POST-EFFECTIVE AMENDMENT #3 TO FORM S-4

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

POS AM 1 d294578dposam.htm POST-EFFECTIVE AMENDMENT #3 TO FORM S-4 POST-EFFECTIVE AMENDMENT #3 TO FORM S-4

As filed with the Securities and Exchange Commission on April 20, 2012

Registration No. 333-171386

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Post-Effective Amendment No. 3

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

USMD Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware

8000

27-2866866

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

6333 North State Highway 161, Suite 200

Irving, Texas 75038

(214) 493-4000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Christopher Dunleavy

Chief Financial Officer

USMD Holdings, Inc.

6333 North State Highway 161, Suite 200

Irving, Texas 75038

(214) 493-4000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With a copy to:

Bruce H. Hallett

Hallett & Perrin, P.C.

2001 Bryan Street, Suite 3900

Dallas, Texas 75201

(214) 953-0053

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement and all other conditions to the proposed contributions described herein have been satisfied or waived.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

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):

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ¨

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ¨

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

EXPLANATORY NOTE

Pursuant to a Registration Statement on Form S-4 (File No. 333-171386) of USMD Holdings, Inc. (“Holdings”) filed with the Securities and Exchange Commission (the “SEC”) and declared effective by the SEC on July 25, 2011 (the “Original Registration Statement”), Holdings registered the issuance of up to 10,225,000 shares (the “Shares”) of its common stock, par value $0.01 per share (the “Common Stock”), to be issued in connection with a business combination described therein (the “Contribution”) and in the Contribution and Purchase Agreement by and among Holdings, Urology Associates of North Texas, L.L.P. (“UANT”), UANT Ventures, L.L.P. (“Ventures”) and USMD Inc. (“USMD”), dated as of August 19, 2010 (the “Original Contribution Agreement”). Pursuant to the terms of the Original Contribution Agreement, the shareholders of USMD agreed to contribute all of their equity interests in USMD, and Ventures agreed to contribute all of its assets, to Holdings. On August 23, 2011, the shareholders of USMD and the partners of Ventures approved the Contribution and the Original Contribution Agreement at the special meetings described in the Original Registration Statement.

Prior to the consummation of the Contribution, Ventures entered into merger agreements with each of The Medical Clinic of North Texas, P.A. (“MCNT”) and Impel Management Services, L.L.C. (“Impel”). These merger agreements provide that subsidiaries of Ventures will merge with and into MCNT and Impel, resulting in these businesses becoming wholly-owned subsidiaries of Ventures prior to the closing of the Contribution. By virtue of the mergers, the equity interests in MCNT and Impel will convert into partnership interests in Ventures. USMD, UANT and Ventures entered into an Amendment to the Contribution and Purchase Agreement (the “Amendment” and collectively with the Original Contribution Agreement, the “Contribution Agreement”) to reflect, among other changes, that, immediately following the mergers, Ventures will contribute all of the equity interests of MCNT and Impel to Holdings as part of the Contribution. In view of the Amendment, new special meetings of the USMD shareholders and Ventures partners will be convened to consider and vote upon the Contribution Agreement as so amended.

The Prospectus/Proxy Statement contained in the Original Registration Statement, as amended by this Post-Effective Amendment, constitutes the prospectus of Holdings with respect to the Shares and the proxy statement and notice of meeting with respect to the new special meetings described above. No additional shares of Common Stock are being registered by virtue of this Post-Effective Amendment. The Shares previously registered are merely being reallocated among the parties to the Contribution.

PROXY STATEMENT/PROSPECTUS

To the shareholders of USMD Inc. and the partners of UANT Ventures, L.L.P.:

On August 19, 2010, USMD Inc. (“USMD”), UANT Ventures, L.L.P. (“Ventures”) and Urology Associates of North Texas, L.L.P. (“UANT”) entered into a Contribution and Purchase Agreement (the “Original Contribution Agreement”), pursuant to which the shareholders of USMD will contribute all of their equity interests in USMD to either Ventures or to a Delaware corporation formed in contemplation of this transaction named USMD Holdings, Inc. (“Holdings”), and Ventures will contribute all of its assets to Holdings. The contribution by the USMD shareholders and by Ventures is collectively referred to as the “Contribution.” Immediately prior to the Contribution, UANT will merge with a subsidiary of Ventures and, as the surviving entity, will become a wholly-owned subsidiary of Ventures.

On December 1, 2011, Ventures entered into a merger agreement with The Medical Clinic of North Texas, P.A. (“MCNT”) and on December 15, 2011, Ventures entered into a merger agreement with Impel Management Services, L.L.C. (“Impel”). These merger agreements provide that subsidiaries of Ventures will merge with and into MCNT and Impel, resulting in these businesses also becoming wholly-owned subsidiaries of Ventures.

As a result of these merger agreements, on February 9, 2012, USMD, UANT and Ventures executed an Amendment to the Contribution and Purchase Agreement (the “Amendment”), effective December 15, 2011, to reflect, among other changes, that Ventures will contribute all of the equity interests of MCNT and Impel to Holdings as part of the Contribution. The Original Contribution Agreement, as amended by the Amendment, is referred to as the “Contribution Agreement.”

As consideration for their contributions, the USMD shareholders and Ventures will receive an aggregate of 10 million shares of common stock issued by Holdings, and Ventures will receive options to purchase shares of Holdings common stock. The allocation of the 10 million shares among the USMD shareholders and Ventures is based upon the relative value of the assets contributed by the USMD shareholders and Ventures. When the Contribution is consummated, the assets owned, and the businesses previously conducted separately, by USMD, UANT, Ventures, MCNT and Impel will consolidate into a single integrated health services company.

Pursuant to the Contribution Agreement, immediately prior to the Contribution, certain USMD shareholders will contribute all or a portion of their shares of USMD common stock to Ventures in exchange for partnership interests in Ventures. As part of the Contribution, Ventures will then contribute these shares of USMD common stock to Holdings in exchange for shares of Holdings common stock.

In view of the Amendment, the parties are convening new special meetings of the USMD shareholders and Ventures partners to consider and vote upon the Contribution Agreement. Subject to the approvals of the USMD shareholders and Ventures partners, and the satisfaction of other conditions to the Contribution, we are seeking to close the Contribution in mid-2012. Any party may terminate the Contribution Agreement if the Contribution has not been consummated by August 31, 2012.

Currently, no public market exists for the common stock of Holdings. Holdings will apply for listing of its common stock on the NASDAQ Capital Market under the symbol “USMD.” The shares of common stock of Holdings will begin trading on or promptly after the closing of the Contribution, subject to listing on the NASDAQ Capital Market.

USMD is holding a special meeting of its shareholders to obtain shareholder approval of the Contribution Agreement. At the special meeting, which will be held at 6:00 p.m., local time, on [ ], 2012, at the principal executive offices of USMD located at 6333 North State Highway 161, Suite 200, Irving, Texas 75038, unless postponed or adjourned to a later date, USMD will ask its shareholders to approve the Contribution.

Ventures is holding a special meeting of its partners to obtain partner approval of the Contribution Agreement. At the special meeting, which will be held at 6:00 p.m., local time, on [ ], 2012, at the principal executive offices of Ventures located at 612 East Lamar Blvd., Suite 700, Arlington, Texas 76011, unless postponed or adjourned to a later date, Ventures will ask its partners to approve the Contribution.

More information about Holdings, USMD, UANT, Ventures, MCNT and Impel and the Contribution Agreement is contained in the accompanying proxy statement/prospectus, including the annexes thereto. Holdings encourages you to read the proxy statement/prospectus carefully and in its entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 25.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the Contribution described in this proxy statement/prospectus or the Holdings common stock to be issued pursuant to the Contribution Agreement or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated [ ], 2012 and is first being mailed to the shareholders of USMD and the partners of Ventures on or about [ ], 2012.

NOTICE OF SPECIAL MEETING OF PARTNERS

To Be Held On [ ], 2012

Dear Partners of UANT Ventures, L.L.P.:

A special meeting of the partners of UANT Ventures, L.L.P. (“Ventures”) will be held at [ ], local time, on [ ], 2012, at the principal executive offices of Ventures located at 612 East Lamar Blvd., Suite 700, Arlington, Texas 76011, for the following purposes:

•

to consider and vote upon a proposal to approve and adopt the Contribution and Purchase Agreement, dated as of August 19, 2010, as amended on February 9, 2012, by and among USMD Holdings, Inc., USMD Inc., Urology Associates of North Texas, L.L.P. (“UANT”) and Ventures (as amended, the “Contribution Agreement”), a copy of which is attached as Annex A to the joint proxy statement/prospectus accompanying this notice, and the transactions contemplated thereby, including the contribution of substantially all of the assets of Ventures to USMD Holdings, Inc.;

•

to consider and act on any other matters as may properly come before the special meeting or any adjournment or postponement thereof, including any procedural matters incident to the conduct of the special meeting.

The managing partner of Ventures has fixed [ ], 2012 as the record date for the determination of partners entitled to notice of, and to vote at, the Ventures special meeting or any adjournments or postponements of the Ventures special meeting. Only holders of record of Ventures partnership interests at the close of business on such record date are entitled to notice of, and to vote at, the Ventures special meeting. At the close of business on the record date, Ventures had [ ] partners entitled to vote at the special meeting.

Your vote is important. The affirmative vote of at least 75% of the partners of Ventures is required to approve the Contribution Agreement.

Even if you plan to attend the Ventures special meeting in person, Ventures requests that you complete, sign and return the enclosed proxy card, and thus ensure that you are represented at the Ventures special meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote in favor of the Contribution Agreement. If you do attend the Ventures special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

At the time Ventures was negotiating the Contribution Agreement, most of the Ventures partners had no financial interest in or business arrangements with USMD Inc. (other than their indirect ownership of the USMD Inc. common stock held by Ventures) or with USMD Holdings, Inc. However, the managing partner of Ventures is the Chairman, President and CEO of USMD Holdings, Inc. and USMD Inc., and, as such, had interests in the transaction that may have been different from the interests of those unaffiliated Ventures partners. With the approval of the Ventures partners, Ventures appointed an independent task force composed of unaffiliated Ventures partners for the purpose of negotiating the terms and conditions of the Contribution Agreement and making a recommendation to the Ventures partners with respect to the approval of the Contribution Agreement. The Ventures task force has determined that the Contribution Agreement and the transactions contemplated by it are advisable and in the best interests of Ventures and its partners.

Ventures’ managing partner and the Ventures task force unanimously recommend that partners of Ventures vote “FOR” the approval and adoption of the Contribution Agreement and the transactions contemplated thereby.

By Order of the Managing Partner,

/s/ John M. House

John M. House

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held On [ ], 2012

Dear USMD Inc. Shareholders:

A special meeting of the shareholders of USMD Inc. (“USMD”) will be held at 6:00 p.m., local time, on [ ], 2012, at the principal executive offices of USMD located at 6333 North State Highway 161, Suite 200, Irving, Texas 75038, for the following purposes:

•

to consider and vote upon a proposal to approve and adopt the Contribution and Purchase Agreement, dated as of August 19, 2010, as amended on February 9, 2012, by and among USMD Holdings, Inc., USMD, Urology Associates of North Texas, L.L.P. and UANT Ventures, L.L.P. (as amended, the “Contribution Agreement”), a copy of which is attached as Annex A to the joint proxy statement/prospectus accompanying this notice, and the transactions contemplated thereby, including the approval of the contribution by the USMD shareholders of all of the shares of USMD common stock; and

•

The board of directors of USMD has fixed [ ], 2012 as the record date for the determination of USMD shareholders entitled to notice of, and to vote at, the USMD special meeting or any adjournments or postponements of the USMD special meeting. Only holders of record of USMD common stock at the close of business on such record date are entitled to notice of, and to vote at, the USMD special meeting. At the close of business on the record date, USMD had 29,707,912 shares of common stock outstanding and entitled to vote.

Your vote is important. The affirmative vote of holders of two-thirds of the USMD common stock outstanding and entitled to vote on the record date is required to approve the Contribution Agreement.

Even if you plan to attend the USMD special meeting in person, USMD requests that you complete, sign and return the enclosed proxy card, and thus ensure that your shares will be represented at the USMD special meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote in favor of the Contribution Agreement. If you do attend the USMD special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

The majority of the directors on the USMD board of directors are considered interested directors under the Texas Business Organizations Code because they are partners of, and receive compensation from, UANT Ventures, L.L.P. or its affiliates. As a result, the interests of these directors may be different from those of the USMD shareholders who do not have any ownership in or financial affiliation with Ventures. It will be important for you to carefully review the disclosures contained in this joint proxy statement/prospectus and form your own opinions about the benefits of the proposed Contribution.

