equipment	02/28/2003	03-0018807360
Metroplex Surgicare Partners, Ltd.	Texas SOS	UCC-1	Baxter Healthcare Corporation	Leased equipment	03/19/2003	03-0021084604
Metroplex Surgicare Partners, Ltd.	Texas SOS	UCC-1	Baxter Healthcare Corporation	Leased equipment	03/24/2003	03-0021736305
Metroplex Surgicare Partners, Ltd.	Texas SOS	UCC-1	Citicorp Vendor Finance, Inc.	Leased equipment	04/09/2003	03-0023784663
Mid Rivers Ambulatory Surgery Center, L.P.	Missouri SOS	UCC-1	Citicorp Vendor Finance, Inc.	All assets	01/31/2006	20060012141J
Mid Rivers Ambulatory Surgery Center, L.P.	Missouri SOS	UCC-1	Cardinal Health	All goods, equipment, inventory, accounts and general intangibles	03/15/2006	20060028518C
New Mexico Orthopaedic Surgery Center, L.P.	Georgia, Barrow County	UCC-1	Citicorp Vendor Finance, Inc.	Leased equipment	10/01/2004	007-2004-013176
North Shore Same Day Surgery, L.L.C.	Illinois SOS	UCC-1 Continuation	American National Bank and Trust Company of Chicago	All assets	08/01/1997	3723559	07/15/2002	5555337

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
North Shore Same Day Surgery Center, L.L.C.	Illinois SOS	UCC-1 Continuation Amends debtor info	American National Bank and Trust Company of Chicago	All assets	07/09/1999	4063575	01/16/2004 02/18/2004	8114528 8254001
North Shore Same Day Surgery, L.L.C. (this is the amended name)
North Shore Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	Alcon Laboratories, Inc.	Specific equipment	03/16/2005	9629998
North Shore Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	Olympus America, Inc.	Specific equipment	12/30/2005	10512441
North Shore Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	CIT Healthcare LLC	Specific equipment	02/10/2006	10647029
North Shore Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	Smith & Nephew Finance	Leased equipment	09/14/2006	11339018
North Shore Same Day Surgery, L.L.C.	Illinois SOS	UCC-1 Assignment	Smith & Nephew Finance M&I Marshall & IIsley Bank [sic] (this is the assignee)	Specific equipment	02/05/2007	11779786	02/28/2007	8859661
North Shore Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	Smith & Nephew Finance	Leased equipment	01/02/2007	11676928
Northridge Surgery Center, LP	Tennessee SOS	UCC-1	The Fifth Third Leasing Company	Leased equipment	10/08/2003	203-054464
Northridge Surgery Center, LP	Tennessee SOS	UCC-1	The Fifth Third Leasing Company	Leased equipment	06/21/2004	304-040200
Northridge Surgery Center, LP	Tennessee SOS	UCC-1	The Fifth Third Leasing Company	Leased equipment	02/05/2005	105-004160
Northridge Surgery Center, L.P.	Tennessee SOS	UCC-1	Citicorp Leasing, Inc	All assets, etc.	02/09/2007	107-006259

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
Northwest Surgery Center, Ltd.	Texas SOS	UCC-1 Amends debtor address Continuation	Marcap Corporation	All equipment	11/01/1997	232011	08/23/1999 06/01/2002	99-733006 02-0032445
Northwest Surgery Center, Ltd	Texas SOS	UCC-1	US Bank as Custodian or Trustee	Specific equipment	12/31/2002	03-0012462058
Northwest Surgery Center, Ltd.	Texas SOS	UCC-1	DVI Strategic Partner Group, A Division of DVI Financial Services Inc. and US Bank as Custodian or Trustee	Specific equipment	07/01/2003	03-0033131872
Northwest Surgery Center, Ltd	Texas SOS	UCC-1	Wells Fargo Financial Leasing, Inc.	Leased equipment	10/04/2004	04-0085100189
Northwest Surgery Center, Ltd	Texas SOS	UCC-1	Republic National Bank	All equipment	10/15/2004	04-0085277225
Northwest Surgery Center, Ltd	Texas SOS	UCC-1	Fifth Third Bank, N.A.	All assets	08/26/2005	05-0026838880
Northwest Surgery Center Ltd	Texas SOS	UCC-1	Sound Surgical Technologies LLC	Leased equipment	10/27/2005	05-0033462578
Northwest Surgery Center, LLP	Texas SOS	UCC-1	MarCap Corporation	All personal property and fixtures	01/03/2007	07-0000232539
[this is not a similar name because the address matches the chief executive office]
Olive Ambulatory Surgery Center, L.P.	Missouri SOS	UCC-1	Citicorp Vendor Finance, Inc.	All assets	01/31/2006	20060012124K
Olive Ambulatory Surgery Center, L.P.	Missouri SOS	UCC-1	Cardinal Health	All goods, equipment, inventory, accounts and general intangibles	03/15/2006	20060028512H

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
Orthopedic and Surgical Specialty Company, LLC	Arizona SOS	UCC-1	Wells Fargo Financial Leasing, Inc.	Leased equipment	04/09/2004	200413103818
Orthopedic and Surgical Specialty Company, LLC	Arizona SOS	UCC-1	Wells Fargo Financial Leasing, Inc.	Leased equipment	05/18/2004	200413142235
Orthopedic and Surgical Specialty Company, LLC	Arizona SOS	UCC-1	Citicorp Vendor Finance, Inc.	Leased equipment	05/13/2004	200413146526
Orthopedic and Surgical Specialty Company, LLC	Arizona SOS	UCC-1	Wells Fargo Financial Leasing, Inc.	Leased equipment	06/07/2004	200413170706
Orthopedic and Surgical Specialty Company, LLC	Arizona SOS	UCC-1	Smith & Nephew Finance	Leased equipment	04/19/2006	200614176606
Torrance Endoscopy Center, a California Limited Partnership Pacific Endo-Surgical Center, L.P. (this is the amended name)	California SOS	UCC-1 Amends debtor name Continuation	Citicorp Vendor Finance, Inc.	Leased equipment	03/18/2002	0207860365	08/16/2005 01/30/2007	05-70378458 07-71007343
Pacific Endo-Surgical Center, L.P.	California SOS	UCC-3 Amendment Amends secured party name & address	Citicorp Vendor Finance Inc. (this is the amended version without comma)	Leased equipment	03/18/2002	0207860365	03/02/2007	07-71047025
Pacific Endo-Surgical Center, L.P.	California SOS	UCC-1	The CIT Group/Equipment Financing, Inc.	Specific equipment	11/15/2004	04-7006006770
Park Cities Surgery Center, L.P.	Texas SOS	UCC-1 Restates collateral	General Electric Capital Corporation	All assets [restated by amendment]	06/09/2003	03-0030488894	12/17/2004	04-00916953

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
Park Cities Surgery Center, L.P.	Texas SOS	UCC-1 Assignment	Leasing Associates of Barrington, Inc.	Specific equipment	09/18/2003	04-0042198674	10/24/2003	04-00458992
Park Cities Surgery Center, LP.	Texas SOS	UCC-1	Park Cities Bank	Specific equipment	12/31/2004	04-0093321385
Reading Ambulatory Surgery Center, L.P.	Pennsylvania SOS	UCC-1	Citicorp Vendor Finance, Inc.	Specific equipment	08/12/2005	2005081600900
Redding Surgery Center, LP	Tennessee SOS	UCC-1	Fifth Third Bank, (Tennessee)	Specific equipment	10/26/2004	204-042268
Redding Surgery Center, L.P.	Tennessee SOS	UCC-1	Fifth Third Bank, N.A.	Specific equipment	01/03/2006	106-200524
River North Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	Smith & Nephew Capital	Leased equipment	12/06/2004	9326790
River North Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	General Electric Capital Corporation	Specific equipment	08/08/2005	10077451
River North Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	Smith & Nephew Capital	Leased equipment	05/12/2006	10954584
River North Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	USBancorp	Specific equipment	09/19/2006	11351700
River North Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	Smith & Nephew Capital	Leased equipment	11/14/2006	11530990
San Antonio Endoscopy Center, L.P.	Texas SOS	UCC-1	MarCap Corporation	Leased equipment	04/28/2003	03-0025885394
San Antonio Endoscopy, L.P.		Amends debtor name					03/10/2006	06-00079253
(this is the amended name)

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
San Antonio Endoscopy Center, L.P.	Texas SOS	UCC-1 Deletes certain collateral	MarCap Corporation	Leased equipment	05/01/2003	03-0026244435	05/29/2003	03-00293916
San Antonio Endoscopy, L.P.		Amends debtor name					03/10/2006	06-00079215
(this is the amended name)
San Gabriel Valley Surgical Center, L.P.	California SOS	UCC-1 Continuation	MarCap Corporation	All personal property and fixtures	02/20/2002	0205360174	08/24/2006	06-70827107
San Gabriel Valley Surgical Center, L.P.	California SOS	UCC-1	Alcon Laboratories, Inc.	Specific equipment	01/08/2003	0301360507
San Gabriel Valley Surgical Center, L.P.	California SOS	UCC-1	HSPC,Inc	Assets acquired with proceeds of financing by secured party	09/11/2006	06-7084397276
San Gabriel Valley Surgical Center, L.P.	California SOS	UCC-1	Alcon Laboratories, Inc.	Specific equipment	10/10/2006	06-7087800733
Shore Outpatient Surgicenter, L.L.C.	Georgia, Barrow County	UCC-1	Wachovia Bank, National Association	Fixtures and equipment located at 360 Route 70, Lakewood, NJ.	05/16/2003	007-2003-005485
Specialists Surgery Center, L.L.C.	Oklahoma, Oklahoma County	UCC-1	Alcon Laboratories, Inc.	Specific equipment	02/04/2003	2003001381220
Specialists Surgery Center, L.L.C.	Oklahoma, Oklahoma County	UCC-1	U.S. Bank Trust N.A. as Custodian or Trustee	All assets	04/23/2004	2004004934329
Specialists Surgery Center, L.L.C.	Oklahoma, Oklahoma County	UCC-1	Siemens Financial Services, Inc.	Leased equipment	07/12/2004	2004008445734
Specialists Surgery Center, L.L.C.	Oklahoma, Oklahoma County	UCC-1	The CIT Group/Equipment Financing, Inc.	Specific equipment	02/28/2005	2005002384327
Specialists Surgery Center, LLC	Oklahoma, Oklahoma County	UCC-1	Steris Corporation	Goods sold on credit by secured party	01/23/2006	2006000857937

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
Specialists Surgery Center, L.L.C.	Oklahoma, Oklahoma County	UCC-1	CIT Healthcare LLC	Specific equipment	04/14/2006	2006004444933
Sunset Hills Ambulatory Surgery Center, L.P.	Missouri SOS	UCC-1	Citicorp Vendor Finance, Inc.	All assets	01/31/2006	20060012114J
Sunset Hills Ambulatory Surgery Center, L.P.	Missouri SOS	UCC-1	Cardinal Health	All goods, equipment, inventory, accounts and general intangibles	03/15/2006	20060028507A
Tamarac Surgery Center LLC	Florida Secured Transaction Registry	UCC-1 Amends secured party address Continuation	U.S. Bank Trust N.A. as Custodian or Trustee	All assets	02/01/2000	200000027952-9	12/28/2004 01/03/2005	200408615042 200508650389
Tamarac Surgery Center, LLC	Florida Secured Transaction Registry	UCC-1	Olympus America, Inc.	Leased equipment	07/08/2002	200201611382
Tamarac Surgery Center, LLC	Florida Secured Transaction Registry	UCC-1 Restates collateral Continuation	U.S. Bank, N.A. as Custodian or Trustee	Specific equipment	07/16/2002	200201675879	02/04/2003 02/15/2007	200303195841 200704828586
Tamarac Surgery Center, LLC	Florida Secured Transaction Registry	UCC-1 Adds collateral	Olympus America, Inc.	Specific equipment	09/17/2003	200304972930	10/16/2003	200305221319
Tamarac Surgery Center LLC	Florida Secured Transaction Registry	UCC-1	Olympus America, Inc.	Specific equipment	09/27/2005	200500776723
Tamarac Surgery Center, LLC	Florida Secured Transaction Registry	UCC-1	Olympus America, Inc.	Specific equipment	01/03/2006	200601536205
Tamarac Surgery Center, LLC	Florida Secured Transaction Registry	UCC-1	General Electric Capital Corporation	Specific equipment	07/26/2006	200603268623

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
Templeton Surgery Center, LLC	Tennessee SOS	UCC-1	MarCap Corporation	Leased equipment	06/16/2005	305-033437
Texan Ambulatory Surgery Center, L.P.	Texas SOS	UCC-1 Adds RA9 info Continuation Continuation	Copelco Capital, Inc.	Leased equipment	10/21/1999	99-212788	07/18/2003 10/18/2004 10/19/2004	03-00349270 04-00853918 04-00855297
The Surgery Center (an Ohio limited partnership)	Ohio SOS	UCC-1	Alcon Laboratories, Inc.	Specific equipment	06/17/2005	OH00090504753
TOPS Specialty Hospital, Ltd.	Texas SOS	UCC-1 Assignment Continuation Assignment	Leasing Associates of Barrington, Inc. Firstar Bank, N.A. (this is the assignee) Leasing Associated of Barrington, Inc. [sic]	Leased equipment	12/27/2001	02-0013680070	02/25/2002 06/27/2006 10/30/2006	02-00206629 06-00218122 06-00359314
Tops Specialty Hospital, Ltd.	Texas SOS	UCC-1	US Bank Trust N.A. as Custodian or Trustee	Specific equipment	03/17/2003	03-0020893207
TOPS Specialty Hospital, Ltd.	Texas SOS	UCC-1	U.S. Bank Trust N.A. as Custodian or Trustee	Specific equipment	03/21/2003	03-0021556052
TOPS Specialty Hospital, Ltd.	Texas SOS	UCC-1	ACMI Financial Services	Leased equipment	03/31/2003	03-0022540036
TOPS Specialty Hospital, Ltd.	Texas SOS	UCC-1	U.S. Bank Trust N.A. as Custodian or Trustee	Specific equipment	06/30/2003	03-0032967323

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
TOPS Specialty Hospital, Ltd.	Texas SOS	UCC-1	MarCap Corporation	Specific equipment	06/23/2004	04-0072484594
Tops Specialty Hospital, LTD.	Texas SOS	UCC-1	LEAF Funding, Inc.	Specific equipment	10/28/2005	05-0033647826
TOPS Specialty Hospital, Ltd.	Texas SOS	UCC-1	General Electric Capital Corporation	Specific equipment	03/22/2006	06-0009217378
Tops Specialty Hospital, Ltd.	Texas SOS	UCC-1	Toshiba America Medical Credit	Leased equipment	03/31/2006	06-0010441571
TOPS Specialty Hospital, Ltd.	Texas SOS	UCC-1	General Electric Capital Corporation	Specific equipment	05/15/2006	06-0016511747
United Surgery Center — Southeast, Ltd.	Texas SOS	UCC-1 Assignment Assignment Continuation Assignment	Leasing Associates of Barrington, Inc. Firstar Bank, N.A. (this is the assignee) U.S. Bank, N.A. (this is the assignee) Leasing Associates of Barrington, Inc. (this is the assignee)	Leased equipment	03/11/2002	0022235490	04/29/2002 09/10/2002 09/25/2006 01/04/2007	02-00280946 03-00009681 06-00318367 07-00005350
United Surgery Center — Southeast, LTD.	Texas SOS	UCC-1	MedCash Financial Services, LLC	All accounts purchased by secured party from debtor	06/06/2002	02-0032621288
United Surgery Center — Southeast, Ltd.	Texas SOS	UCC-1	Leasing Associates of Barrington, Inc.	Leased equipment	07/24/2002	02-0038292258
United Surgery Center — Southeast, Ltd.	Texas SOS	UCC-1	Leasing Associates of Barrington, Inc.	Leased equipment	07/24/2002	02-0038292258
United Surgery Center — Southeast, Ltd.	Texas SOS	UCC-1	The CIT Group/Equipment Financing, Inc.	Specific equipment	11/09/2004	04-0087849050

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
United Surgery Center — Southeast, Ltd.	Texas SOS	UCC-1	Citicorp Vendor Finance, Inc.	Specific equipment	02/21/2006	06-0005791735
University Surgery Center, Ltd.	Florida Secured Transaction Registry	UCC-1	MarCap Corporation	All personal property and fixtures	09/30/2005	200500813602
Warner Park Surgery Center, L.P.	Arizona SOS	UCC-1 Assignment Assignment	Leasing Associates of Barrington, Inc. Firstar Bank, N.A. (this is the assignee) Leasing Associates of Barrington, Inc. (this is the assignee)	Leased equipment	06/12/2001	01177804	09/24/2001 04/28/2006	01177804 01177804
Warner Park Surgery Center, L.P.	Arizona SOS	UCC-1	Citicorp Vendor Finance, Inc.	Specific equipment	06/16/2004	200413179589
Warner Park Surgery Center, L.P.	Arizona SOS	UCC-1	Citicorp Vendor Finance, Inc.	Leased equipment	11/23/2004	200413418125
Warner Park Surgery Center, L.P.	Arizona SOS	UCC-1 Adds collateral	Citicorp Vendor Finance, Inc.	Leased equipment	05/13/2005	200513652961	07/26/2005	200513652961
Warner Park Surgery Center, L.P.	Arizona SOS	UCC-1	Citicorp Vendor Finance, Inc.	Leased equipment	08/01/2005	200513736815
Warner Park Surgery Center, L.P.	Arizona SOS	UCC-1	Citicorp Vendor Finance, Inc.	Specific equipment	11/25/2005	200513936704
Warner Park Surgery Center, L.P.	Arizona SOS	UCC-1	Citicorp Vendor Finance, Inc.	Specific equipment	05/15/2006	200614227880

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
West Houston Ambulatory Surgical Associates, L.P.	Texas SOS	UCC-1	Smith & Nephew Capital	Leased equipment	04/15/2004	04-0064507713
West Houston Ambulatory Surgical Associates, L.P.	Texas SOS	UCC-1	Smith & Nephew Capital	Leased equipment	11/04/2004	04-0087315159
West Houston Ambulatory Surgical Associates, LP	Texas SOS	UCC-1	Fifth Third Bank, (Tennessee)	Specific equipment	06/06/2005	05-0017594233
West Houston Ambulatory Surgical Associates, L.P.	Texas SOS	UCC-1	FPC Funding II, LLC	Leased equipment	01/09/2007	07-0001113073
West Houston Ambulatory Surgical Associates, L.P.	Texas SOS	UCC-1	Smith & Nephew Capital	Leased equipment	03/14/2007	07-0008549528
Willowbrook Ambulatory Surgery Center, LP	Tennessee SOS	UCC-1	CIT Healthcare LLC	All assets	10/18/2006	306-165395
United Surgical Partners International, Inc.	Delaware SOS	UCC-1	Koger Post Oak Limited Partnership	Personal property at 3050 Post Oak Boulevard, Houston, Texas	11/14/2002	22982332
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Smith & Nephew Finance, assigned to DVI Strategic Partner Group, A Division of DVI Financial Services Inc.	Leased equipment	05/10/2002	302-026902	06/30/2003	303-033922
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Bank of Nashville	Leased equipment	06/03/2002	102-025747
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Bank of Nashville	Leased equipment	06/13/2002	202-034595
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Olympus America, Inc.	Specific equipment	02/27/2003	303-011257
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Olympus America, Inc.	Specific equipment	03/25/2003	203-014186

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Olympus America, Inc.	Specific equipment	03/25/2003	203-014187
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	The Fifth Third Leasing Company	Leased equipment	10/06/2003	203-053627
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Fifth Third Bank, Tennessee, an Ohio Banking Corp	Specific equipment	11/07/2003	103-052264
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Olympus America, Inc.	Specific equipment	12/17/2003	103-055346
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Fifth Third Bank, (Tennessee)	Specific equipment	09/15/2004	104-051662
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Olympus America, Inc.	Specific equipment	10/01/2004	104-054842
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Fifth Third Bank, (Tennessee)	Specific equipment	11/04/2004	204-045170
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Fifth Third Bank, (Tennessee)	Specific equipment	01/06/2005	105-001001
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Olympus America, Inc.	Specific equipment	07/05/2005	205-017079
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Fifth Third Bank, (Tennessee)	All assets	07/21/2005	305-040663
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Fifth Third Bank, Tennessee, an Ohio Banking Corp	Specific equipment	07/21/2005	305-040685
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Olympus America, Inc.	Specific equipment	01/10/2006	206-001565	02/15/2006	306-108347
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Olympus America, Inc.	Specific equipment	01/10/2006	206-001598
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Fifth Third Bank, (Tennessee)	Medical equipment	10/17/2006	306-165102
American Endoscopy Services, Inc.	Tennessee SOS	UCC-1	Olympus America, Inc.	Specific equipment	02/05/2007	107-005366

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
ISS-Orlando LLC	Florida Secured Transaction Registry	UCC-1	U.S. Bank, N.A. as Custodian or Trustee	Equity interests in Orlando Ophthmology Surgery Center, LLC	08/21/2002	200201974868
OrthoLink Physicians Corporation	Delaware SOS	UCC-1	Fleet Capital Leasing Healthcare Finance, (a division of Fleet Business Credit, LLC)	Leased equipment	08/20/2001	10871496
OrthoLink Physicians Corporation	Delaware SOS	UCC-1	De Lage Landen Financial Services, Inc.	Leased equipment	09/20/2001	11196786	11/16/2001 01/09/2004 03/27/2006	1173100 cover sheet indicates filing should say 11731004 40290090 61023902
OrthoLink Physicians Corporation	Delaware SOS	In-Lieu UCC-1 Re: New Mexico & Tennessee	Fleet Capital Leasing Healthcare Finance, a division of Fleet Business Credit Corporation (n/k/a Fleet Capital Leasing Healthcare Finance, a division of Fleet Business Credit LLC)	not indicated	11/28/2001	11556187
OrthoLink Physicians Corporation	Delaware SOS	In-Lieu UCC-1 Re: Georgia	Fleet Capital Leasing Healthcare Finance, a division of Fleet Business Credit Corporation (n/k/a Fleet Capital Leasing Healthcare Finance, a division of Fleet Business Credit LLC)	not indicated	11/28/2001	11556203

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
OrthoLink Physicians Corporation	Delaware SOS	In-Lieu UCC-1 Re: Georgia	Fleet Capital Leasing Healthcare Finance, a division of Fleet Business Credit Corporation (n/k/a Fleet Capital Leasing Healthcare Finance, a division of Fleet Business Credit LLC)	not indicated	11/28/2001	11556211
OrthoLink Physicians Corporation	Delaware SOS	In-Lieu UCC-1 Re: Tennessee	Fleet Business Credit, LLC and U.S. Bank, N.A. as Custodian or Trustee Successor in Interest to U.S. Bank Trust, N.A.	Specific equipment	07/30/2002	21877046	02/25/2003	30464530
OrthoLink Physicians Corporation	Delaware SOS	In-Lieu UCC-1 Re: Tennessee	National City Commercial Capital Corporation	Leased equipment	07/25/2002	21995830	12/29/2004	50052812
OrthoLink Physicians Corporation	Delaware SOS	In-Lieu UCC-1 Re: Tennessee	U.S. Bank, N.A. as Custodian or Trustee Successor in Interest to U.S. Bank Trust N.A.	Not indicated	03/25/2003	30756968	04/05/2004	40940405
OrthoLink Physicians Corporation	Delaware SOS	In-Lieu UCC-1 Re: New Mexico	U.S. Bank, N.A. as Custodian or Trustee Successor in Interest to U.S. Bank Trust N.A.	Leased equipment	03/31/2003	30830979
OrthoLink Physicians Corporation	Delaware SOS	In-Lieu UCC-1 Re: New Mexico & Tennessee	U.S. Bank, N.A. as Custodian or Trustee Successor in Interest to U.S. Bank Trust N.A.	Leased equipment	03/31/2003	30832603
OrthoLink Physicians Corporation	Delaware SOS	UCC-1	General Electric Company	All equipment, furniture, fixtures etc. at specified location in Georgia	05/30/2003	31370686

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
OrthoLink Physicians Corporation	Delaware SOS	UCC-1	Philips Medical Capital LLC	Leased equipment	08/09/2004	42232348
Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	Leasing Associates of Barrington, Inc.	Leased equipment	06/11/2001	4397253	11/05/2001 04/01/2003	4458240 6785123
							02/03/2006	8798824
							05/30/2006	8817196
Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	U.S. Bank, N.A.	Leased equipment	01/21/2003	6437125	04/07/2003	6816029
Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	M Campbell, LLC and numerous additional secured parties	Equity Interests in River North Same Day Surgery, LLC (“Issuer”) and any parent of the Issuer	05/07/2003	6969720
Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	DVI Strategic Partner Group, A Division of DVI Financial Services Inc.	Leased equipment	07/15/2003	7286341	07/28/2003	7343337
Same Day Surgery, L.L.C.	Illinois SOS	UCC-1	M Campbell, LLC and numerous additional secured parties	Equity Interests in Elmwood Park Same Day Surgery, LLC (“Issuer”) and any parent of the Issuer	05/07/2003	6969739
Same Day Surgery, L.L.C. Specialty Surgicenters, Inc.	Illinois SOS Georgia, Fulton County	UCC-1 UCC-1	Lakeside Bank US Bank Trust NA	Leased equipment Membership interests in Tamarac Surgery Center, LLC	01/08/2004 02/03/2000	8080917 060200002166	01/26/2004 01/03/2005 01/03/2005	8158789 060200500099 060200500100
Specialty Surgicenters, Inc.	Georgia, Fulton County	UCC-1	Bank South	Certificate of Deposit	12/16/2003	060200315458
Specialty Surgicenters, Inc.	Georgia, Gwinnett County	In-Lieu UCC-1 Re: Florida	US Bank Trust NA	Membership interests in Tamarac Surgery Center, LLC	12/30/2004	67-2004-012836

		Type of	Secured		Original	Original	Amdt.	Amdt.
Debtor	Jurisdiction	filing found	Party	Collateral	File Date	File Number	File Date	File Number
Surgery Centers of America II, LLC	Oklahoma, Oklahoma County	UCC-1	MarCap Corporation	Ownership interests in Northeast Ohio Surgery Center, LLC	12/04/2001	2001010393524	06/21/2006	E2006007528030
Surgery Centers of America II, L.L.C.	Oklahoma, Oklahoma District Court	Judgment	Rick Mason	$75,000.00	07/03/2001	CJ 2001-2940-65
Surginet of Northwest Houston, Inc.	Tennessee SOS	UCC-1	Republic National Bank	All equipment	03/09/2005	305-013163
Surginet, Inc.	Tennessee SOS	UCC-1	Smith & Nephew Endoscopty	Leased equipment	03/04/2004	304-015181

Schedule 6.04

Existing Investments

(as of March 31, 2007)

Investor	Investee	Total1
USP Nevada, Inc.	CHW/USP Las Vegas Surgery Centers, LLC	$	1,350,533
USP Kansas City, Inc.	St.Mary’s / USP Surgery Centers, LLC		1,553,164
Health Horizons of Murfreesboro, Inc.	Middle Tenn Ambulatory Surgery Center, LP		3,502,140
USP North Texas, Inc.	Texas Health Ventures Group, LLC		62,636,693
USP North Texas, Inc.	Trophy Club Medical Center, LP		1,427,723
USP North Texas, Inc.	Valley View Surgicare Partners, Ltd.		2,555,936
USP North Texas, Inc.	Denton Surgicare Partners, Ltd.		1,179,034
USP North Texas, Inc.	Grapevine Surgicare Partners, Ltd.		4,766,962
USP North Texas, Inc.	Frisco Medical Center, LLP		(62,230	)
USP North Texas, Inc.	Lewisville Surgicare Partners, Ltd.		8,285,654
USP North Texas, Inc.	Bellaire Outpatient Surgery Center, LLP		(6,499	)
USP North Texas, Inc.	University Surgical Partners of Dallas, LLP		6,863,220
USP North Texas, Inc.	Garland Surgicare Partners, Ltd.		871,198
USP North Texas, Inc.	Fort Worth Surgicare Partners, Ltd.		2,036,144
USP North Texas, Inc.	Physicians Surgical Center of Fort Worth, LLP (20% direct)		3,685,569
THVG/HealthFirst, LLC	Physicians Surgical Center of Fort Worth, LLP		401,095
Texas Health Venture Huguley, LP	Huguley Surgery Center (10825)		223,144
USP New Jersey, Inc.	Shrewsbury Surgery Center, LLC		968,492
USP New Jersey, Inc.	Tom’s River Surgery Center, LLC		1,557,316
USP New Jersey, Inc.	Northern Monmouth Regional Surgery Center, LLC		362,990
OrthoLink ASC Corporation	OrthoLink/TOC LLC		622,215
OrthoLink ASC Corporation	OrthoLink / Baptist ASC, LLC & Baptist Surgery Center, LP		7,497,367
OrthoLink ASC Corporation	Mountain Empire Surgery Center, LP		4,473,934
OrthoLink ASC Corporation	Roswell Surgery Center, LLC		111,906
OrthoLink ASC Corporation	Lawrenceville Surgery Center, LLC		149,950
OrthoLink ASC Corporation	Northwest Georgia Orthopaedic Surgery Center, LLC		1,786,014
OrthoLink ASC Corporation	Orthopedic South Surgical Partners, LLC		177,249
USP Las Cruces, Inc.	Las Cruces Surgical Center, LLC		2,426,242
United Surgical of Atlanta, Inc.	Northside-Cherokee / USP Surgery Centers, LLC		5,018,157
USP Central New Jersey, Inc.	East Brunswick Surgery Center, LLC		1,739,113
USP Tennessee, Inc.	Saint Thomas/USP Surgery Centers, LLC		2,007,234
USP Cleveland, Inc.	Bagley Holdings, LLC		1,657,283
USP Houston, Inc.	Memorial Hermann/USP Surgery Centers, LLP		839,240
USP Houston, Inc.	Memorial Hermann/USP Surgery Centers III, LLP		3,414,345
USP Destin, Inc.	Destin Surgery Center, Ltd.		1,637,746

¹ Total Investment in the Investees is inclusive of the amount of Guarantees of Indebtedness set forth on Schedule 6.01.

Investor	Investee	Total1
USP Austin, Inc.	Northwest Surgery Center, LLP		(34,387	)
USP Phoenix, Inc.	CHW/USP Surgery Centers, LLC		8,683,839
USP San Gabriel, Inc.	CHW/USP San Gabriel Surgery Centers, LLC		1,993,023
USP Baton Rouge, Inc.	Baton Rouge Surgical Hospital, LLC		1,436,864
USP San Antonio, Inc.	Christus/USP General Partner, LLC		1,902,977
USP Cedar Park, Inc.	Cedar Park Surgery Center, LLP		634,864
USP Newport News, Inc.	Mary Immaculate Ambulatory Surgery Center, LLC		512,913
USP Oxnard, Inc.	CHW/USP Oxnard Surgery Centers, LLC		2,343,006
USP Michigan, Inc.	Lansing ASC Partners, LLC		3,333,547
USP Michigan, Inc.	Michigan ASC Partners, LLC		1,844,727
USP Michigan, Inc.	McLaren ASC of Flint, LLC		1,046,312
USP Mission Hills, Inc.	Providence/USP Surgery Centers, LLC		1,142,744
USP Oklahoma, Inc.	Southwest Ambulatory Surgery Center, LLC (includes OCOMS)		13,693,567
USP Oklahoma, Inc.	INTEGRIS / USP Surgery Centers, LLC		(205	)
USP Chicago, Inc.	ENH/USP Surgery Centers I, LLC		48,726
USP Baltimore, Inc.	St. Agnes / USP Joint Venture, LLC		1,367,523
USP Sarasota, Inc.	CHC / USP Surgery Centers, LLC		3,830,694
SSI Holdings, Inc.	Central Jersey Surgery Center, LLC		7,436,573
SSI Holdings, Inc.	Tulsa Outpatient Surgery Center, LLC		781,335
USP Richmond, Inc.	Memorial Ambulatory Surgery Center, LLC		780,799
USP Richmond, Inc.	Richmond ASC Leasing Company, LLC		696,487
USP Richmond II, Inc.	St. Mary’s Ambulatory Surgery Center, LLC		874,340
USP Sacramento, Inc.	CHW/USP Sacramento Surgery Centers, LLC		9,930,523
USP North Kansas City, Inc.	NKCH / USP Surgery Centers, LLC		5,494,487
USP MidWest, Inc.	Adventist Midwest / USP Surgery Centers, LLC		1,096,600
Advanced Ambulatory Surgical Care, LP	Real Estate Co-Op		6,023
USP Alexandria, Inc.	Alexandria Surgery Center Real Estate, LLC		2,875,276
USP Alexandria, Inc.	Christus Cabrini Surgery Center, LLC		500,514
USP Indiana, Inc.	St. Vincent Health / USP, LLC		(65,401	)
USP Virginia Beach, Inc.	Bon Secours Surgery Center at Virigina Beach, LLC		(32,354	)
USP Texas, LP	Legacy Warren Partners, LP		1,898,693
ICNU Rockford, LLC	Pendragon Development, LLC		103,056
Surgery Centers Of America II, LLC	Surgery Center of Scottsdale, LLC		10,424,998
Surgery Centers Of America II, LLC	Surgery Center of Peoria, LLC		5,603,224
Surginet, Inc.	Suburban Endoscopy Services, LLC		3,981,958
Surginet, Inc.	Redmond Surgery Center, LLC		2,604,573
Surginet, Inc.	Central Avenue Surgery Center, LLC		145,364
Surginet, Inc.	GP Surgery Center, LLC		1,904,169
Surginet, Inc.	Idaho Surgery Center, LLC		1,386,629
Surginet, Inc.	The Surgery Center at Tri-City Orthopaedic Clinic, LLC		4,487,514
Surginet, Inc.	Manitowoc Surgery Center, LLC		725,648
ISS — Orlando, LLC	Orlando Ophthalmology Surgery Center, LLC		1,411,837
Surgery Centers Of America II, LLC	Surgery Center of Gilbert, LLC		3,623,558
Surgery Centers Of America II, LLC	Physicians Surgery Center of Tempe, LLC		884,952
Surgery Centers Of America II, LLC	New Horizons Surgery Center, LLC		1,340,618

Investor	Investee	Total1
Surgery Centers Of America II, LLC	Surgery Center of Canfield, LLC		2,126,674
Surgery Centers Of America II, LLC	Northeast Ohio Surgery Center, LLC		8,020,288
USP Texas, LP	Veroscan, Inc.		50,000
USP Harbour View, Inc	Bon Secours Surgery Center at Harbour View, L.L.C.		(19,683	)
USPI San Diego, Inc.	Scripps/USP JV		(27,724	)
USP Corpus Christi, Inc.	CS/USP General Partner, L.L.C. and CS/USP Surgery Centers, L.P.		7,150,462
Surginet, Inc.	New Gulf Coast Surgery Center, L.L.C.		351,007
USP Lyndhurst, Inc.	Zeeba Surgery Center, L.P.		837,600

Schedule 6.09

Existing Transactions with Affiliates

Stock Subscription and Exchange Agreement, dated as of April 19, 2007, among Holdings, the Sponsor and the other purchasers party thereto.

Stockholders Agreement, dated as of April 19, 2007, among Holdings, the Sponsor and the other stockholders party thereto.

Registration Rights Agreement, dated as of April 19, 2007, among Holdings, the Sponsor and the investors party thereto.

Management Agreement, dated as of April 19, 2007, between the Borrower and WCAS Management Corporation.

Schedule 6.10

Existing Restrictions

None.

EXHIBIT A

Form of
ASSIGNMENT AND ASSUMPTION

          This Assignment and Assumption is dated as of the date set forth below (the “Effective Date”) and is entered into by and between [the][each] Assignor (as defined below) and [the][each] Assignee (as defined below). Capitalized terms used in this Assignment and Assumption and not otherwise defined herein have the meanings specified in the Credit Agreement dated as of April 19, 2007 (the “Credit Agreement”), among United Surgical Partners International, Inc., a Delaware corporation (the “Borrower”), USPI Holdings, Inc., a Delaware corporation (“Holdings”), the Lenders party thereto from time to time, Citibank, N.A., as Administrative Agent, Citigroup Global Markets, Inc. and Lehman Brothers Inc., as joint lead arrangers and joint bookrunners, Bear Stearns & Co. Inc. and UBS Securities LLC, as joint bookrunners, Lehman Brothers Inc., as Syndication Agent, and Bear Stearns Corporate Lending Inc., SunTrust Bank and UBS Securities LLC, as Co-Documentation Agents, receipt of a copy of which is hereby acknowledged by [the][each] Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto (the “Standard Terms”) are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

          For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the][each] Assignee, and [the][each] Assignee hereby irrevocably purchases and assumes from [the][each] Assignor, subject to and in accordance with the Standard Terms and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (a) all of [the][each] Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the][each] Assignor under the facilities identified below (including participations in any Letters of Credit and Swingline Loans included in such facilities) and (b) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the][each] Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (a) above (the rights and obligations sold and assigned pursuant to clauses (a) and (b) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to [the][each] Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][such] Assignor.

1.	Assignor[(s)]:
2.	Assignee[(s)]:
	[(a) Assignee is an Affiliate of: ]
	[(b) Assignee is an Approved Fund:]
3.	Borrower: UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
4.	Administrative Agent: CITIBANK, N.A., as Administrative Agent under the Credit Agreement.
5.	Assigned Interest:

	Aggregate Amount of
	All Lenders’		Amount of	Percentage of
	Commitments and		Commitments and Loans	Global Commitment
Facility Assigned1	Loans		Assigned	Assigned		CUSIP
Delayed Draw Term Loan	$	100,000,000	$		%
Revolving Facility	$	100,000,000	$		%
Tranche B Facility	$	430,000,000	$		%

Effective Date:

¹ Select as applicable.

-2-

          The terms sets forth in this Assignment and Assumption are hereby agreed to:

		,
as Assignor2
By:
	Name:
	Title:

          The terms set forth by this Assignment and Assumption are hereby agreed to:

		,
as Assignee2
By:
	Name:
	Title:

² Additional signatures may be added as appropriate.

-3-

Consented to and Accepted: CITIBANK, N.A., as Administrative Agent
By:
	Name:
	Title:
[Consented to and Accepted: [                                                       ], as Issuing Bank
By:
	Name:
	Title:

Consented to: UNITED SURGICAL PARTNERS INTERNATIONAL, INC.]3
By:
	Name:
	Title:

³ To be included to the extent applicable under Section 9.04 of the Credit Agreement.

-4-

STANDARD TERMS AND CONDITIONS
FOR ASSIGNMENT AND ASSUMPTION

          1. Representations and Warranties.

          1.1 Assignor. [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby, and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

          1.2 Assignee. [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 4.01(k) or 5.01 of the Credit Agreement, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, (v) if it is a Foreign Lender, attached to this Assignment and Assumption is any documentation required to be delivered by it pursuant to Section 2.17(e) of the Credit Agreement, duly completed and executed by [the][such] Assignee and (vi) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, [the][each] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

          2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][each] Assignor for amounts which have accrued to but

excluding the Effective Date and to [the][each] Assignee for amounts which have accrued from and after the Effective Date.

          3. General Provisions. This Assignment and Assumption shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by facsimile or other electronic transmission shall be as effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be construed in accordance with and governed by the law of the State of New York.

-2-

Exhibit B

Form of

Opinion of Ropes & Gray LLP

April 19, 2007

To the Administrative Agent
and each Lender party to the
Credit Agreement referred to below

Ladies and Gentlemen:

     This opinion is being furnished to you pursuant to the Credit Agreement dated as of April 19, 2007 (the “Credit Agreement”), among United Surgical Partners International, Inc., a Delaware corporation (the “Company”), USPI Holdings, Inc., a Delaware corporation (“Holdings”), the Lenders from time to time party thereto, Citibank, N.A., as Administrative Agent, Citigroup Global Markets Inc. and Lehman Brothers Inc., as Joint Lead Arrangers and Joint Bookrunners, Bear, Stearns & Co. Inc. and UBS Securities LLC, as Joint Bookrunners, Lehman Brothers Inc., as Syndication Agent, and Bear, Stearns Corporate Lending Inc., SunTrust Bank and UBS Securities LLC, as Co-Documentation Agents, in connection with the closing held this day under the Credit Agreement. Unless otherwise defined herein, capitalized terms used herein have the meanings set forth in the Credit Agreement.

     We have acted as counsel to the Loan Parties (as defined below) in connection with the Credit Agreement, the Guarantee and Collateral Agreement (the “Collateral Agreement”) and the Notes being delivered by the Company today under the Credit Agreement (which Agreements and Notes are collectively referred to herein as the “Credit Documents”). The subsidiaries of the Company listed in Parts A and B of Schedule I hereto are referred to herein respectively as the “Delaware Corporate Guarantors” and the “California Corporate Guarantors”, and the subsidiaries of the Company listed on Schedule II hereto are referred to herein as the “Other Guarantors”. Holdings, the Delaware Corporate Guarantors and the California Corporate Guarantors are referred to herein collectively as the “Covered Guarantors”. The Company, the Covered Guarantors and the Other Guarantors are referred to herein collectively as the “Loan Parties”.

     We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents and records and have made such investigation of fact and such examination of law as we have deemed appropriate in order to enable us to render the opinions set forth herein. In conducting such investigation, we have relied, without independent verification, upon certificates of officers of the Loan Parties and one or more of their Subsidiaries, public officials and other appropriate Persons, and on the representations and warranties as to matters of fact and on the covenants as to the application of proceeds contained in the Credit Documents.

     In rendering the opinions set forth below, we have assumed that (a) each of the Other Guarantors (i) is validly existing and in good standing under the laws of its jurisdiction of

The Administrative Agent, et al. -2-

organization, (ii) has the power and authority to execute and deliver each of the Credit Documents to which it is a party and to perform its obligations thereunder and (iii) has duly authorized, executed and delivered each of the Credit Documents to which it is a party and (b) the execution and delivery by each of the Other Guarantors of each of the Credit Documents to which it is a party and the performance by each such Person of its obligations thereunder will not violate any law of its jurisdiction of organization or any other applicable laws (excluding, in the case of other applicable laws, any Covered Laws (as defined below)).

     The opinions expressed herein are limited to matters governed by the laws of the State of New York, the General Corporation Law of the State of Delaware, the General Corporation Law of the State of California and the federal laws of the United States of America (collectively, the “Covered Laws”), and in the case of paragraph 10 below, Article 9 of the Delaware Uniform Commercial Code (“Delaware Article 9”) and in the case of paragraph 11 below, Article 9 of the California Uniform Commercial Code (“California Article 9”).

     Based upon and subject to the foregoing and subject to the additional qualifications set forth below, we are of the opinion that:

     1. Each of Holdings, the Company and the Delaware Corporate Guarantors (a) is a corporation validly existing and in good standing under the laws of the State of Delaware and (b) has the corporate power and authority to conduct the business in which it is engaged and to execute, deliver and perform its obligations under each of the Credit Documents to which it is a party. Each of the California Corporate Guarantors (a) is a corporation validly existing and in good standing under the laws of the State of California and (b) has the corporate power and authority to conduct the business in which it is engaged and to execute, deliver and perform its obligations under each of the Credit Documents to which it is a party.

     2. Each of the Company and the Covered Guarantors has duly authorized, executed and delivered each of the Credit Documents to which it is a party.

     3. Each of the Credit Documents to which each of the Loan Parties is a party constitutes the valid and binding obligation of each such Person as is party thereto and is enforceable against each such Person in accordance with its terms.

     4. The execution and delivery by each of the Company and the Covered Guarantors of the Credit Documents to which such Person is party and the performance by such Person of its obligations thereunder will not violate or require the repurchase of securities under the certificate of incorporation, articles of incorporation or by-laws of such Person. The execution and delivery by each of the Loan Parties of the Credit Documents to which such Person is party and the performance by such Person of its obligations thereunder (a) will not violate any Covered Laws and (b) will not result in a breach or violation of, or constitute a default under, any of the agreements, instruments, court orders, judgments or decrees listed on Schedule III hereto.

     5. Except as may be required in order to perfect the Liens contemplated by the Collateral Agreement, under the Covered Laws, no consent, approval, license or exemption by,

The Administrative Agent, et al. -3-

or order or authorization of, or filing, recording or registration with, any governmental authority is required to be obtained by the Loan Parties in connection with the execution and delivery of the Credit Documents to which each such Person is party or the performance by each such Person of its obligations thereunder.

     6. We are not representing any of the Loan Parties in any pending litigation in which it is a named defendant that challenges the validity or enforceability of, or seeks to enjoin the performance of, the Credit Documents.

     7. None of the Loan Parties is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

     8. Neither the making of the loans under the Credit Agreement, nor the application of the proceeds thereof as provided in the Credit Agreement, will violate Regulations T, U or X of the Board of Governors of the Federal Reserve System as in effect on the date hereof.

     9. The Collateral Agreement creates a valid security interest in favor of the Collateral Agent for the benefit of the Secured Parties in the Collateral described therein to the extent that a security interest in such Collateral can be created under Article 9 of the New York Uniform Commercial Code (“New York Article 9”).

     10. Upon the proper filing of the financing statements attached as Schedule IV-A in the office of the Secretary of State of the State of Delaware (the “Delaware Filing Office”), the security interest in the Collateral granted by Holdings, the Company and the Delaware Corporate Guarantors under the Collateral Agreement will be perfected to the extent a security interest in such Collateral can be perfected under Delaware Article 9 by the filing of a financing statement in the Delaware Filing Office.

     11. Upon the proper filing of the financing statements attached as Schedule IV-B in the office of the Secretary of State of the State of California (the “California Filing Office”), the security interest in the Collateral granted by the California Corporate Guarantors under the Collateral Agreement will be perfected to the extent a security interest in such Collateral can be perfected under California Article 9 by the filing of a financing statement in the California Filing Office.

     12. Upon the delivery in the State of New York to the Collateral Agent of the Pledged Stock listed on Schedule V and the related stock powers pursuant to the Collateral Agreement and assuming that neither the Collateral Agent nor the Lenders have “notice of an adverse claim” (within the meaning of Section 8-105 of the New York Uniform Commercial Code) with respect to such Pledged Stock at the time such Pledged Stock is delivered to the Collateral Agent, the respective security interests in such Pledged Stock created in favor of the Collateral Agent for the benefit of the Secured Parties under the Collateral Agreement constitute perfected security interests in such Pledged Stock, free of any “adverse claim” (as defined in the New York Uniform Commercial Code).

The Administrative Agent, et al. -4-

     Our opinion that each of the Credit Documents to which each of the Loan Parties is a party constitutes the valid and binding obligation of each such Person, enforceable against each such Person in accordance with its terms, is subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws of general application affecting the rights and remedies of creditors and secured parties and (ii) general principles of equity. The opinions expressed herein do not purport to cover, and we express no opinion with respect to, the applicability of Section 548 of the federal Bankruptcy Code or any comparable provision of state law.

     The opinions expressed herein are subject to the qualification that the enforceability of provisions in the Credit Documents providing for indemnification or contribution may be limited by public policy considerations. In addition, we express no opinion as to (i) the extent to which broadly worded waivers, conclusive presumptions or determinations or powers of attorney may be enforced, (ii) the enforceability of any provision of the Credit Documents which purports to grant the right of setoff to an affiliate of a lender or a purchaser of a participation in the loans outstanding thereunder, which permits the exercise of a right of setoff against amounts not then due, or which constitutes a penalty or forfeiture, or (iii) the enforceability of any provision which provides for non-effectiveness of oral modifications, waiver of or consent to service of process and venue, waiver of offset or defenses, or judgment currency. In connection with the provisions of the Credit Documents whereby the parties submit to the jurisdiction of the courts of the United States of America located in the State of New York, we note the limitations of 28 U.S.C. §§ 1331 and 1332 on subject matter jurisdiction of the federal courts.

     In addition, certain provisions contained in the Credit Documents, may be unenforceable in whole or in part but the inclusion of such provisions in the Credit Documents does not affect the validity of any of the other provisions thereof, and the remaining provisions of the Credit Documents are sufficient for the practical realization of the benefits intended to be provided thereby.

     We further express no opinion as to the existence of, or as to the title of any Person who has granted a security interest in any Collateral to, any item of Collateral or (except to the extent set forth in paragraph 12 above) as to the priority or (except to the extent set forth in paragraphs 10 through 12 above) the perfection of any security interest in the Collateral. We express no opinion with respect to (a) security interests in any commercial tort claims or (b) security interests in goods which are in accession to, or commingled or processed with other goods to the extent that a security interest is limited by Section 9-336 of New York Article 9 or California Article 9. We call your attention to the fact that your security interest in certain Collateral described in the Collateral Agreement may not be able to be perfected by the filing of financing statements and that under certain circumstances, the filings referred to in paragraphs 10 and 11 may become ineffective as a result of changes occurring after the date hereof and will terminate after five years after the original filing date unless appropriate continuation statements are duly filed. In addition, Section 552 of the Bankruptcy Code limits the extent to which property acquired by a debtor after the commencement of a case under the Bankruptcy Code may be subject to a lien resulting from any security agreement entered into by the debtor before the

The Administrative Agent, et al. -5-

commencement of the case.

     This opinion is being furnished only to the addressees and is solely for their benefit and the benefit of their participants and assignees permitted by the Credit Agreement. This opinion may not be relied upon for any other purpose or by any other Person without our prior written consent.

Very truly yours,


Ropes & Gray LLP
 

Schedule I

Covered Guarantors

A. Delaware Corporate Guarantors

     USPI Holdings, Inc.

     Medcenter Management Services, Inc.

     Ortho Excel, Inc.

     OrthoLink Physicians Corporation

     Surgis, Inc.

     United Surgical Partners Holdings, Inc.

     USP Domestic Holdings, Inc.

     USP International Holdings, Inc.

     USP Long Island, Inc.

     USP North Texas, Inc.

B. California Corporate Guarantors

     USP Coast, Inc.

     USP Glendale, Inc.

     USP Mission Hills, Inc.

     USP Oxnard, Inc.

     USP Sacramento, Inc.

     USP San Gabriel, Inc.

     USP West Covina, Inc.

     USP Westwood, Inc.

     USPI San Diego, Inc.

     USP Torrance, Inc.

Schedule II

Other Guarantors

Georgia Musculoskeletal Network, Inc.
Health Horizons of Kansas City, Inc.
Health Horizons of Murfreesboro, Inc.
Health Horizons of Nashville, Inc.
ISS-Orlando, LLC
North MacArthur Surgery Center, LLC
OrthoLink ASC Corporation
OrthoLink Radiology Services Corporation
OrthoLink/Georgia ASC, Inc.
OrthoLink/New Mexico ASC, Inc.
OrthoLink/TN ASC, Inc.
Pasadena Holdings, LLC
Physicians Data Professionals, Inc.
Same Day Management, L.L.C.
Same Day Surgery, L.L.C.
Specialty Surgicenters, Inc.
SSI Holdings, Inc.
Surgery Centers Holding Company, L.L.C.
Surgery Centers of America II, L.L.C.
Surginet of Northwest Houston, Inc.
Surginet of Rivergate, Inc.
Surginet, Inc.
Surgis Management Services, Inc.
Surgis of Chico, Inc.
Surgis of Pearland, Inc.
Surgis of Phoenix, Inc.
Surgis of Redding, Inc.
Surgis of Sand Lake, Inc.
Surgis of Sonoma, Inc.
Surgis of Victoria, Inc.
Surgis of Willowbrook, Inc.
United Surgical of Atlanta, Inc.
USP Alexandria, Inc.
USP Assurance Company
USP Austin, Inc.
USP Austintown, Inc.
USP Baltimore, Inc.
USP Baton Rouge, Inc.
USP Bridgeton, Inc.
USP Cedar Park, Inc
USP Central New Jersey, Inc.
USP Chesterfield, Inc.

USP Chicago, Inc.
USP Cleveland, Inc.
USP Columbia, Inc.
USP Corpus Christi, Inc.
USP Cottonwood, Inc.
USP Creve Coeur, Inc.
USP Decatur, Inc.
USP Des Peres, Inc.
USP Destin, Inc.
USP Florissant, Inc.
USP Fredericksburg, Inc.
USP Harbour View, Inc.
USP Houston, Inc.
USP Indiana, Inc.
USP Kansas City, Inc.
USP Las Cruces, Inc.
USP Lyndhurst, Inc.
USP Mason Ridge, Inc.
USP Michigan, Inc.
USP Midwest, Inc.
USP Nevada Holdings, LLC
USP Nevada, Inc.
USP New Jersey, Inc.
USP Newport News, Inc.
USP North Kansas City, Inc.
USP Oklahoma, Inc.
USP Olive, Inc.
USP Phoenix, Inc.
USP Reading, Inc.
USP Richmond II, Inc.
USP Richmond, Inc.
USP San Antonio, Inc.
USP Sarasota, Inc.
USP Securities Corporation
USP St. Peters, Inc.
USP Sunset Hills, Inc.
USP Tennessee, Inc.
USP Texas Air, LLC
USP Texas, L.P.
USP Virginia Beach, Inc.
USP Webster Groves, Inc.
USP Winter Park, Inc.
WHASA, L.C.

Schedule III

Material Agreements

1.	Agreement and Plan of Merger, dated as of January 7, 2007, among USPI Holdings, Inc. (formerly named UNCN Holdings, Inc.), UNCN Acquisition Corp. and United Surgical Partners International, Inc.
2.	Indenture, dated as of April 19, 2007, among the Company, the Guarantors party thereto and U.S. Bank Trust National Association, as trustee, related to the Company’s 87/8% Senior Subordinated Notes due 2017 and the 91/4% /10% Senior Subordinated Toggle Notes due 2017.
3.	Registration Rights Agreement, dated as of April 19, 2007, among the Company and Citigroup Global Markets Inc. and Lehman Brothers Inc., as representatives of the Initial Purchasers (as defined therein).
4.	Stock Subscription and Exchange Agreement, dated as of April 19, 2007, among USPI Group Holdings, Inc., Welsh, Carson, Anderson & Stowe X, L.P. and the other subscribers party thereto.
5.	Stockholders Agreement, dated as of April 19, 2007, among USPI Group Holdings, Inc., Welsh, Carson, Anderson & Stowe X, L.P. and the other investors party thereto.
6.	Registration Rights Agreement, dated as of April 19, 2007, among USPI Group Holdings, Inc., Welsh, Carson, Anderson & Stowe X, L.P. and the other investors party thereto.

Schedule IV-A

Delaware Financing Statements

Schedule IV-B

California Financing Statements

Schedule V

Pledged Stock

				Number of
Issuer	Certificate No.		Registered Owner	Shares/Units
USPI Holdings, Inc.		2	USPI Group Holdings, Inc.		100
USP Cottonwood, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Phoenix, Inc.		3	USP Domestic Holdings, Inc.		1,000
USP Coast, Inc.		2	USP Domestic Holdings, Inc.		1,000
USP Glendale, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Mission Hills, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Oxnard, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Sacramento, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP San Gabriel, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP West Covina, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Westwood, Inc.		1	USP Domestic Holdings, Inc.		1,000
USPI San Diego, Inc.		1	USP Domestic Holdings, Inc.		1,000
Medcenter Management Services, Inc.		2R	OrthoExcel, Inc.		100
Ortho Excel, Inc.	AB101R		OrthoLink Physicians Corporation		648.1113
OrthoLink Physicians Corporation		2R	USP Domestic Holdings, Inc.		1,000
Surgis, Inc.		1	USP Domestic Holdings, Inc.		1,000
United Surgical Partners Holdings, Inc.		1R	United Surgical Partners International, Inc.		1,000
USP Domestic Holdings, Inc.		2R	United Surgical Partners Holdings, Inc.		1,000
USP International Holdings, Inc.		4R	United Surgical Partners Holdings, Inc.		1,000
USP Long Island, Inc.		1R	USP Domestic Holdings, Inc.		1,000
USP North Texas, Inc.		2R	USP Domestic Holdings, Inc.		1,000
USP Destin, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Sarasota, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Winter Park, Inc.		2R	USP Domestic Holdings, Inc.		1,000
Georgia Musculoskeletal Network, Inc.		1R	OrthoLink Physicians Corporation		1000
OrthoLink/Georgia ASC, Inc.		1R	OrthoLink ASC Corporation		1,000
OrthoLink/New Mexico ASC, Inc.		1R	OrthoLink ASC Corporation		1,000
Specialty Surgicenters, Inc.		1	SSI Holdings, Inc.		1,000
SSI Holdings, Inc.		C46	USP Domestic Holdings, Inc.		6,859,514
United Surgical of Atlanta, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Chicago, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Midwest, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Indiana, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Alexandria, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Baton Rouge, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Baltimore, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Michigan, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Bridgeton, Inc.		1	USP Domestic Holdings, Inc.		1,000

				Number of
Issuer	Certificate No.		Registered Owner	Shares/Units
USP Chesterfield, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Columbia, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Creve Coeur, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Des Peres, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Florissant, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Kansas City, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Mason Ridge, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP North Kansas City, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Olive, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP St. Peters, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Sunset Hills, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Webster Groves, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Central New Jersey, Inc.		1R	USP Domestic Holdings, Inc.		1,000
USP New Jersey, Inc.		2R	USP Domestic Holdings, Inc.		1,000
USP Las Cruces, Inc.		1R	USP Domestic Holdings, Inc.		1,000
USP Nevada, Inc.		2R	USP Domestic Holdings, Inc.		1,000
USP Austintown, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Cleveland, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Lyndhurst, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Oklahoma, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Reading, Inc.		1	USP Domestic Holdings, Inc.		1,000
Health Horizons of Kansas City, Inc.		4R	USP Domestic Holdings, Inc.		1,000
Health Horizons of Murfreesboro, Inc.		3R	USP Domestic Holdings, Inc.		1,000
Health Horizons of Nashville, Inc.		8R	USP Domestic Holdings, Inc.		1000
OrthoLink ASC Corporation		1R	OrthoLink Physicians Corporation		1,000
OrthoLink Radiology Services Corporation		1	OrthoLink Physicians Corporation		1,000
OrthoLink/TN ASC, Inc.		1R	OrthoLink ASC Corporation		100
Surginet of Northwest Houston, Inc.		1	Surginet, Inc.		1,000
Surginet of Rivergate, Inc.		2	Surginet, Inc.		1,000
Surginet, Inc.		32	Surgis, Inc.		1
Surgis Management Services, Inc.		1	Surginet, Inc.		1,000
Surgis of Chico, Inc.		1	Surginet, Inc.		1,000
Surgis of Pearland, Inc.		1	Surginet, Inc.		1,000
Surgis of Phoenix, Inc.		1	Surginet, Inc.		1000
Surgis of Redding, Inc.		1	Surginet, Inc.		1,000
Surgis of Sand Lake, Inc.		1	Surginet, Inc.		1,000
Surgis of Sonoma, Inc.		1	Surginet, Inc.		1,000
Surgis of Victoria, Inc.		1	Surginet, Inc.		1,000
Surgis of Willowbrook, Inc.		1	Surginet, Inc.		1,000
USP Decatur, Inc.		5	USP Domestic Holdings, Inc.		1,000
USP Securities Corporation		2	OrthoLink Physicians Corporation		1,000
USP Tennessee, Inc.		1	USP Domestic Holdings, Inc.		1,000
Physicians Data Professionals, Inc.		1	USP Domestic Holdings, Inc.		1,000

				Number of
Issuer	Certificate No.		Registered Owner	Shares/Units
USP Austin, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Cedar Park, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Corpus Christi, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Houston, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP San Antonio, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Fredericksburg, Inc.		2R	USP Domestic Holdings, Inc.		1,000
USP Harbour View, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Newport News, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Richmond II, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Richmond, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Virginia Beach, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Assurance Company		1	USP Domestic Holdings, Inc.		1,000
USP Torrance, Inc.		1	USP Domestic Holdings, Inc.		1,000

Exhibit C

GUARANTEE AND COLLATERAL AGREEMENT

dated as of

April 19, 2007

among

USPI HOLDINGS, INC.,

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.,

THE SUBSIDIARIES OF UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
IDENTIFIED HEREIN

and

CITIBANK, N.A.

as Collateral Agent

TABLE OF CONTENTS

	Page
ARTICLE I
DEFINITIONS
Section 1.01. Credit Agreement		1
Section 1.02. Other Defined Terms		1
ARTICLE II
GUARANTEE
Section 2.01. Guarantee		5
Section 2.02. Guarantee of Payment		5
Section 2.03. No Limitations		5
Section 2.04. Reinstatement		6
Section 2.05. Agreement To Pay; Subrogation		6
Section 2.06. Information		7
Section 2.07. Remedies		7
Section 2.08. Instrument for the Payment of Money		7
Section 2.09. Continuing Guarantee		7
Section 2.10. General Limitation on Guarantee		7
ARTICLE III
PLEDGE OF SECURITIES
Section 3.01. Pledge		7
Section 3.02. Delivery of the Pledged Collateral		8
Section 3.03. Representations, Warranties and Covenants		9
Section 3.04. Certification of Limited Liability Company and Limited Partnership Interests		10
Section 3.05. Registration in Nominee Name; Denominations		10
Section 3.06. Voting Rights; Dividends and Interest		11
ARTICLE IV
SECURITY INTERESTS IN PERSONAL PROPERTY
Section 4.01. Security Interest		13
Section 4.02. Representations and Warranties		14
Section 4.03. Covenants		16

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	Page
Section 4.04. Other Actions		20
Section 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral		20
ARTICLE V
REMEDIES
Section 5.01. Remedies upon Default		22
Section 5.02. Application of Proceeds		24
Section 5.03. Grant of License To Use Intellectual Property		25
Section 5.04. Securities Act		25
Section 5.05. Medicare/Medicaid		26
ARTICLE VI
INDEMNITY, SUBROGATION AND SUBORDINATION
Section 6.01. Indemnity and Subrogation		26
Section 6.02. Contribution and Subrogation		26
Section 6.03. Subordination		26
ARTICLE VII
MISCELLANEOUS
Section 7.01. Notices		27
Section 7.02. Waivers; Amendment		27
Section 7.03. Collateral Agent’s Fees and Expenses; Indemnification		27
Section 7.04. Successors and Assigns		28
Section 7.05. Survival of Agreement		28
Section 7.06. Counterparts; Effectiveness; Several Agreement		28
Section 7.07. Severability		29
Section 7.08. Right of Set-Off		29
Section 7.09. Governing Law; Jurisdiction; Consent to Service of Process		29
Section 7.10. WAIVER OF JURY TRIAL		30
Section 7.11. Headings		30
Section 7.12. Security Interest Absolute		30
Section 7.13. Termination or Release		31
Section 7.14. Additional Subsidiaries		31
Section 7.15. Collateral Agent Appointed Attorney-in-Fact		32
Section 7.16. Further Assurances		32

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Schedules

Schedule I	Subsidiary Loan Parties
Schedule II	Pledged Stock; Debt Securities
Schedule III	Intellectual Property
Schedule IV	Commercial Tort Claims

Exhibits

Exhibit I Form of Supplement

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          GUARANTEE AND COLLATERAL AGREEMENT (this “Agreement”) dated as of April 19, 2007, among USPI HOLDINGS, INC., a Delaware corporation, UNITED SURGICAL PARTNERS INTERNATIONAL, INC., a Delaware corporation, the Subsidiaries of UNITED SURGICAL PARTNERS INTERNATIONAL, INC. identified herein and CITIBANK, N.A., as Collateral Agent.