The USMD board of directors has determined that the Contribution Agreement and the transactions contemplated by it are advisable and in the best interests of USMD and its shareholders. The USMD board of directors unanimously recommends that USMD shareholders vote “FOR” the approval and adoption of the Contribution Agreement and the transactions contemplated thereby.

By Order of the Board of Directors,

/s/ John M. House

John M. House

Chairman of the Board

ADDITIONAL INFORMATION

This proxy statement/prospectus forms a part of a registration statement on Form S-4 (Registration No. 333-171386), filed by Holdings with the SEC. It constitutes a prospectus of Holdings under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), and the rules thereunder, with respect to the shares of Holdings common stock to be issued to the shareholders of USMD and partners of Ventures in the Contribution. In addition, it constitutes a proxy statement and a notice of meeting with respect to the special meetings of shareholders and partners of USMD and Ventures, respectively, at which the USMD shareholders and Ventures partners will consider and vote on the proposals to approve the Contribution. This proxy statement/prospectus does not constitute a prospectus of either USMD or Ventures.

You should rely only on the information contained in this proxy statement/prospectus or on information to which Holdings has referred you. None of Holdings, USMD, UANT, Ventures, MCNT or Impel has authorized any other party to provide you with any information. USMD has provided the information herein concerning USMD, UANT has provided the information herein concerning UANT and Ventures, MCNT has provided the information herein concerning MCNT and Impel has provided the information herein concerning Impel.

This proxy statement/prospectus incorporates important business and financial information about Holdings that is not included in or delivered with this proxy statement/prospectus. We will provide you with copies of this information, without charge, upon written or oral request to:

USMD Holdings, Inc.

6333 North State Highway 161, Suite 200

Irving, Texas 75038

Attention: General Counsel

Phone: (214) 493-4000

In order to receive timely delivery of this information, you should make your request no later than [ ], 2012, five business days before the date you must make your investment decision.

TABLE OF CONTENTS


QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETINGS AND THE CONTRIBUTION			1
SUMMARY			8
THE COMPANIES			8
THE TRANSACTION			9
RISK FACTORS			11
SPECIAL MEETING OF VENTURES PARTNERS			11
SPECIAL MEETING OF USMD SHAREHOLDERS			12
MANAGEMENT FOLLOWING TRANSACTION			13
OPINION OF FINANCIAL ADVISOR			13
INTERESTS OF THE MANAGING PARTNER AND OFFICERS OF VENTURES AND OF THE DIRECTORS AND OFFICERS OF USMD IN THE TRANSACTION			14
CONTEMPORANEOUS TRANSACTIONS			15
EFFECTIVE TIME OF TRANSACTION			15
THIRD-PARTY CONSENTS			15
U.S. FEDERAL INCOME TAX CONSEQUENCES OF TRANSACTIONS			16
ANTICIPATED ACCOUNTING TREATMENT			16
OVERVIEW OF CONTRIBUTION AND PURCHASE AGREEMENT			16
COMPARISON OF SHAREHOLDER RIGHTS			18
SELECTED HISTORICAL FINANCIAL DATA OF HOLDINGS			19
SELECTED HISTORICAL FINANCIAL DATA OF USMD			20
SELECTED HISTORICAL FINANCIAL DATA OF UANT			21
SELECTED HISTORICAL FINANCIAL DATA OF MCNT AND IMPEL			22
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF HOLDINGS			23
RISK FACTORS			25
RISKS RELATING TO OUR BUSINESSES AND THE INDUSTRY IN WHICH WE OPERATE			25
RISKS RELATING TO FEDERAL AND STATE LAWS AND REGULATIONS			32
RISKS RELATING TO OWNERSHIP OF OUR COMMON STOCK			37
RISKS RELATING TO THE CONTRIBUTION			40
RISKS RELATING TO FEDERAL INCOME TAXES			44
FORWARD-LOOKING STATEMENTS			47
THE SPECIAL MEETING OF VENTURES PARTNERS			48
GENERAL			48
DATE, TIME AND PLACE			48
PURPOSES OF THE VENTURES SPECIAL MEETING			48
RECORD DATE AND VOTING POWER			48
VOTING AND REVOCATION OF PROXIES			48
SOLICITATION OF PROXIES			49
OTHER MATTERS			49
MATTERS TO BE SUBMITTED TO A VOTE OF VENTURES PARTNERS			50
GENERAL			50
VOTE REQUIRED			50
CREATION OF VENTURES TASK FORCE			50
RECOMMENDATIONS OF VENTURES’ MANAGING PARTNER AND THE VENTURES TASK FORCE			50
THE SPECIAL MEETING OF USMD SHAREHOLDERS			51
GENERAL			51
DATE, TIME AND PLACE			51
PURPOSES OF THE USMD SPECIAL MEETING			51
RECORD DATE AND VOTING POWER			51
VOTING AND REVOCATION oF PROXIES			51
SOLICITATION OF PROXIES			52


QUORUM			52
INTERESTED DIRECTORS			52
SHAREHOLDERS’ AGREEMENT			52
APPRAISAL RIGHTS			53
OTHER MATTERS			55
MATTERS TO BE SUBMITTED TO A VOTE OF USMD SHAREHOLDERS			56
GENERAL			56
VOTE REQUIRED			56
RECOMMENDATIONS OF USMD BOARD OF DIRECTORS			56
THE TRANSACTION			57
BACKGROUND OF THE TRANSACTION			57
FAIRNESS OPINION OF VMG HEALTH			63
INTERESTS IN THE TRANSACTION OF THE MANAGING PARTNER OF VENTURES AND OF THE DIRECTORS AND OFFICERS OF USMD, MCNT AND IMPEL			69
TRANSACTION CONSIDERATION AND ADJUSTMENTS			70
CONTEMPORANEOUS TRANSACTIONS			72
SUBSEQUENT TRANSFERS OF BUSINESS UNITS; PHYSICIAN EMPLOYMENT ARRANGEMENTS			72
EFFECTIVE TIME OF TRANSACTION			73
THIRD-PARTY CONSENTS			73
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION			73
ANTICIPATED ACCOUNTING TREATMENT			78
DESCRIPTION OF CONTRIBUTION AND PURCHASE AGREEMENT			79
GENERAL			79
CONSIDERATION			80
CONTRIBUTION BY VENTURES			80
STOCK OPTION CONVERSION			81
REPRESENTATIONS AND WARRANTIES OF THE PARTIES			81
COVENANTS			82
CONDITIONS TO COMPLETION OF TRANSACTION			83
TERMINATION AND TERMINATION FEES			83
INFORMATION ABOUT THE COMPANIES			84
GENERALLY			84
INDUSTRY OVERVIEW			85
BUSINESS OF USMD			91
BUSINESSES OF UANT AND VENTURES			94
BUSINESS OF MCNT			96
BUSINESS OF IMPEL			100
GENERAL BUSINESS INFORMATION			100
IMPACT OF CERTAIN GOVERNMENT REGULATIONS			101
HOLDINGS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			107
EXECUTIVE OVERVIEW			107
KEY DEVELOPMENTS			108
RESULTS OF OPERATIONS			108
LIQUIDITY AND CAPITAL RESOURCES			108
RECENT ACCOUNTING PRONOUNCEMENTS			110
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			110
USMD’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			111
EXECUTIVE OVERVIEW			111
SOURCES OF REVENUE			112
KEY DEVELOPMENTS			113
KEY DRIVERS AND CHALLENGES			114


RESULTS OF OPERATIONS			115
PRO FORMA RESULTS OF OPERATIONS			119
LIQUIDITY AND CAPITAL RESOURCES			122
CAPITAL RESOURCES AND DEBT OBLIGATIONS			123
PRO FORMA LIQUIDITY AND CAPITAL RESOURCES			125
OFF-BALANCE SHEET ARRANGEMENTS			126
CRITICAL ACCOUNTING POLICIES AND ESTIMATES			126
RECENT ACCOUNTING PRONOUNCEMENTS			130
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			130
UANT’S AND VENTURES’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			131
EXECUTIVE OVERVIEW			131
RESULTS OF OPERATIONS			134
LIQUIDITY AND CAPITAL RESOURCES			136
OFF-BALANCE SHEET ARRANGEMENTS			139
CRITICAL ACCOUNTING POLICIES AND ESTIMATES			139
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS			144
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			144
MCNT’S AND IMPEL’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			145
EXECUTIVE OVERVIEW			145
RESULTS OF OPERATIONS			148
LIQUIDITY AND CAPITAL RESOURCES			150
LIQUIDITY, CAPITAL RESOURCES AND DEBT AND LEASE OBLIGATIONS			151
OFF-BALANCE SHEET ARRANGEMENTS			151
CRITICAL ACCOUNTING POLICIES AND ESTIMATES			151
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS			153
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			154
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA FOR HOLDINGS			155
MANAGEMENT FOLLOWING THE TRANSACTION			161
EXECUTIVE OFFICERS AND DIRECTORS			161
INVESTOR RIGHTS AGREEMENT			164
BOARD COMPOSITION AND DIVERSITY POLICIES			164
DIRECTOR INDEPENDENCE			164
DIRECTOR COMPENSATION			165
BOARD COMMITTEES AND GOVERNANCE			166
LIMITATION OF LIABILITY OF DIRECTORS			166
CODE OF CONDUCT AND NON-RETALIATION POLICY			166
HOLDINGS EXECUTIVE COMPENSATION			167
SUMMARY COMPENSATION TABLE			167
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END – 2011			168
SEVERANCE AND CHANGE OF CONTROL BENEFITS			168
TRANSACTIONS WITH RELATED PERSONS			170
BENEFICIAL OWNERSHIP OF HOLDINGS STOCK			171
DESCRIPTION OF HOLDINGS CAPITAL STOCK			173
GENERAL			173
COMMON STOCK			173
PREFERRED STOCK			173
DIVIDEND POLICY			173
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND OUR CERTIFICATE OF INCORPORATION AND BYLAWS			173


TRANSFER AGENT AND REGISTRAR			175
LISTING			175
COMPARISON OF RIGHTS OF HOLDERS OF USMD COMMON STOCK AND HOLDINGS COMMON STOCK			176
AUTHORIZED CAPITAL STOCK			176
DIVIDENDS/DISTRIBUTIONS			177
BOARD OF DIRECTORS			177
VOTING RIGHTS			178
SHAREHOLDER ACTIONS			180
RIGHTS OF DISSENTING SHAREHOLDERS			181
AMENDMENT OF CHARTER DOCUMENTS			181
LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS			182
INDEMNIFICATION OF DIRECTORS AND OFFICERS			182
ANTI-TAKEOVER PROVISIONS			183
LEGAL MATTERS			184
EXPERTS			184
SHAREHOLDER PROPOSALS FOR THE 2013 ANNUAL MEETING			184
INDEX TO FINANCIAL STATEMENTS			F-1
ANNEX A – CONTRIBUTION AND PURCHASE AGREEMENT AND AMENDMENT TO THE CONTRIBUTION AND PURCHASE AGREEMENT			A-1
ANNEX B – FAIRNESS OPINION OF VMG HEALTH			B-1
ANNEX C – SECTIONS 10.351 TO 10.368 OF TEXAS BUSINESS ORGANIZATIONS CODE			C-1

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETINGS AND THE CONTRIBUTION

The following section provides answers to frequently asked questions about the USMD special meeting of shareholders and the Ventures special meeting of partners. This section, however, only provides summary information. These questions and answers do not address all issues that may be important to you as a shareholder of USMD or a partner of Ventures. We encourage you to read this joint proxy statement/prospectus (the “Prospectus”) carefully and in its entirety, including each of the annexes.

Q.	Who are the parties?

A.	USMD Inc., a Texas corporation (“USMD”)

UANT Ventures, L.L.P., a Texas limited liability partnership (“Ventures”)

Urology Associates of North Texas, L.L.P., a Texas limited liability partnership (“UANT”)

USMD Holdings, Inc., a newly formed Delaware corporation (“Holdings”)

The Medical Clinic of North Texas, P.A., a Texas professional association (“MCNT”)

Impel Management Services, L.L.C., a Texas limited liability company (“Impel”)

Q.	What is the proposed Contribution?

It is proposed that the USMD shareholders contribute all of their common stock in USMD to either Ventures or Holdings, and that Ventures contribute all of its assets, which will, at the time of such contribution, include all of its equity interests in USMD, UANT, MCNT and Impel, to Holdings (the contribution by the USMD shareholders and by Ventures being collectively referred to as the “Contribution”). As a result of the Contribution, the businesses previously conducted separately by USMD, UANT, Ventures, MCNT and Impel will consolidate into a single integrated health services company under the common ownership of Holdings.