          Reference is made to the Credit Agreement dated as of April 19, 2007 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among United Surgical Partners International, Inc. (the “Borrower”), USPI Holdings, Inc., the Lenders party thereto, Citibank, N.A., as Administrative Agent, Lehman Brothers Inc., as Syndication Agent, and Bear Stearns Corporate Lending Inc., Suntrust Bank and UBS Securities LLC, as Co-Documentation Agents. The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the Credit Agreement. The obligations of the Lenders to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. Holdings and the Subsidiary Loan Parties are affiliates of the Borrower, will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement and are willing to execute and deliver this Agreement in order to induce the Lenders to extend such credit. Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

          Section 1.01. Credit Agreement. (a) Capitalized terms used in this Agreement and not otherwise defined in this Agreement have the meanings specified in the Credit Agreement. All terms defined in the New York UCC (as defined in this Agreement) and not defined in this Agreement have the meanings specified therein.

     (b) The rules of construction specified in Section 1.03 of the Credit Agreement also apply to this Agreement, mutatis mutandis.

     Section 1.02. Other Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

     “Account Debtor” means any Person who is or who may become obligated to any Grantor under, with respect to or on account of an Account.

     “Article 9 Collateral” has the meaning assigned to such term in Section 4.01.

     “Claiming Party” shall have the meaning assigned to such term in Section 6.02.

     “Collateral” means Article 9 Collateral and Pledged Collateral.

     “Contributing Party” shall have the meaning assigned to such term in Section 6.02.

     “Copyright License” means any written agreement, now or hereafter in effect, granting any right to any third party under any copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any copyright now or hereafter owned by any third party, and all rights of any Grantor under any such agreement.

     “Copyrights” means all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise and (b) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office, including those listed on Schedule III.

     “Credit Agreement” has the meaning assigned to such term in the preliminary statement in this Agreement.

     “Federal Securities Laws” has the meaning assigned to such term in Section 5.04.

     “General Intangibles” means all “General Intangibles” of any Grantor as defined in Section 9-102(42) of the New York UCC.

     “Grantors” means Holdings, the Borrower and the Subsidiary Loan Parties.

     “Guarantors” means Holdings and the Subsidiary Loan Parties.

     “Instrument” has the meaning specified in Article 9 of the New York UCC.

     “Intellectual Property” means all intellectual and similar property of any Grantor of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

     “Investment Property” means a security, whether certificated or uncertificated, Security Entitlement, Securities Account, Commodity Contract or Commodity Account.

     “LC Account” means any account established and maintained in accordance with the provisions of Section 2.05(j) of the Credit Agreement and all property from time to time on deposit in such LC Account.

     “License” means any Patent License, Trademark License, Copyright License or other license or sublicense agreement to which any Grantor is a party, including those listed on Schedule III.

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     “Loan Document Obligations” means (a) the due and punctual payment by the Borrower of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) and obligations to provide cash collateral, and (iii) all other monetary obligations of the Borrower to any of the Secured Parties under the Credit Agreement and each other Loan Document, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Borrower under or pursuant to the Credit Agreement and each other Loan Document, and (c) the due and punctual payment and performance in full of all the obligations of each other Loan Party under or pursuant to this Agreement and each other Loan Document.

     “Medicare” shall mean that government-sponsored entitlement program under Title XVIII of the Social Security Act that provides for a health insurance system for eligible elderly and disabled individuals (Social Security Act of 1965, Title XVIII, P.L. 89-87 as amended; 42 U.S.C. § 1395 et seq.).

     “Medicaid” shall mean that means-tested entitlement program under Title XIX of the Social Security Act that provides federal grants to states for medical assistance based on specific eligibility criteria (Social Security Act of 1965, Title XIX, P.L. 89-87, as amended; 42 U.S.C. § 1396 et seq.).

     “New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

     “Obligations” means (a) Loan Document Obligations and (b) the due and punctual payment and performance in full of all obligations of each Loan Party under each Swap Agreement relating to interest rates or Treasury Services Agreement that (i) is in effect on the Effective Date with a counterparty that is a Lender or an Affiliate of a Lender as of the Effective Date or (ii) is entered into after the Effective Date with any counterparty that is a Lender or an Affiliate of a Lender at the time such Swap Agreement relating to interest rates or Treasury Services Agreement is entered into.

     “Patent License” means any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a patent, now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any

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invention on which a patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement.

     “Patents” means all of the following now owned or hereafter acquired by any Grantor: (a) all letters patent of the United States or the equivalent thereof in any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or the equivalent thereof in any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office or any similar offices in any other country, including those listed on Schedule III, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

     “Pledged Collateral” has the meaning assigned to such term in Section 3.01.

     “Pledged Debt Securities” has the meaning assigned to such term in Section 3.01.

     “Pledged Securities” means any promissory notes, stock certificates or other securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

     “Pledged Stock” has the meaning assigned to such term in Section 3.01.

     “Proceeds” has the meaning specified in Section 9-102 of the New York UCC.

     “Secured Parties” means (a) the Lenders, (b) the Collateral Agent, (c) the Administrative Agent, (d) the Issuing Bank, (e) each counterparty to any Swap Agreement or Treasury Services Agreement with a Loan Party the obligations under which constitute Obligations and (f) the successors and assigns of each of the foregoing.

     “Security Interest” has the meaning assigned to such term in Section 4.01.

     “Subsidiary Loan Parties” means (a) the Subsidiaries identified on Schedule I and (b) each other Subsidiary that becomes a party to this Agreement as a Subsidiary Loan Party after the Effective Date.

     “Trademark License” means any written agreement, now or hereafter in effect, granting to any third party any right to use any trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement.

     “Trademarks” means all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, domain names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including

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registrations and registration applications in the United States Patent and Trademark Office or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule III, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill; provided, however, that the foregoing definition shall not include any “intent to use” based application for a Trademark until such time that a statement of use has been filed with the United States Patent and Trademark Office.

     “Treasury Services Agreement” shall mean any agreement relating to treasury, depositary and cash management services or automated clearinghouse transfer of funds.

ARTICLE II

Guarantee

          Section 2.01. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, the due and punctual payment and performance in full of the Obligations. Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, or amended or modified, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension, renewal, amendment or modification of the Obligations. Each Guarantor waives presentment to, demand of payment from and protest to the Borrower or any other Loan Party of the Obligations and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.

          Section 2.02. Guarantee of Payment. Each Guarantor further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any security held for the payment of the Obligations or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or any other Person.

          Section 2.03. No Limitations. (a) Except for termination of a Guarantor’s obligations hereunder as expressly provided in Section 7.13, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by (i) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any right or remedy under the provisions of any Loan Document or otherwise; (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement;

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(iii) the release of, impairment of or failure to perfect any Lien held by the Collateral Agent or any other Secured Party for the payment and performance of the Obligations or any of them; (iv) any default, failure or delay, willful or otherwise, in the performance of the Obligations; or (v) any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of the Obligations). Each Guarantor expressly authorizes the Collateral Agent (i) to take and hold security for the payment and performance of the Obligations, (ii) to exchange, waive or release any or all such security (with or without consideration), (iii) to enforce or apply such security and direct the order and manner of any sale thereof in its sole discretion or (iv) to release or substitute any one or more other guarantors or obligors upon or in respect of the Obligations, all without affecting the obligations of any Guarantor hereunder.

          (b) To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Borrower or any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower or any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other Loan Party or exercise any other right or remedy available to them against the Borrower or any other Loan Party, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully and indefeasibly paid in full in cash. To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Loan Party, as applicable, or any security.

          Section 2.04. Reinstatement. Each of the Guarantors agrees that its guarantee hereunder shall continue to be effective or be reinstated, as applicable, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the Collateral Agent or any other Secured Party upon the bankruptcy or reorganization of the Borrower, any other Loan Party or otherwise.

          Section 2.05. Agreement To Pay; Subrogation. In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent for distribution to the applicable Secured Parties in cash the amount of such unpaid Obligation. Upon payment by any Guarantor of any sums to the Collateral Agent as provided above, all rights of such Guarantor against the Borrower or any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article VI.

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          Section 2.06. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower’s and each other Loan Party’s financial condition and assets and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder and agrees that none of the Collateral Agent or the other Secured Parties will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks.

          Section 2.07. Remedies. The Guarantors jointly and severally agree that, as between the Guarantors and the Secured Parties, the Obligations may be declared to be forthwith due and payable as provided in the Credit Agreement for purposes of Section 2.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by the Guarantors for purposes of Section 2.01.

          Section 2.08. Instrument for the Payment of Money. Each Guarantor hereby acknowledges that the guarantee in this Article II constitutes an instrument for the payment of money, and consents and agrees that any Secured Party, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213.

          Section 2.09. Continuing Guarantee. The guarantee in this Article II is a continuing guarantee of payment, and shall apply to all Obligations whenever arising.

          Section 2.10. General Limitation on Guarantee. In any action or proceeding involving any state corporate limited partnership or limited liability company law, or any applicable state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 2.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 2.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Loan Party or any other person, be automatically limited and reduced to the highest amount (after giving effect to the right of contribution established in Section 6.02) that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.

ARTICLE III

Pledge of Securities

          Section 3.01. Pledge. As security for the payment or performance, as applicable, in full of the Obligations, each Grantor hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in, all of such Grantor’s right, title and interest in, to and under (a) the shares of capital stock and other Equity Interests of

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the Borrower and each wholly owned Restricted Subsidiary owned by it and listed on Schedule II and any other Equity Interests of a wholly owned Restricted Subsidiary obtained in the future by such Grantor and the certificates representing all such Equity Interests (the “Pledged Stock”), provided that the Pledged Stock shall not include more than 65% of the outstanding voting Equity Interests of any Foreign Subsidiary and shall not include Equity Interests of entities that are Specified Subsidiaries by reason of clauses (ii) or (iii) of the definition of Specified Subsidiary; (b)(i) the debt securities listed opposite the name of such Grantor on Schedule II, (ii) any debt securities issued after the Effective Date to such Grantor by any of Holdings, the Borrower or any Subsidiary and (iii) the promissory notes and any other instruments evidencing such debt securities (the “Pledged Debt Securities”); (c) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms of this Section 3.01; (d) subject to Section 3.06, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (a), (b) and (c) above; (e) subject to Section 3.06, all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above; and (f) all Proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the “Pledged Collateral”).

          TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever, subject, however, to the terms, covenants and conditions hereinafter set forth.

          Section 3.02. Delivery of the Pledged Collateral. (a) Each Grantor represents and warrants that all certificates, agreements or instruments representing or evidencing the Pledged Collateral in existence on the date hereof have been delivered to the Collateral Agent in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank. Each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent any and all Pledged Securities. Notwithstanding the foregoing two sentences, it is understood and agreed that no Grantor will have to deliver any Pledged Debt Securities to the Collateral Agent unless the amount of the Indebtedness represented thereby is in excess of $2,000,000 individually or $10,000,000 in the aggregate with all Pledged Debt Securities not so delivered.

          (b) Each Grantor will cause any Indebtedness for borrowed money owed to such Grantor by any Person (other than a Loan Party) which is (A) in excess of $2,000,000 and (B) evidenced by a duly executed promissory note to be pledged and delivered to the Collateral Agent pursuant to the terms hereof. If any Grantor shall at any time hold or acquire any Indebtedness for borrowed money owed to such Grantor by any Person (other than a Loan Party) evidenced by a duly executed promissory note that when taken together with the value of any other Indebtedness for borrowed money owed to such Grantor by any Person (other than a Loan Party) evidenced by a duly executed promissory note not endorsed and delivered to the Collateral Agent exceeds $10,000,000, such Grantor shall forthwith endorse and deliver the same to the Collateral Agent, accompanied by such undated instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably request.

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          (c) Upon delivery to the Collateral Agent, (i) any Pledged Securities shall be accompanied by undated stock powers duly executed in blank or other undated instruments of transfer reasonably satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing such Pledged Securities, which schedule shall be attached hereto as a supplement to Schedule II and made a part hereof, provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.

          Section 3.03. Representations, Warranties and Covenants. The Grantors jointly and severally represent, warrant and covenant to and with the Collateral Agent, for the benefit of the Secured Parties, that:

          (a) Schedule II correctly sets forth the percentage of the issued and outstanding shares (or units or other comparable measure) of each class of the Equity Interests of the issuer thereof represented by the Pledged Stock and includes all Equity Interests, debt securities and promissory notes required to be pledged hereunder in order to satisfy the Collateral and Guarantee Requirement;

          (b) the Pledged Stock and Pledged Debt Securities have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Stock, are fully paid and nonassessable and (ii) in the case of Pledged Debt Securities, are legal, valid and binding obligations of the issuers thereof;

          (c) except for the security interests granted hereunder, each of the Grantors (i) is and, subject to any transfers made in compliance with the Credit Agreement, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II as owned by such Grantor, (ii) holds the same free and clear of all Liens, other than Liens created by any Loan Document and Liens permitted by Section 6.02 of the Credit Agreement, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than Liens created by any Loan Document, Liens permitted by Section 6.02 of the Credit Agreement and transfers made in compliance with the Credit Agreement and (iv) will defend its title or interest thereto or therein against any and all Liens (other than Liens created by any Loan Document and Liens permitted by Section 6.02 of the Credit Agreement), however arising, of all Persons whomsoever; provided that nothing in this Agreement shall prevent any Grantor from discontinuing the operation or maintenance of any of its assets or properties if such discontinuance is (x) in the good faith determination of its Board of Directors, desirable in the conduct of its business and (y) permitted by the Credit Agreement;

          (d) except for restrictions and limitations imposed by (i) the Loan Documents, (ii) securities laws generally or (iii) customary provisions in joint venture agreements relating to purchase options, rights of first refusal, tag, drag, call or similar rights of a third party that owns Equity Interests in such joint venture, the Pledged Collateral is and will continue to be freely

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transferable and assignable, and none of the Pledged Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provision or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder;

          (e) each of the Grantors has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated;

          (f) no consent or approval of any Governmental Authority, any securities exchange or any other Person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect);

          (g) subject to clauses (c) and (d) of this Section 3.03, by virtue of the execution and delivery by the Grantors of this Agreement, when any Pledged Securities are delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will obtain, for the benefit of the Secured Parties, a legal, valid and perfected lien upon and security interest in such Pledged Securities as security for the payment and performance of the Obligations; and

          (h) the pledge effected hereby is effective to vest in the Collateral Agent, for the benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral as set forth in this Agreement.

          Section 3.04. Certification of Limited Liability Company and Limited Partnership Interests. (a) Each Grantor acknowledges and agrees that each interest in any limited liability company or limited partnership controlled by any Grantor and acquired after the Effective Date and constituting Pledged Collateral that is represented by a certificate, shall be a “security” within the meaning of Article 8 of the New York UCC and shall be governed by Article 8 of the New York UCC.

          (b) Each Grantor further acknowledges and agrees that (i) the interests in any limited liability company or limited partnership controlled by such Grantor and constituting Pledged Collateral that are not represented by a certificate are not “securities” within the meaning of Article 8 of the New York UCC and (ii) such Grantor shall at no time elect to treat any such interest as a “security” within the meaning of Article 8 of the New York UCC or issue any certificate representing such interest, unless such Grantor provides prompt written notification to the Collateral Agent of such election and promptly (but in no case later than 10 Business Days) pledges any such certificate to the Collateral Agent pursuant to the terms hereof; provided, however, that this Section 3.04 shall not apply to any Equity Interests in limited liability companies or limited partnerships which may not be pledged, assigned or otherwise encumbered pursuant to applicable Federal, state or local laws, rules or regulations related to the practice of medicine or the healthcare industry generally.

          Section 3.05. Registration in Nominee Name; Denominations. The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in the name of the applicable Grantor, endorsed or assigned in

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blank or in favor of the Collateral Agent or, upon the occurrence and during the continuation of an Event of Default, in its own name as pledge or the name of its nominee (as pledge or as sub-agent). Each Grantor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Grantor. The Collateral Agent shall at all times upon the occurrence and during the continuation of an Event of Default have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement.

          Section 3.06. Voting Rights; Dividends and Interest. (a) Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have notified the Grantors that their rights under this Section 3.06 are being suspended:

     (i) Each Grantor shall be entitled to exercise any and all voting and other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms in this Agreement, the Credit Agreement and the other Loan Documents, provided that such rights and powers shall not be exercised in any manner that would reasonably be expected to materially and adversely affect the rights inuring to a holder of any Pledged Securities or the rights and remedies of any of the Collateral Agent or the other Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.

     (ii) The Collateral Agent shall execute and deliver to each Grantor, or cause to be executed and delivered to such Grantor, all such proxies, powers of attorney and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and other consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above.

     (iii) Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws, provided that any noncash dividends, interest, principal or other distributions that would constitute Pledged Stock or Pledged Debt Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, shall not be commingled by such Grantor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and the other Secured Parties and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement as described in Section 3.02(c) or otherwise).

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          (b) Upon the occurrence and during the continuation of an Event of Default, after the Collateral Agent shall have notified (or shall be deemed to have notified) the Grantors of the suspension of their rights under Section 3.06(a)(iii), all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to Section 3.06(a)(iii) shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 3.06 shall be held in trust for the benefit of the Collateral Agent and the other Secured Parties, shall be segregated from other property or funds of such Grantor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this Section 3.06(b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02. After all Events of Default have been cured or waived and the Borrower has delivered to the Collateral Agent a certificate to that effect, the Collateral Agent shall promptly repay to each Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of Section 3.06(a)(iii) and that remain in such account.

          (c) Upon the occurrence and during the continuation of an Event of Default, after the Collateral Agent shall have notified (or shall be deemed to have notified) the Grantors of the suspension of their rights under Section 3.06(a)(i), all rights of any Grantor to exercise the voting and other consensual rights and powers it is entitled to exercise pursuant to Section 3.06(a)(i), and the obligations of the Collateral Agent under Section 3.06(a)(ii), shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and other consensual rights and powers, provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuation of an Event of Default to permit the Grantors to exercise such rights. After all Events of Default have been cured or waived, the Grantors shall have the right to exercise the voting and consensual rights and powers that they would otherwise be entitled to exercise pursuant to the terms of Section 3.06(a)(i).

          (d) Any notice given by the Collateral Agent to the Grantors suspending their rights under Section 3.06(a) (i) may be given by telephone if promptly confirmed in writing, (ii) may be given to one or more of the Grantors at the same or different times and (iii) may suspend the rights of the Grantors under Sections 3.06(a)(i) or (a)(iii) in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agent’s rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.

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ARTICLE IV

Security Interests in Personal Property

          Section 4.01. Security Interest. (a) As security for the payment or performance, as applicable, in full of the Obligations, each Grantor hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest (the “Security Interest”) in all right, title or interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the “Article 9 Collateral”):

     (i) all Accounts;

     (ii) all Chattel Paper;

     (iii) all Documents;

     (iv) all Equipment;

     (v) all General Intangibles;

     (vi) Intellectual Property;

     (vii) all Instruments;

     (viii) all Inventory;

     (ix) all Investment Property;

     (x) all Letter-of-credit rights;

     (xi) the commercial tort claims specified on Schedule IV;

     (xii) all books and records pertaining to the Article 9 Collateral; and

     (xiii) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security, supporting obligations and guarantees given by any Person with respect to any of the foregoing.

Notwithstanding the foregoing, the Article 9 Collateral shall not include (i) any Equipment that is subject to a purchase money Lien or Lien securing Capital Lease Obligations, in each case, permitted under the Credit Agreement to the extent the documents relating to such purchase money Lien or Capital Lease Obligations would not permit such Equipment to be subject to the Security Interests created hereby, (ii) any property to the extent that the grant of the Security Interest in such property is prohibited by any Requirements of Law of any Governmental Authority, (iii) any contract, license or agreement to the extent that the grant of the Security Interest in such contract, license or agreement constitutes a breach or default under or results in

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termination of such contract, license, agreement, (iv) any Investment Property or Pledged Securities to the extent that the grant of the Security Interest in such Investment Property or Pledged Securities constitutes a breach or default under any applicable shareholder or similar agreement, except, in each case (i) through (iv), to the extent that such Requirement of Law or the provision of such contract, license, agreement instrument or other document or shareholder or similar agreement giving rise to such prohibition, breach, default or termination is ineffective under applicable law, (v) Equity Interests of Unrestricted Subsidiaries, Restricted Subsidiaries that are not wholly owned, entities that are Specified Subsidiaries by reason of clauses (ii) or (iii) of the definition of Specified Subsidiary or entities that are not Subsidiaries (other than Equity Interests held in any Securities Account), and (vi) more than 65% of the outstanding voting Equity Interests of any Foreign Subsidiary; it being understood that this paragraph shall not be seen as excluding from the Article 9 Collateral Proceeds, substitutions or replacements of property described in clauses (i) through (vi) above unless such Proceeds, substitutions or replacements would constitute property described in such clauses (i) through (vi).

          (b) Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements (including fixture filings) with respect to the Article 9 Collateral or any part thereof and amendments thereto that (i) indicate the Collateral as “all assets” of such Grantor or such other description as the Collateral Agent may determine and (ii) contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (A) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor and (B) in the case of a financing statement filed as a fixture filing or covering Article 9 Collateral constituting minerals or the like to be extracted or timber to be cut, a sufficient description of the real property to which such Article 9 Collateral relates. Each Grantor agrees to provide such information to the Collateral Agent promptly upon request.

          Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any initial financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations or amendments thereto if filed prior to the date hereof.

          The Collateral Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) such documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party.

          (c) The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Article 9 Collateral.

          Section 4.02. Representations and Warranties. The Grantors jointly and severally represent and warrant to the Collateral Agent and the other Secured Parties that:

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          (a) Each Grantor has good and valid rights in and title to the Article 9 Collateral and has full power and authority to grant to the Collateral Agent, for the ratable benefit of the Secured Parties, the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms in this Agreement, without the consent or approval of any other Person other than any consent or approval that has been obtained.

          (b) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein, including (x) the exact legal name of each Grantor and (y) the jurisdiction of organization of each Grantor, is correct and complete in all material respects as of the Effective Date (except that the information referred to in the preceding clauses (x) and (y) shall not be subject to such materiality qualifier). The Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations prepared by the Collateral Agent based upon the information provided to the Collateral Agent in the Perfection Certificate for filing at the secretary of state or other central filing office in each Grantor’s jurisdiction of organization, are all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in Article 9 Collateral consisting of United States Patents, United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements. Each Grantor represents and warrants that a fully executed agreement in the form hereof or short form hereof and containing a description of all Article 9 Collateral consisting of Intellectual Property with respect to United States Patents and United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights have been delivered to the Collateral Agent for recording by the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and the regulations thereunder, as applicable, and otherwise as may be required pursuant to the laws of any other necessary jurisdiction, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, in respect of all Article 9 Collateral consisting of United States Patents, United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights in which a security interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Article 9 Collateral consisting of United States Patents, United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights acquired or developed after the date hereof).

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          (c) The Security Interest constitutes (i) a legal and valid security interest in all the Article 9 Collateral securing the payment and performance of the Obligations, (ii) subject to the filings described in Section 4.02(b), a perfected security interest in all Article 9 Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (iii) a security interest that shall be perfected in all Article 9 Collateral in which a security interest may be perfected upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, within the three-month period (commencing as of the date hereof) pursuant to 35 U.S.C. § 261 or 15 U.S.C. § 1060 or the one-month period (commencing as of the date hereof) pursuant to 17 U.S.C. § 205 and otherwise as may be required pursuant to the laws of any other necessary jurisdiction. The Security Interest is and shall be prior to any other Lien on any of the Article 9 Collateral, other than Permitted Encumbrances and Liens that are permitted by the Credit Agreement and that have priority as a matter of applicable law.

          (d) The Article 9 Collateral is owned by the Grantors free and clear of any Lien, except for Liens permitted pursuant to Section 6.02 of the Credit Agreement. None of the Grantors has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the United States Patent and Trademark Office or the United States Copyright Office or (iii) any assignment in which any Grantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens permitted pursuant to Section 6.02 of the Credit Agreement.

          Section 4.03. Covenants. (a) Each Grantor agrees promptly (but in no case more than 60 days) to notify the Collateral Agent in writing of any change (i) in its legal name, (ii) in the location of its chief executive office or its principal place of business, (iii) in its identity or type of organization or corporate structure, (iv) in its Federal Taxpayer Identification Number or organizational identification number or (v) in its jurisdiction of organization. Each Grantor agrees to promptly provide the Collateral Agent with certified organizational documents reflecting any of the changes described in the first sentence of this Section 4.03(a). Each Grantor agrees not to effect or permit any change referred to in the second preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest (subject to Liens permitted under Section 6.02 of the Credit Agreement that had priority as of the initial grant of such security interest) in the Article 9 Collateral. Each Grantor agrees promptly to notify the Collateral Agent if any portion of the Article 9 Collateral material to a Grantor’s business owned or held by such Grantor is damaged or destroyed.

          (b) Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Article 9 Collateral owned by it as is consistent

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with its current practices and in accordance with such standard practices used in industries that are the same as or similar to those in which such Grantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any part of the Article 9 Collateral, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing the identity, amount and location of any and all Article 9 Collateral.

          (c) Each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to Section 5.01(a) of the Credit Agreement, the Borrower shall deliver to the Collateral Agent a certificate executed by a Financial Officer of the Borrower setting forth the information required pursuant to the Perfection Certificate or confirming that there has been no material change in such information since the date of the Perfection Certificate delivered on the Effective Date or the date of the most recent certificate delivered pursuant to this Section 4.03(c). Each certificate delivered pursuant to this Section 4.03(c) shall identify in the format of Schedule III all Intellectual Property of any Grantor in existence on the date thereof and not then listed on the schedules to the Perfection Certificate previously so identified to the Collateral Agent.

          (d) Each Grantor shall, at its own expense, take any and all actions necessary to defend title to the Article 9 Collateral (other than Article 9 Collateral that is deemed by the Board of Directors of such Grantor to be immaterial to the conduct of its business) against all Persons and to defend the Security Interest of the Collateral Agent in the Article 9 Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.02 of the Credit Agreement. Nothing in this Agreement shall prevent any Grantor from discontinuing the operation or maintenance of any of its assets or properties if such discontinuance is (x) in the judgment of its Board of Directors, desirable in the conduct of its business and (y) permitted by the Credit Agreement.

          (e) Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable to any Grantor under or in connection with any of the Article 9 Collateral shall be or become evidenced by any promissory note or other instrument in excess of $2,000,000 or by any promissory note or other instrument in an amount that when taken together with any promissory note or other instruments not previously pledged and endorsed to the Collateral Agent exceeds $5,000,000, such note or instrument shall be promptly pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent.

          (f) The Collateral Agent and such Persons as the Collateral Agent may reasonably designate shall have the right, at the Grantors’ own cost and expense, to inspect the Article 9 Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Article 9 Collateral is located, to discuss the

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Grantors’ affairs with the officers of the Grantors and their independent accountants and to verify under reasonable procedures, in accordance with Section 5.09 of the Credit Agreement, the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Article 9 Collateral, including, (upon the occurrence and during the continuation of a Default or with the consent of the applicable Grantor (not to be unreasonably withheld)) in the case of Accounts or other Article 9 Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Article 9 Collateral for the purpose of making such a verification. Subject to Section 9.12 of the Credit Agreement, the Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party.

          (g) At its option, the Collateral Agent may discharge past due Taxes, assessments, charges, fees or Liens at any time levied or placed on the Article 9 Collateral and not permitted pursuant to Section 6.02 of the Credit Agreement, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization, provided that nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to Taxes, assessments, charges, fees, Liens and maintenance as set forth in this Agreement or in the other Loan Documents.

          (h) If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other Person with a value in excess of $2,000,000 or with a value that when taken together with the value of any property of an Account Debtor or any other Person not previously assigned to the Collateral Agent exceeds $5,000,000, to secure payment and performance of an Account, such Grantor shall promptly assign such security interest to the Collateral Agent. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other Person granting the security interest.

          (i) Each Grantor shall remain liable to observe and perform all the conditions and material obligations to be observed and performed by it under each contract, agreement or instrument relating to the Article 9 Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the other Secured Parties from and against any and all liability for such performance.

          (j) None of the Grantors shall make or permit to be made an assignment, pledge or hypothecation of the Article 9 Collateral or shall grant any other Lien in respect of the Article 9 Collateral, except as permitted by the Credit Agreement. Subject to the immediately following sentence, none of the Grantors shall make or permit to be made any transfer of the Article 9 Collateral and each Grantor shall remain at all times in possession of the Article 9 Collateral owned by it, except as permitted by Sections 6.02 and 6.05 of the Credit Agreement. Without limiting the generality of the foregoing, each Grantor agrees that it shall not permit any Inventory to be in the possession or control of any warehouseman, agent, bailee, or processor at

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any time unless such Person shall have been notified of the Security Interest and shall have acknowledged in writing, in form and substance reasonably satisfactory to the Collateral Agent, that such warehouseman, agent, bailee or processor holds the Inventory for the benefit of the Collateral Agent subject to the Security Interest and shall act upon the instructions of the Collateral Agent without further consent from the Grantor, and that such warehouseman, agent, bailee or processor further agrees to waive and release any Lien held by it with respect to such Inventory, whether arising by operation of law or otherwise; provided that such notice and acknowledgement shall not be required if the aggregate fair value of Inventory in the possession of or subject to the control of such warehouseman, agent, bailee or processor who has not been so notified and provided such acknowledgement is less than $2,000,000 and the aggregate fair value of Inventory in the possession of or subject to the control of all warehousemen, agents, bailees and processors who have not been so notified and provided such acknowledgement is less than $5,000,000.

          (k) None of the Grantors will, without the Collateral Agent’s prior written consent, grant any extension of the time of payment of any Accounts included in the Article 9 Collateral, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any Person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than compromises, compoundings, settlements and collections made in the ordinary course of business or in accordance with the reasonable business judgment of such Grantor.

          (l) The Grantors, at their own expense, shall maintain or cause to be maintained insurance covering physical loss or damage to the Inventory and Equipment in accordance with the requirements set forth in Section 5.07 of the Credit Agreement. Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor’s true and lawful agent (and attorney-in-fact) for the purpose, upon the occurrence and during the continuation of an Event of Default, of making, settling and adjusting claims in respect of Article 9 Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required under the Credit Agreement or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Grantors hereunder or any Event of Default, in its sole reasonable discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in connection with this paragraph, including reasonable attorneys’ fees, court costs, out-of-pocket expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent and shall be additional Obligations secured hereby.

          (m) Each Grantor shall maintain, in form and manner reasonably satisfactory to the Collateral Agent, records of its Chattel Paper and its books, records and documents evidencing or pertaining thereto.

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          Section 4.04. Other Actions. In order to insure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Security Interest, each Grantor agrees, in each case at such Grantor’s own expense, to take the following actions with respect to the following Article 9 Collateral:

          (a) Instruments and Tangible Chattel Paper. Each Grantor represents and warrants that each Instrument and each item of Tangible Chattel Paper with a value in excess of $2,000,000 in existence on the date hereof has been properly endorsed, assigned and delivered to the Collateral Agent, accompanied by instruments of transfer or assignment duly executed in blank or otherwise acceptable to the Collateral Agent. If any Grantor shall at any time hold or acquire any Instruments or Chattel Paper with a value in excess of $2,000,000 or any Instrument or Chattel Paper with a value that when taken together with the value of any Instrument or Chattel Paper not previously endorsed, assigned and delivered to the Collateral Agent exceeds $10,000,000, such Grantor shall forthwith endorse, assign and deliver the same to the Collateral Agent, accompanied by such undated instruments of transfer or assignment duly executed in blank or otherwise acceptable to the Collateral Agent as the Collateral Agent may from time to time reasonably request.

          (b) Electronic Chattel Paper and Transferable Records. If any Grantor at any time holds or acquires an interest in any electronic chattel paper or any “transferable record,” as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Grantor shall promptly notify the Collateral Agent thereof and, at the request of the Collateral Agent, shall take such action as the Collateral Agent may reasonably request to vest in the Collateral Agent control under New York UCC Section 9-105 of such electronic chattel paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as applicable, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction, of such transferable record. The Collateral Agent agrees with such Grantor that the Collateral Agent will arrange, pursuant to procedures reasonably satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agent’s loss of control, for the Grantor to make alterations to the electronic chattel paper or transferable record permitted under UCC Section 9-105 or, as applicable, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such electronic chattel paper or transferable record.

          Section 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral.

          (a) Each Grantor agrees that it will not do any act or omit to do any act (and will exercise commercially reasonable efforts to prevent its licensees from doing any act or omitting to do any act) whereby any Patent that is material to the conduct of such Grantor’s business would become invalidated or dedicated to the public, and agrees that it shall continue to mark any products covered by a Patent with the relevant patent number as necessary and sufficient in its reasonable judgment to establish and preserve its material rights under applicable patent laws.

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          (b) Each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor’s business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) use commercially reasonable efforts to maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration (or, if such Trademark is unregistered, display such Trademark with notice as required for unregistered Trademarks) to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in any violation of any third party rights.

          (c) Each Grantor (either itself or through its licensees or sublicensees) will, for each work covered by a Copyright material to the conduct of such Grantor’s business, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient in its reasonable judgment to establish and preserve its material rights under applicable copyright laws.

          (d) Each Grantor shall notify the Collateral Agent promptly if it knows that any Patent, Trademark or Copyright material to the conduct of its business could reasonably be expected to become abandoned, lost or dedicated to the public, or of any materially adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office or any court or similar office of any country) regarding such Grantor’s ownership of any Patent, Trademark or Copyright, its right to register the same, or its right to keep and maintain the same.

          (e) In no event shall any Grantor, either itself or through any agent, employee, licensee or designee, file an application with respect to any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, unless it promptly informs the Collateral Agent and, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may reasonably request to evidence the Collateral Agent’s security interest in such Patent, Trademark or Copyright, and each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings as are reasonably necessary for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable.

          (f) Each Grantor will take all reasonably necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, to maintain and pursue each registration or application that is material to the conduct of such Grantor’s business relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor’s business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if

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consistent with good business judgment, to initiate opposition, interference and cancellation proceedings against third parties.

          (g) In the event that any Grantor knows that any Article 9 Collateral consisting of a Patent, Trademark or Copyright material to the conduct of any Grantor’s business has been or is about to be infringed, misappropriated or diluted by a third party, such Grantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution (and take any actions required by applicable law prior to instituting such suit), and take such other actions as are appropriate under the circumstances to protect such Article 9 Collateral. Nothing in this Agreement shall prevent any Grantor from discontinuing the use or maintenance of any Article 9 Collateral consisting of a Patent, Trademark or Copyright, or require any Grantor to pursue any claim of infringement, misappropriation or dilution, if (x) such Grantor so determines in its good business judgment and (y) it is not prohibited by the Credit Agreement.

          (h) Upon and during the continuation of an Event of Default, each Grantor shall, at the request of the Collateral Agent, use its commercially reasonable efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License to effect the assignment of all such Grantor’s right, title and interest thereunder to the Collateral Agent or its designee.

ARTICLE V

Remedies

          Section 5.01. Remedies upon Default. Upon the occurrence and during the continuation of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable Grantors to the Collateral Agent, for the ratable benefit of the Secured Parties, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any such Article 9 Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice or demand for performance, to take possession of the Article 9 Collateral and without liability for trespass to enter any premises where the Article 9 Collateral may be located for the purpose of taking possession of or removing the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem

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appropriate. Each such purchaser at any sale of Collateral shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal that such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

          The Collateral Agent shall give the applicable Grantors 10 days’ written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may determine in its sole and absolute discretion. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent and the other Secured Parties shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement, all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions.

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          Section 5.02. Application of Proceeds. The proceeds received by the Collateral Agent in respect of any sale of, collection from or other realization upon all or any part of the Collateral pursuant to the exercise by the Collateral Agent of its remedies shall be applied, in full or in part, together with any other sums then held by the Collateral Agent pursuant to the Loan Documents, promptly by the Collateral Agent as follows:

     (a) First, to the payment of all reasonable costs and expenses, fees, commissions and taxes of such sale, collection or other realization including compensation to the Collateral Agent, the Administrative Agent, their respective agents and counsel, and all expenses, liabilities and advances made or incurred by the Collateral Agent and Administrative Agent in connection therewith and all amounts for which the Collateral Agent and Administrative Agent are entitled to indemnification pursuant to the provisions of any Loan Document, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full;

     (b) Second, to the payment of all other reasonable costs and expenses of such sale, collection or other realization including compensation to the other Secured Parties and their agents and counsel and all costs, liabilities and advances made or incurred by the other Secured Parties in connection therewith, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full;

     (c) Third, without duplication of amounts applied pursuant to clauses (a) and (b) above, to the indefeasible payment in full in cash, pro rata, of interest and other amounts constituting Obligations (other than principal, reimbursement obligations pursuant to Section 2.05(e) of the Credit Agreement and obligations to cash collateralize Letters of Credit) and any fees, premiums and scheduled periodic payments due under Swap Agreements or Treasury Services Agreements constituting Obligations and any interest accrued thereon, in each case equally and ratably in accordance with the respective amounts thereof then due and owing;

     (d) Fourth, to the indefeasible payment in full in cash, pro rata, of principal amount of the Obligations and any premium thereon (including reimbursement obligations pursuant to Section 2.05(e) of the Credit Agreement and obligations to cash collateralize Letters of Credit) and any breakage, termination or other payments under Swap Agreements and Treasury Services Agreements constituting Obligations and any interest accrued thereon; and

     (e) Fifth, the balance, if any, to the person lawfully entitled thereto (including the applicable Loan Party or its successors or assigns) or as a court of competent jurisdiction may direct.

     In the event that any such proceeds are insufficient to pay in full the items described in clauses (a) through (e) of this Section 5.02, the Loan Parties shall remain liable, jointly and severally, for any deficiency.

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The Collateral Agent shall have sole and absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.

          Section 5.03. Grant of License To Use Intellectual Property. For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Grantors) to use, license or sublicense any of the Article 9 Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Collateral Agent shall be exercised, at the option of the Collateral Agent, only upon the occurrence and during the continuation of an Event of Default, provided that any license, sublicense or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon the Grantors notwithstanding any subsequent cure of an Event of Default.

          Section 5.04. Securities Act. In view of the position of the Grantors in relation to the Pledged Collateral, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the “Federal Securities Laws”) with respect to any disposition of the Pledged Collateral permitted hereunder. Each Grantor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Collateral under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Grantor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Collateral, limit the purchasers to those who will agree, among other things, to acquire such Pledged Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Grantor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the

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Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Collateral Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 5.04 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells.

          Section 5.05. Medicare/Medicaid. The parties hereto understand and agree that the exercise of remedies hereunder with respect to receivables from Medicare or Medicaid may be subject to applicable federal laws.

ARTICLE VI

Indemnity, Subrogation and Subordination

          Section 6.01. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 6.03), the Borrower agrees that (a) in the event a payment of any Obligation shall be made by any Guarantor under this Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the Person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Grantor shall be sold pursuant to this Agreement or any other Security Document to satisfy in whole or in part any Obligation owed to any Secured Party, the Borrower shall indemnify such Grantor in an amount equal to the fair value of the assets so sold.

          Section 6.02. Contribution and Subrogation. Each Guarantor and Grantor (a “Contributing Party”) agrees (subject to Section 6.03) that, in the event a payment shall be made by any other Guarantor hereunder in respect of any Obligation or assets of any other Grantor shall be sold pursuant to any Security Document to satisfy any Obligation owed to any Secured Party and such other Guarantor or Grantor (the “Claiming Party”) shall not have been fully indemnified by the Borrower as provided in Section 6.01, the Contributing Party shall indemnify the Claiming Party in an amount equal to the amount of such payment or the greater of the book value or the fair value of such assets, as applicable, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Party on the date hereof (or, in the case any Guarantor or Grantor becomes a party hereto pursuant to Section 7.14, the date of the last supplement hereto executed and delivered by a Guarantor or Grantor) and the denominator shall be the aggregate net worth of all the Guarantors and Grantors on the date hereof (or, in the case any Guarantor or Grantor becomes a party hereto pursuant to Section 7.14, the date of the last supplement hereto executed and delivered by a Guarantor or Grantor). Any Contributing Party making any payment to a Claiming Party pursuant to this Section 6.02 shall be subrogated to the rights of such Claiming Party under Section 6.01 to the extent of such payment.

          Section 6.03. Subordination. Notwithstanding any provision in this Agreement to the contrary, all rights of the Guarantors and Grantors under Sections 6.01 and 6.02 and all

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other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Guarantor or Grantor to make the payments required by Sections 6.01 and 6.02 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor or Grantor with respect to its Obligations hereunder, and each Guarantor and Grantor shall remain liable for the full amount of the Obligations of such Guarantor or Grantor hereunder.

ARTICLE VII

Miscellaneous

          Section 7.01. Notices. All communications and notices hereunder shall (except as otherwise expressly permitted in this Agreement) be in writing and given as provided in Section 9.01 of the Credit Agreement, provided that any communication or notice hereunder from the Collateral Agent to any Loan Party upon the occurrence and during the continuation of an Event of Default may be given by telephone if promptly confirmed in writing. All communications and notices hereunder to any Subsidiary Loan Party shall be given to it in care of the Borrower as provided for notices to the Borrower in Section 9.01 of the Credit Agreement.

          Section 7.02. Waivers; Amendment. (a) No failure or delay by any Secured Party in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Secured Parties hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision in this Agreement or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted Section 7.02(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any Secured Party may have had notice or knowledge of such Default at the time. No notice or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances.

          (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.02 of the Credit Agreement.

          Section 7.03. Collateral Agent’s Fees and Expenses; Indemnification. (a) The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its reasonable out-of-pocket expenses incurred hereunder as provided in Section 9.03 of the Credit Agreement.

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          (b) Without limitation of its indemnification obligations under the other Loan Documents, each Grantor and each Guarantor jointly and severally agrees to indemnify the Collateral Agent and the other Indemnitees (as defined in Section 9.03 of the Credit Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related out-of-pocket expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of, the execution, delivery or performance of this Agreement or any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing agreements or instruments contemplated hereby, or to the Collateral, whether or not any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related out-of-pocket expenses are finally judicially determined by a non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, bad faith or wilful misconduct of, or breach of the Loan Documents by, such Indemnitee.

          (c) Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.03 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 7.03 shall be payable on written demand therefor.

          Section 7.04. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Guarantor, Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns and shall inure to the benefit of the other Secured Parties and their respective successors and assigns.

          Section 7.05. Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any Lender or on its behalf and notwithstanding that the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended under the Credit Agreement, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under any Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated.

          Section 7.06. Counterparts; Effectiveness; Several Agreement. This Agreement may be executed in counterparts, each of which shall constitute an original but all of which,

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when taken together, shall constitute single contract. Delivery of an executed signature page to this Agreement by facsimile or electronic transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. This Agreement shall become effective as to any Loan Party when a counterpart hereof executed on behalf of such Loan Party shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Loan Party and the Collateral Agent and their respective permitted successors and assigns, and shall inure to the benefit of such Loan Party, the Administrative Agent, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Loan Party shall have the right to assign or transfer its rights or obligations hereunder or any interest in this Agreement or in the Collateral (and any such assignment or transfer shall be void) except as contemplated by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Loan Party and may be amended, modified, supplemented, waived or released with respect to any Loan Party without the approval of any other Loan Party and without affecting the obligations of any other Loan Party hereunder.

          Section 7.07. Severability. Any provision in this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

          Section 7.08. Right of Set-Off. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Loan Party against any of and all the obligations of such Loan Party now or hereafter existing under this Agreement owed to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The applicable Lender shall notify the Borrower, the Collateral Agent and the Administrative Agent of such set-off or application, provided that any failure to give or any delay in giving such notice shall not affect the validity of any such set-off or application under this Section 7.08. The rights of each Lender under this Section 7.08 are in addition to other rights and remedies (including other rights of set-off) which such Lender may have.

          Section 7.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York.

          (b) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any

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action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Collateral Agent, the Issuing Bank, any Lender or any Loan Party may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document in the courts of any jurisdiction.

          (c) Each of the Loan Parties hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in Section 7.09(b). Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

          (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 7.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

          Section 7.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.

          Section 7.11. Headings. Article and Section headings and the Table of Contents used in this Agreement are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

          Section 7.12. Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest, the grant of a security interest in the Pledged Collateral and all obligations of each Grantor and Guarantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan

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Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor or Guarantor in respect of the Obligations or this Agreement.

          Section 7.13. Termination or Release. (a) This Agreement and the Guarantees made in this Agreement shall terminate and the Security Interest and all other security interests granted hereby shall be automatically released when all the Loan Document Obligations (other than wholly contingent indemnification obligations not then due) have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the LC Exposure has been reduced to zero and the Issuing Bank has no further obligations to issue Letters of Credit under the Credit Agreement.

          (b) A Person which was a Loan Party immediately prior to the consummation of any transaction permitted by the Credit Agreement shall automatically be released from its obligations hereunder and the Security Interest in the Collateral of such Person shall be automatically released upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Person ceases to be a Loan Party.

          (c) Upon any sale or other transfer by any Grantor of any Collateral that is permitted under the Credit Agreement, or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.02 of the Credit Agreement, the security interest in such Collateral shall be automatically released.

          (d) In connection with any termination or release pursuant to Sections 7.13(a), (b) or (c), the Collateral Agent shall execute and deliver to any Person, at such Person’s expense, all documents that such Person shall reasonably request to evidence such termination or release of its obligations or the Security Interests in its Collateral. Any execution and delivery of documents pursuant to this Section 7.13 shall be without recourse to or warranty by the Collateral Agent. Without limiting the provisions of Section 7.03, the Borrower shall reimburse the Collateral Agent upon demand for all reasonable costs and out of pocket expenses, including the reasonable fees, charges and disbursements of counsel, incurred by it in connection with any action contemplated by this Section 7.13.

          Section 7.14. Additional Subsidiaries. Pursuant to Section 5.12 of the Credit Agreement, certain Subsidiaries of a Loan Party that were not in existence or not a Subsidiary on the date of the Credit Agreement are required to enter in this Agreement as a Subsidiary Loan Party upon becoming such a Subsidiary. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Exhibit I hereto, such Subsidiary shall become a Subsidiary Loan Party hereunder with the same force and effect as if originally named as a Subsidiary Loan Party in this Agreement. The execution and delivery of any such instrument shall not require the consent of any other Loan Party hereunder. The rights and obligations of

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each Loan Party hereunder shall remain in full force and effect notwithstanding the addition of any new Loan Party as a party to this Agreement.

          Section 7.15. Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby appoints the Collateral Agent the attorney-in-fact of such Grantor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuation of an Event of Default, with full power of substitution either in the Collateral Agent’s name or in the name of such Grantor (except to the extent such action would be prohibited by applicable law with respect to Medicare and Medicaid receivables) (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes, provided that nothing in this Agreement contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them in this Agreement, and neither they nor their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

          Section 7.16. Further Assurances. Notwithstanding anything to the contrary herein, the parties hereto agree to comply with the requirements set forth in Section 5.13 of the Credit Agreement.

[Signature Pages to Follow]

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

USPI HOLDINGS INC.,
By:
	Name:
	Title:
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.,
By:
	Name:
	Title:
EACH OF THE SUBSIDIARIES LISTED ON SCHEDULE I HERETO,
By:
	Name:
	Title:
CITIBANK, N.A., AS COLLATERAL AGENT,
By:
	Name:
	Title:

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Exhibit I to the
Collateral Agreement

     SUPPLEMENT NO. ___ dated as of [     ], to the Guarantee and Collateral Agreement dated as of April 19, 2007 as the same may be amended or otherwise modified from time to time (the “Collateral Agreement”), among UNITED SURGICAL PARTNERS INTERNATIONAL, INC., a Delaware corporation (the “Borrower”), USPI HOLDINGS INC., a Delaware corporation, each subsidiary of the Borrower listed on Schedule I thereto (each such subsidiary individually a “Subsidiary Guarantor” and collectively, the “Subsidiary Guarantors”; the Subsidiary Guarantors, Holdings and the Borrower are referred to collectively herein as the “Grantors”) and CITIBANK, N.A., (“Citibank”), as Collateral Agent (in such capacity, the “Collateral Agent”).

          A. Reference is made to the Credit Agreement dated as of April 19, 2007 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, Holdings, the lenders from time to time party thereto, Citibank, as Administrative Agent, Lehman Brothers Inc., as Syndication Agent, and Bear Stearns Corporate Lending Inc., Suntrust Bank and UBS Securities LLC, as Co-Documentation Agents.

          B. Capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have the meanings assigned to such terms in the Credit Agreement and the Collateral Agreement referred to therein.

          C. The Grantors have entered into the Collateral Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Section 7.14 of the Collateral Agreement provides that additional Subsidiaries of the Borrower may become Subsidiary Loan Parties under the Collateral Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the “New Subsidiary”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Loan Party under the Collateral Agreement in order to induce the Lenders to make additional Loans and the Issuing Bank to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued.

          Accordingly, the Collateral Agent and the New Subsidiary agree as follows:

          SECTION 1. In accordance with Section 7.14 of the Collateral Agreement, the New Subsidiary by its signature below becomes a Subsidiary Loan Party, a Grantor and a Guarantor under the Collateral Agreement with the same force and effect as if originally named therein as a Subsidiary Loan Party, a Grantor and a Guarantor and the New Subsidiary hereby (a) agrees to all the terms and provisions of the Collateral Agreement applicable to it as a Subsidiary Loan Party, Grantor and Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Grantor and Guarantor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Subsidiary, as security for the payment and performance in full of the Obligations (as defined in the Collateral Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for

Exh. I-1

the ratable benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all the New Subsidiary’s right, title and interest in and to the Collateral (as defined in the Collateral Agreement) of the New Subsidiary. Each reference to a “Guarantor” or “Grantor” in the Collateral Agreement shall be deemed to include the New Subsidiary. The Collateral Agreement is hereby incorporated in this Agreement by reference.

          SECTION 2. The New Subsidiary represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.

          SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received a counterpart of this Supplement that bears the signature of the New Subsidiary and the Collateral Agent has executed a counterpart hereof. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.

          SECTION 4. The New Subsidiary hereby represents and warrants that set forth under its signature hereto is (i) the true and correct legal name of the New Subsidiary, (ii) its jurisdiction of formation, (iii) its Federal Taxpayer Identification Number or its organizational identification number and (iv) the location of its chief executive office.

          SECTION 5. Except as expressly supplemented hereby, the Collateral Agreement shall remain in full force and effect.

          SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

          SECTION 7. Any provision of this Supplement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof and in the Collateral Agreement; the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

          SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Collateral Agreement.

          SECTION 9. The New Subsidiary agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent.

Exh. I-2

          IN WITNESS WHEREOF, the New Subsidiary and the Collateral Agent have duly executed this Supplement to the Collateral Agreement as of the day and year first above written.

[NAME OF NEW SUBSIDIARY],
By:
	Name:
	Title:
Legal Name: Jurisdiction of Formation: Location of Chief Executive Office:
CITIBANK, N.A., AS COLLATERAL AGENT,
By:
	Name:
	Title:

Exh. I-3

Schedule I
to the Supplement No. __
to the Collateral Agreement

LOCATION OF COLLATERAL

Description Location

EQUITY INTERESTS

			Number and
	Number of	Registered	Class of	Percentage of
Issuer	Certificate	Owner	Equity Interests	Equity Interests

DEBT SECURITIES

	Principal
Issuer	Amount	Date of Note	Maturity Date

INTELLECTUAL PROPERTY

I. Copyrights

		Registration	Expiration
Registered Owner	Title	Number	Date

II. Copyright Applications

		Registration	Date
Registered Owner	Title	Number	Filed

III. Copyright Licenses

			Registration	Expiration
Licensee	Licensor	Title	Number	Date

IV. Patents

		Registration	Expiration
Registered Owner	Mark	Number	Date

V. Patent Applications

		Registration	Date
Registered Owner	Mark	Number	Filed

VI. Patent Licenses

			Registration	Expiration
Licensee	Licensor	Mark	Number	Date

VII. Trademarks

		Registration	Expiration
Registered Owner	Type	Number	Date

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VIII. Trademark Applications

		Registration	Date
Registered Owner	Type	Number	Filed

IX. Trademark Licenses

			Registration	Expiration
Licensee	Licensor	Type	Number	Date

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Exhibit D

PERFECTION CERTIFICATE

     Reference is hereby made to (i) that certain Collateral Agreement dated as of [               ], 2007 (the “Collateral Agreement”), between United Surgical Partners International, Inc., a Delaware corporation (“Borrower”), USPI Holdings, Inc., a Delaware corporation (“Holdings”), the Guarantors party thereto (collectively, the “Guarantors”) and the Collateral Agent (as hereinafter defined) and (ii) that certain Credit Agreement dated as of [               ], 2007 (the “Credit Agreement”) among the Borrower, Holdings, the Guarantors, certain other parties thereto and Citibank, N.A., as Collateral Agent (in such capacity, the “Collateral Agent”). Capitalized terms used but not defined herein have the meanings assigned in the Credit Agreement or the Collateral Agreement, as applicable.

     As used herein, the term “Companies” means Holdings, Borrower and each of its Domestic Subsidiaries and the term “Loan Parties” means Holdings, Borrower and each of its wholly owned Domestic Subsidiaries.

     The undersigned hereby certify to the Collateral Agent as follows as of the date hereof:

     1. Names.

     (a) The exact legal name of each Company, as such name appears in its respective certificate of incorporation or any other organizational document, is set forth in Schedule 1(a). Each Company is the type of entity disclosed next to its name in Schedule 1(a). Also set forth in Schedule 1(a) is the organizational identification number, if any, of each Loan Party that is a registered organization, the Federal Taxpayer Identification Number of each Company and the jurisdiction of formation of each Company. Also set forth on Schedule 1(a) is a true and correct list of the holders of all of the authorized, issued and outstanding stock, partnership interests, limited liability company membership interests or other equity interest held in each Company as of December 31, 2006.

     (b) Set forth in Schedule 1(b) hereto is any other corporate or organizational names each Loan Party has had in the past five years and each Company that is not a Loan Party has had in the last four months, together with the date of the relevant change.

     (c) Set forth in Schedule 1(c) is a list of all other names used by each Loan Party, or any other business or organization to which each Loan Party became the successor by merger, consolidation, acquisition, change in form, nature or jurisdiction of organization or otherwise, on any filings with the Internal Revenue Service at any time between [date five years from date of perfection certificate] and the date hereof. Except as set forth in Schedule 1(c), no Company has changed its jurisdiction of organization at any time during the past four months.

     2. Current Locations. The chief executive office of each Loan Party is located at the address set forth in Schedule 2 hereto.

     3. Locations in Arizona. (a) Set forth in Schedule 3(a) are all locations in Arizona where each Loan Party maintains a place of business or any Collateral or any books or records relating to any Collateral.

     (b) Set forth in Schedule 3(b) hereto are the names and addresses of all persons or entities other than each Loan Party, such as lessees, consignees, warehousemen or purchasers of chattel paper, located in Arizona which have possession or are intended to have possession of any of the Collateral consisting of instruments, chattel paper, inventory or equipment.