Q.	How will the Contribution be consummated?

Immediately prior to the Contribution, the equity owners of each of UANT, MCNT and Impel will cause each entity to merge with a separate subsidiary of Ventures. UANT, MCNT and Impel will be the surviving entities of their mergers and will become wholly-owned subsidiaries of Ventures. In addition, immediately prior to the Contribution, certain of the USMD shareholders will contribute all or a portion of their shares of USMD common stock to Ventures in order to become partners in Ventures. When the Contribution is consummated, Ventures will contribute its equity interests in USMD, UANT, MCNT and Impel as part of the contribution of its assets to Holdings, and the USMD shareholders who continue to own shares of USMD common stock will contribute those shares to Holdings, in exchange for shares of Holdings common stock.

Q.	Why are the companies proposing the Contribution?

UANT is a physician group practice that provides professional medical services in the medical specialty of urology. USMD develops, operates, and manages entities that deliver diagnostic, therapeutic, and hospital-based healthcare services to patients with an emphasis on urological care. Ventures was formed by the partners of UANT to hold certain passive investment interests of UANT. UANT and Ventures have historically had identical ownership structures and have interlocking ownership and management with USMD. MCNT is a multi-specialty physician practice group that provides professional medical services to patients throughout the Dallas/Fort Worth metropolitan area in the specialties of family medicine, internal medicine, obstetrics and gynecology, pediatrics, psychotherapy, sports medicine, rheumatology, endocrinology, infectious disease, geriatrics, neurology, podiatry, general surgery, allergy and immunology, travel medicine and diabetes education. Impel provides management, operational and administrative services primarily to MCNT, and has interlocking ownership and management with MCNT.

The relationships among the various constituent entities and their physician owners are heavily regulated by federal and state laws and regulations, which are subject to constant change. By combining into a single integrated health services company, Holdings believes it will:

•

more efficiently deliver healthcare services to the public;

•

reduce the potential compliance risk associated with physician ownership of and financial arrangements with related companies by having physician ownership in Holdings take the form of publicly traded securities;

•

eliminate existing regulatory barriers to expanding USMD and UANT’s current strategic relationships and fostering new relationships with MCNT and Impel; and

•

assist Holdings in creating an accountable care organization that is well-positioned to provide comprehensive patient care.

For a more complete description of the reasons for the Contribution, see the section entitled “THE TRANSACTION—Background of the Transaction.”

Q.	What will USMD shareholders and Ventures receive in the Contribution?

A.	Holdings will issue a total of 10 million shares of its common stock to the USMD shareholders and Ventures, and will issue options to Ventures to purchase shares of its common stock, in exchange for their respective contributions of equity and assets to Holdings in the Contribution.

Q.	How will the 10 million shares of Holdings common stock be allocated between the USMD shareholders and Ventures?

The Contribution Agreement provides a formula and related schedules for allocating the number of shares of Holdings common stock between Ventures and the USMD shareholders who contributed their shares of USMD common stock directly to Holdings. The formula will utilize the net enterprise values of the individual business lines and investments of USMD, UANT, Ventures, MCNT and Impel, as agreed upon by the parties, and adjusted for indebtedness, deferred payment obligations, working capital, certain agreed upon capital expenditures and changes in ownership percentages of the business units, as more particularly described in the Contribution Agreement.

Had the Contribution been completed as of September 30, 2011, the net enterprise value agreed upon by the parties, as adjusted for indebtedness, deferred payment obligations, working capital and certain agreed upon capital expenditures, of the businesses lines and investments of USMD, UANT/Ventures, MCNT and Impel would have been approximately $85.4 million, $99.7 million, $45.5 million and $13.2 million, respectively. Because Ventures would have contributed all of the outstanding equity interests of UANT, MCNT and Impel and a portion of the outstanding shares of USMD common stock, as of September 30, 2011, it would have been allocated approximately 9,275,000 of the 10 million shares of Holdings common stock based on the net enterprise values of those entities. As of such date, the USMD shareholders who contribute their shares of USMD common stock directly to Holdings would have been allocated approximately 725,000 shares of the 10 million shares of Holdings common stock based on the net enterprise value of USMD calculated on a per share basis. The companies will determine any adjustments as promptly as practicable following the closing in accordance with the formulas set forth in the Contribution Agreement. To the extent that, as of the closing date of the Contribution, there are changes in the percentage ownership of equity investments or changes in indebtedness or working capital from the levels set forth in the Contribution Agreement, the relative value of the Contribution and the number of shares each will receive will be adjusted accordingly. Of the 10 million shares to be issued in connection with the Contribution, an aggregate of one million shares will be set aside until the adjustments are finalized. See “THE TRANSACTION—Transaction Consideration and Adjustments” for additional information about the consideration Holdings will give for the Contribution.

Q.	Why did the parties structure the Contribution so that Ventures will hold a significant portion of the Holdings common stock?

Certain of the USMD shareholders intend to contribute a substantial portion of their shares of UMSD common stock to Ventures in exchange for partnership interests in Ventures. Similarly, because each of UANT, MCNT and Impel will merge with wholly-owned subsidiaries of Ventures prior to the consummation of the Contribution, the equity holders of UANT, MCNT and Impel will receive partnership interests in Ventures as part of the mergers.

The reasons that the equity holders of the constituent entities selected this transaction structure are as follows:

•

to consolidate voting control of Holdings into one entity that is managed by the physician owners;

•

to enable Holdings to qualify as a “controlled company” for purposes of the governance rules of the NASDAQ Capital Market; and

•

to ensure that the desired federal income tax consequences of the combination would be achieved by causing at least 80% of the Holdings common stock to be owned by the persons who are party to the Contribution and not quickly resold in the public market.

As a result of this transaction structure, and based on the net enterprise values of the entities as of September 30, 2011, Ventures will own approximately 9.3 million shares, or 93% of Holdings common stock upon completion of the Contribution. However, immediately following the completion of the Contribution, Ventures intends to distribute approximately 535,000 shares of Holdings common stock to its partners on a pro rata basis. See “Will the Ventures partners hold any shares of Holdings common stock outside of Ventures?”

Q.	Will the Ventures partners hold any shares of Holdings common stock outside of Ventures?

Yes. Holdings is seeking to be listed for quotation on the NASDAQ Capital Market and the NASDAQ Capital Market requires that its listed companies maintain a minimum of one million shares of common stock that are “publicly held.” “Publicly held” means those shares of a company’s common stock that are held by persons other than the directors, officers and those person who beneficially own more than 10% of the listed company’s outstanding stock. To ensure that Holdings meets this “publicly held” share requirement, Ventures intends to distribute approximately 535,000 shares of Holdings common stock to its partners on a pro rata basis immediately following the consummation of the Contribution. This distribution may have tax consequences to certain of the Ventures partners. See “THE TRANSACTION—U.S. Federal Income Tax Consequences of the Transaction.” As a result of this distribution and the shares of Holdings common stock to be held outside Ventures by the USMD shareholders who are contributing directly to Holdings, Holdings estimates that it will have approximately 1,145,000 shares that qualify as “publicly held.”

Q.	What steps did Ventures take to alleviate any potential conflicts of interest its managing partner may have in negotiating a business transaction with USMD?

At the time Ventures was negotiating the Contribution Agreement, most of the Ventures partners had no financial interest in or business arrangements with USMD (other than their indirect ownership of the USMD common stock held by Ventures) or with Holdings. However, the managing partner of Ventures is the Chairman, President and CEO of USMD and Holdings and, as such, had interests in the transaction that may have been different from the interests of those unaffiliated Ventures partners. With the approval of the Ventures partners, Ventures appointed an independent task force (the “Ventures Task Force “) composed of unaffiliated Ventures partners for the purpose of negotiating the terms and conditions of the Contribution Agreement and making a recommendation to the Ventures partners with respect to the approval of the Contribution Agreement. The Ventures Task Force independently determined that the Contribution is in the best interests of the Ventures partners.

Q.	What steps did USMD take to alleviate any potential conflicts of interest its board of directors may have in negotiating a business transaction with UANT and Ventures?

A.	Three of the five directors, Drs. John House, Patrick Collini and James Saalfield, on the USMD board of directors are considered interested directors under the Texas Business Organizations Code because they have ownership

interests in Ventures or its affiliates. USMD considered the contributions made by these directors to be vital in the negotiation and structuring of the Contribution, but recognized there was a potential that the interests of these directors may be different from those of the USMD shareholders who did not have any ownership in or financial affiliation with Ventures. To alleviate any potential conflict of interest, USMD created a working group which included all five directors, including the two independent directors, as well as USMD’s chief financial officer and legal counsel, neither of whom have any financial interests in Ventures. This working group unanimously determined that the Contribution was in the best interests of USMD prior to submitting the documents to the USMD board of directors for approval. Further, the USMD board of directors, along with the UANT board of directors and the Ventures executive committee, retained Value Management Group, LLC, d/b/a VMG Health (“VMG Health”) as an independent third party to determine and deliver an opinion (described below) that the relative allocation of the consideration to be received was fair, from a financial point of view, to the USMD shareholders and Ventures. Finally, all of USMD’s directors, including the independent directors, voted unanimously to recommend the USMD shareholders approve the Contribution.

Q.	What opinion did USMD, UANT and Ventures receive from VMG Health?

On February 9, 2012, VMG Health delivered its written opinion to the USMD board of directors, the UANT board of directors and the Ventures executive committee to the effect that, as of such date and based upon and subject to the matters and assumptions set forth in such opinion, the relative allocation established by the Contribution Agreement of the consideration to be received by the USMD shareholders and by Ventures, taken in the aggregate, was fair from a financial point of view to the USMD shareholders and to Ventures. The full text of VMG Health’s written opinion, dated February 9, 2012, which describes the assumptions made, procedures followed, factors considered and limitations on the review undertaken, has been filed with the SEC with this Prospectus as Annex B and is incorporated by reference herein in its entirety.

Q.	When do you expect the Contribution to be completed?

A.	We anticipate that consummation of the Contribution will occur as soon as practicable after the special meetings of USMD shareholders and Ventures partners and anticipate that it will be effected in mid-2012.

Q.	How will USMD stock options be treated in the Contribution?

As of December 31, 2011, USMD had granted options to purchase 1,757,500 shares of USMD common stock pursuant to the USMD Inc. 2007 Long Term Incentive Plan. On the date the Contribution closes, all outstanding stock options granted under the USMD Inc. 2007 Long Term Incentive Plan will be assumed, and deemed to constitute stock options granted, under the USMD Holdings, Inc. 2010 Equity Compensation Plan. The exercise price and number of shares issuable under these Holdings options will be determined, at the closing of the Contribution, by use of a conversion formula that is based on the number of shares of USMD common stock outstanding relative to the number of shares of Holdings common stock that was allocated to Ventures and the USMD shareholders based on the net enterprise value of USMD and its operations.

As part of the Contribution Agreement and in order to compensate Ventures for dilution arising from the potential exercise by the USMD shareholders of their options to purchase shares of Holdings common stock, Holdings has agreed to grant to Ventures options to purchase the number of Holdings shares that is equivalent to 657,500 shares of USMD common stock, as converted based upon the conversion formula noted above. See “DESCRIPTION OF THE CONTRIBUTION AND PURCHASE AGREEMENT—Stock Option Conversion” for additional information. To the extent that USMD issues additional stock options to persons who will become the senior officers of Holdings (to date it has issued 1,050,000 such options), the parties have agreed that Ventures will not receive additional options or other matching consideration.

Q.	When is the USMD special shareholder meeting?

A.	The special meeting of USMD’s shareholders to vote on the approval of the Contribution Agreement will be held at 6:00 p.m., local time, on [ ], 2012, at the principal executive offices of USMD located at 6333 North State Highway 161, Suite 200, Irving, Texas 75038.

Q.	Who is entitled to vote at the USMD special shareholder meeting and what is the vote requirement to approve the Contribution Agreement?

At the special meeting, each USMD shareholder may cast one vote per share of USMD common stock held by him on the close of business on [ ], 2012, the record date for the special meeting. As of the record date, 27,707,912 shares of USMD common stock were outstanding and entitled to vote. The proposal to approve the Contribution Agreement must be approved by the affirmative vote of the holders of at least two-thirds of the shares of USMD common stock outstanding, entitled to vote and present in person or by proxy at a shareholder meeting at which a quorum is present. A quorum for the special meeting is the presence of USMD shareholders representing more than 50% of the shares eligible to vote at the meeting. Shareholders may vote in person or by proxy.

Q.	When is the Ventures special meeting of partners?

A.	The special meeting of Ventures’ partners to vote on the approval of the Contribution Agreement will be held at 6:00 p.m., local time, on [ ], 2012, at the principal executive offices of Ventures located at 612 East Lamar Blvd., Suite 700, Arlington, Texas 76011.

Q.	Who is entitled to vote at the Ventures special meeting of partners and what is the vote requirement to approve the Contribution Agreement?

Only holders of record of Ventures partnership interests at the close of business on [ ], 2012, the record date for the special meeting, are entitled to vote at the Ventures special meeting. At the close of business on the record date, Ventures had [ ] partners entitled to vote at the special meeting. The affirmative vote of at least 75% of the partners of Ventures is required to approve the Contribution Agreement. Partners may vote in person or by proxy.

Q.	What do I need to do now?

We encourage you to read this Prospectus carefully in its entirety, including each of the annexes, and to consider how the issuance of shares pursuant to the Contribution Agreement affects you. You may vote by completing, dating and signing the enclosed proxy card and returning it by mail in the enclosed postage-paid envelope, in person or by courier service to:

If to Ventures:

UANT Ventures, L.L.P.

612 East Lamar Blvd., Suite 700

Arlington, Texas 76011

Attention: Chief Executive Officer

If to USMD:

USMD Inc.

6333 North State Highway 161, Suite 200

Irving, Texas 75038

Attention: General Counsel

Alternatively, you may vote by delivering your completed proxy card at the special meeting or vote by completing a ballot in person at the special meeting.

If the Contribution is approved, USMD shareholders will be asked to execute a power of attorney authorizing the secretary of USMD to surrender the certificates representing their shares of USMD common stock in order to receive the shares of Holdings common stock or partnership interests in Ventures that they are entitled to receive as part of the Contribution. USMD shareholders do not execute anything now, but will receive written instructions upon completion of the Contribution. If the Contribution is approved, the Ventures partners will continue to own their partnership interests in Ventures and accordingly do not need to take any further action.

Q.	How does the board of directors of USMD recommend the USMD shareholders vote?

The USMD board of directors has determined that the Contribution Agreement and the proposed Contribution are fair to, and in the best interests of, the USMD shareholders and unanimously recommends that the USMD shareholders vote FOR the proposal to approve the Contribution Agreement. It is important to note, however, that three of the five directors on the USMD board of directors are considered interested directors under the Texas Business Organizations Code because they are partners of, and receive compensation from, Ventures or its affiliates. As a result, the interests of these directors may be different from those of the USMD shareholders who do not have any ownership in or financial affiliation with Ventures. It will be important for you to carefully review the disclosures contained in this Prospectus and form your own opinions about the benefits of the proposed Contribution.

Q.	How do the managing partner of Ventures and the Ventures Task Force recommend the Ventures partners vote?

The managing partner of Ventures and the Ventures Task Force have determined that the Contribution Agreement and the proposed Contribution are fair to, and in the best interests of, Ventures and its partners and unanimously recommend that the Ventures partners vote FOR the proposal to approve the Contribution Agreement.

Q.	May I change my vote after I have mailed my signed proxy card?

USMD shareholders: You may change your vote at any time before your proxy is voted at the special meeting in one of three ways. First, you can send a written notice to USMD stating that you wish to revoke your proxy. Second, you can complete and submit a new proxy card. If you choose either of these two methods, you must submit your notice of revocation or your new proxy card to:

USMD Inc.

6333 North State Highway 161, Suite 200

Irving, Texas 75038

Attention: General Counsel

Third, you can attend the special meeting and vote in person. Simply attending the special meeting, however, will not revoke your proxy; you must vote at the meeting.

Ventures partners: You may change your vote at any time before your proxy is voted at the special meeting one of three ways. First, you can send a written notice to Ventures stating that you wish to revoke your proxy. Second, you can complete and submit a new proxy card. If you choose either of these two methods, you must submit your notice of revocation or your new proxy card to:

UANT Ventures, L.L.P.

612 East Lamar Blvd., Suite 700

Arlington, Texas 76011

Attention: Chief Executive Officer

Third, you can attend the special meeting and vote in person. Simply attending the special meeting, however, will not revoke your proxy; you must vote at the meeting.

Q.	What will happen if the Contribution is not approved?

If the Contribution is not approved, USMD, UANT, Ventures, MCNT and Impel will continue to operate in the same manner as they currently operate their businesses as independent but, in some cases, related companies. See “THE TRANSACTION—Background of the Transaction” for further explanation. Even if the Contribution is approved, the Contribution may not be completed if the parties fail to complete or satisfy certain conditions. If the companies fail to satisfy certain conditions, the Contribution Agreement will terminate without liability to any party and the companies will continue to operate as independent entities in

accordance with past practices. If the Contribution is not completed as a result of the failure of either the USMD shareholders or the Ventures partners to approve the Contribution, the party whose shareholders or partners failed to approve the Contribution will be liable for the expenses incurred on or after April 28, 2010 relating to this Prospectus and the Contribution of the other party, up to a maximum of $500,000.

Q.	Who can help answer my questions?

A.	USMD shareholders: If you have more questions about the proposals, you should contact:

USMD Inc.

6333 North State Highway 161, Suite 200

Irving, Texas 75038

Attention: General Counsel

Ventures partners: If you have more questions about the proposals, you should contact:

UANT Ventures, L.L.P.

612 East Lamar Blvd., Suite 700

Arlington, Texas 76011

Attention: Chief Executive Officer

SUMMARY

This summary highlights selected information contained in this Prospectus and does not contain all of the information that may be important to you. To better understand the Contribution and its effect on you, you should read carefully this Prospectus in its entirety, including the annexes.

The Companies

Holdings. Holdings was formed in 2010 in contemplation of the Contribution by USMD and Ventures to facilitate the business combination of USMD, UANT and Ventures. As of December 31, 2011, Holdings had no operations or revenues and its only expenses were those related to the issuance of restricted shares of its common stock and expenses associated with the preparation and filing of periodic reports with the SEC. Upon consummation of the Contribution, Holdings intends to continue to own and operate the existing lines of business currently owned and operated by USMD, UANT, Ventures, MCNT and Impel. Holdings principal executive offices are located at 6333 South State Highway 161, Suite 200, Irving, Texas 75038 and its phone number is (214) 493-4000.

USMD. USMD owns and operates three healthcare management companies–USMD Hospital Division, USMD CTC Division and USMD Lithotripsy Division–that develop, acquire, own, operate and/or manage acute-care hospitals, cancer treatment centers and lithotripsy service providers. USMD Hospital Division currently beneficially owns a 5% interest in, and manages, USMD Arlington Hospital, and also owns a 20% interest in, and manages, USMD Fort Worth Hospital. USMD Hospital Division manages the hospital operations of both hospitals pursuant to long-term contractual management agreements. USMD CTC Division is a healthcare management services company that was formed to establish, acquire, operate and/or manage cancer treatment centers that specialize in the provision of intensity-modulated radiation therapy and radio surgery procedures. As of December 31, 2011, USMD CTC Division had six management agreements under which it manages a total of nine radiation therapy centers located in Texas, Missouri, Arizona and Florida. USMD Lithotripsy Division is a healthcare management services company that was formed to establish, acquire, operate and/or manage joint venture entities that provide lithotripsy services to hospitals, ambulatory surgery centers, and/or physician offices. As of December 31, 2011, USMD Lithotripsy Division provided management services to 23 lithotripsy service providers, either pursuant to a management agreement or as a result of its role as general partner or managing member of such providers. In addition, USMD Lithotripsy Division owns equity interests in substantially all of these lithotripsy service providers. The lithotripsy service providers are primarily located in the South Central United States. The lithotripsy service providers are primarily located in the South Central United States. USMD’s principal executive offices are located at 6333 South State Highway 161, Suite 200, Irving, Texas 75038 and its phone number is (214) 493-4000.

Ventures. Ventures is a Texas limited liability partnership that was formed by the partners of UANT to hold certain passive investment interests of UANT. As of December 31, 2011 Ventures’ assets consist of a 23.4% ownership interest in USMD Arlington Hospital, a 10.9% ownership interest in USMD Fort Worth Hospital and a 0.9% interest in Rocky Mountain Medical Center, LP (dba North Texas Hospital). Ventures’ principal executive offices are located at 612 East Lamar Blvd., Suite 700, Arlington, Texas 76011 and its phone number is (817) 784-8268.

UANT. UANT is a urological surgical physician practice group that provides professional and ancillary urological healthcare services to patients in the greater Dallas/Fort Worth metropolitan area. These healthcare services include general urology, male infertility and sexual dysfunction, pediatric urology, incontinence, neurourology, oncology, special surgery, cryosurgery and radiation oncology. UANT is one of the largest fully-integrated physician practice groups in the United States specializing in urology and has one of the largest robotic surgery programs in the United States. As of December 31, 2011, UANT’s medical group practice includes 53 physicians who practice at 24 different locations across the North Texas area and one pathologist who practices in Florida.

MCNT. MCNT is a physician-owned and physician-controlled multi-specialty group that, as of December 31, 2011, has 145 physicians and 40 sites located throughout the Dallas/Fort Worth metropolitan area. MCNT is the largest independently owned multi-specialty group practice in the Dallas/Fort Worth metropolitan area and provides professional medical services to patients in the specialties of family medicine, internal medicine, obstetrics and gynecology, pediatrics, psychotherapy, sports medicine, rheumatology, endocrinology, infectious disease, geriatrics, neurology, podiatry, general surgery, allergy and immunology, travel medicine and diabetes education. MCNT’s clinics are managed by Impel.

Impel. Impel is a physician practice management company that handles all training, accounting, finance, operations management, marketing, billing and collection services for MCNT, and has interlocking ownership and management with MCNT. As of December 31, 2011, Impel manages each of MCNT’s medical clinics, but does not manage any third party clinics. Impel also provides EHR and EPM services through its wholly-owned subsidiary, Impel Consulting Experts, LLC. As of December 31, 2011, Impel Consulting Group, LLC provides physician and staff training and has approximately 31 clients in 20 different states

The Transaction

Background of the Transaction

USMD, UANT and MCNT were founded on a commitment to a healthcare delivery system controlled by physicians. The Contribution permits USMD, UANT, Ventures, MCNT and Impel to structure physician ownership of an integrated healthcare delivery system that complies with health care fraud and abuse laws, and that Holdings believes will enable USMD, UANT, Ventures, MCNT and Impel to provide exceptional patient care without running afoul of federal regulations that govern the referral of patients between physicians and entities they own. In early 2009, USMD, Ventures and UANT began to discuss the possibility of combining the operations of their businesses into one company and these discussions culminated in the execution of the Contribution Agreement on August 19, 2010. In 2010, USMD management began investigating opportunities to broaden its service lines and breadth and identified business combinations in MCNT and Impel as a means to achieve this goal. In early 2010, USMD and Ventures management began discussion regarding business combinations with MCNT and Impel. Throughout 2011, USMD, UANT, Ventures, MCNT and Impel negotiated the terms of definitive agreements pursuant to which subsidiaries of Ventures would merge with and into each of MCNT and Impel. The parties signed merger agreements relating to these mergers in December 2011, and USMD, UANT and Ventures executed an amendment to the Contribution Agreement on February 9, 2012.

Transaction Consideration and Adjustments

The consideration for the Contribution will consist of 10 million shares of Holdings common stock (allocated between Ventures and the USMD shareholders who are contributing their stock directly to Holdings as indicated below) and options granted to Ventures to purchase shares of Holdings common stock.

Ventures will contribute all of its assets to Holdings in exchange for shares of Holdings common stock. Immediately prior to the Contribution, the equity owners of each of UANT, MCNT and Impel will cause each entity to merge with a separate subsidiary of Ventures. UANT, MCNT and Impel will be the surviving entities of their mergers and will become wholly-owned subsidiaries of Ventures. In addition, certain of the USMD shareholders will contribute a portion of their shares of USMD common stock to Ventures in order to become partners in Ventures. Ventures will then contribute its equity interests in USMD, UANT, MCNT and Impel as part of the contribution of its assets to Holdings. At the same time, the remaining USMD shareholders who continue to own shares of USMD common stock will contribute those shares to Holdings in exchange for shares of Holdings common stock.