     (c) Set forth in Schedule 3(c) is the information required by Schedule 3(a) and Schedule 3(b) with respect to each location or place of business previously maintained by each Loan Party at any time during the past four months in Arizona.

     4. Extraordinary Transactions. Except for those purchases, acquisitions and other transactions described on Schedule 4 attached hereto, all of the Collateral originated in the past five years has been originated by each Loan Party in the ordinary course of business or consists of goods which have been acquired by such Loan Party in the ordinary course of business from a person in the business of selling goods of that kind.

     5. Schedule of Filings. Attached hereto as Schedule 5 is a schedule of (i) the appropriate filing offices for the UCC financing statements and (ii) the appropriate filing offices for the filings described in Schedule 9 and (iii) any other actions required to create, preserve, protect and perfect the security interests in the Pledged Collateral (as defined in the Collateral Agreement) granted to the Collateral Agent pursuant to the Collateral Documents. No other filings or actions are required to create, preserve, protect and perfect the security interests in the Pledged Collateral granted to the Collateral Agent pursuant to the Security Documents.

     6. Real Property. (a) Attached hereto as Schedule 6(a) is a list of all (i) real property owned, leased or otherwise held by each Loan Party, (ii) filing offices for mortgages relating to each Mortgaged Property as of the Closing Date, (iii) common names, addresses and uses of each Mortgaged Property (stating improvements located thereon) and (iv) other information relating thereto required by such Schedule. Except as described on Schedule 6(b) attached hereto: (i) no Loan Party has entered into any leases, subleases, tenancies, franchise agreements, licenses or other occupancy arrangements as owner, lessor, sublessor, licensor, franchisor or grantor with respect to any of the real property described on Schedule 6(a) and (ii) no Loan Party has any Leases which require the consent of the landlord, tenant or other party thereto to the Transactions.

     7. Instruments and Tangible Chattel Paper. Attached hereto as Schedule 7 is a true and correct list of all promissory notes, instruments (other than checks to be deposited in the ordinary course of business), tangible chattel paper, electronic chattel paper and other evidence of indebtedness held by each Loan Party as of                     , 2007, including all intercompany notes held by each Loan Party.

     8. Intellectual Property. Attached hereto as Schedule 8(a) is a schedule setting forth all of each Loan Party’s Patents, Patent Licenses, Trademarks and Trademark Licenses (each as defined in the Security Agreement) registered with the United States Patent and Trademark Office, and all other Patents, Patent Licenses, Trademarks and Trademark Licenses, including the name of the registered owner and the registration number of each Patent, Patent License, Trademark and Trademark License owned by each Loan Party. Attached hereto as Schedule 8(b) is a schedule setting forth all of each Loan Party’s United States Copyrights and Copyright Licenses (each as defined in the Security Agreement), and all other Copyrights and Copyright Licenses, including the name of the registered owner and the registration number of each Copyright or Copyright License owned by each Loan Party.

     9. Commercial Tort Claims. Attached hereto as Schedule 9 is a true and correct list of all Commercial Tort Claims (as defined in the Security Agreement) held by each Loan Party, including a brief description thereof.

[The Remainder of this Page has been intentionally left blank]

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     IN WITNESS WHEREOF, we have hereunto signed this Perfection Certificate as of this ___ day of                     , 2007.

UNITED SURGICAL PARTNERS INTERNATIONAL, INC., as Borrower
By:
	Name:
	Title:
[Guarantors]
By:
	Name:
	Title:

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EXHIBIT E

Form of
BORROWING REQUEST

Citibank, N.A.,
as Administrative Agent for
the Lenders referred to below,
2 Penns Way, Suite 100
New Castle, DE 19720

Attention: Kwase Bame
Telecopier: (212) 994-0961
Telephone: (302) 894-6073

[DATE]

Ladies and Gentlemen:

          The undersigned, United Surgical Partners International, Inc., a Delaware corporation (the “Borrower”), refers to the Credit Agreement dated as of April 19, 2007 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among United Surgical Partners International, Inc., a Delaware corporation (the “Borrower”), USPI Holdings, Inc., a Delaware corporation (“Holdings”), the Lenders party thereto from time to time, Citibank, N.A., as Administrative Agent, Citigroup Global Markets, Inc. and Lehman Brothers Inc., as joint lead arrangers and joint bookrunners, Bear Stearns & Co. Inc. and UBS Securities LLC, as joint bookrunners, Lehman Brothers Inc., as Syndication Agent, and Bear Stearns Corporate Lending Inc., SunTrust Bank and UBS Securities LLC, as Co-Documentation Agents. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives you notice pursuant to Section 2.03 of the Credit Agreement that it requests a Borrowing under the Credit Agreement, and in that connection sets forth below the terms on which such Borrowing is requested to be made:

(A)	Date of Borrowing (which is a Business Day)
(B)	Principal Amount of Borrowing
(C)	Class of Borrowing4

⁴ Specify Tranche B Term Loan, Delayed Draw Term Loan, Revolving Loan or Swingline Loan.

(D)	Type of Borrowing 5
(E)	[Interest Period and the last day thereof 6                                     ______________________________]

(F) Funds are requested to be disbursed to the Borrower’s account as follows (Account No.                                           )

5	Specify Eurodollar Borrowing or ABR Borrowing.
6	Applicable for Eurodollar Borrowings only; which shall be subject to the definition of “Interest Period” and end not later than the Revolving Maturity Date or the Tranche B Maturity Date, as applicable.

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          The Borrower hereby represents and warrants to the Administrative Agent and the Lenders that, on the date of this Borrowing Request and on the date of the related Borrowing, the conditions to lending specified in Section 4.02 of the Credit Agreement have been satisfied.

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.,
By:
	Name:
	Title:	[Responsible Officer]

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EXHIBIT F

Form of
INTEREST ELECTION REQUEST

Citibank, N.A.,
as Administrative Agent for
the Lenders referred to below,
2 Penns Way, Suite 100
New Castle, DE 19720

Attention: Kwase Bame
Telecopier: (212) 994-0961
Telephone: (302) 894-6073

[Date]

Ladies and Gentlemen:

          Reference is made to the Credit Agreement dated as of April 19, 2007 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among United Surgical Partners International, Inc., a Delaware corporation (the “Borrower”), USPI Holdings, Inc., a Delaware corporation (“Holdings”), the Lenders party thereto from time to time, Citibank, N.A., as Administrative Agent, Citigroup Global Markets, Inc. and Lehman Brothers Inc., as joint lead arrangers and joint bookrunners, Bear Stearns & Co. Inc. and UBS Securities LLC, as joint bookrunners, Lehman Brothers Inc., as Syndication Agent, and Bear Stearns Corporate Lending Inc., SunTrust Bank and UBS Securities LLC, as Co-Documentation Agents. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. This notice constitutes an Interest Election Request, and the Borrower hereby requests the conversion or continuation of a Borrowing under the Credit Agreement, and in that connection the Borrower specifies the following information with respect to the Borrowing to be converted or continued as requested hereby:

(A)	Borrowing to which this request applies:7
(B)	Principal amount of the Borrowing to be converted/continued:

⁷ Specify existing Class, Type and last day of current Interest Period. If different options are being elected with respect to different portions of the Borrowing, use separate form for each portion.

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(C)	Effective date of election (which is a Business Day):
(D)	Interest rate basis of resulting Borrowing:8
(E)	Interest Period of resulting Borrowing:

Very truly yours, UNITED SURGICAL PARTNERS INTERNATIONAL, INC.,
By:
	Name:
	Title:

⁸ Eurodollar Borrowing or ABR Borrowing.

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EXHIBIT G-1

Form of
TERM LOAN NOTE

$                             New York, New York
[Date]

          FOR VALUE RECEIVED, the undersigned, UNITED SURGICAL PARTNERS INTERNATIONAL, INC., a Delaware corporation (the “Borrower”), hereby promises to pay to the order of [                    ] (the “Lender”) on the [Tranche B] [Delayed Draw] Maturity Date (as defined in the Credit Agreement referred to below) in lawful money of the United States and in immediately available funds, the principal amount of _________ DOLLARS ($_________), or, if less, the aggregate unpaid principal amount of all [Delayed Draw Term Loans][Tranche B Term Loans] of the Lender outstanding under the Credit Agreement referred to below, which sum shall be due and payable in such amounts and on such dates as are set forth in the Credit Agreement. Borrower further agrees to pay interest in like money at such office specified in Section 2.18 of the Credit Agreement on the unpaid principal amount hereof from time to time from the date hereof at the rates, and on the dates, set forth in the Credit Agreement.

          The holder of this Note may endorse and attach a schedule to reflect the date, type and amount of each [Delayed Draw Term Loans][Tranche B Term Loans] of the Lender outstanding under the Credit Agreement, the date and amount of each payment or prepayment of principal hereof, and the date of each interest rate conversion or continuation pursuant to Section 2.07 of the Credit Agreement and the principal amount subject thereto; provided that the failure of the Lender to make any such recordation (or any error in such recordation) shall not affect the obligations of Borrower hereunder or under the Credit Agreement.

          This Note is one of the Notes referred to in the Credit Agreement dated as of April 19, 2007 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, USPI Holdings, Inc., a Delaware corporation (“Holdings”), the Lenders party thereto from time to time, Citibank, N.A., as Administrative Agent, Citigroup Global Markets, Inc. and Lehman Brothers Inc., as joint lead arrangers and joint bookrunners, Bear Stearns & Co. Inc. and UBS Securities LLC, as joint bookrunners, Lehman Brothers Inc., as Syndication Agent, and Bear Stearns Corporate Lending Inc., SunTrust Bank and UBS Securities LLC, as Co-Documentation Agents, is subject to the provisions thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. Terms used herein which are defined in the Credit Agreement shall have such defined meanings unless otherwise defined herein or unless the context otherwise requires.

          This Note is secured and guaranteed as provided in the Credit Agreement and the Security Documents. Reference is hereby made to the Credit Agreement and the Security Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and guarantees, the terms and conditions upon

1

which the security interest and each guarantee was granted and the rights of the holder of this Note in respect thereof.

          Upon the occurrence and during the continuation of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided therein.

          All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.

          THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE CREDIT AGREEMENT. TRANSFERS OF THIS NOTE MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF THE CREDIT AGREEMENT.

          THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

[Signature Page Follows]

2

UNITED SURGICAL PARTNERS INTERNATIONAL, INC., as Borrower
By:
	Name:
	Title:

3

EXHIBIT G-2

Form of
REVOLVING CREDIT FACILITY NOTE

$                           New York, New York
[Date]

          FOR VALUE RECEIVED, the undersigned, UNITED SURGICAL PARTNERS INTERNATIONAL, INC., a Delaware corporation (the “Borrower”), hereby promises to pay to the order of [                        ] (the “Lender”) on the Revolving Maturity Date (as defined in the Credit Agreement referred to below), in lawful money of the United States and in immediately available funds, the principal amount of the lesser of (a) ___________ DOLLARS ($___________) and (b) the aggregate unpaid principal amount of all Revolving Loans of the Lender outstanding under the Credit Agreement referred to below. Borrower further agrees to pay interest in like money at such office specified in Section 2.18 of the Credit Agreement on the unpaid principal amount hereof from time to time from the date hereof at the rates, and on the dates, set forth in the Credit Agreement.

          The holder of this Note may endorse and attach a schedule to reflect the date, type and amount of each Revolving Loan of the Lender outstanding under the Credit Agreement, the date and amount of each payment or prepayment of principal hereof, and the date of each interest rate conversion or continuation pursuant to Section 2.07 of the Credit Agreement and the principal amount subject thereto; provided that the failure of the Lender to make any such recordation (or any error in such recordation) shall not affect the obligations of Borrower hereunder or under the Credit Agreement.

          This Note is one of the Notes referred to in the Credit Agreement dated as of April 19, 2007 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, USPI Holdings, Inc., a Delaware corporation (“Holdings”), the Lenders party thereto from time to time, Citibank, N.A., as Administrative Agent, Citigroup Global Markets, Inc. and Lehman Brothers Inc., as joint lead arrangers and joint bookrunners, Bear Stearns & Co. Inc. and UBS Securities LLC, as joint bookrunners, Lehman Brothers Inc., as Syndication Agent, and Bear Stearns Corporate Lending Inc., SunTrust Bank and UBS Securities LLC, as Co-Documentation Agents, is subject to the provisions thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. Terms used herein which are defined in the Credit Agreement shall have such defined meanings unless otherwise defined herein or unless the context otherwise requires.

          This Note is secured and guaranteed as provided in the Credit Agreement and the Security Documents. Reference is hereby made to the Credit Agreement and the Security Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and guarantees, the terms and conditions upon which the security interest and each guarantee was granted and the rights of the holder of this Note in respect thereof.

          Upon the occurrence and during the continuation of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided therein.

          All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.

          THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE CREDIT AGREEMENT. TRANSFERS OF THIS NOTE MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF THE CREDIT AGREEMENT.

          THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

[Signature Page Follows]

2

UNITED SURGICAL PARTNERS INTERNATIONAL, INC., as Borrower
By:
	Name:
	Title:

3

EX-10.3

Exhibit 10.3

GUARANTEE AND COLLATERAL AGREEMENT

dated as of

April 19, 2007

among

USPI HOLDINGS, INC.,

UNITED SURGICAL PARTNERS INTERNATIONAL, INC.,

THE SUBSIDIARIES OF UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
IDENTIFIED HEREIN

and

CITIBANK, N.A.

as Collateral Agent

TABLE OF CONTENTS

	Page
ARTICLE I
DEFINITIONS
Section 1.01. Credit Agreement		1
Section 1.02. Other Defined Terms		1
ARTICLE II
GUARANTEE
Section 2.01. Guarantee		5
Section 2.02. Guarantee of Payment		5
Section 2.03. No Limitations		5
Section 2.04. Reinstatement		6
Section 2.05. Agreement To Pay; Subrogation		6
Section 2.06. Information		7
Section 2.07. Remedies		7
Section 2.08. Instrument for the Payment of Money		7
Section 2.09. Continuing Guarantee		7
Section 2.10. General Limitation on Guarantee		7
ARTICLE III
PLEDGE OF SECURITIES
Section 3.01. Pledge		7
Section 3.02. Delivery of the Pledged Collateral		8
Section 3.03. Representations, Warranties and Covenants		9
Section 3.04. Certification of Limited Liability Company and Limited Partnership Interests		10
Section 3.05. Registration in Nominee Name; Denominations		10
Section 3.06. Voting Rights; Dividends and Interest		11
ARTICLE IV
SECURITY INTERESTS IN PERSONAL PROPERTY
Section 4.01. Security Interest		13
Section 4.02. Representations and Warranties		14
Section 4.03. Covenants		16

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	Page
Section 4.04. Other Actions		20
Section 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral		20
ARTICLE V
REMEDIES
Section 5.01. Remedies upon Default		22
Section 5.02. Application of Proceeds		24
Section 5.03. Grant of License To Use Intellectual Property		25
Section 5.04. Securities Act		25
Section 5.05. Medicare/Medicaid		26
ARTICLE VI
INDEMNITY, SUBROGATION AND SUBORDINATION
Section 6.01. Indemnity and Subrogation		26
Section 6.02. Contribution and Subrogation		26
Section 6.03. Subordination		26
ARTICLE VII
MISCELLANEOUS
Section 7.01. Notices		27
Section 7.02. Waivers; Amendment		27
Section 7.03. Collateral Agent’s Fees and Expenses; Indemnification		27
Section 7.04. Successors and Assigns		28
Section 7.05. Survival of Agreement		28
Section 7.06. Counterparts; Effectiveness; Several Agreement		28
Section 7.07. Severability		29
Section 7.08. Right of Set-Off		29
Section 7.09. Governing Law; Jurisdiction; Consent to Service of Process		29
Section 7.10. WAIVER OF JURY TRIAL		30
Section 7.11. Headings		30
Section 7.12. Security Interest Absolute		30
Section 7.13. Termination or Release		31
Section 7.14. Additional Subsidiaries		31
Section 7.15. Collateral Agent Appointed Attorney-in-Fact		32
Section 7.16. Further Assurances		32

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Schedules

Schedule I	Subsidiary Loan Parties
Schedule II	Pledged Stock; Debt Securities
Schedule III	Intellectual Property
Schedule IV	Commercial Tort Claims

Exhibits

Exhibit I Form of Supplement

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          GUARANTEE AND COLLATERAL AGREEMENT (this “Agreement”) dated as of April 19, 2007, among USPI HOLDINGS, INC., a Delaware corporation, UNITED SURGICAL PARTNERS INTERNATIONAL, INC., a Delaware corporation, the Subsidiaries of UNITED SURGICAL PARTNERS INTERNATIONAL, INC. identified herein and CITIBANK, N.A., as Collateral Agent.

          Reference is made to the Credit Agreement dated as of April 19, 2007 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among United Surgical Partners International, Inc. (the “Borrower”), USPI Holdings, Inc., the Lenders party thereto, Citibank, N.A., as Administrative Agent, Lehman Brothers Inc., as Syndication Agent, and Bear Stearns Corporate Lending Inc., Suntrust Bank and UBS Securities LLC, as Co-Documentation Agents. The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the Credit Agreement. The obligations of the Lenders to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. Holdings and the Subsidiary Loan Parties are affiliates of the Borrower, will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement and are willing to execute and deliver this Agreement in order to induce the Lenders to extend such credit. Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

          Section 1.01. Credit Agreement. (a) Capitalized terms used in this Agreement and not otherwise defined in this Agreement have the meanings specified in the Credit Agreement. All terms defined in the New York UCC (as defined in this Agreement) and not defined in this Agreement have the meanings specified therein.

     (b) The rules of construction specified in Section 1.03 of the Credit Agreement also apply to this Agreement, mutatis mutandis.

     Section 1.02. Other Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

     “Account Debtor” means any Person who is or who may become obligated to any Grantor under, with respect to or on account of an Account.

     “Article 9 Collateral” has the meaning assigned to such term in Section 4.01.

     “Claiming Party” shall have the meaning assigned to such term in Section 6.02.

     “Collateral” means Article 9 Collateral and Pledged Collateral.

     “Contributing Party” shall have the meaning assigned to such term in Section 6.02.

     “Copyright License” means any written agreement, now or hereafter in effect, granting any right to any third party under any copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any copyright now or hereafter owned by any third party, and all rights of any Grantor under any such agreement.

     “Copyrights” means all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise and (b) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office, including those listed on Schedule III.

     “Credit Agreement” has the meaning assigned to such term in the preliminary statement in this Agreement.

     “Federal Securities Laws” has the meaning assigned to such term in Section 5.04.

     “General Intangibles” means all “General Intangibles” of any Grantor as defined in Section 9-102(42) of the New York UCC.

     “Grantors” means Holdings, the Borrower and the Subsidiary Loan Parties.

     “Guarantors” means Holdings and the Subsidiary Loan Parties.

     “Instrument” has the meaning specified in Article 9 of the New York UCC.

     “Intellectual Property” means all intellectual and similar property of any Grantor of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

     “Investment Property” means a security, whether certificated or uncertificated, Security Entitlement, Securities Account, Commodity Contract or Commodity Account.

     “LC Account” means any account established and maintained in accordance with the provisions of Section 2.05(j) of the Credit Agreement and all property from time to time on deposit in such LC Account.

     “License” means any Patent License, Trademark License, Copyright License or other license or sublicense agreement to which any Grantor is a party, including those listed on Schedule III.

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     “Loan Document Obligations” means (a) the due and punctual payment by the Borrower of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) and obligations to provide cash collateral, and (iii) all other monetary obligations of the Borrower to any of the Secured Parties under the Credit Agreement and each other Loan Document, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Borrower under or pursuant to the Credit Agreement and each other Loan Document, and (c) the due and punctual payment and performance in full of all the obligations of each other Loan Party under or pursuant to this Agreement and each other Loan Document.

     “Medicare” shall mean that government-sponsored entitlement program under Title XVIII of the Social Security Act that provides for a health insurance system for eligible elderly and disabled individuals (Social Security Act of 1965, Title XVIII, P.L. 89-87 as amended; 42 U.S.C. § 1395 et seq.).

     “Medicaid” shall mean that means-tested entitlement program under Title XIX of the Social Security Act that provides federal grants to states for medical assistance based on specific eligibility criteria (Social Security Act of 1965, Title XIX, P.L. 89-87, as amended; 42 U.S.C. § 1396 et seq.).

     “New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

     “Obligations” means (a) Loan Document Obligations and (b) the due and punctual payment and performance in full of all obligations of each Loan Party under each Swap Agreement relating to interest rates or Treasury Services Agreement that (i) is in effect on the Effective Date with a counterparty that is a Lender or an Affiliate of a Lender as of the Effective Date or (ii) is entered into after the Effective Date with any counterparty that is a Lender or an Affiliate of a Lender at the time such Swap Agreement relating to interest rates or Treasury Services Agreement is entered into.

     “Patent License” means any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a patent, now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any

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invention on which a patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement.

     “Patents” means all of the following now owned or hereafter acquired by any Grantor: (a) all letters patent of the United States or the equivalent thereof in any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or the equivalent thereof in any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office or any similar offices in any other country, including those listed on Schedule III, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

     “Pledged Collateral” has the meaning assigned to such term in Section 3.01.

     “Pledged Debt Securities” has the meaning assigned to such term in Section 3.01.

     “Pledged Securities” means any promissory notes, stock certificates or other securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

     “Pledged Stock” has the meaning assigned to such term in Section 3.01.

     “Proceeds” has the meaning specified in Section 9-102 of the New York UCC.

     “Secured Parties” means (a) the Lenders, (b) the Collateral Agent, (c) the Administrative Agent, (d) the Issuing Bank, (e) each counterparty to any Swap Agreement or Treasury Services Agreement with a Loan Party the obligations under which constitute Obligations and (f) the successors and assigns of each of the foregoing.

     “Security Interest” has the meaning assigned to such term in Section 4.01.

     “Subsidiary Loan Parties” means (a) the Subsidiaries identified on Schedule I and (b) each other Subsidiary that becomes a party to this Agreement as a Subsidiary Loan Party after the Effective Date.

     “Trademark License” means any written agreement, now or hereafter in effect, granting to any third party any right to use any trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement.

     “Trademarks” means all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, domain names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including

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registrations and registration applications in the United States Patent and Trademark Office or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule III, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill; provided, however, that the foregoing definition shall not include any “intent to use” based application for a Trademark until such time that a statement of use has been filed with the United States Patent and Trademark Office.

     “Treasury Services Agreement” shall mean any agreement relating to treasury, depositary and cash management services or automated clearinghouse transfer of funds.

ARTICLE II

Guarantee

          Section 2.01. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, the due and punctual payment and performance in full of the Obligations. Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, or amended or modified, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension, renewal, amendment or modification of the Obligations. Each Guarantor waives presentment to, demand of payment from and protest to the Borrower or any other Loan Party of the Obligations and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.

          Section 2.02. Guarantee of Payment. Each Guarantor further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any security held for the payment of the Obligations or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or any other Person.

          Section 2.03. No Limitations. (a) Except for termination of a Guarantor’s obligations hereunder as expressly provided in Section 7.13, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by (i) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any right or remedy under the provisions of any Loan Document or otherwise; (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement;

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(iii) the release of, impairment of or failure to perfect any Lien held by the Collateral Agent or any other Secured Party for the payment and performance of the Obligations or any of them; (iv) any default, failure or delay, willful or otherwise, in the performance of the Obligations; or (v) any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of the Obligations). Each Guarantor expressly authorizes the Collateral Agent (i) to take and hold security for the payment and performance of the Obligations, (ii) to exchange, waive or release any or all such security (with or without consideration), (iii) to enforce or apply such security and direct the order and manner of any sale thereof in its sole discretion or (iv) to release or substitute any one or more other guarantors or obligors upon or in respect of the Obligations, all without affecting the obligations of any Guarantor hereunder.

          (b) To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Borrower or any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower or any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other Loan Party or exercise any other right or remedy available to them against the Borrower or any other Loan Party, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully and indefeasibly paid in full in cash. To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Loan Party, as applicable, or any security.

          Section 2.04. Reinstatement. Each of the Guarantors agrees that its guarantee hereunder shall continue to be effective or be reinstated, as applicable, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the Collateral Agent or any other Secured Party upon the bankruptcy or reorganization of the Borrower, any other Loan Party or otherwise.

          Section 2.05. Agreement To Pay; Subrogation. In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent for distribution to the applicable Secured Parties in cash the amount of such unpaid Obligation. Upon payment by any Guarantor of any sums to the Collateral Agent as provided above, all rights of such Guarantor against the Borrower or any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article VI.

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          Section 2.06. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower’s and each other Loan Party’s financial condition and assets and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder and agrees that none of the Collateral Agent or the other Secured Parties will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks.

          Section 2.07. Remedies. The Guarantors jointly and severally agree that, as between the Guarantors and the Secured Parties, the Obligations may be declared to be forthwith due and payable as provided in the Credit Agreement for purposes of Section 2.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by the Guarantors for purposes of Section 2.01.

          Section 2.08. Instrument for the Payment of Money. Each Guarantor hereby acknowledges that the guarantee in this Article II constitutes an instrument for the payment of money, and consents and agrees that any Secured Party, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213.

          Section 2.09. Continuing Guarantee. The guarantee in this Article II is a continuing guarantee of payment, and shall apply to all Obligations whenever arising.

          Section 2.10. General Limitation on Guarantee. In any action or proceeding involving any state corporate limited partnership or limited liability company law, or any applicable state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 2.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 2.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Loan Party or any other person, be automatically limited and reduced to the highest amount (after giving effect to the right of contribution established in Section 6.02) that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.

ARTICLE III

Pledge of Securities

          Section 3.01. Pledge. As security for the payment or performance, as applicable, in full of the Obligations, each Grantor hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in, all of such Grantor’s right, title and interest in, to and under (a) the shares of capital stock and other Equity Interests of

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the Borrower and each wholly owned Restricted Subsidiary owned by it and listed on Schedule II and any other Equity Interests of a wholly owned Restricted Subsidiary obtained in the future by such Grantor and the certificates representing all such Equity Interests (the “Pledged Stock”), provided that the Pledged Stock shall not include more than 65% of the outstanding voting Equity Interests of any Foreign Subsidiary and shall not include Equity Interests of entities that are Specified Subsidiaries by reason of clauses (ii) or (iii) of the definition of Specified Subsidiary; (b)(i) the debt securities listed opposite the name of such Grantor on Schedule II, (ii) any debt securities issued after the Effective Date to such Grantor by any of Holdings, the Borrower or any Subsidiary and (iii) the promissory notes and any other instruments evidencing such debt securities (the “Pledged Debt Securities”); (c) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms of this Section 3.01; (d) subject to Section 3.06, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (a), (b) and (c) above; (e) subject to Section 3.06, all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above; and (f) all Proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the “Pledged Collateral”).

          TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever, subject, however, to the terms, covenants and conditions hereinafter set forth.

          Section 3.02. Delivery of the Pledged Collateral. (a) Each Grantor represents and warrants that all certificates, agreements or instruments representing or evidencing the Pledged Collateral in existence on the date hereof have been delivered to the Collateral Agent in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank. Each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent any and all Pledged Securities. Notwithstanding the foregoing two sentences, it is understood and agreed that no Grantor will have to deliver any Pledged Debt Securities to the Collateral Agent unless the amount of the Indebtedness represented thereby is in excess of $2,000,000 individually or $10,000,000 in the aggregate with all Pledged Debt Securities not so delivered.

          (b) Each Grantor will cause any Indebtedness for borrowed money owed to such Grantor by any Person (other than a Loan Party) which is (A) in excess of $2,000,000 and (B) evidenced by a duly executed promissory note to be pledged and delivered to the Collateral Agent pursuant to the terms hereof. If any Grantor shall at any time hold or acquire any Indebtedness for borrowed money owed to such Grantor by any Person (other than a Loan Party) evidenced by a duly executed promissory note that when taken together with the value of any other Indebtedness for borrowed money owed to such Grantor by any Person (other than a Loan Party) evidenced by a duly executed promissory note not endorsed and delivered to the Collateral Agent exceeds $10,000,000, such Grantor shall forthwith endorse and deliver the same to the Collateral Agent, accompanied by such undated instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably request.

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          (c) Upon delivery to the Collateral Agent, (i) any Pledged Securities shall be accompanied by undated stock powers duly executed in blank or other undated instruments of transfer reasonably satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing such Pledged Securities, which schedule shall be attached hereto as a supplement to Schedule II and made a part hereof, provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.