The Contribution Agreement provides a formula and related schedules for allocating the number of shares of common stock that each USMD shareholder and Ventures will receive at the closing of the Contribution. The allocation of the shares is based on the net enterprise values of assets and businesses of USMD, UANT, Ventures, MCNT and Impel as agreed upon by the parties. In determining the net enterprise values of the individual business lines and investments, USMD, UANT, Ventures, MCNT and Impel prepared multi-year financial forecasts for each of their respective business lines and investments and provided these forecasts to each other for review and discussion. USMD, UANT and Ventures also provided historical financial information and financial forecasts related to USMD, UANT and Ventures to VMG Health for VMG Health’s evaluation in connection with its fairness opinion, and provided financial data regarding MCNT and Impel to VMG Health for VMG Health’s review of certain financial assumptions and projections contained in such financial data. VMG Health did not, however, express any opinion on or perform any valuations with respect to the MCNT and Impel financial data. The parties further provided each other with information regarding their percentage ownership of certain investments, debt balances as of December 31, 2011, net working capital adjustments and deferred payment obligations.

The parties determined that the gross enterprise value of contributions made to Holdings by USMD, UANT/Ventures, MCNT and Impel would have been $87.2 million, $110.5 million, $57.3 million and $10.2 million, respectively. The parties agreed to adjust these gross enterprise values at the closing of the Contribution to reflect (1) certain agreed upon capital expenditures by the entities, (2) subsequent changes in the amount of debt (on a consolidated basis to include debt held at the subsidiary level) owed by USMD, UANT/ Ventures, MCNT and Impel on the closing date of the Contribution, (3) the amount of deferred payment obligations to certain UANT partners as of the closing date of the Contribution, (4) any changes in ownership percentages of the assets or investments held by USMD, UANT, Ventures, MCNT or Impel as of the closing date of the Contribution, and (5) the amount of any net working capital adjustments after September 30, 2011. The deferred payment obligations represent obligations of UANT to make certain payments to former partners associated with the redemption of their partnership interests. As of September 30, 2011, the parties determined that the net enterprise value of the contributions made to Holdings by USMD, UANT/Ventures, MCNT and Impel would have been $85.4 million, $99.7 million, $45.5 million and $13.2 million, respectively.

Option Conversion

As of December 31, 2011, USMD had granted options to purchase an aggregate of 1,757,500 shares of USMD common stock (238,116 shares at an exercise price of $2.00 per USMD share, and 1,519,384 shares at an exercise price of $3.00 per USMD share) pursuant to the USMD Inc. 2007 Long Term Incentive Plan. On the date the Contribution closes and pursuant to the USMD Holdings, Inc. 2010 Equity Compensation Plan, all outstanding stock options granted under the USMD Inc. 2007 Long Term Incentive Plan will be assumed under the USMD Holdings, Inc. 2010 Equity Compensation Plan and deemed to constitute stock options granted under the USMD Holdings, Inc. 2010 Equity Compensation Plan. The exercise price and number of shares issuable under these Holdings options will be determined, at the closing of the Contribution, by use of a conversion formula that is based on the number of shares of USMD common stock outstanding relative to the number of shares of Holdings common stock that was allocated to Ventures and the USMD shareholders based on the net enterprise value of USMD and its operations. The exchange of those options is intended to be tax free for federal income tax purposes.

On the date the Contribution is effected, Holdings will grant to Ventures options to purchase the number of Holdings shares that is equivalent to 657,500 shares of USMD common stock in order to partially compensate Ventures’ for the dilution in its interest in Holdings arising from the existing USMD stock options. The exercise price and number of shares issuable under these Holdings options will be determined by use of the conversion formula applicable to the USMD stock options. It is expected that Venture’s receipt of the Holdings stock options will be taxable as described in “THE TRANSACTION—U.S. Federal Income Tax Consequences of the Transaction.”

In addition, the Contribution Agreement allows Holdings to issue up to 50,000 shares of Holdings common stock as restricted stock grants of 100 shares each to up to 500 employees of USMD and Ventures. At December 31, 2011, restricted stock grants aggregating approximately 37,300 shares had been made to 373 such employees.

Risk Factors

Holdings will provide health services through its consolidated subsidiaries and will receive management fee revenue based largely on the revenues generated from certain health care providers it manages. These entities are subject to various risks associated with their businesses and their financial condition that create risk with regards to Holdings’ financial performance. In addition, the Contribution poses a number of risks. The risks facing Holdings include the following:

•

Our subsidiaries and the health care providers we manage depend on their relationships with physicians and other healthcare providers who refer patients to them for their services.

•

A significant portion of the revenues of our subsidiaries and the health care providers we manage are payments from third-party payers.

•

Our indebtedness may limit our financial and operating flexibility.

•

Uncertainties exist in integrating the businesses and operations of USMD, UANT, Ventures, MCNT and Impel.

•

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

•

Federal and state laws and regulatory initiatives relating to healthcare reform could require us to expend substantial sums to respond appropriately to and comply with a broad variety of legislation, which could negatively impact our financial results.

•

An active trading market for our common stock may not develop, and you may not be able to resell your shares.

•

The lack of a public market for the equity interests of USMD, UANT, Ventures, MCNT or Impel makes it difficult to evaluate the fairness of the consideration to be paid in connection with the Contribution.

•

Substantially all of the directors, managers and executive officers of USMD and Ventures have interests in the Contribution that may be different from, or in addition to or in conflict with interests of other shareholders or partners of USMD and Ventures generally.

•

Upon completion of the Contribution and after the distribution of shares of Holdings common stock to its partners, Ventures is expected to own approximately 87% of our capital stock and this concentration of ownership will limit the ability of other shareholders to influence corporate matters.

Special Meeting of Ventures Partners

Generally

The special meeting of Ventures partners will be held at 6:00 p.m., local time, on [ ], 2012, at the principal executive offices of Ventures located at 612 East Lamar Blvd., Suite 700, Arlington, Texas 76011.

The purposes of the special meeting are to consider and act upon the proposal to approve the Contribution Agreement. The close of business on [ ], 2012 has been fixed as the record date for the determination of Ventures partners entitled to notice of, and to vote at, the special meeting or any adjournments or postponements of the special meeting. Only holders of record of Ventures partnership interests at the close of business on the record date are entitled to notice of, and to vote at, the special meeting.

Required Vote

The proposal to approve the Contribution Agreement will require the approval of at least 75% of the partners of Ventures.

Creation of Ventures Task Force

Recommendation of Ventures’ Managing Partner and Ventures Task Force

The Ventures Task Force has determined and believes that the Contribution Agreement is advisable, fair to, and in the best interests of Ventures and its partners and unanimously has approved the related Proposal. Ventures’ managing partner and the Ventures Task Force recommend that partners of Ventures vote “FOR” the approval and adoption of the Contribution Agreement and the transactions contemplated thereby.

Special Meeting of USMD Shareholders

Generally

The special meeting of USMD shareholders will be held at 6:00 p.m., local time, on [ ], 2012, at the principal executive offices of USMD located at 6333 North State Highway 161, Suite 200, Irving, Texas 75038.

The purposes of the special meeting are to consider and act upon the proposal to approve the Contribution Agreement. The close of business on [ ], 2012 has been fixed as the record date for the determination of USMD shareholders entitled to notice of, and to vote at, the special meeting or any adjournments or postponements of the special meeting. Only holders of record of USMD shares at the close of business on the record date are entitled to notice of, and to vote at, the special meeting.

Required Vote

The Contribution must be approved by the affirmative vote of the holders of at least two-thirds of the outstanding shares of USMD common stock entitled to vote.

Interested Directors

Three of the five directors on the USMD board of directors are considered interested directors under the Texas Business Organizations Code because they are partners of, and receive compensation from, Ventures or its affiliates. As a result the interests of these directors may be different from those of the USMD shareholders who do not have any ownership in or financial affiliation with Ventures. It will be important for you to carefully review the disclosures contained in this Prospectus and form your own opinions about the benefits of the proposed Contribution.

Shareholders’ Agreement

The rights and obligations of all USMD shareholders are governed by a Shareholders’ Agreement by and among USMD and its shareholders. Under this agreement, if the holders of a majority of the outstanding shares of USMD common stock desire to transfer all of their shares of USMD common stock to one or more related acquirers, then those shareholders have the right to require other USMD shareholders to transfer all of their shares to the same acquirer, for the same consideration per share and on the same terms of transfer. This means that, if the Contribution is approved by at least two-thirds of the USMD shareholders, then all shareholders, including any shareholders who do not wish to participate in the Contribution, will be contractually required to tender their shares in exchange for shares of Holdings common stock on the terms and conditions of the Contribution Agreement.

Appraisal Rights

By following the specific procedures set forth in the Texas Business Organizations Code, a USMD shareholder has a statutory right to dissent from the Contribution. If the Contribution is approved and consummated, any USMD shareholder who properly perfects his rights of dissent and appraisal will be entitled to receive an amount of cash equal to the fair value of his shares of USMD common stock rather than receiving the shares of Holdings common stock as contemplated in the Contribution Agreement. However, you should note that each USMD shareholder executed a Shareholders’ Agreement (as noted above) under which the shareholder contractually granted USMD and the other shareholders the right to require a dissenting shareholder to transfer his shares to Holdings on the same terms as those shareholders. USMD will seek to enforce these drag-along rights should any USMD shareholder seek to assert his statutorily prescribed appraisal rights.

Recommendation of the USMD Board of Directors

The USMD board of directors has determined and believes that the Contribution Agreement is advisable, fair to, and in the best interests of USMD and its shareholders and unanimously has approved the Proposal. The board of directors unanimously recommends that the USMD shareholders vote “FOR” the proposals listed above. It is important to note, however, that three of the five directors on the USMD board of directors are considered interested directors under the Texas Business Organizations Code because they are partners of, and receive compensation from, Ventures or its affiliates. As a result, the interests of these directors may be different from those of the USMD shareholders who do not have any ownership in or financial affiliation with Ventures. It will be important for you to carefully review the disclosures contained in this Prospectus and form your own opinions about the benefits of the proposed Contribution.

Management Following Transaction

Following the Contribution, the Holdings board of directors will consist of the five current directors of USMD, three directors who are current stockholders of MCNT and three independent directors. The executive officers of Holdings are expected to be comprised of the executive officers of USMD and certain executive officers of MCNT. Effective on the closing date of the Contribution, Holdings and Ventures will enter into an Investor Rights Agreement, pursuant to which, in nominating directors for election at any meeting of Holdings’ shareholders, Holdings will agree to nominate those persons that Ventures has designated to be members of the Holdings board of directors.

Opinion of Financial Advisor

In July 2009, the USMD board of directors, the UANT board of directors and the Ventures executive committee engaged VMG Health as a financial advisor to render a fairness opinion regarding the relative allocation of the consideration in the Contribution, pursuant to the Original Contribution Agreement. On

February 2, 2011, VMG Health delivered its written opinion to the effect that, as of such date and based upon and subject to the matters and assumptions set forth in such opinion, the relative allocation established by the Original Contribution Agreement of the consideration to be received by the USMD shareholders and by Ventures, taken in the aggregate, was fair, from a financial point of view, to the USMD shareholders and to Ventures.

In November 2011, the USMD board of directors, the UANT board of directors and the Ventures executive committee engaged VMG Health to further update its fairness opinion based upon the anticipated inclusion of MCNT and Impel in the Contribution. On February 9, 2012, VMG Health delivered a new fairness opinion that, as of such date and based upon and subject to the matters and assumptions set forth in the opinion, the relative allocation established by the Contribution Agreement of the consideration to be received by Ventures and USMD shareholders, taken in the aggregate, was fair from a financial point of view to Ventures and the USMD shareholders.

The full text of VMG Health’s written fairness opinion, dated February 9, 2012, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B. VMG Health provided its fairness opinion for the information and assistance of the USMD board of directors, the UANT board of directors and the Ventures executive committee in connection with their consideration of the Contribution. The VMG Health opinion is not a recommendation as to how any shareholder of USMD or partner of Ventures should vote or make any election with respect to the Contribution or any other matter.

Interests of the Managing Partner and Officers of Ventures and of the Directors and Officers of USMD in the Transaction

There is a substantial degree of cross ownership and interrelated management among UANT, Ventures and USMD. At the present time, UANT and Ventures have identical ownership and all of the partners of UANT and Ventures own shares of USMD common stock. Further, Dr. John House, who is the managing partner of Ventures, is also Chairman of the Board, Chief Executive Officer and President of USMD and directly holds a substantial ownership interest in USMD. Mr. Thomas Hall, the Chief Executive Officer of UANT, has no ownership interest in UANT or Ventures, but he is a shareholder of USMD.

Three of the five USMD directors are persons who own a beneficial interest in UANT and Ventures. Dr. House currently beneficially owns approximately 19% of the common stock of USMD and beneficially owns an approximately 2.5% partnership interest in Ventures. In addition, Dr. Patrick Collini and Dr. James Saalfield, two current members of the USMD board of directors, are partners in Ventures. Drs. Collini and Saalfield each currently hold less than 1% of the common stock of USMD and an approximately 2.5% partnership interest in Ventures. None of the remaining officers of USMD currently hold partnership interests in Ventures, but Mr. Thomas Hall, the Chief Executive Officer of UANT, holds approximately 1% of the USMD common stock.

No owners or executive officers of MCNT or Impel have existing management responsibilities over USMD, UANT or Ventures and, other than Dr. Russell Dickey, none possess ownership interests in USMD, UANT or Ventures. Richard Johnston, M.D., however, is expected to assume the position of Chief Physician Officer effective upon the closing of the Contribution, and will receive compensation from Holdings for services rendered in that capacity. In addition, Drs. Steve Brock, Russell Dickey, and Khang Tran will be appointed directors of Holdings effective upon the closing of the Contribution and will receive compensation from Holdings for such services. Dr. Dickey is a member of MCNT’s board of directors and is a shareholder of both USMD and MCNT. Further, Karen Kennedy, the CEO of Impel and the Chief Administrative Officer of MCNT, has been appointed the Chief Operations Officer of Holdings and the President of the USMD Physician Practice Management Division.

Upon the consummation of the Contribution, all of Holdings’ directors, other than Mr. Breaux Castleman and Mr. Gary Rudin, and all of Holdings’ executive officers, other than Mr. Greg Cardenas and Mr. Gordan Davis, will be partners of Ventures.

Karen Kennedy has a change of control severance agreement with Impel pursuant to which she will receive certain severance benefits in the event she is terminated within two years of the date of a change of control of Impel. The merger of Impel into a wholly-owned subsidiary of Ventures meets the definition of change in control under the agreement. Greg Cardenas has a severance agreement with USMD pursuant to which he will receive certain severance benefits in the event USMD terminates his employment without cause or Mr. Cardenas resigns his employment with good reason. In addition, although the terms of such agreement have not yet been finalized, Drs. John House, Steven Brock, Patrick Collini, Russell Dickey, James Saalfield, Khang Tran and Richard Johnston will receive compensation from USMD Physician Services, a wholly-owned non-profit health organization, for their services as practicing physicians pursuant to a written physician’s employment agreement between each of them and USMD Physician Services that will be executed to be effective as of the closing date of the Contribution. Further, although the terms of the employment agreement have not yet been finalized, Holdings will enter into a written employment agreement with Karen Kennedy for her role as the Chief Operations Officer of Holdings and the President of the USMD Physician Practice Management Division, such agreement to be effective as of the closing date of the Contribution.

Contemporaneous Transactions

Currently, UANT and Ventures are affiliated entities with identical ownership and management. As of December 31, 2011, Ventures’ assets consist of a 23.4% ownership interest in USMD Arlington Hospital, a 10.9% ownership interest in USMD Fort Worth Hospital and a 0.9% interest in Rocky Mountain Medical Center, LP (dba North Texas Hospital). Before the closing of the Contribution, Ventures, UANT, MCNT and Impel will take the following actions in preparation of the Contribution:

•

Ventures will file articles of conversion to convert from a Texas limited liability partnership to a Texas limited partnership;

•

UANT will file articles of conversion to convert from a Texas limited liability partnership to a Texas professional limited liability company;

•

MCNT will file articles of conversion to convert from a Texas professional association to a Texas corporation;

•

Ventures will form a limited liability company as a wholly-owned subsidiary, and UANT will merge with such newly formed entity, with UANT remaining as the surviving entity. As a result, Ventures will own 100% of the outstanding equity interests of UANT.

•

Ventures will form a limited liability company as a wholly-owned subsidiary, and Impel will merge with such newly formed entity, with Impel remaining as the surviving entity. As a result, Ventures will own 100% of the outstanding equity interests of Impel.

•

Ventures will form a Texas corporation as a wholly-owned subsidiary, and MCNT will merge with such newly formed entity, with MCNT remaining as the surviving entity. As a result, Ventures will own 100% of the outstanding equity interests of MCNT.

Effective Time of Transaction

The Company expects the Contribution to be effected in mid-2012.

Third-Party Consents

Certain of the agreements USMD, UANT, Ventures, MCNT and Impel have entered into with third parties prohibit certain of the actions to be taken as part of the Contribution (for example, the sale of substantially all of

UANT’s assets to Holdings) without the prior consent of the other party to such agreement. In order to complete the Contribution, we must secure the consents of these third parties.

U.S. Federal Income Tax Consequences of Transactions

In general, the contributions made by the USMD shareholders and Ventures to Holdings are intended to be tax-free exchanges. However, certain portions of the consideration to be received will be subject to taxation as further outlined in “THE TRANSACTION—U.S. Federal Income Tax Consequences of the Transaction.” The discussion of U.S. federal tax issues set forth in this Prospectus is intended to provide only a general summary and is not a complete analysis or description of all potential U.S. federal income tax consequences of the Contribution. The discussion does not address tax consequences that may vary with, or are contingent on, individual circumstances. In addition, it does not address the effects of any foreign, state or local tax laws. USMD shareholders and the partners of Ventures are strongly urged to consult with their tax advisors regarding the tax consequences of the Contribution to them, including the effects of U.S. federal, state, local, foreign and other tax laws.

Anticipated Accounting Treatment

The Contribution will be accounted for as an acquisition of UANT (which includes the accounts of Ventures), MCNT and Impel, by USMD under the purchase method of accounting under accounting principles generally accepted in the United States.

Overview of Contribution and Purchase Agreement

Ventures, UANT, USMD and Holdings entered into the Original Contribution Agreement on August 19, 2010 and the respective equity holders of USMD and Ventures approved the Original Contribution Agreement at special meetings held in August 2011. On December 1, 2011, Ventures entered into a merger agreement with MCNT, and on December 15, 2011 entered into a merger agreement with Impel. As a result of these merger agreements, the parties executed an Amendment on February 9, 2012 and effective as of December 15, 2011. The parties have determined to convene new special meetings to approve the Contribution Agreement as so amended.

The full text of the Contribution Agreement, comprised of the Original Contribution Agreement between the parties and the Amendment, is attached as Annex A to this Prospectus and is incorporated by reference into this Prospectus. Ventures and USMD urge you to read the Contribution Agreement in its entirety for a more complete description of the terms and conditions of Contribution and related matters.

Contributions and Consideration

The Contribution Agreement provides that Ventures will contribute all of its assets, including its equity interests in USMD, UANT, MCNT and Impel, to Holdings in exchange for common stock issued by Holdings and options to purchase Holdings common stock. Immediately prior to the Contribution, certain of the USMD shareholders will contribute a portion of their equity interests in USMD to Ventures in exchange for Ventures partnership interests. The remaining USMD shareholders will contribute all or a portion of their equity interests in USMD to Holdings in exchange for common stock issued by Holdings.

consolidated basis to include debt held at the subsidiary level) owed by USMD, UANT/ Ventures, MCNT and Impel on the closing date of the Contribution, (3) the amount of deferred payment obligations to certain UANT partners as of the closing date of the Contribution, (4) any changes in ownership percentages of the assets or investments held by USMD, UANT, Ventures, MCNT or Impel as of the closing date of the Contribution, and (5) the amount of any net working capital adjustments after September 30, 2011. The deferred payment obligations represent obligations of UANT to make certain payments to a former partner associated with the redemption of his partnership interests.

Representations and Warranties of the Parties

The Contribution Agreement contains customary representations and warranties of the parties.

Covenants

Each of the parties agreed to undertake certain actions or uphold certain restrictions on it and its subsidiaries until the Contribution has been consummated. These covenants are as customarily seen in an agreement of this type. In addition, Holdings agreed to prepare and file with the SEC a registration statement on Form S-4, a proxy statement and a form of proxy and to use its reasonable best efforts to cause the Form S-4 to be declared effective as promptly as practicable. Further, Holdings agreed to prepare and submit to the NASDAQ Capital Market, a listing application with respect to its shares of common stock and to use reasonable best efforts to obtain approval for such listing.

Conditions to Closing

The obligations of Ventures and USMD to consummate the Contribution are subject to the satisfaction (or waiver, if permissible) at or before the closing date of the Contribution Agreement of the following conditions:

•

each party has complied with and performed the terms, covenants and conditions of the Contribution Agreement;

•

all representations and warranties of the parties, and all certificates and other documents, are true and correct in all material respects as of the date of execution of the Contribution Agreement and as of the date of the closing of the Contribution;

•

the parties have received the required permits, licenses, contracts and third-party consents, including the expiration of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976;

•

the Contribution Agreement and the Contribution have been approved by the necessary percentages of USMD shareholders and Ventures partners;

•

Holdings has met the “public company exception” of the Stark Law as set forth in 42 U.S.C. 1395nn;

•

each of the transaction documents are approved by the Joint Task Force jointly established by Ventures and USMD to facilitate the closing of the Contribution;

•

substantially all of the physicians who are members of UANT and MCNT have entered into employment agreements with USMD Physician Services or an affiliate;

•

the Original Registration Statement was declared effective by the SEC; and

•

the shares of Holdings’ common stock were approved for quotation on the NASDAQ Capital Market.

Termination and Termination Fees

The Contribution Agreement can only be terminated by the mutual consent of the parties or by one party if the obligations or covenants required of the other party in the Contribution Agreement have not been satisfied, fulfilled or waived, or if the Contribution has not been consummated by August 31, 2012.

If the Contribution Agreement is terminated because the Joint Task Force failed to approve any of the transaction documents, then USMD and Ventures will each pay one-half the reasonable out-of-pocket fees and expenses incurred by the parties since the execution of the Contribution Agreement. If the Contribution Agreement is terminated solely as a result of the failure of either USMD or Ventures to obtain the necessary approval of its equity holders to consummate the Contribution, then the party who failed to obtain such approval will be obligated to reimburse the other party for all of its reasonable out-of-pocket fees and expenses incurred on or after April 28, 2010, up to a maximum of $500,000. In addition, at the closing of the Contribution, Holdings will pay up to $55,000 to enable UANT, and up to $55,000 to enable MCNT and Impel, to purchase “tail” insurance coverage for a period of six years following the closing of the Contribution under their respective director and officer liability policies as such policies are in effect on the date the Contribution is consummated. Finally, if the Contribution is completed, Holdings has agreed to pay for the reasonable and documented out of pocket costs and expenses of MCNT and Impel incurred in connection with the Contribution and the MCNT Merger in an aggregate amount not to exceed $500,000, and Holdings has been advised that the maximum amount of such reimbursable aggregate expenses has already been exceeded by MCNT and Impel.

Comparison of Shareholder Rights

After the Contribution, all of the USMD shareholders will become shareholders of Holdings and accordingly their rights will be governed by Holdings’ Certificate of Incorporation and the Holdings Bylaws, each as amended, restated, supplemented or otherwise modified from time to time, and the laws of the State of Delaware. While the rights and privileges of USMD shareholders are, in many instances, comparable to those of the shareholders of Holdings, there are some differences.

SELECTED HISTORICAL FINANCIAL DATA OF HOLDINGS

The following table sets forth Holdings’ summary historical financial data. The financial data as of and for the year ended December 31, 2011 is derived from Holdings’ financial statements included elsewhere in this Prospectus. The selected historical data is not indicative of the future results of operations or financial position of Holdings either as a stand-alone company or as a parent company following the Contribution. Holdings will account for the Contribution as acquisitions of UANT (including the accounts of Ventures), MCNT and Impel by USMD using the acquisition method of accounting in conformity with accounting principles generally accepted in the United States. The selected historical data below should be read in conjunction with Holdings’ audited financial statements and related notes to those financial statements and the “USMD Holdings, Inc.’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Prospectus.


	Year Ended December 31, 2011
	(in thousands)
Statement of Operations Data:
Net operating revenue	$	—
Operating expenses		303

Loss before benefit for income taxes		(303	)
Income tax benefit		106

Net loss	$	(197	)


	December 31, 2011
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	—
Total assets		106
Total liabilities		125
Stockholders’ deficit		(19	)

SELECTED HISTORICAL FINANCIAL DATA OF USMD

The following table sets forth USMD’s summary historical consolidated financial data. The consolidated financial data as of and for the years ended December 31, 2011 and 2010 are derived from USMD’s audited consolidated financial statements included elsewhere in this Prospectus. The selected historical consolidated data may not be indicative of the results of operations or financial position of USMD that may be expected in the future either as a stand-alone business or following the consummation of the Contribution. The selected historical consolidated data below should be read in conjunction with USMD’s audited consolidated financial statements and related notes to those financial statements and the “USMD’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Prospectus.