          Section 3.03. Representations, Warranties and Covenants. The Grantors jointly and severally represent, warrant and covenant to and with the Collateral Agent, for the benefit of the Secured Parties, that:

          (a) Schedule II correctly sets forth the percentage of the issued and outstanding shares (or units or other comparable measure) of each class of the Equity Interests of the issuer thereof represented by the Pledged Stock and includes all Equity Interests, debt securities and promissory notes required to be pledged hereunder in order to satisfy the Collateral and Guarantee Requirement;

          (b) the Pledged Stock and Pledged Debt Securities have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Stock, are fully paid and nonassessable and (ii) in the case of Pledged Debt Securities, are legal, valid and binding obligations of the issuers thereof;

          (c) except for the security interests granted hereunder, each of the Grantors (i) is and, subject to any transfers made in compliance with the Credit Agreement, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II as owned by such Grantor, (ii) holds the same free and clear of all Liens, other than Liens created by any Loan Document and Liens permitted by Section 6.02 of the Credit Agreement, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than Liens created by any Loan Document, Liens permitted by Section 6.02 of the Credit Agreement and transfers made in compliance with the Credit Agreement and (iv) will defend its title or interest thereto or therein against any and all Liens (other than Liens created by any Loan Document and Liens permitted by Section 6.02 of the Credit Agreement), however arising, of all Persons whomsoever; provided that nothing in this Agreement shall prevent any Grantor from discontinuing the operation or maintenance of any of its assets or properties if such discontinuance is (x) in the good faith determination of its Board of Directors, desirable in the conduct of its business and (y) permitted by the Credit Agreement;

          (d) except for restrictions and limitations imposed by (i) the Loan Documents, (ii) securities laws generally or (iii) customary provisions in joint venture agreements relating to purchase options, rights of first refusal, tag, drag, call or similar rights of a third party that owns Equity Interests in such joint venture, the Pledged Collateral is and will continue to be freely

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transferable and assignable, and none of the Pledged Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provision or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder;

          (e) each of the Grantors has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated;

          (f) no consent or approval of any Governmental Authority, any securities exchange or any other Person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect);

          (g) subject to clauses (c) and (d) of this Section 3.03, by virtue of the execution and delivery by the Grantors of this Agreement, when any Pledged Securities are delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will obtain, for the benefit of the Secured Parties, a legal, valid and perfected lien upon and security interest in such Pledged Securities as security for the payment and performance of the Obligations; and

          (h) the pledge effected hereby is effective to vest in the Collateral Agent, for the benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral as set forth in this Agreement.

          Section 3.04. Certification of Limited Liability Company and Limited Partnership Interests. (a) Each Grantor acknowledges and agrees that each interest in any limited liability company or limited partnership controlled by any Grantor and acquired after the Effective Date and constituting Pledged Collateral that is represented by a certificate, shall be a “security” within the meaning of Article 8 of the New York UCC and shall be governed by Article 8 of the New York UCC.

          (b) Each Grantor further acknowledges and agrees that (i) the interests in any limited liability company or limited partnership controlled by such Grantor and constituting Pledged Collateral that are not represented by a certificate are not “securities” within the meaning of Article 8 of the New York UCC and (ii) such Grantor shall at no time elect to treat any such interest as a “security” within the meaning of Article 8 of the New York UCC or issue any certificate representing such interest, unless such Grantor provides prompt written notification to the Collateral Agent of such election and promptly (but in no case later than 10 Business Days) pledges any such certificate to the Collateral Agent pursuant to the terms hereof; provided, however, that this Section 3.04 shall not apply to any Equity Interests in limited liability companies or limited partnerships which may not be pledged, assigned or otherwise encumbered pursuant to applicable Federal, state or local laws, rules or regulations related to the practice of medicine or the healthcare industry generally.

          Section 3.05. Registration in Nominee Name; Denominations. The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in the name of the applicable Grantor, endorsed or assigned in

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blank or in favor of the Collateral Agent or, upon the occurrence and during the continuation of an Event of Default, in its own name as pledge or the name of its nominee (as pledge or as sub-agent). Each Grantor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Grantor. The Collateral Agent shall at all times upon the occurrence and during the continuation of an Event of Default have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement.

          Section 3.06. Voting Rights; Dividends and Interest. (a) Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have notified the Grantors that their rights under this Section 3.06 are being suspended:

     (i) Each Grantor shall be entitled to exercise any and all voting and other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms in this Agreement, the Credit Agreement and the other Loan Documents, provided that such rights and powers shall not be exercised in any manner that would reasonably be expected to materially and adversely affect the rights inuring to a holder of any Pledged Securities or the rights and remedies of any of the Collateral Agent or the other Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.

     (ii) The Collateral Agent shall execute and deliver to each Grantor, or cause to be executed and delivered to such Grantor, all such proxies, powers of attorney and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and other consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above.

     (iii) Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws, provided that any noncash dividends, interest, principal or other distributions that would constitute Pledged Stock or Pledged Debt Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, shall not be commingled by such Grantor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and the other Secured Parties and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement as described in Section 3.02(c) or otherwise).

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          (b) Upon the occurrence and during the continuation of an Event of Default, after the Collateral Agent shall have notified (or shall be deemed to have notified) the Grantors of the suspension of their rights under Section 3.06(a)(iii), all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to Section 3.06(a)(iii) shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 3.06 shall be held in trust for the benefit of the Collateral Agent and the other Secured Parties, shall be segregated from other property or funds of such Grantor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this Section 3.06(b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02. After all Events of Default have been cured or waived and the Borrower has delivered to the Collateral Agent a certificate to that effect, the Collateral Agent shall promptly repay to each Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of Section 3.06(a)(iii) and that remain in such account.

          (c) Upon the occurrence and during the continuation of an Event of Default, after the Collateral Agent shall have notified (or shall be deemed to have notified) the Grantors of the suspension of their rights under Section 3.06(a)(i), all rights of any Grantor to exercise the voting and other consensual rights and powers it is entitled to exercise pursuant to Section 3.06(a)(i), and the obligations of the Collateral Agent under Section 3.06(a)(ii), shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and other consensual rights and powers, provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuation of an Event of Default to permit the Grantors to exercise such rights. After all Events of Default have been cured or waived, the Grantors shall have the right to exercise the voting and consensual rights and powers that they would otherwise be entitled to exercise pursuant to the terms of Section 3.06(a)(i).

          (d) Any notice given by the Collateral Agent to the Grantors suspending their rights under Section 3.06(a) (i) may be given by telephone if promptly confirmed in writing, (ii) may be given to one or more of the Grantors at the same or different times and (iii) may suspend the rights of the Grantors under Sections 3.06(a)(i) or (a)(iii) in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agent’s rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.

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ARTICLE IV

Security Interests in Personal Property

          Section 4.01. Security Interest. (a) As security for the payment or performance, as applicable, in full of the Obligations, each Grantor hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest (the “Security Interest”) in all right, title or interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the “Article 9 Collateral”):

     (i) all Accounts;

     (ii) all Chattel Paper;

     (iii) all Documents;

     (iv) all Equipment;

     (v) all General Intangibles;

     (vi) Intellectual Property;

     (vii) all Instruments;

     (viii) all Inventory;

     (ix) all Investment Property;

     (x) all Letter-of-credit rights;

     (xi) the commercial tort claims specified on Schedule IV;

     (xii) all books and records pertaining to the Article 9 Collateral; and

     (xiii) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security, supporting obligations and guarantees given by any Person with respect to any of the foregoing.

Notwithstanding the foregoing, the Article 9 Collateral shall not include (i) any Equipment that is subject to a purchase money Lien or Lien securing Capital Lease Obligations, in each case, permitted under the Credit Agreement to the extent the documents relating to such purchase money Lien or Capital Lease Obligations would not permit such Equipment to be subject to the Security Interests created hereby, (ii) any property to the extent that the grant of the Security Interest in such property is prohibited by any Requirements of Law of any Governmental Authority, (iii) any contract, license or agreement to the extent that the grant of the Security Interest in such contract, license or agreement constitutes a breach or default under or results in

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termination of such contract, license, agreement, (iv) any Investment Property or Pledged Securities to the extent that the grant of the Security Interest in such Investment Property or Pledged Securities constitutes a breach or default under any applicable shareholder or similar agreement, except, in each case (i) through (iv), to the extent that such Requirement of Law or the provision of such contract, license, agreement instrument or other document or shareholder or similar agreement giving rise to such prohibition, breach, default or termination is ineffective under applicable law, (v) Equity Interests of Unrestricted Subsidiaries, Restricted Subsidiaries that are not wholly owned, entities that are Specified Subsidiaries by reason of clauses (ii) or (iii) of the definition of Specified Subsidiary or entities that are not Subsidiaries (other than Equity Interests held in any Securities Account), and (vi) more than 65% of the outstanding voting Equity Interests of any Foreign Subsidiary; it being understood that this paragraph shall not be seen as excluding from the Article 9 Collateral Proceeds, substitutions or replacements of property described in clauses (i) through (vi) above unless such Proceeds, substitutions or replacements would constitute property described in such clauses (i) through (vi).

          (b) Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements (including fixture filings) with respect to the Article 9 Collateral or any part thereof and amendments thereto that (i) indicate the Collateral as “all assets” of such Grantor or such other description as the Collateral Agent may determine and (ii) contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (A) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor and (B) in the case of a financing statement filed as a fixture filing or covering Article 9 Collateral constituting minerals or the like to be extracted or timber to be cut, a sufficient description of the real property to which such Article 9 Collateral relates. Each Grantor agrees to provide such information to the Collateral Agent promptly upon request.

          Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any initial financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations or amendments thereto if filed prior to the date hereof.

          The Collateral Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) such documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party.

          (c) The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Article 9 Collateral.

          Section 4.02. Representations and Warranties. The Grantors jointly and severally represent and warrant to the Collateral Agent and the other Secured Parties that:

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          (a) Each Grantor has good and valid rights in and title to the Article 9 Collateral and has full power and authority to grant to the Collateral Agent, for the ratable benefit of the Secured Parties, the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms in this Agreement, without the consent or approval of any other Person other than any consent or approval that has been obtained.

          (b) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein, including (x) the exact legal name of each Grantor and (y) the jurisdiction of organization of each Grantor, is correct and complete in all material respects as of the Effective Date (except that the information referred to in the preceding clauses (x) and (y) shall not be subject to such materiality qualifier). The Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations prepared by the Collateral Agent based upon the information provided to the Collateral Agent in the Perfection Certificate for filing at the secretary of state or other central filing office in each Grantor’s jurisdiction of organization, are all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in Article 9 Collateral consisting of United States Patents, United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements. Each Grantor represents and warrants that a fully executed agreement in the form hereof or short form hereof and containing a description of all Article 9 Collateral consisting of Intellectual Property with respect to United States Patents and United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights have been delivered to the Collateral Agent for recording by the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and the regulations thereunder, as applicable, and otherwise as may be required pursuant to the laws of any other necessary jurisdiction, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, in respect of all Article 9 Collateral consisting of United States Patents, United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights in which a security interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Article 9 Collateral consisting of United States Patents, United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights acquired or developed after the date hereof).

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          (c) The Security Interest constitutes (i) a legal and valid security interest in all the Article 9 Collateral securing the payment and performance of the Obligations, (ii) subject to the filings described in Section 4.02(b), a perfected security interest in all Article 9 Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (iii) a security interest that shall be perfected in all Article 9 Collateral in which a security interest may be perfected upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, within the three-month period (commencing as of the date hereof) pursuant to 35 U.S.C. § 261 or 15 U.S.C. § 1060 or the one-month period (commencing as of the date hereof) pursuant to 17 U.S.C. § 205 and otherwise as may be required pursuant to the laws of any other necessary jurisdiction. The Security Interest is and shall be prior to any other Lien on any of the Article 9 Collateral, other than Permitted Encumbrances and Liens that are permitted by the Credit Agreement and that have priority as a matter of applicable law.

          (d) The Article 9 Collateral is owned by the Grantors free and clear of any Lien, except for Liens permitted pursuant to Section 6.02 of the Credit Agreement. None of the Grantors has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the United States Patent and Trademark Office or the United States Copyright Office or (iii) any assignment in which any Grantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens permitted pursuant to Section 6.02 of the Credit Agreement.

          Section 4.03. Covenants. (a) Each Grantor agrees promptly (but in no case more than 60 days) to notify the Collateral Agent in writing of any change (i) in its legal name, (ii) in the location of its chief executive office or its principal place of business, (iii) in its identity or type of organization or corporate structure, (iv) in its Federal Taxpayer Identification Number or organizational identification number or (v) in its jurisdiction of organization. Each Grantor agrees to promptly provide the Collateral Agent with certified organizational documents reflecting any of the changes described in the first sentence of this Section 4.03(a). Each Grantor agrees not to effect or permit any change referred to in the second preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest (subject to Liens permitted under Section 6.02 of the Credit Agreement that had priority as of the initial grant of such security interest) in the Article 9 Collateral. Each Grantor agrees promptly to notify the Collateral Agent if any portion of the Article 9 Collateral material to a Grantor’s business owned or held by such Grantor is damaged or destroyed.

          (b) Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Article 9 Collateral owned by it as is consistent

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with its current practices and in accordance with such standard practices used in industries that are the same as or similar to those in which such Grantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any part of the Article 9 Collateral, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing the identity, amount and location of any and all Article 9 Collateral.

          (c) Each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to Section 5.01(a) of the Credit Agreement, the Borrower shall deliver to the Collateral Agent a certificate executed by a Financial Officer of the Borrower setting forth the information required pursuant to the Perfection Certificate or confirming that there has been no material change in such information since the date of the Perfection Certificate delivered on the Effective Date or the date of the most recent certificate delivered pursuant to this Section 4.03(c). Each certificate delivered pursuant to this Section 4.03(c) shall identify in the format of Schedule III all Intellectual Property of any Grantor in existence on the date thereof and not then listed on the schedules to the Perfection Certificate previously so identified to the Collateral Agent.

          (d) Each Grantor shall, at its own expense, take any and all actions necessary to defend title to the Article 9 Collateral (other than Article 9 Collateral that is deemed by the Board of Directors of such Grantor to be immaterial to the conduct of its business) against all Persons and to defend the Security Interest of the Collateral Agent in the Article 9 Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.02 of the Credit Agreement. Nothing in this Agreement shall prevent any Grantor from discontinuing the operation or maintenance of any of its assets or properties if such discontinuance is (x) in the judgment of its Board of Directors, desirable in the conduct of its business and (y) permitted by the Credit Agreement.

          (e) Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable to any Grantor under or in connection with any of the Article 9 Collateral shall be or become evidenced by any promissory note or other instrument in excess of $2,000,000 or by any promissory note or other instrument in an amount that when taken together with any promissory note or other instruments not previously pledged and endorsed to the Collateral Agent exceeds $5,000,000, such note or instrument shall be promptly pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent.

          (f) The Collateral Agent and such Persons as the Collateral Agent may reasonably designate shall have the right, at the Grantors’ own cost and expense, to inspect the Article 9 Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Article 9 Collateral is located, to discuss the

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Grantors’ affairs with the officers of the Grantors and their independent accountants and to verify under reasonable procedures, in accordance with Section 5.09 of the Credit Agreement, the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Article 9 Collateral, including, (upon the occurrence and during the continuation of a Default or with the consent of the applicable Grantor (not to be unreasonably withheld)) in the case of Accounts or other Article 9 Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Article 9 Collateral for the purpose of making such a verification. Subject to Section 9.12 of the Credit Agreement, the Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party.

          (g) At its option, the Collateral Agent may discharge past due Taxes, assessments, charges, fees or Liens at any time levied or placed on the Article 9 Collateral and not permitted pursuant to Section 6.02 of the Credit Agreement, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization, provided that nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to Taxes, assessments, charges, fees, Liens and maintenance as set forth in this Agreement or in the other Loan Documents.

          (h) If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other Person with a value in excess of $2,000,000 or with a value that when taken together with the value of any property of an Account Debtor or any other Person not previously assigned to the Collateral Agent exceeds $5,000,000, to secure payment and performance of an Account, such Grantor shall promptly assign such security interest to the Collateral Agent. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other Person granting the security interest.

          (i) Each Grantor shall remain liable to observe and perform all the conditions and material obligations to be observed and performed by it under each contract, agreement or instrument relating to the Article 9 Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the other Secured Parties from and against any and all liability for such performance.

          (j) None of the Grantors shall make or permit to be made an assignment, pledge or hypothecation of the Article 9 Collateral or shall grant any other Lien in respect of the Article 9 Collateral, except as permitted by the Credit Agreement. Subject to the immediately following sentence, none of the Grantors shall make or permit to be made any transfer of the Article 9 Collateral and each Grantor shall remain at all times in possession of the Article 9 Collateral owned by it, except as permitted by Sections 6.02 and 6.05 of the Credit Agreement. Without limiting the generality of the foregoing, each Grantor agrees that it shall not permit any Inventory to be in the possession or control of any warehouseman, agent, bailee, or processor at

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any time unless such Person shall have been notified of the Security Interest and shall have acknowledged in writing, in form and substance reasonably satisfactory to the Collateral Agent, that such warehouseman, agent, bailee or processor holds the Inventory for the benefit of the Collateral Agent subject to the Security Interest and shall act upon the instructions of the Collateral Agent without further consent from the Grantor, and that such warehouseman, agent, bailee or processor further agrees to waive and release any Lien held by it with respect to such Inventory, whether arising by operation of law or otherwise; provided that such notice and acknowledgement shall not be required if the aggregate fair value of Inventory in the possession of or subject to the control of such warehouseman, agent, bailee or processor who has not been so notified and provided such acknowledgement is less than $2,000,000 and the aggregate fair value of Inventory in the possession of or subject to the control of all warehousemen, agents, bailees and processors who have not been so notified and provided such acknowledgement is less than $5,000,000.

          (k) None of the Grantors will, without the Collateral Agent’s prior written consent, grant any extension of the time of payment of any Accounts included in the Article 9 Collateral, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any Person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than compromises, compoundings, settlements and collections made in the ordinary course of business or in accordance with the reasonable business judgment of such Grantor.

          (l) The Grantors, at their own expense, shall maintain or cause to be maintained insurance covering physical loss or damage to the Inventory and Equipment in accordance with the requirements set forth in Section 5.07 of the Credit Agreement. Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor’s true and lawful agent (and attorney-in-fact) for the purpose, upon the occurrence and during the continuation of an Event of Default, of making, settling and adjusting claims in respect of Article 9 Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required under the Credit Agreement or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Grantors hereunder or any Event of Default, in its sole reasonable discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in connection with this paragraph, including reasonable attorneys’ fees, court costs, out-of-pocket expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent and shall be additional Obligations secured hereby.

          (m) Each Grantor shall maintain, in form and manner reasonably satisfactory to the Collateral Agent, records of its Chattel Paper and its books, records and documents evidencing or pertaining thereto.

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          Section 4.04. Other Actions. In order to insure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Security Interest, each Grantor agrees, in each case at such Grantor’s own expense, to take the following actions with respect to the following Article 9 Collateral:

          (a) Instruments and Tangible Chattel Paper. Each Grantor represents and warrants that each Instrument and each item of Tangible Chattel Paper with a value in excess of $2,000,000 in existence on the date hereof has been properly endorsed, assigned and delivered to the Collateral Agent, accompanied by instruments of transfer or assignment duly executed in blank or otherwise acceptable to the Collateral Agent. If any Grantor shall at any time hold or acquire any Instruments or Chattel Paper with a value in excess of $2,000,000 or any Instrument or Chattel Paper with a value that when taken together with the value of any Instrument or Chattel Paper not previously endorsed, assigned and delivered to the Collateral Agent exceeds $10,000,000, such Grantor shall forthwith endorse, assign and deliver the same to the Collateral Agent, accompanied by such undated instruments of transfer or assignment duly executed in blank or otherwise acceptable to the Collateral Agent as the Collateral Agent may from time to time reasonably request.

          (b) Electronic Chattel Paper and Transferable Records. If any Grantor at any time holds or acquires an interest in any electronic chattel paper or any “transferable record,” as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Grantor shall promptly notify the Collateral Agent thereof and, at the request of the Collateral Agent, shall take such action as the Collateral Agent may reasonably request to vest in the Collateral Agent control under New York UCC Section 9-105 of such electronic chattel paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as applicable, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction, of such transferable record. The Collateral Agent agrees with such Grantor that the Collateral Agent will arrange, pursuant to procedures reasonably satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agent’s loss of control, for the Grantor to make alterations to the electronic chattel paper or transferable record permitted under UCC Section 9-105 or, as applicable, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such electronic chattel paper or transferable record.

          Section 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral.

          (a) Each Grantor agrees that it will not do any act or omit to do any act (and will exercise commercially reasonable efforts to prevent its licensees from doing any act or omitting to do any act) whereby any Patent that is material to the conduct of such Grantor’s business would become invalidated or dedicated to the public, and agrees that it shall continue to mark any products covered by a Patent with the relevant patent number as necessary and sufficient in its reasonable judgment to establish and preserve its material rights under applicable patent laws.

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          (b) Each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor’s business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) use commercially reasonable efforts to maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration (or, if such Trademark is unregistered, display such Trademark with notice as required for unregistered Trademarks) to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in any violation of any third party rights.

          (c) Each Grantor (either itself or through its licensees or sublicensees) will, for each work covered by a Copyright material to the conduct of such Grantor’s business, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient in its reasonable judgment to establish and preserve its material rights under applicable copyright laws.

          (d) Each Grantor shall notify the Collateral Agent promptly if it knows that any Patent, Trademark or Copyright material to the conduct of its business could reasonably be expected to become abandoned, lost or dedicated to the public, or of any materially adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office or any court or similar office of any country) regarding such Grantor’s ownership of any Patent, Trademark or Copyright, its right to register the same, or its right to keep and maintain the same.

          (e) In no event shall any Grantor, either itself or through any agent, employee, licensee or designee, file an application with respect to any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, unless it promptly informs the Collateral Agent and, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may reasonably request to evidence the Collateral Agent’s security interest in such Patent, Trademark or Copyright, and each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings as are reasonably necessary for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable.

          (f) Each Grantor will take all reasonably necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, to maintain and pursue each registration or application that is material to the conduct of such Grantor’s business relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor’s business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if

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consistent with good business judgment, to initiate opposition, interference and cancellation proceedings against third parties.

          (g) In the event that any Grantor knows that any Article 9 Collateral consisting of a Patent, Trademark or Copyright material to the conduct of any Grantor’s business has been or is about to be infringed, misappropriated or diluted by a third party, such Grantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution (and take any actions required by applicable law prior to instituting such suit), and take such other actions as are appropriate under the circumstances to protect such Article 9 Collateral. Nothing in this Agreement shall prevent any Grantor from discontinuing the use or maintenance of any Article 9 Collateral consisting of a Patent, Trademark or Copyright, or require any Grantor to pursue any claim of infringement, misappropriation or dilution, if (x) such Grantor so determines in its good business judgment and (y) it is not prohibited by the Credit Agreement.

          (h) Upon and during the continuation of an Event of Default, each Grantor shall, at the request of the Collateral Agent, use its commercially reasonable efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License to effect the assignment of all such Grantor’s right, title and interest thereunder to the Collateral Agent or its designee.

ARTICLE V

Remedies

          Section 5.01. Remedies upon Default. Upon the occurrence and during the continuation of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable Grantors to the Collateral Agent, for the ratable benefit of the Secured Parties, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any such Article 9 Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice or demand for performance, to take possession of the Article 9 Collateral and without liability for trespass to enter any premises where the Article 9 Collateral may be located for the purpose of taking possession of or removing the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem

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appropriate. Each such purchaser at any sale of Collateral shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal that such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

          The Collateral Agent shall give the applicable Grantors 10 days’ written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may determine in its sole and absolute discretion. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent and the other Secured Parties shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement, all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions.

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          Section 5.02. Application of Proceeds. The proceeds received by the Collateral Agent in respect of any sale of, collection from or other realization upon all or any part of the Collateral pursuant to the exercise by the Collateral Agent of its remedies shall be applied, in full or in part, together with any other sums then held by the Collateral Agent pursuant to the Loan Documents, promptly by the Collateral Agent as follows:

     (a) First, to the payment of all reasonable costs and expenses, fees, commissions and taxes of such sale, collection or other realization including compensation to the Collateral Agent, the Administrative Agent, their respective agents and counsel, and all expenses, liabilities and advances made or incurred by the Collateral Agent and Administrative Agent in connection therewith and all amounts for which the Collateral Agent and Administrative Agent are entitled to indemnification pursuant to the provisions of any Loan Document, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full;

     (b) Second, to the payment of all other reasonable costs and expenses of such sale, collection or other realization including compensation to the other Secured Parties and their agents and counsel and all costs, liabilities and advances made or incurred by the other Secured Parties in connection therewith, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full;

     (c) Third, without duplication of amounts applied pursuant to clauses (a) and (b) above, to the indefeasible payment in full in cash, pro rata, of interest and other amounts constituting Obligations (other than principal, reimbursement obligations pursuant to Section 2.05(e) of the Credit Agreement and obligations to cash collateralize Letters of Credit) and any fees, premiums and scheduled periodic payments due under Swap Agreements or Treasury Services Agreements constituting Obligations and any interest accrued thereon, in each case equally and ratably in accordance with the respective amounts thereof then due and owing;

     (d) Fourth, to the indefeasible payment in full in cash, pro rata, of principal amount of the Obligations and any premium thereon (including reimbursement obligations pursuant to Section 2.05(e) of the Credit Agreement and obligations to cash collateralize Letters of Credit) and any breakage, termination or other payments under Swap Agreements and Treasury Services Agreements constituting Obligations and any interest accrued thereon; and

     (e) Fifth, the balance, if any, to the person lawfully entitled thereto (including the applicable Loan Party or its successors or assigns) or as a court of competent jurisdiction may direct.

     In the event that any such proceeds are insufficient to pay in full the items described in clauses (a) through (e) of this Section 5.02, the Loan Parties shall remain liable, jointly and severally, for any deficiency.

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The Collateral Agent shall have sole and absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.

          Section 5.03. Grant of License To Use Intellectual Property. For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Grantors) to use, license or sublicense any of the Article 9 Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Collateral Agent shall be exercised, at the option of the Collateral Agent, only upon the occurrence and during the continuation of an Event of Default, provided that any license, sublicense or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon the Grantors notwithstanding any subsequent cure of an Event of Default.

          Section 5.04. Securities Act. In view of the position of the Grantors in relation to the Pledged Collateral, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the “Federal Securities Laws”) with respect to any disposition of the Pledged Collateral permitted hereunder. Each Grantor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Collateral under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Grantor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Collateral, limit the purchasers to those who will agree, among other things, to acquire such Pledged Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Grantor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the

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Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Collateral Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 5.04 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells.

          Section 5.05. Medicare/Medicaid. The parties hereto understand and agree that the exercise of remedies hereunder with respect to receivables from Medicare or Medicaid may be subject to applicable federal laws.

ARTICLE VI

Indemnity, Subrogation and Subordination

          Section 6.01. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 6.03), the Borrower agrees that (a) in the event a payment of any Obligation shall be made by any Guarantor under this Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the Person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Grantor shall be sold pursuant to this Agreement or any other Security Document to satisfy in whole or in part any Obligation owed to any Secured Party, the Borrower shall indemnify such Grantor in an amount equal to the fair value of the assets so sold.

          Section 6.02. Contribution and Subrogation. Each Guarantor and Grantor (a “Contributing Party”) agrees (subject to Section 6.03) that, in the event a payment shall be made by any other Guarantor hereunder in respect of any Obligation or assets of any other Grantor shall be sold pursuant to any Security Document to satisfy any Obligation owed to any Secured Party and such other Guarantor or Grantor (the “Claiming Party”) shall not have been fully indemnified by the Borrower as provided in Section 6.01, the Contributing Party shall indemnify the Claiming Party in an amount equal to the amount of such payment or the greater of the book value or the fair value of such assets, as applicable, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Party on the date hereof (or, in the case any Guarantor or Grantor becomes a party hereto pursuant to Section 7.14, the date of the last supplement hereto executed and delivered by a Guarantor or Grantor) and the denominator shall be the aggregate net worth of all the Guarantors and Grantors on the date hereof (or, in the case any Guarantor or Grantor becomes a party hereto pursuant to Section 7.14, the date of the last supplement hereto executed and delivered by a Guarantor or Grantor). Any Contributing Party making any payment to a Claiming Party pursuant to this Section 6.02 shall be subrogated to the rights of such Claiming Party under Section 6.01 to the extent of such payment.

          Section 6.03. Subordination. Notwithstanding any provision in this Agreement to the contrary, all rights of the Guarantors and Grantors under Sections 6.01 and 6.02 and all

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other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Guarantor or Grantor to make the payments required by Sections 6.01 and 6.02 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor or Grantor with respect to its Obligations hereunder, and each Guarantor and Grantor shall remain liable for the full amount of the Obligations of such Guarantor or Grantor hereunder.

ARTICLE VII

Miscellaneous

          Section 7.01. Notices. All communications and notices hereunder shall (except as otherwise expressly permitted in this Agreement) be in writing and given as provided in Section 9.01 of the Credit Agreement, provided that any communication or notice hereunder from the Collateral Agent to any Loan Party upon the occurrence and during the continuation of an Event of Default may be given by telephone if promptly confirmed in writing. All communications and notices hereunder to any Subsidiary Loan Party shall be given to it in care of the Borrower as provided for notices to the Borrower in Section 9.01 of the Credit Agreement.

          Section 7.02. Waivers; Amendment. (a) No failure or delay by any Secured Party in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Secured Parties hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision in this Agreement or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted Section 7.02(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any Secured Party may have had notice or knowledge of such Default at the time. No notice or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances.

          (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.02 of the Credit Agreement.

          Section 7.03. Collateral Agent’s Fees and Expenses; Indemnification. (a) The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its reasonable out-of-pocket expenses incurred hereunder as provided in Section 9.03 of the Credit Agreement.

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          (b) Without limitation of its indemnification obligations under the other Loan Documents, each Grantor and each Guarantor jointly and severally agrees to indemnify the Collateral Agent and the other Indemnitees (as defined in Section 9.03 of the Credit Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related out-of-pocket expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of, the execution, delivery or performance of this Agreement or any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing agreements or instruments contemplated hereby, or to the Collateral, whether or not any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related out-of-pocket expenses are finally judicially determined by a non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, bad faith or wilful misconduct of, or breach of the Loan Documents by, such Indemnitee.

          (c) Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.03 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 7.03 shall be payable on written demand therefor.

          Section 7.04. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Guarantor, Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns and shall inure to the benefit of the other Secured Parties and their respective successors and assigns.

          Section 7.05. Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any Lender or on its behalf and notwithstanding that the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended under the Credit Agreement, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under any Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated.