	Years Ended December 31,
	2011			2010
	(in thousands)
Consolidated Statement of Operations Data:
Net operating revenue	$	48,876		$	56,033
Operating expenses		30,195			39,789

Income from operations		18,681			16,244
Total other income (expense), net		111			7,193
Provision for income taxes		(2,838	)		(4,449	)

Net income		15,954			18,988
Less: net income attributable to noncontrolling interests		(13,296	)		(11,563	)

Net income attributable to USMD Inc.	$	2,658		$	7,425


	December 31,
	2011			2010
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	10,822		$	7,477
Total assets		40,420			36,892
Total liabilities		18,972			18,764
Total equity		21,448			18,128

SELECTED HISTORICAL FINANCIAL DATA OF UANT

The following table sets forth summary historical combined financial data of UANT, which includes the accounts of Ventures. The combined financial data as of and for the years ended December 31, 2011 and 2010 are derived from UANT’s audited combined financial statements included elsewhere in this Prospectus. The selected historical consolidated data may not be indicative of the results of operations or financial position of UANT that may be expected in the future either as a stand-alone business or following the consummation of the transaction. The selected historical consolidated data below should be read in conjunction with UANT’s audited combined financial statements and related notes to those financial statements and the “UANT’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Prospectus.


	Years Ended December 31,
	2011		2010
	(in thousands)
Consolidated Statement of Operations Data:
Net patient services revenue	$	55,541	$	50,129
Total expenses		46,824		40,364

Operating income		8,717		9,765
Other income, net		6,897		12,482

Net income	$	15,614	$	22,247


	December 31,
	2011		2010
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	1,954	$	3,367
Total assets		35,046		33,674
Total liabilities		19,802		20,229
Total capital		15,244		13,445

SELECTED HISTORICAL FINANCIAL DATA OF MCNT AND IMPEL

The following table sets forth summary historical combined financial data for MCNT and Impel. The combined financial data as of and for the years ended December 31, 2011 and 2010 are derived from the audited combined financial statements of MCNT and Impel included elsewhere in this Prospectus. The selected historical combined data may not be indicative of the results of operations or financial position of MCNT and Impel that may be expected in the future either as stand-alone businesses or following the consummation of the Contribution. The selected historical combined data below should be read in conjunction with the audited combined financial statements of MCNT and Impel and related notes to those financial statements and “MCNT’s and Impel’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Prospectus.


	Years Ended December 31,
	2011			2010
	(in thousands)
Combined Statement of Operations Data:
Net operating revenue	$	109,021		$	102,154
Operating expenses		108,052			99,937

Income from operations		969			2,217
Other expense, net		(346	)		(521	)
Provision for income taxes		(325	)		(407	)

Net income	$	298		$	1,289


	December 31,
	2011			2010
	(in thousands)
Combined Balance Sheet Data:
Cash and cash equivalents	$	3,737		$	3,443
Total assets		30,557			26,959
Total liabilities		31,294			26,677
Total members’ and stockholders’ equity (deficit)		(737	)		282

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF HOLDINGS

The following table sets forth selected unaudited pro forma condensed combined financial data derived from:

•

the audited financial statements of Holdings as of and for the year ended December 31, 2011;

•

the audited consolidated financial statements of USMD as of and for the year ended December 31, 2011;

•

the audited combined financial statements of UANT as of and for the year ended December 31, 2011; and

•

the audited combined financial statements of MCNT and Impel as of and for the year ended December 31, 2011,

all of which are included in this Prospectus. The following pro forma combined financial information is presented for illustrative purposes only and is not necessarily indicative of results of operations and financial position that would have been achieved had the consummation of the Contribution taken place on the dates indicated or the future operations of the combined company.

The following table was prepared only for the limited purpose of presenting what the results of operations and financial position of the combined businesses of Holdings might have looked like had the Contribution taken place at an earlier date. Actual amounts, determined on the basis of more detailed information, will differ from the amounts reflected below. For a discussion of the assumptions and adjustments made in the preparation of the pro forma financial information presented in this Prospectus, see “Pro Forma Financial Data for Holdings.”

The following unaudited pro forma financial information should be read in conjunction with:

•

the unaudited pro forma combined condensed financial statements and the accompanying notes in the section captioned “Pro Forma Financial Data for Holdings;”

•

the financial statements of Holdings as of and for the year ended December 31, 2011 and the notes relating thereto, which are included elsewhere in this Prospectus;

•

the consolidated financial statements of USMD as of and for the year ended December 31, 2011 and the notes relating thereto, which are included elsewhere in this Prospectus;

•

the combined financial statements of UANT and Ventures as of and for the year ended December 31, 2011 and the notes relating thereto, which are included elsewhere in this Prospectus; and

•

the combined financial statements of MCNT and Impel as of and for the year ended December 31, 2011 and the notes relating thereto, which are included elsewhere in this Prospectus.


	Year Ended December 31, 2011
	(in thousands)
Unaudited Pro Forma Condensed Combined Statement of Operations Data:
Net operating revenue	$	213,894
Income from operations		19,978
Net income attributable to Holdings		6,566

	December 31, 2011
	(in thousands)
Unaudited Pro Forma Condensed Combined Balance Sheet Data:
Cash and cash equivalents	$	16,513
Total assets		237,357
Total liabilities		71,652
Total equity		165,465

RISK FACTORS

The information below sets forth risk factors and uncertainties relating to the business of Holdings following the Contribution that could materially and adversely affect Holdings, its financial condition and results of operations. USMD’s shareholders and Ventures’ partners should consider the following risk factors and uncertainties, together with the other information provided in this Prospectus, in deciding how to cast their votes on the proposals discussed herein.

Risks Relating to Our Businesses and the Industry in Which We Operate

Our revenues will be primarily comprised of the income generated from the operations of our consolidated subsidiaries and from the management fees we will receive as a result of the management contracts with the hospitals, clinics, cancer treatment centers, lithotripsy service providers and physician group practices that we manage. These management contracts generally provide that the management fees we receive are significantly based upon the revenues generated by these companies. As a result, anything that adversely affects the revenues and operations of our consolidated subsidiaries or the health care providers we manage will adversely affect our revenues and operations.

A significant source of the revenues of our consolidated subsidiaries and of the health care providers we manage come from payments made by third-party payers, including private insurance companies and government healthcare programs.

Third party payers continue to attempt to contain healthcare costs by limiting coverage, access to services, and reimbursement rates for medical services and procedures. Any of these restrictions could make it more difficult or more costly for patients to utilize the services of our consolidated subsidiaries and of the health care providers we manage and could substantially reduce the number of medical services and procedures they perform. To the extent third-party payers reduce the amount of their reimbursement payments to patients, these patients may seek to reduce their payments to us or seek an alternate supplier of services.

In addition, the reimbursement rates our consolidated subsidiaries and the health care providers we manage receive from government healthcare programs are affected annually by the budgetary funding process. These government healthcare programs continue to propose reduced rates for services and these rate reductions directly impact the revenues our consolidated subsidiaries and the health care providers we manage receive for the services they perform. Changes in reimbursement rates offered by government healthcare programs could adversely affect the demand for the services of our consolidated subsidiaries and of the health care providers we manage or could create significant downward pressure on pricing.

If our consolidated subsidiaries and the health care providers we manage fail to maintain profitable managed care contracts with, or do not remain a contracted provider for, third-party payers, they may experience lost revenues and, correspondingly, our management fee revenue and operating performance could be adversely affected.

While we are not substantially dependent on any single managed care contract, a significant portion of the revenues of our consolidated subsidiaries and the health care providers we manage are derived from managed care contracts negotiated with third-party payers. The terms of these managed care contracts are generally one to three years in length, although many contain evergreen provisions automatically renewing the contract at the end of each term, unless one party provides notice of termation prior to the expiration of the term. Many of the contracts contain provisions that allow a party to terminate the contract upon the occurrence of specific event, such as the bankruptcy of a party or a material breach of the contract, or upon the passage of a notice period, generally ranging between 90 and 180 days. Some of these contracts may be terminable by either party for convenience.

Third-party payers are attempting to manage their costs by re-negotiating these managed care contracts, and our consolidated subsidiaries and the health care providers we manage may be forced to accept lower contracted reimbursement rates to retain these payers and patients as customers and to attract new ones. Such changes could have a significant adverse effect on the revenues and financial results of our consolidated subsidiaries and of the health care providers we manage, and consequently could adversely affect our revenues and results of operations.

Additionally, a portion of our business is derived from referrals that result from the participation of our consolidated subsidiaries and the health care providers we manage in the provider networks of commercial insurers. Due to the relatively high cost of maintaining providers in these networks, commercial insurers may seek to restrict participation in their networks. If our consolidated subsidiaries and the health care providers we manage fail to maintain their participation in these networks, referrals could be redirected to other providers. If this occurs, their revenues and operations would suffer, and consequently, our revenues and financial performance would suffer.

Our consolidated subsidiaries and the health care providers we manage depend on their relationships with physicians, commercial insurers and other healthcare providers who refer patients to them for their services. Our ability to maintain and grow our business would be impaired and our revenues reduced if our consolidated subsidiaries and the health care providers we manage were not able to maintain these relationships.

Our consolidated subsidiaries and the health care providers we manage rely on physicians, commercial insurers and other healthcare providers for the majority of their new patients. If these referral sources determine that the services are not of sufficiently high quality or reliability, or if the customers or the third-party payers who pay for these services determine that these services are not cost effective, they may not refer patients to or utilize our consolidated subsidiaries and the health care providers we manage. If this occurs, our ability to maintain and grow our business and our potential for revenue growth will be harmed.

In addition, if the relationships our consolidated subsidiaries and the health care providers we manage have developed with one or more key physicians or physician group practices were to become damaged or if one or more physicians or group practices were to reduce their use of our facilities or the number of referrals they make to our physicians or health care providers, our revenues would be reduced and our business would be harmed.

Our consolidated subsidiaries and the health care providers we manage face intense competition from other healthcare providers.

The healthcare business is highly competitive, and competition among hospitals, clinics, physicians, physician group practices, diagnostic imaging centers, clinical and anatomical laboratories, radiation therapy centers and other healthcare and ancillary service providers has intensified in recent years. The number of new healthcare facilities offering competitive services has increased significantly in the past and may continue to do so. Some of these companies have greater financial, research, marketing and staff resources and a lower level of infrastructure requirements, which allow them to, among other things, leverage economies of scale to position themselves as low-cost or preferred providers. Other 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. In addition, some of these competitors may have cost structures that allow them to offer exceptional discounts to insurers and lower patient cost-sharing co-payments. If these competitors are better able to attract patients, recruit physicians, expand services, position themselves as a low-cost or preferred provider or obtain more favorable managed care contracts at their facilities than we can, our consolidated subsidiaries and the health care providers we manage may experience an overall decline in patient volume and a corresponding decline in revenue. If this occurs, we may be unable to implement our medium and long-term business strategies successfully and our business could be adversely affected.

Competition in the clinical and anatomical laboratory business as well as the diagnostic imaging business is also intense. Our diagnostic labs and imaging centers compete with national, regional and local clinical and anatomical pathology labs and diagnostic imaging centers. Certain competitors have significantly greater resources than we do and some have nationally-recognized reputations. In addition, these regional and local providers may have pre-established long-term relationships with private insurance payers as well as physicians and physician group practices which could hinder the ability of our laboratories and diagnostic imaging centers to effectively compete.

Our regional focus may limit potential sources of additional revenue.

Our operations are focused on a limited geographic region—namely, the Northern portion of the State of Texas. Our revenue potential may be limited by the number of patients seeking care in this region, the insurance coverage held by our patients, and by the types of treatment sought by patients. Further, areas with a workforce that is reliant on certain industry sectors during the current economic downturn could make our operations particularly susceptible to market fluctuation as a result of layoffs or increased unemployment. A change in the patient mix within our operations that results in a decrease in patients covered by private insurance could have a material adverse effect on our results of operations and revenues.

The deterioration in the collectability of accounts receivable could adversely affect the results of operations of our consolidated subsidiaries and the health care providers we manage.