          Section 7.06. Counterparts; Effectiveness; Several Agreement. This Agreement may be executed in counterparts, each of which shall constitute an original but all of which,

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when taken together, shall constitute single contract. Delivery of an executed signature page to this Agreement by facsimile or electronic transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. This Agreement shall become effective as to any Loan Party when a counterpart hereof executed on behalf of such Loan Party shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Loan Party and the Collateral Agent and their respective permitted successors and assigns, and shall inure to the benefit of such Loan Party, the Administrative Agent, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Loan Party shall have the right to assign or transfer its rights or obligations hereunder or any interest in this Agreement or in the Collateral (and any such assignment or transfer shall be void) except as contemplated by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Loan Party and may be amended, modified, supplemented, waived or released with respect to any Loan Party without the approval of any other Loan Party and without affecting the obligations of any other Loan Party hereunder.

          Section 7.07. Severability. Any provision in this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

          Section 7.08. Right of Set-Off. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Loan Party against any of and all the obligations of such Loan Party now or hereafter existing under this Agreement owed to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The applicable Lender shall notify the Borrower, the Collateral Agent and the Administrative Agent of such set-off or application, provided that any failure to give or any delay in giving such notice shall not affect the validity of any such set-off or application under this Section 7.08. The rights of each Lender under this Section 7.08 are in addition to other rights and remedies (including other rights of set-off) which such Lender may have.

          Section 7.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York.

          (b) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any

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action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Collateral Agent, the Issuing Bank, any Lender or any Loan Party may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document in the courts of any jurisdiction.

          (c) Each of the Loan Parties hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in Section 7.09(b). Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

          (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 7.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

          Section 7.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.

          Section 7.11. Headings. Article and Section headings and the Table of Contents used in this Agreement are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

          Section 7.12. Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest, the grant of a security interest in the Pledged Collateral and all obligations of each Grantor and Guarantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan

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Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor or Guarantor in respect of the Obligations or this Agreement.

          Section 7.13. Termination or Release. (a) This Agreement and the Guarantees made in this Agreement shall terminate and the Security Interest and all other security interests granted hereby shall be automatically released when all the Loan Document Obligations (other than wholly contingent indemnification obligations not then due) have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the LC Exposure has been reduced to zero and the Issuing Bank has no further obligations to issue Letters of Credit under the Credit Agreement.

          (b) A Person which was a Loan Party immediately prior to the consummation of any transaction permitted by the Credit Agreement shall automatically be released from its obligations hereunder and the Security Interest in the Collateral of such Person shall be automatically released upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Person ceases to be a Loan Party.

          (c) Upon any sale or other transfer by any Grantor of any Collateral that is permitted under the Credit Agreement, or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.02 of the Credit Agreement, the security interest in such Collateral shall be automatically released.

          (d) In connection with any termination or release pursuant to Sections 7.13(a), (b) or (c), the Collateral Agent shall execute and deliver to any Person, at such Person’s expense, all documents that such Person shall reasonably request to evidence such termination or release of its obligations or the Security Interests in its Collateral. Any execution and delivery of documents pursuant to this Section 7.13 shall be without recourse to or warranty by the Collateral Agent. Without limiting the provisions of Section 7.03, the Borrower shall reimburse the Collateral Agent upon demand for all reasonable costs and out of pocket expenses, including the reasonable fees, charges and disbursements of counsel, incurred by it in connection with any action contemplated by this Section 7.13.

          Section 7.14. Additional Subsidiaries. Pursuant to Section 5.12 of the Credit Agreement, certain Subsidiaries of a Loan Party that were not in existence or not a Subsidiary on the date of the Credit Agreement are required to enter in this Agreement as a Subsidiary Loan Party upon becoming such a Subsidiary. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Exhibit I hereto, such Subsidiary shall become a Subsidiary Loan Party hereunder with the same force and effect as if originally named as a Subsidiary Loan Party in this Agreement. The execution and delivery of any such instrument shall not require the consent of any other Loan Party hereunder. The rights and obligations of

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each Loan Party hereunder shall remain in full force and effect notwithstanding the addition of any new Loan Party as a party to this Agreement.

          Section 7.15. Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby appoints the Collateral Agent the attorney-in-fact of such Grantor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuation of an Event of Default, with full power of substitution either in the Collateral Agent’s name or in the name of such Grantor (except to the extent such action would be prohibited by applicable law with respect to Medicare and Medicaid receivables) (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes, provided that nothing in this Agreement contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them in this Agreement, and neither they nor their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

          Section 7.16. Further Assurances. Notwithstanding anything to the contrary herein, the parties hereto agree to comply with the requirements set forth in Section 5.13 of the Credit Agreement.

[Signature Pages to Follow]

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

USPI HOLDINGS INC.,
By:	/s/ William H. Wilcox
	Name:	William H. Wilcox
	Title:	President
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.,
By:	/s/ William H. Wilcox
	Name:	William H. Wilcox
	Title:	President
EACH OF THE SUBSIDIARIES LISTED ON SCHEDULE I HERETO,
By:	/s/ William H. Wilcox
	Name:	William H. Wilcox
	Title:	President

USP ASSURANCE COMPANY,

By:  /s/ John J. Wellik

Title: President

PHYSICIANS DATA PROFESSIONALS, INC.,

By:  /s/ John J. Wellik

Title: Secretary

USP SECURITIES CORPORATION

By:  /s/ Kim Tillett

Title: President

PASADENA HOLDINGS, LLC
USP NEVADA HOLDINGS, LLC,

By:  USP North Texas, Inc., its manager

By:  /s/ William H. Wilcox

Title: President

SAME DAY MANAGEMENT, L.L.C.,

By:  Same Day Surgery LLC, its sole member

By:  /s/ William H. Wilcox

Title: President

WHASA, L.C.,

By:  Surginet, Inc., its sole member

By:  /s/ William H. Wilcox

Title: President

USP TEXAS, L.P.,

By:  USP North Texas, Inc., its general partner

By:  /s/  William H. Wilcox

Title: President

USP TEXAS AIR, LLC

By:  USP North Texas, Inc., its sole member

By:  /s/  William H. Wilcox

Title: President

SURGERY CENTERS OF AMERICA II, L.L.C.,

By:  /s/  William H. Wilcox

Title: Manager

ISS-ORLANDO, LLC

By:  /s/  William H. Wilcox

Title: Manager

SURGERY CENTERS HOLDINGS COMPANY, L.L.C.,

By:  Surgery Centers of America II, L.L.C., its sole member

By:  /s/  John J. Wellik

Title: Manager

CITIBANK, N.A., AS COLLATERAL AGENT,

By:  /s/  Michael M. Schadt

Title: Vice President

SCHEDULES

Schedule I	— Subsidiary Loan Parties
Schedule II	— Pledged Stock; Debt Securities
Schedule III	— Intellectual Property
Schedule IV	— Commercial Tort Claims

SCHEDULE I

Subsidiary Loan Parties

Georgia Musculoskeletal Network, Inc.

Health Horizons of Kansas City, Inc.

Health Horizons of Murfreesboro, Inc.

Health Horizons of Nashville, Inc.

Medcenter Management Services, Inc.

Ortho Excel, Inc.

OrthoLink ASC Corporation

OrthoLink Physicians Corporation

OrthoLink Radiology Services Corporation

OrthoLink/Georgia ASC, Inc.

OrthoLink/New Mexico ASC, Inc.

OrthoLink/TN ASC, Inc.

Physicians Data Professionals, Inc.

Specialty Surgicenters, Inc.

SSI Holdings, Inc.

Surginet of Northwest Houston, Inc.

Surginet of Rivergate, Inc.

Surginet, Inc.

Surgis Management Services, Inc.

Surgis of Chico, Inc.

Surgis of Pearland, Inc.

Surgis of Phoenix, Inc.

Surgis of Redding, Inc.

Surgis of Sand Lake, Inc.

Surgis of Sonoma, Inc.

Surgis of Victoria, Inc.

Surgis of Willowbrook, Inc.

Surgis, Inc.

United Surgical of Atlanta, Inc.

United Surgical Partners Holdings, Inc.

USP Alexandria, Inc.

USP Assurance Company

USP Austin, Inc.

USP Austintown, Inc.

USP Baltimore, Inc.

USP Baton Rouge, Inc.

USP Bridgeton, Inc.

USP Cedar Park, Inc

USP Central New Jersey, Inc.

USP Chesterfield, Inc.

USP Chicago, Inc.

USP Cleveland, Inc.

USP Coast, Inc.

USP Columbia, Inc.

USP Corpus Christi, Inc.

USP Cottonwood, Inc.

USP Creve Coeur, Inc.

USP Decatur, Inc.

USP Des Peres, Inc.

USP Destin, Inc.

USP Domestic Holdings, Inc.

USP Florissant, Inc.

USP Fredericksburg, Inc.

USP Glendale, Inc.

USP Harbour View, Inc.

USP Houston, Inc.

USP Indiana, Inc.

USP International Holdings, Inc.

USP Kansas City, Inc.

USP Las Cruces, Inc.

USP Long Island, Inc.

USP Lyndhurst, Inc.

USP Mason Ridge, Inc.

USP Michigan, Inc.

USP Midwest, Inc.

USP Mission Hills, Inc.

USP Nevada, Inc.

USP New Jersey, Inc.

USP Newport News, Inc.

USP North Kansas City, Inc.

USP North Texas, Inc.

USP Oklahoma, Inc.

USP Olive, Inc.

USP Oxnard, Inc.

USP Phoenix, Inc.

USP Reading, Inc.

USP Richmond II, Inc.

USP Richmond, Inc.

USP Sacramento, Inc.

USP San Antonio, Inc.

USP San Gabriel, Inc.

USP Sarasota, Inc.

USP Securities Corporation

USP St. Peters, Inc.

USP Sunset Hills, Inc.

USP Tennessee, Inc.

USP Torrance, Inc.

USP Virginia Beach, Inc.

USP Webster Groves, Inc.

USP West Covina, Inc.

USP Westwood, Inc.

USP Winter Park, Inc.

USPI San Diego, Inc.

ISS-Orlando, LLC

North MacArthur Surgery Center, LLC

Pasadena Holdings, LLC

Same Day Management, L.L.C.

Same Day Surgery, L.L.C.

Surgery Centers Holding Company, L.L.C.

Surgery Centers of America II, L.L.C.

USP Nevada Holdings, LLC

USP Texas Air, LLC

WHASA, L.C.

USP Texas, L.P.

SCHEDULE II
EQUITY INTERESTS

				Number of
Issuer	Certificate No.		Registered Owner	Shares/Units
USPI Holdings, Inc.		2	USPI Group Holdings, Inc.		100
USP Cottonwood, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Phoenix, Inc.		3	USP Domestic Holdings, Inc.		1,000
USP Coast, Inc.		2	USP Domestic Holdings, Inc.		1,000
USP Glendale, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Mission Hills, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Oxnard, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Sacramento, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP San Gabriel, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP West Covina, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Westwood, Inc.		1	USP Domestic Holdings, Inc.		1,000
USPI San Diego, Inc.		1	USP Domestic Holdings, Inc.		1,000
Medcenter Management Services, Inc.		2R	OrthoExcel, Inc.		100
Ortho Excel, Inc.	AB101R		OrthoLink Physicians Corporation		648.1113
OrthoLink Physicians Corporation		2R	USP Domestic Holdings, Inc.		1,000
Surgis, Inc.		1	USP Domestic Holdings, Inc.		1,000
United Surgical Partners Holdings, Inc.		1R	United Surgical Partners International, Inc.		1,000
USP Domestic Holdings, Inc.		2R	United Surgical Partners Holdings, Inc.		1,000
USP International Holdings, Inc.		4R	United Surgical Partners Holdings, Inc.		1,000
USP Long Island, Inc.		1R	USP Domestic Holdings, Inc.		1,000
USP North Texas, Inc.		2R	USP Domestic Holdings, Inc.		1,000
USP Destin, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Sarasota, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Winter Park, Inc.		2R	USP Domestic Holdings, Inc.		1,000
Georgia Musculoskeletal Network, Inc.		1R	OrthoLink Physicians Corporation		1000
OrthoLink/Georgia ASC, Inc.		1R	OrthoLink ASC Corporation		1,000
OrthoLink/New Mexico ASC, Inc.		1R	OrthoLink ASC Corporation		1,000
Specialty Surgicenters, Inc.		1	SSI Holdings, Inc.		1,000
SSI Holdings, Inc.		C46	USP Domestic Holdings, Inc.		6,859,514
United Surgical of Atlanta, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Chicago, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Midwest, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Indiana, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Alexandria, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Baton Rouge, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Baltimore, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Michigan, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Bridgeton, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Chesterfield, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Columbia, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Creve Coeur, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Des Peres, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Florissant, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Kansas City, Inc.		1	USP Domestic Holdings, Inc.		1,000

				Number of
Issuer	Certificate No.		Registered Owner	Shares/Units
USP Mason Ridge, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP North Kansas City, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Olive, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP St. Peters, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Sunset Hills, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Webster Groves, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Central New Jersey, Inc.		1R	USP Domestic Holdings, Inc.		1,000
USP New Jersey, Inc.		2R	USP Domestic Holdings, Inc.		1,000
USP Las Cruces, Inc.		1R	USP Domestic Holdings, Inc.		1,000
USP Nevada, Inc.		2R	USP Domestic Holdings, Inc.		1,000
USP Austintown, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Cleveland, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Lyndhurst, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Oklahoma, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Reading, Inc.		1	USP Domestic Holdings, Inc.		1,000
Health Horizons of Kansas City, Inc.		4R	USP Domestic Holdings, Inc.		1,000
Health Horizons of Murfreesboro, Inc.		3R	USP Domestic Holdings, Inc.		1,000
Health Horizons of Nashville, Inc.		8R	USP Domestic Holdings, Inc.		1000
OrthoLink ASC Corporation		1R	OrthoLink Physicians Corporation		1,000
OrthoLink Radiology Services Corporation		1	OrthoLink Physicians Corporation		1,000
OrthoLink/TN ASC, Inc.		1R	OrthoLink ASC Corporation		100
Surginet of Northwest Houston, Inc.		1	Surginet, Inc.		1,000
Surginet of Rivergate, Inc.		2	Surginet, Inc.		1,000
Surginet, Inc.		32	Surgis, Inc.		1
Surgis Management Services, Inc.		1	Surginet, Inc.		1,000
Surgis of Chico, Inc.		1	Surginet, Inc.		1,000
Surgis of Pearland, Inc.		1	Surginet, Inc.		1,000
Surgis of Phoenix, Inc.		1	Surginet, Inc.		1000
Surgis of Redding, Inc.		1	Surginet, Inc.		1,000
Surgis of Sand Lake, Inc.		1	Surginet, Inc.		1,000
Surgis of Sonoma, Inc.		1	Surginet, Inc.		1,000
Surgis of Victoria, Inc.		1	Surginet, Inc.		1,000
Surgis of Willowbrook, Inc.		1	Surginet, Inc.		1,000
USP Decatur, Inc.		5	USP Domestic Holdings, Inc.		1,000
USP Securities Corporation		2	OrthoLink Physicians Corporation		1,000
USP Tennessee, Inc.		1	USP Domestic Holdings, Inc.		1,000
Physicians Data Professionals, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Austin, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Cedar Park, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Corpus Christi, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Houston, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP San Antonio, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Fredericksburg, Inc.		2R	USP Domestic Holdings, Inc.		1,000
USP Harbour View, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Newport News, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Richmond II, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Richmond, Inc.		1	USP Domestic Holdings, Inc.		1,000
USP Virginia Beach, Inc.		1	USP Domestic Holdings, Inc.		1,000

				Number of
Issuer	Certificate No.		Registered Owner	Shares/Units
USP Assurance Company		1	USP Domestic Holdings, Inc.		1,000
USP Torrance, Inc.		1	USP Domestic Holdings, Inc.		1,000

DEBT SECURITIES

		Type of		Secured			Original			Original	Amdt.
Debtor	Jurisdiction	filing		Party		Collateral	File Date			File Number	File Date
USP Texas, L.P.	Cape Surgery Center, L.P.	$	755,000.00	$	248,161.85	October 28, 2004		9.00	%	November 15, 2010	All assets
USP Texas, L.P.	Christus Santa Rosa Surgery Center, L.L.P.	$	1,049,776.56	$	1,049,776.56	November 1, 2006		9.00	%	November 1, 2013	Cash/AR
USP Texas, L.P.	Doctors Outpatient Surgicenter, Ltd	$	3,652,568.00	$	2,745,138.54	February 1, 2005		7.00	%	February 1, 2012	All Assets
USP Texas, L.P.	Elmwood Park Same Day Surgery, L.L.C.	$	188,918.00	$	140,610.00	July 1, 2005		8.75	%	July 1, 2010	All Assets
USP Texas, L.P.	Elmwood Park Same Day Surgery, L.L.C.	$	527,828.89	$	334,649.87	November 1, 2004		8.50	%	November 1, 2009	All Assets
USP Texas, L.P.	Elmwood Park Same Day Surgery, L.L.C.	$	350,000.00	$	350,000.00	February 1, 2006	Prime + 1%			February 1, 2011	All Assets
USP Texas, L.P.	Greater Baton Rouge Surgical Hospital, L.L.C.	$	179,000.00	$	179,000.00	April 1, 2007	Prime Rate			April 1, 2008	All Assets
USP Texas, L.P.	Independence Surgery Center, L.L.C.	$	352,080.00	$	211,752.77	August 1, 2005		8.50	%	August 1, 2011	All Assets
USP Texas, L.P.	Las Cruces Surgical Center, L.L.C.	$	300,000.00	$	291,763.26	March 1, 2005		10.00	%	February 1, 2010	Unsecured
USP Texas, L.P.	Las Cruces Surgical Center, L.L.C.	$	300,000.00	$	165,000.00	October 1, 2006		10.00	%	June 1, 2013	Unsecured
USP Texas, L.P.	Madison Ambulatory Surgery, L.L.C.	$	1,553,430.00	$	1,518,430.00	October 11, 2006		8.00	%	April 1, 2014	All assets
USP Texas, L.P.	North Shore Same Day Surgery, L.L.C.	$	30,000.00	$	3,949.28	June 20, 2005		6.00	%	June 20, 2007	Specific Equipment
USP Texas, L.P.	North Shore Same Day Surgery, L.L.C.	$	250,000.00	$	245,480.81	February 1, 2006	Prime + 1%			February 1, 2011	All assets
USP Texas, L.P.	Northwest Surgery Center, Ltd.	$	187,317.37	$	187,317.37	April 18, 2007	Prime Rate			August 14, 2007	All assets
USP Texas, L.P.	Physicians Pavilion L.P.	$	1,340,000.00	$	1,293,286.70	September 21, 2006		8.00	%	December 1, 2013	All assets
USP Texas, L.P.	Physicians Pavilion L.P.	$	200,000.00	$	—	January 5, 2007		8.00	%	January 14, 2014	All assets
USP Texas, L.P.	River North Same Day Surgery, L.L.C.	$	1,003,216.83	$	244,682.40	November 1, 2004		8.00	%	November 1, 2007	All assets
USP Texas, L.P.	San Gabriel Ambulatory Surgery Center, L.P.	$	1,625,000.00	$	1,320,000.89	March 1, 2006		10.00	%	February 1, 2012	All assets
USP Texas, L.P.	Specialists Surgery Center, L.L.C.	$	65,393.00	$	25,820.55	December 16, 2003		8.00	%	December 1, 2008	2nd-Cash/AR/Equip.

		Type of		Secured			Original			Original	Amdt.
Debtor	Jurisdiction	filing		Party		Collateral	File Date			File Number	File Date
USP Texas, L.P.	St. Agnes Surgery Center of Ellcott City, L.L.P.	$	1,229,201.80	$	1,229,201.80	March 1, 2007		9.00	%	March 1, 2007	All assets
USP Texas, L.P.	Tops Speciality Hospital, Ltd.	$	668,688.00	$	568,240.30	September 1, 2005		9.00	%	December 31, 2007	CASH/AR
USP Texas, L.P.	Tops Speciality Hospital, Ltd.	$	452,985.40	$	151,327.47	January 1, 2002		9.50	%	December 29, 2008	All assets
USP Texas, L.P.	Tops Speciality Hospital, Ltd.	$	4,640,000.00	$	3,449,749.20	March 31, 2001		9.50	%	December 31, 2007
USP Texas, L.P.	Tops Speciality Hospital, Ltd.	$	285,000.00	$	285,000.00	March 1, 2007				June 1, 2007	All assets
USP Sarasota, Inc.	CHC-USP Surgery Centers, L.L.C.	$	701,130.00	$	632,866.06	October 18, 2004		9.00	%	March 31, 2005	Unsecured
USP Houston, Inc.	Memorial Health Ventures, Inc.	$	2,491,500.00	$	71,614.76
United Surgical Partners International, Inc	East Brunswick Surgery Center, L.L.C.	$	450,000.00	$	133,959.35	February 1, 2003	Prime + 2%			January 1, 2008	All Assets
United Surgical Partners International, Inc	Tops Speciality Hospital, Ltd.	$	710,000.00	$	620,571.22	December 1, 2003		9.50	%	December 31, 2007	All assets
THVG/Healthfirst, LLC	Trophy Club Medical Center, L.P.	$	4,100,000.00	$	2,942,279.74	May 1, 2005		8.75	%	May 1, 2010	All assets
Texas Health Ventures Group, LLC	Frisco Medical Center, L.L.P.	$	3,000,000.00	$	352,919.69	March 1, 2005	Prime + 0.75%			March 1, 2008	Cash/AR
Texas Health Ventures Group, LLC	Irving-Coppell Surgical Hospital, L.L.P.	$	1,980,050.00	$	1,431,096.66	August 1, 2005		7.50	%	August 1, 2010	Cash/AR
Texas Health Ventures Group, LLC	MSH Partners, L.L.P.	$	561,393.00	$	282,182.02	June 20, 2006	LIBOR + 1.50%			June 20, 2007	Cash/AR
Texas Health Ventures Group, LLC	Rockwall/Heath Surgery Center, L.L.P.	$	350,000.00	$	175,000.00	April 20, 2006		8.50	%	April 20, 2010	Cash/AR
Texas Health Ventures Group, LLC	University Surgical Partners of Dallas, L.L.P.	$	2,875,000.00	$	2,875,000.00	May 11, 2005	Prime + 1%			June 1, 2010	All assets
Surgis, Inc.	Sand Lake Surgery Center, L.P.	$	1,400,000.00	$	1,400,000.00	May 27, 2004	Prime + 4%			TBD	Unsecured
Surgis Management Services, Inc	Northridge Surgery Center, L.P.	$	1,325,000.00	$	1,545,175.00	July 1, 2006		8.00	%	July 1, 2013	Unsecured
Surgis Management Services, Inc	Surgery Center of Canfield, L.L.C.	$	428,000.00	$	401,765.24	September 30, 2003		7.00	%	September 1, 2009	GTEES of Physicians
Surgis Management Services, Inc	Surgery Center of Canfield, L.L.C.	$	120,000.00	$	106,619.59	May 1, 2004		7.00	%	September 1, 2009	Unsecured
Surgis Management Services, Inc	Surgery Center of Canfield, L.L.C.	$	175,000.00	$	138,425.79	September 30, 2005		7.00	%	December 1, 2010	Unsecured
Northside-Cherokee/USP Surgery Centers, L.L.C	Surgery Center of Georgia, L.L.C.	$	2,000,000.00	$	1,615,874.54	March 26, 2002		12.25	%	March 31, 2015	Unsecured

		Type of		Secured			Original			Original	Amdt.
Debtor	Jurisdiction	filing		Party		Collateral	File Date			File Number	File Date
ENH/USP Surgery Centers, II, L.L.C.	Elmwood Park Same Day Surgery, L.L.C.	$	100,000.00	$	25,000.00	March 15, 2007	Prime + 1%			March 1, 2010	All assets, subordinate to USP Texas Lien
CHW-USP Phoenix II, LLC	Orthopedic and Surgical Speciality Company, L.L.C.	$	1,000,000.00	$	1,000,000.00	April 1, 2005	Prime + 1.50%			May 1, 2008	Cash/AR
CHW-USP Phoenix II, LLC	Orthopedic and Surgical Speciality Company, L.L.C.	$	750,000.00	$	598,473.81	April 17, 2006		8.40	%	September 1, 2011

SCHEDULE III
INTELLECTUAL PROPERTY

UNITED STATES PATENTS:

Registrations:

	REGISTRATION
OWNER	NUMBER	DESCRIPTION
None

Applications:

	APPLICATION
OWNER	NUMBER	DESCRIPTION
None

Licenses:

		REGISTRATION/
		APPLICATION
LICENSEE	LICENSOR	NUMBER	DESCRIPTION
None

OTHER PATENTS:

Registrations:

	REGISTRATION
OWNER	NUMBER	COUNTRY/STATE	DESCRIPTION
None

Applications:

	APPLICATION
OWNER	NUMBER	COUNTRY/STATE	DESCRIPTION
None

Licenses:

			REGISTRATION/
			APPLICATION
LICENSEE	LICENSOR	COUNTRY/STATE	NUMBER	DESCRIPTION
None

UNITED STATES TRADEMARKS:

Registrations:

	REGISTRATION
OWNER	NUMBER		TRADEMARK
Surgis, Inc.		#76398434/2758259	Surgis Inc., The Surgical Services Company

Applications:

	APPLICATION
OWNER	NUMBER	TRADEMARK
None

Licenses:

		REGISTRATION/
		APPLICATION
LICENSEE	LICENSOR	NUMBER	TRADEMARK

OTHER TRADEMARKS:

Registrations:

	REGISTRATION
OWNER	NUMBER	COUNTRY/STATE	TRADEMARK
N/A

Applications:

	APPLICATION
OWNER	NUMBER	COUNTRY/STATE	TRADEMARK
N/A

Licenses:

			REGISTRATION/
			APPLICATION
LICENSEE	LICENSOR	COUNTRY/STATE	NUMBER	TRADEMARK
N/A

SCHEDULE IV
COMMERCIAL TORT CLAIMS

None.

Exhibit I to the
Collateral Agreement

     SUPPLEMENT NO. ___ dated as of [     ], to the Guarantee and Collateral Agreement dated as of April 19, 2007 as the same may be amended or otherwise modified from time to time (the “Collateral Agreement”), among UNITED SURGICAL PARTNERS INTERNATIONAL, INC., a Delaware corporation (the “Borrower”), USPI HOLDINGS INC., a Delaware corporation, each subsidiary of the Borrower listed on Schedule I thereto (each such subsidiary individually a “Subsidiary Guarantor” and collectively, the “Subsidiary Guarantors”; the Subsidiary Guarantors, Holdings and the Borrower are referred to collectively herein as the “Grantors”) and CITIBANK, N.A., (“Citibank”), as Collateral Agent (in such capacity, the “Collateral Agent”).

          A. Reference is made to the Credit Agreement dated as of April 19, 2007 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, Holdings, the lenders from time to time party thereto, Citibank, as Administrative Agent, Lehman Brothers Inc., as Syndication Agent, and Bear Stearns Corporate Lending Inc., Suntrust Bank and UBS Securities LLC, as Co-Documentation Agents.

          B. Capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have the meanings assigned to such terms in the Credit Agreement and the Collateral Agreement referred to therein.

          C. The Grantors have entered into the Collateral Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Section 7.14 of the Collateral Agreement provides that additional Subsidiaries of the Borrower may become Subsidiary Loan Parties under the Collateral Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the “New Subsidiary”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Loan Party under the Collateral Agreement in order to induce the Lenders to make additional Loans and the Issuing Bank to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued.

          Accordingly, the Collateral Agent and the New Subsidiary agree as follows:

          SECTION 1. In accordance with Section 7.14 of the Collateral Agreement, the New Subsidiary by its signature below becomes a Subsidiary Loan Party, a Grantor and a Guarantor under the Collateral Agreement with the same force and effect as if originally named therein as a Subsidiary Loan Party, a Grantor and a Guarantor and the New Subsidiary hereby (a) agrees to all the terms and provisions of the Collateral Agreement applicable to it as a Subsidiary Loan Party, Grantor and Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Grantor and Guarantor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Subsidiary, as security for the payment and performance in full of the Obligations (as defined in the Collateral Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for

Exh. I-1

the ratable benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all the New Subsidiary’s right, title and interest in and to the Collateral (as defined in the Collateral Agreement) of the New Subsidiary. Each reference to a “Guarantor” or “Grantor” in the Collateral Agreement shall be deemed to include the New Subsidiary. The Collateral Agreement is hereby incorporated in this Agreement by reference.

          SECTION 2. The New Subsidiary represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.

          SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received a counterpart of this Supplement that bears the signature of the New Subsidiary and the Collateral Agent has executed a counterpart hereof. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.

          SECTION 4. The New Subsidiary hereby represents and warrants that set forth under its signature hereto is (i) the true and correct legal name of the New Subsidiary, (ii) its jurisdiction of formation, (iii) its Federal Taxpayer Identification Number or its organizational identification number and (iv) the location of its chief executive office.

          SECTION 5. Except as expressly supplemented hereby, the Collateral Agreement shall remain in full force and effect.

          SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

          SECTION 7. Any provision of this Supplement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof and in the Collateral Agreement; the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

          SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Collateral Agreement.

          SECTION 9. The New Subsidiary agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent.

Exh. I-2

          IN WITNESS WHEREOF, the New Subsidiary and the Collateral Agent have duly executed this Supplement to the Collateral Agreement as of the day and year first above written.

[NAME OF NEW SUBSIDIARY],
By:
	Name:
	Title:
Legal Name: Jurisdiction of Formation: Location of Chief Executive Office:
CITIBANK, N.A., AS COLLATERAL AGENT,
By:
	Name:
	Title:

Exh. I-3

Schedule I
to the Supplement No. __
to the Collateral Agreement

LOCATION OF COLLATERAL

Description Location

EQUITY INTERESTS

			Number and
	Number of	Registered	Class of	Percentage of
Issuer	Certificate	Owner	Equity Interests	Equity Interests

DEBT SECURITIES

	Principal
Issuer	Amount	Date of Note	Maturity Date

INTELLECTUAL PROPERTY

I. Copyrights

		Registration	Expiration
Registered Owner	Title	Number	Date

II. Copyright Applications

		Registration	Date
Registered Owner	Title	Number	Filed

III. Copyright Licenses

			Registration	Expiration
Licensee	Licensor	Title	Number	Date

IV. Patents

		Registration	Expiration
Registered Owner	Mark	Number	Date

V. Patent Applications

		Registration	Date
Registered Owner	Mark	Number	Filed

VI. Patent Licenses

			Registration	Expiration
Licensee	Licensor	Mark	Number	Date

VII. Trademarks

		Registration	Expiration
Registered Owner	Type	Number	Date

-2-

VIII. Trademark Applications

		Registration	Date
Registered Owner	Type	Number	Filed

IX. Trademark Licenses

			Registration	Expiration
Licensee	Licensor	Type	Number	Date

-3-

EX-21.1

Exhibit 21.1

SUBSIDIARIES

	STATE OF
NAME	INCORPORATION
25 East Same Day Surgery, L.L.C.	MO
Advanced Ambulatory Surgical Care, L.P. (doing business as Advanced Surgical Care)	MO
Adventist Midwest Health/USP Surgery Centers, L.L.C.	IL
Alamo Heights Surgicare, L.P. (doing business as Alamo Heights Surgery Center)	TX
Alexandria Surgery Center Real Estate, LLC	LA
American Endoscopy Services, LLC	TN
Arlington Orthopedic and Spine Hospital, LLC (doing business as Baylor Orthopedic and Spine Hospital at Arlington)	TX
Arlington Surgicare Partners, Ltd. (doing business as Baylor Surgicare at Arlington)	TX
Aspen Healthcare Holdings, Ltd.	UK
Aspen Healthcare, Ltd.	UK
Aspen Leasing, Ltd.	UK
Austintown Surgery Center, LLC (doing business as Austintown Ambulatory Surgery Center)	OH
Bagley Holdings, LLC	OH
Ballenger Crow Development, LLC	DE
Baptist Plaza Surgicare, L.P.	TN
Baptist Surgery Center, L.P. (doing business as Baptist Ambulatory Surgery Center)	TN
Baptist Women’s Health Center, LLC (doing business as The Center for Spinal Surgery)	TN
Baptist/USP Beaumont, LLC	TX
Baptist/USP Surgery Centers, L.L.C.	TX
Baylor Surgicare at Granbury, LLC	TX
Baylor Surgicare at Plano, LLC	TX
Beaumont Surgical Affiliates, Ltd. (dba Baptist Beaumont Surgical Affiliates)	TX
Bellaire Outpatient Surgery Center, L.L.P. (doing business as Baylor Surgicare at Oakmont)	TX
Bon Secours Surgery Center at Harbour View, LLC	VA
Bon Secours Surgery Center at Virginia Beach, LLC	VA
Briarcliff Ambulatory Surgery Center, L.P. (doing business as Briarcliff Surgery Center)	MO
Cedar Park Surgery Center, L.L.P. (dba Hill Country Surgery Center)	TX
Central Jersey Surgery Center, LLC	GA
Central Virginia Surgi-Center, L.P. (doing business as Surgi-Center of Central Virginia)	VA
Chesterfield Ambulatory Surgery Center, L.P. (doing business as Chesterfield Surgery Center)	MO
Chico Surgery Center, LP	CA
CHRISTUS Cabrini Surgery Center, L.L.C.	LA
CHRISTUS Santa Rosa Imaging Centers Partnership, LLC	TX
Christus/USP General Partner, LLC	TX
Christus/USP Surgery Centers, L.P.	TX
CHW/USP Folsom GP, LLC	CA
CHW/USP Las Vegas Surgery Centers, LLC	NV
CHW/USP Phoenix Surgery Centers, LLC	AZ
CHW/USP Phoenix II, LLC	AZ
CHW/USP Redding GP, LLC	CA
CHW/USP Roseville GP, LLC	CA
CHW/USP Sacramento Surgery Centers, L.L.C.	CA
Clarkston ASC Partners, LLC (doing business as Clarkston Surgery Center)	MI
Coast Surgery Center, L.P. (Coast Surgery Center of South Bay)	CA
Corpus Christi Surgicare, Ltd. (doing business as CHRISTUS Spohn — Corpus Christi Outpatient Surgery)	TX
Creekwood Surgery Center, L.P.	MO
Crown Point Surgery Center, LLC	CO
CS/USP General Partners, LLC	TX
CS/USP Surgery Centers, LP	TX
Dallas Surgical Partners, LLC (doing business as (1) Baylor Surgicare (2) Texas Surgery Center and (3) Physicians Day Surgery	TX
Day-Op Surgery Consulting Company, LLC	DE
Denton Surgicare Partners, Ltd. (doing business as Baylor Surgicare at Denton)	TX
Denton Surgicare Real Estate, Ltd.	TX
Desert Ridge Outpatient Surgery, LLC (doing business as Desert Ridge Outpatient Surgery Center)	AZ
Desoto Surgicare Partners, Ltd. (doing business as North Texas Surgery Center)	TX
Destin Surgery Center, Ltd.	FL
Doctors Outpatient Surgicenter, Ltd.	TX
East Portland Surgery Center, LLC	OR
East West Surgery Center, L.P.	GA
Eastgate Building Center, L.L.C.	OH
Elmwood Park Same Day Surgery, L.L.C.	IL
Folsom Outpatient Surgery Center, L.P. (Folsom Surgery Center)	CA
Fort Worth Surgicare Partners, Ltd. (doing business as Baylor Surgical Hospital at Ft. Worth)	TX
Frisco Medical Center, L.L.P. (doing business as Baylor Medical Center at Frisco)	TX
Frontenac Ambulatory Surgery & Spine Care Center, L.P. (doing business as Frontenac Surgery & Spine Care Center)	MO
Garland Surgicare Partners, Ltd. (doing business as Baylor Surgicare at Garland)	TX
Genesis ASC Partners, LLC (doing business as Genesis Surgery Center)	MI
Georgia Musculoskeletal Network, Inc.	GA
Global Healthcare Partners, Ltd.	UK
GP Surgery Center, LLC (doing business as Great Plains Ambulatory Surgery Center)	DE
Grapevine Surgicare Partners, Ltd. (doing business as Baylor Surgicare at Grapevine)	TX
Harvard Park Surgery Center, LLC	CO
Health Horizons of Kansas City, Inc.	TN
Health Horizons of Murfreesboro, Inc.	TN
Highgate Private Clinic, Ltd.	UK

SUBSIDIARIES

	STATE OF
NAME	INCORPORATION
Hinsdale Surgical Center, LLC	IL
Houston Ambulatory Surgical Associates, L.P.	TX
Huguley Surgery Center, LLP (doing business as Doctors Surgery Center at Huguley)	TX
ICNU Rockford, LLC	IL
ICNU San Antonio, LLC	TX
Implant Solutions, LLC	TN
INTEGRIS/USP Surgery Centers, LLC	OK
INTEGRIS/USP Surgery Centers II, L.L.C.	OK
Idaho Surgery Center, LLC	ID
Irving-Coppell Surgical Hospital, L.L.P.	TX
ISS-Orlando, LLC	FL
KHS/USP Surgery Centers, LLC	NJ
KHS Ambulatory Surgery Center LLC (doing business as Select Surgical Center at Kennedy)	NJ
KSF Orthopaedic Surgery Center, L.L.P.	TX
Lake Lansing ASC Partners, LLC (doing business as Lansing Surgery Center)	MI
Lansing ASC Partners, LLC	MI
Las Cruces Surgical Center LLC	NM
Lawrenceville Surgery Center, L.L.C.	GA
Legacy/USP Surgery Centers, L.L.C.	OR
Lewisville Surgicare Partners, Ltd. (doing business as Baylor Surgicare at Lewisville)	TX
Liberty Ambulatory Surgery Center, L.P.	MO
Liberty Ambulatory Surgery Center, LLC	NJ
Liberty/USP Surgery Centers, L.L.C.	NJ
Manchester Ambulatory Surgery Center, LP (doing business as Manchester Surgery Center)	MO
Mary Immaculate Ambulatory Surgery Center, LLC	VA
Mayfield Ambulatory Spine Center, LLC	OH
Mason Ridge Ambulatory Surgery Center, L.P. (doing business as Mason Ridge Surgery Center)	MO
McLaren ASC of Flint, LLC (doing business as Mid-Michigan Surgery & Endoscopy Center)	MI
McLaren Real Estate Partners, Limited Partnership	MI
MCSH Real Estate Investors, Ltd.	TX
Medcenter Management Services, Inc.	DE
Medical Park Tower Surgery Center, LLC	TX
Memorial Ambulatory Surgery Center, LLC	VA
Memorial Hermann Endoscopy & Surgery Center North Houston, LLC	TX
Memorial Hermann Specialty Hospital Kingwood, L.L.C.	TX
Memorial Hermann Surgery Center Katy, LLP	TX
Memorial Hermann Surgery Center Kingsland, LLP	TX
Memorial Hermann Surgery Center Northwest LLP	TX
Memorial Hermann Surgery Center Pearland, LLC	TX
Memorial Hermann Surgery Center Richmond, LLC	TX
Memorial Hermann Surgery Center Southwest, L.L.P.	TX
Memorial Hermann Surgery Center Sugar Land, L.L.P.	TX
Memorial Hermann Surgery Center Texas Medical Center, LLP	TX
Memorial Hermann Surgery Center — The Woodlands, LLP	TX
Memorial Hermann Surgery Center Westside, LLP	TX
Memorial Hermann/USP Surgery Centers, LLP	TX
Memorial Hermann/USP Surgery Centers II, LP	TX
Memorial Hermann/USP Surgery Centers III, LLP	TX
Memorial Hermann/USP Surgery Centers IV, LLP	TX
Memorial Surgery Center, LLC	OK
Metro Surgery Center, L.P.	DE
Metroplex Surgicare Partners, Ltd. (doing business as Baylor Surgicare at Bedford)	TX
MH/USP Kingsland, LLC	TX
MH/USP Kingwood, LLC	TX
MH/USP North Houston, LLC	TX
MH/USP Northwest GP, LLC	TX
MH/USP Richmond, LLC	TX
Michigan ASC Partners, L.L.C.	MI
Mid Rivers Ambulatory Surgery Center, L.P. (doing business as Mid Rivers Surgery Center)	MO
Middle Tennessee Ambulatory Surgery Center, L.P.	DE
Mountain Empire Surgery Center, L.P.	GA
MSH Partners, LLC (doing business as Mary Shiels Hospital)	TX
New Horizons Surgery Center, LLC	OH
New Mexico Orthopaedic Surgery Center Limited Partnership	GA
NKCH/USP Surgery Centers, LLC	MO
NKCH/USP Surgery Centers II, L.L.C.	MO
NKCH/USP Briarcliff GP, LLC	MO
NKCH/USP Liberty GP, LLC	MO
North Central Surgical Center, L.L.P.	TX
North Garland Surgery Center, L.L.P. (doing business as Baylor Surgicare at North Garland)	TX
North Shore Same Day Surgery, L.L.C. (doing business as North Shore Surgical Center)	IL
NorthShore/USP Surgery Centers I, L.L.C.	IL
NorthShore/USP Surgery Centers II, L.L.C.	IL
North State Surgery Centers, L.P. (doing business as (1) Court Street Surgery Center (2) Mercy Surgery Center and (3) Redding Surgery Center	CA
Northeast Ohio Surgery Center, LLC	OH
Northern Monmouth Regional Surgery Center, L.L.C.	NJ
Northridge Surgery Center, L.P.	TN
Northwest Ambulatory Surgery Center, LLC	OR
Northwest Georgia Orthopaedic Surgery Center, LLC (doing business as Northwest Georgia Surgery Center)	GA
Northwest Surgery Center, Ltd.	TX

SUBSIDIARIES

	STATE OF
NAME	INCORPORATION
Northwest Surgery Center, LLP (doing business as Memorial Hermann Surgery Center Red Oak)	TX
Oklahoma Center for Orthopedic and Multi-Specialty Surgery, LLC	OK
Old Tesson Surgery Center, L.P.	MO
Olive Ambulatory Surgery Center, L.P. (doing business as Olive Surgery Center)	MO
Ortho Excel, Inc.	DE
OrthoLink ASC Corporation	TN
OrthoLink Physicians Corporation	DE
OrthoLink Radiology Services Corporation	TN
OrthoLink/Baptist ASC, LLC	TN
OrthoLink/ Georgia ASC, Inc.	GA
OrthoLInk/New Mexico ASC, Inc.	GA
OrthoLink/TN ASC, Inc.	TN
Orthopedic and Surgical Specialty Company, LLC (doing business as Arizona Orthpedic Surgical Hospital)	AZ
Orthopedic South Surgical Partners, LLC (doing business as Orthopedic South Surgical Center)	GA
Pacific Endo-Surgical Center, L.P.	CA
PAHS/USP Surgery Centers, LLC	CO
Park Cities Surgery Center, L.P.	TX
Park Cities/Trophy Club GP, LLC	TX
Parkway Surgery Center, LLC	NV
Parkwest Surgery Center, L.P.	TN
Pasadena Holdings, LLC	NV
Pearland Ambulatory Surgery Center, Ltd.	TN
Pendragon Development, LLC	IL
Physicians Data Professionals, Inc.	TX
Physicians Pavilion, L.P. (doing business as Physicians Pavilion Surgery Center)	DE
Physicians Surgery Center at Good Samaritan, LLC	IL
Physician’s Surgery Center of Knoxville, LLC	TN
Physicians Surgical Center of Ft. Worth, LLP (doing business as (1) Physicians Surgical Center of Ft. Worth and (2) Physicians Surgical Center of Ft. Worth II)	TX
Providence/USP Santa Clarita GP, LLC	CA
Providence/USP Surgery Centers, L.L.C.	CA
Radsource, LLC	DE
Reading Ambulatory Surgery Center, L.P. (doing business as Reading Surgery Center)	PA
Redmond Surgery Center, LLC	TN
Resurgens Surgery Center, LLC	GA
Richmond ASC Leasing Company, LLC	VA
River North Same Day Surgery, L.L.C.	IL
Riverside Ambulatory Surgery Center, L.P. (doing business as Riverside Surgery Center)	MO
Rockwall Ambulatory Surgery Center, L.L.P. (doing business as Baylor Surgicare at Rockwall)	TX
Rockwall/Heath Surgery Center, L.L.P. (doing business as Baylor Surgicare at Heath)	TX
Roseville Surgery Center, L.P.	CA
Roswell Surgery Center, L.L.C.	GA
Saint Thomas Campus Surgicare, L.P. (doing business as Saint Thomas Surgicare)	TN
Saint Thomas/USP — Baptist Plaza, L.L.C.	TN
Saint Thomas/USP Surgery Centers, L.L.C.	TN
Saint Thomas/USP Surgery Centers II, LLC	TN
Same Day Surgery, LLC	IL
Same Day Management, L.L.C.	IL
San Antonio Endoscopy, L.P. (doing business as San Antonio Endoscopy Center)	TX
San Fernando Valley Surgery Center, L.P. (doing business as Providence Holy Cross Surgery Center at Mission Hills)	CA
San Gabriel Valley Surgical Center, L.P.	CA
San Martin Surgery Center, LLC (doing business as Durango Outpatient Surgery Center)	NV
Sand Lake Surgery Center, L.P.	DE
Santa Clarita Surgery Center, L.P.	CA
Scripps Encinitas Surgery Center, LLC	CA
Scripps/USP Surgery Centers, L.L.C.	CA
Shrewsbury Surgery Center, LLC	NJ
Shore Outpatient Surgicenter, L.L.C.	GA
Shoreline Real Estate Partnership, LLP	TX
Shoreline Surgery Center, LLP (doing business as CHRISTUS Spohn — Surgicare of Corpus Christi)	TX
South County Outpatient Endoscopy Services, L.P.	MO
Southwest Ambulatory Surgery Center, L.L.C. (doing business as Southwest Orthopedic Ambulatory Surgery Center)	OK
Southwest Orthopedic and Spine Hospital, LLC	AZ
Specialty Surgicenters, Inc.	GA
SSI Holdings, Inc.	GA
SSM St. Clare Surgical Center, L.L.C.	MO
St. Agnes/USP Joint Venture, LLC	MD
St. Joseph’s Outpatient Surgery Center, LLC	AZ
St. Joseph’s Surgery Center, L.P.	CA
St. Mary’s Ambulatory Surgery Center, LLC	VA
St. Mary’s Surgical Center, LLC	MO
St. Mary’s/USP Surgery Centers, LLC	MO
St. Vincent Health/USP, LLC	IN
Sugar Land Surgical Hospital, LLP (doing business as Surgical Specialty Hospital of Sugar Land LLP, an affiliate of Memorial Hermann)	TX
Summit Radiology, LLC	IL
Summit View Surgery Center, LLC	CO
Sunset Hills Ambulatory Surgery Center, L.P. (doing business as Sunset Hills Surgery Center)	MO
Suburban Endoscopy Services, LLC	TN
Surgery Center of Canfield, LLC	OH
Surgery Center of Columbia, L.P.	MO

SUBSIDIARIES

	STATE OF
NAME	INCORPORATION
Surgery Center of Gilbert, LLC	AZ
Surgery Center of Peoria, LLC	AZ
Surgery Center of Scottsdale, LLC	AZ
Surgery Center of Tempe, LLC (doing business as Physicians Surgery Center of Tempe)	OK
Surgery Centers Holdings Company, L.L.C.	OK
Surgery Centers of America II, LLC	OK
Surgicoe of Texas, Inc.	TX
Surginet, Inc.	TN
Surgis, Inc.	DE
Surgis Management Services, Inc.	TN
Surgis of Chico, Inc.	CA
Surgis of Phoenix, Inc.	TN
Surgis of Redding, Inc.	TN
Surgis of Rivergate, Inc.	TN
Surgis of Sand Lake, Inc.	TN
Surgis of Victoria, Inc.	TN
Tamarac Surgery Center LLC (doing business as Surgery Center of Ft. Lauderdale)	FL
Templeton Surgery Center, LLC	TN
Terre Haute Surgical Center, LLC (doing business as St. Vincent Surgery Center of Terre Haute)	IN
Teton Outpatient Services, LLC	WY
Texan Ambulatory Surgery Center, L.P. (doing business as Texan Surgery Center)	TX
Texas Health Venture Arlington Hospital, LLC	TX
Texas Health Venture Fort Worth, L.L.C.	TX
Texas Health Venture Huguley, L.P.	TX
Texas Health Venture Park Cities, L.P.	TX
Texas Health Venture Plano, LLC	TX
Texas Health Ventures Group L.L.C.	TX
The Ambulatory Surgical Center of St. Louis, L.P.	MO
The Center for Ambulatory Surgical Treatment, L.P.	CA
The Surgery Center at Williamson, LLC	TX
The Surgery Center at Tri-City Orthopaedic Clinic, LLC	WA
THVG Arlington GP, LLC	DE
THVG Bedford GP, LLC	DE
THVG Bellaire GP, LLC	TX
THVG Denton GP, LLC	DE
THVG DeSoto GP, LLC	DE
THVG DeSoto, L.P.	TX
THVG DSP GP, LLC	DE
THVG Fort Worth GP, LLC	DE
THVG Frisco GP, LLC	DE
THVG Garland GP, LLC	DE
THVG Grapevine GP, LLC	DE
THVG Huguley GP, LLC	DE
THVG Irving-Coppell GP, LLC	DE
THVG Lewisville GP, LLC	DE
THVG North Garland GP, LLC	DE
THVG Park Cities GP, LLC	TX
THVG Park Cities/Trophy Club GP, LLC	TX
THVG Rockwall GP, LLC	DE
THVG Rockwall 2 GP, LLC	TX
THVG Valley View GP, LLC	DE
THVG/HeatlhFirst, LLC	TX
THVG/HealthFirst Holdings, LLC	NV
TMC Holding Company, LLC	TX
Toms River Surgery Center, L.L.C.	NJ
TOPS Specialty Hospital, Ltd. (doing business as TOPS Surgical Specialty Hospital)	TX
Trophy Club Medical Center, L.P. (dba Baylor Medical Center at Trophy Club)	TX
Tulsa Outpatient Surgery Center, LLC	OK
United Surgery Center — Southeast, Ltd.	TX
University Surgical Partners of Dallas, L.L.P.	TX
United Surgical Partners Holdings, Inc.	DE
University Surgery Center, Ltd. (dba University Surgical Center)	FL
USP Alexandria, Inc.	LA
USP Assurance Company	VT
USP Austin, Inc.	TX
USP Austintown, Inc.	OH
USP Baton Rouge, Inc.	LA
USP Baltimore, Inc.	MD
USP Beaumont, Inc.	TX
USP Bridgeton, Inc.	MO
USP Cedar Park, Inc.	TX
USP Chesterfield, Inc.	MO
USP Chicago, Inc.	IL
USP Cincinnatti, Inc.	OH
USP Coast, Inc.	CA
USP Columbia, Inc.	MO
USP Corpus Christi, Inc.	TX
USP Creve Coeur, Inc.	MO
USP Denver, Inc.	CO
USP Des Peres, Inc.	MO
USP Destin, Inc.	FL

SUBSIDIARIES

	STATE OF
NAME	INCORPORATION
USP Domestic Holdings, Inc.	DE
USP Fenton, Inc.	MO
USP Festus, Inc.	MO
USP Florissant, Inc.	MO
USP Fredericksburg, Inc.	VA
USP Frontenac, Inc.	MO
USP Glendale, Inc.	CA
USP Harbour View, Inc.	VA
USP Houston, Inc.	TX
USP Indiana, Inc.	IN
USP International Holdings, Inc.	DE
USP Jersey City, Inc.	NJ
USP Kansas City, Inc.	MO
USP Knoxville, Inc.	TN
USP Las Cruses, Inc.	NM
USP Long Island, Inc.	DE
USP Mason Ridge, Inc.	MO
USP Mattis, Inc.	MO
USP Michigan, Inc.	MI
USP Midwest, Inc.	IL
USP Mission Hills, Inc.	CA
USP Mt. Vernon, Inc.	IL
USP Nevada, Inc.	NV
USP Nevada Holdings, LLC	NV
USP Newport News, Inc.	VA
USP New Jersey, Inc.	NJ
USP North Kansas City, Inc.	MO
USP North Texas, Inc.	DE
USP Office Parkway, Inc.	MO
USP Oklahoma, Inc.	OK
USP Olive, Inc.	MO
USP Oxnard, Inc.	CA
USP Phoenix, Inc.	AZ
USP Portland, Inc.	OR
USP Reading, Inc.	PA
USP Richmond, Inc.	VA
USP Richmond II, Inc.	VA
USP Rockwall, Inc.	TX
USP Sacramento, Inc.	CA
USP San Antonio, Inc.	TX
USP San Gabriel, Inc.	CA
USP Securities Corporation	TN
USP St. Louis, Inc.	Mo
USP St. Peters, Inc.	MO
USP Sunset Hills, Inc.	MO
USP Tennessee, Inc.	TN
USP Texas, L.P.	TX
USP Texas Air, L.L.C.	TX
USP Torrance, Inc.	CA
USP Turnersville, Inc.	NJ
USP Virginia Beach, Inc.	VA
USP Webster Groves, Inc.	MO
USP West Covina, Inc.	CA
USP Westwood, Inc.	CA
USP Winter Park, Inc.	FL
USPE Holdings Limited	UK
USPI San Diego, Inc.	CA
USPI Stockton, Inc.	CA
Utica ASC Partners, LLC (doing business as Utica Surgery Cetner)	MI
Utica/USP Tulsa, L.L.C.	OK
Valley View Surgicare Partners, Ltd. (doing business as Baylor Surgicare at Valley View)	TX
Veroscan, Inc.	DE
Victoria Ambulatory Surgery Center, LP (doing business as The Surgery Center)	DE
Warner Park Surgery Center, LP	AZ
Webster Ambulatory Surgery Center, L.P. (doing business as Webster Surgery Center)	MO
West Houston Ambulatory Surgical Associates, L.P. (doing business as West Houston Surgicare)	TX
WHASA, LC	TX

EX-24.1

EXHIBIT 24.1

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Mark A. Kopser and John J. Wellik and each of them, his true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf, as a director or officer, or both, as the case may be, of United Surgical Partners International, Inc., a Delaware corporation (the “Corporation”), the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, and to sign any or all amendments to such Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

/s/ Donald E. Steen  

Donald E. Steen 

EX-24.2

EXHIBIT 24.2

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Mark A. Kopser and John J. Wellik, and each of them, his true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf, as a director or officer, or both, as the case may be, of United Surgical Partners International, Inc., a Delaware corporation (the “Corporation”), the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, and to sign any or all amendments to such Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or its substitute or substitutes may lawfully do or cause to be done by virtue hereof.

/s/ Joel T. Allison  

Joel T. Allison 

EX-24.3

EXHIBIT 24.3

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Mark A. Kopser and John J. Wellik, and each of them, his true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf, as a director or officer, or both, as the case may be, of United Surgical Partners International, Inc., a Delaware corporation (the “Corporation”), the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, and to sign any or all amendments to such Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or its substitute or substitutes may lawfully do or cause to be done by virtue hereof.

/s/ Michael E. Donovan  

Michael E. Donovan 

EX-24.4

EXHIBIT 24.4

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Mark A. Kopser and John J. Wellik, and each of them, his true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf, as a director or officer, or both, as the case may be, of United Surgical Partners International, Inc., a Delaware corporation (the “Corporation”), the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, and to sign any or all amendments to such Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or its substitute or substitutes may lawfully do or cause to be done by virtue hereof.

/s/ John C. Garrett, M.D.  

John C. Garrett, M.D. 

EX-24.5

EXHIBIT 24.5

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Mark A. Kopser and John J. Wellik, and each of them, his true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf, as a director or officer, or both, as the case may be, of United Surgical Partners International, Inc., a Delaware corporation (the “Corporation”), the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, and to sign any or all amendments to such Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or its substitute or substitutes may lawfully do or cause to be done by virtue hereof.

/s/ D. Scott Mackesy  

D. Scott Mackesy 

EX-24.6

EXHIBIT 24.6

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Mark A. Kopser and John J. Wellik, and each of them, his true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf, as a director or officer, or both, as the case may be, of United Surgical Partners International, Inc., a Delaware corporation (the “Corporation”), the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, and to sign any or all amendments to such Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or its substitute or substitutes may lawfully do or cause to be done by virtue hereof.

/s/ James Ken Newman  

James Ken Newman 

EX-24.7

EXHIBIT 24.7

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Mark A. Kopser and John J. Wellik, and each of them, his true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf, as a director or officer, or both, as the case may be, of United Surgical Partners International, Inc., a Delaware corporation (the “Corporation”), the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, and to sign any or all amendments to such Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or its substitute or substitutes may lawfully do or cause to be done by virtue hereof.

/s/ Boone Powell, Jr.  

Boone Powell, Jr. 

EX-24.8

EXHIBIT 24.8

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Mark A. Kopser and John J. Wellik, and each of them, his true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf, as a director or officer, or both, as the case may be, of United Surgical Partners International, Inc., a Delaware corporation (the “Corporation”), the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, and to sign any or all amendments to such Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or its substitute or substitutes may lawfully do or cause to be done by virtue hereof.

/s/ Paul B. Queally  

Paul B. Queally 

EX-24.9

EXHIBIT 24.9

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Mark A. Kopser and John J. Wellik, and each of them, his true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf, as a director or officer, or both, as the case may be, of United Surgical Partners International, Inc., a Delaware corporation (the “Corporation”), the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, and to sign any or all amendments to such Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or its substitute or substitutes may lawfully do or cause to be done by virtue hereof.

/s/ Raymond A. Ranelli  

Raymond A. Ranelli 

EX-31.1

EXHIBIT 31.1

SARBANES-OXLEY SECTION 302 CERTIFICATION

I, William H. Wilcox, certify that:

1.	I have reviewed this annual report on Form 10-K of United Surgical Partners International, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

/s/ William H. Wilcox  

William H. Wilcox 

President and Chief Executive Officer 

February 23, 2010

EX-31.2

EXHIBIT 31.2

SARBANES-OXLEY SECTION 302 CERTIFICATION

I, Mark A. Kopser, certify that:

1.	I have reviewed this annual report on Form 10-K of United Surgical Partners International, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

/s/ Mark A. Kopser  

Mark A. Kopser 

Chief Financial Officer 

February 23, 2010

EX-32.1

EXHIBIT 32.1

SARBANES-OXLEY SECTION 906 CERTIFICATION

     In connection with the Annual Report of United Surgical Partners International, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2009 as filed with the Securities and Exchange Commission (the “Report”), I, William H. Wilcox, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ William H. Wilcox  

William H. Wilcox 

President and Chief Executive Officer 

February 23, 2010

A signed original of this written statement required by Section 906 has been provided to
the Registrant and will be retained by the Registrant and furnished to the Securities and
Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

SARBANES-OXLEY SECTION 906 CERTIFICATION

     In connection with the Annual Report of United Surgical Partners International, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2009 as filed with the Securities and Exchange Commission (the “Report”), I, Mark A. Kopser, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Mark A. Kopser  

Mark A. Kopser 

Chief Financial Officer 

February 23, 2010

A signed original of this written statement required by Section 906 has been provided to
the Registrant and will be retained by the Registrant and furnished to the Securities and
Exchange Commission or its staff upon request.