The healthcare industry is primarily an industry where services are rendered on one date, but full payment is received at a later date. As a result, healthcare service providers generate substantial accounts receivable which are subject to certain collection risks. Collection of amounts due from individuals is typically more difficult than collection of amounts due from third-party payers. Although none of our subsidiaries or the health care companies we manage have experienced deterioration in the collectability of their accounts receivable, as patients become more financially responsible, through increased deductibles and co-insurance obligations, for larger portions of their medical expenses, our consolidated subsidiaries and the health care providers we manage may face higher collection risks. Furthermore, government healthcare programs and private insurance payers are increasingly scrutinizing billing and collection invoices from healthcare service providers, which create both delays in receiving payment as well as increased administrative expense associated with responding to increased payer information requests. Changes in the percentage of patients having adequate healthcare coverage, general economic conditions, payer mix or trends in federal, state and private employer healthcare coverage and funding could negatively impact the collectability of our accounts receivable, which could in turn affect the results of operations of our consolidated subsidiaries and the health care providers we manage, and consequently could affect our results of operations.

The medical services our consolidated subsidiaries and the health care providers we manage are subject to rapid technological changes and advances that could result in procedures being offered by competitors that are superior to the services they currently offer.

The medical equipment, instrumentation, and related goods and supplies our consolidated subsidiaries and the health care providers we manage use to provide medical services is subject to rapid, significant, and often expensive technological improvement. Other health care providers may develop technologies or procedures that are more effective or less costly than the technologies and/or procedures our consolidated subsidiaries and the health care providers we manage currently use to deliver healthcare services, which could render those procedures and services inferior, obsolete or not competitive. The acquisition of such improved technologies could be difficult or very costly to obtain. There is also intense competition among alternate treatment options to address specific medical conditions. While our consolidated subsidiaries and the health care providers we manage currently provide a wide array of treatment services, there is no guarantee that those services will keep up with the advances in procedures and new technologies used to treat patients. To the extent other companies

are better able to keep up with technological advances, our consolidated subsidiaries and the health care providers we manage will be disadvantaged and may lose patients who will seek providers that are able to offer the latest in technological innovation. Such developments could have an adverse effect on our operations.

If we fail to retain key members of our senior management or if we fail to attract and retain qualified physicians, our business, financial condition and operating results could be materially harmed.

We will be highly dependent on our senior management, particularly our chief executive officer, Dr. John House, and other executive officers identified in “MANAGEMENT FOLLOWING THE TRANSACTION – Executive Officers and Directors.” We do not intend to enter into written employment agreements with any executive officers with respect to their work as executive officers, other than our Chief Operating Officer, Karen Kennedy. We also anticipate that Drs. John House and Richard Johnston enter into physician employment agreements with USMD Physician Services that will govern their services and compensation as practicing physicians. We do not intend to maintain “key man” life insurance policies on any of our executive 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 our business and operations.

Effective as of the closing of the Contribution, USMD Physician Services will enter into employment agreements with substantially all of the physicians who currently provide professional medical services on behalf of UANT or MCNT. We expect these agreements, which are not finalized, will provide for increases from the historic levels of professional services compensation for these physicians. In the event that USMD Physician Services is unable to generate additional revenues from operations or realize other cost savings sufficient to pay the physicians their aggregate employment compensation, we intend to make supplemental contributions to USMD Physician Services to enable it to make such compensation payments to the physicians, but only up to a certain agreed amount to be negotiated by the parties. See “THE TRANSACTION—Subsequent Transfer of Business Units; Physician Employment Arrangements.” To the extent that we are unable to meet the obligations set forth in these arrangements, we may lose the services of key physicians and our operations will be adversely affected.

In addition, our success depends greatly on our ability to attract and retain qualified technical personnel and to attract and retain quality physicians to provide professional medical services to patients within our core medical specialties. The loss of services of any key technical personnel or physicians, and the inability to attract qualified replacements, could adversely affect the operations of our consolidated subsidiaries and the health care providers we manage and would likely adversely affect our ability to grow. There is intense competition for qualified physicians, staff, and management, and we cannot give any assurances that we will be able to attract and retain the necessary qualified personnel to develop our business. If we fail to attract and retain physicians and key management and technical staff, or if we lose their key physician or non-physician personnel, our business, financial condition and operating results could be materially harmed.

Our ability to develop solutions to changing information technology needs, and our ability to fund these needs, could impact our ability to effectively manage our company.

As an integrated healthcare delivery system with hospitals, free-standing clinics and diagnostic and imaging centers and physician group practices on disparate information systems, it is critical that we find solutions in the near term that enable us to connect these disparate platforms in a way that allows us to effectively manage the operations of our consolidated subsidiaries and of the health care providers we manage and improve the quality of patient care. Our success may depend upon our ability, within a reasonable period of time, to implement new information management systems and to integrate these systems into the existing operational, financial and clinical information systems of the combined companies. We will need to continue to invest in and administer sophisticated information technology support; however, we may experience unanticipated delays, complications and expenses in implementing, integrating and operating these information technology systems. Future

modifications, improvements or replacements to our information technology system may require substantial expenditures and may require interruptions in operations during periods of implementation. Our failure to successfully implement and maintain operational, financial and clinical information systems on a timely basis could have a material adverse effect on our business, financial condition and operations.

In addition, if our consolidated subsidiaries and the health care providers we manage do not implement and maintain an appropriate and comprehensive information technology infrastructure, they will be unable to take advantage of government sector funding that is available to defray the costs of infrastructure development. In the future, these increased information technology requirements may play a more important role in their ability to remain enrolled as a government program provider and to meet increasingly rigorous compliance criteria from accrediting organizations.

Recent legislation allows integrated healthcare delivery systems comprised of hospitals and physician practices groups to form “accountable care organizations” to contract with Medicare and other payers and receive shared savings for meeting quality and cost targets. If we do not have an effective integrated information technology platform, it will be difficult to meet these quality and cost targets. Further, if we do not develop electronic health record technology, we may be unable to qualify for existing and future government incentive programs for acute-care inpatient hospitals that are “meaningful users” of certified electronic health record technology.

Telecommunications and information technology system disruptions and failures, including those caused by cyber-security threats, could significantly disrupt our operations.

We rely on information technology systems to process, transmit and store electronic information, including electronically maintained and transmitted patient health information. Hence, telecommunications and information technology system disruptions and failures at any of our facilities or those of the health care providers we manage could significantly disrupt our operations. Like most companies, Holdings’ information technology systems may be vulnerable to a variety of failures or disruptions due to events beyond its control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues. Holdings, its consolidated subsidiaries and the health care providers it manages have technology security initiatives and disaster recovery plans in place to mitigate its risk to these vulnerabilities, but these measures may not be adequate or implemented properly to ensure that their operations are not disrupted.

Our indebtedness may limit our financial and operating flexibility.

As of December 31, 2011, Holdings, USMD, UANT, Ventures, MCNT and Impel had combined, consolidated indebtedness of approximately $29.5 million. We must comply with various covenants contained in credit facilities and any other future debt arrangements that, among other things, limit our ability to:

•

incur additional debt or liens;

•

make payments on, redeem or acquire any debt or equity issued by us;

•

sell assets;

•

make capital expenditures;

•

make loans or investments;

•

acquire or be acquired by other companies; and

•

amend some of our contracts.

If we fail to comply with the terms of any of our credit agreements, the lenders may have the right to accelerate the maturity of that debt and foreclose upon the collateral, if any, securing that debt. Any of these actions could adversely affect our business, financial condition and results of operations.

In addition, some of our consolidated subsidiaries and the health care providers we manage, namely USMD, USMD Arlington Hospital and USMD Fort Worth Hospital, are highly leveraged entities and, based on historical profitability measures, have reached their debt capacity. No significant additional debt funding is available under the hospitals’ existing credit facilities and notes payable. While we believe these entities will be able to fund working capital and routine capital expenditure requirements with cash flow from operations, there can be no assurances that they will be able to maintain sufficient cash flow to sustain current operations.

We will require additional financing to conduct our operations and pursue our business strategy.

We will seek additional capital, whether from sales of equity or by borrowing money, to fund the growth of our operations. The availability of additional capital, whether from private capital sources (including banks) or the public capital markets, fluctuates as market conditions change. There may be times when the private capital markets and the public debt or equity markets lack sufficient liquidity or when our securities cannot be sold at attractive prices, in which case we would not be able to access capital from these sources. In addition, a weakening of our financial condition or strength could adversely affect our ability to obtain necessary funds. If we are unable to secure such financing, our business could suffer and we may be forced to reduce our operations or delay our growth strategy.

Even if available, additional financing could be costly or have adverse consequences. If additional funds are raised through the issuance of stock, our current shareholders will be diluted. This could also have adverse federal income tax consequences. See “THE TRANSACTION—U.S. Federal Tax Consequences of the Transaction” for additional information. In addition, our Certificate of Incorporation, as amended, authorizes our board of directors to issue preferred stock without shareholder approval. If any such series of preferred stock were to be issued, then depending on the rights and terms of any new series created, and the reaction of the market to the series, the rights or the value of our common stock could be negatively affected. If additional funds are raised through the incurrence of debt, we would incur increased debt servicing costs and would likely become subject to additional restrictive financial and other covenants.

Our strategy to grow through acquisitions could fail or present unanticipated problems for our business in the future, which could adversely affect our ability to make acquisitions or realize anticipated benefits from those acquisitions.

Following the Contribution, part of our business strategy will be to make strategic acquisitions and form strategic business alliances that fit within our goals of becoming a single integrated health services business. This acquisition strategy may include acquiring other physician practice groups and healthcare services businesses and is dependent on the continued availability of suitable acquisition candidates and our ability to finance and complete any particular acquisition successfully. The acquisition strategy will involve a number of risks and challenges, including:

•

diversion of management’s attention;

•

the need to find suitable financing for any acquisition;

•

the need to successfully integrate acquired operations;

•

potential loss of key employees of the acquired companies; and

•

an increase in our expenses and working capital requirements.

Any of these factors could adversely affect our ability to achieve anticipated levels of cash flows from our acquired businesses or realize other anticipated benefits from those acquisitions.

Uncertainties exist in integrating the businesses and operations of USMD, UANT, Ventures, MCNT and Impel.

Although we believe the integration of the USMD, UANT, Ventures, MCNT and Impel businesses and operations will be successfully completed, there can be no assurance that we will be able to successfully integrate

these companies and their businesses. Issues that must be addressed in integrating the operations of the companies include, among other things:

•

conforming standards, controls, procedures and policies, business cultures and compensation structures between USMD, Ventures, UANT, MCNT and Impel;

•

consolidating corporate and administrative infrastructures;

•

consolidating sales and marketing operations;

•

consolidating information technology and financial reporting systems and integrating health and wellness plans;

•

retaining key employees;

•

identifying and eliminating redundant and underperforming operations and assets;

•

minimizing the diversion of management’s attention from ongoing business concerns;

•

coordinating geographically dispersed organizations;

•

managing tax costs or inefficiencies associated with integrating the operations of the combined company; and

•

enhancing operating control standards to comply with the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder.

If we are not able to successfully address these challenges, we may be unable to successfully integrate the companies’ operations, or to realize the anticipated benefits of the integration of USMD, UANT, Ventures, MCNT and Impel.

If we or our consolidated subsidiaries and the health care providers we manage become subject to significant legal actions, they and we could be subject to substantial uninsured liabilities.

In recent years, physicians and physician group practices, clinics, ambulatory surgery centers, hospitals and other healthcare providers have become subject to an increasing number of legal actions alleging malpractice or related legal theories. In addition, many such providers are the subject of federal “qui tam” or whistle blower suits alleging non-compliance with federal healthcare laws and regulations. Many of these actions involve large monetary claims and significant defense costs.

To protect themselves and us from the cost of these claims, our consolidated subsidiaries and the health care providers we manage maintain professional malpractice liability insurance and general liability insurance coverage and the physicians who practice at our facilities are required to maintain professional liability insurance. USMD, USMD Arlington Hospital and USMD Fort Worth Hospital each maintain general and professional liability insurance with a total limit of $1,000,000 per loss event and $3,000,000 in aggregate, and umbrella insurance with an excess limit of $5,000,000. UANT maintains general liability with a total limit of $1,000,000 per loss event and $2,000,000 in aggregate, and an umbrella excess policy with a limit of $2,000,000. MCNT and Impel, on a combined basis, maintain aggregate general liability coverage with a limit of $1,000,000 per loss event and $2,000,000 in aggregate, and umbrella coverage up to $4,000,000 in the aggregate. The medical professionals who provide healthcare services at our subsidiaries (other than MCNT and Impel) and the healthcare providers we manage (other than those at MCNT) must maintain insurance coverage, generally general liability and professional liability coverage with limits of at least $1,000,000 per occurrence and from $2,000,000 to $4,000,000 in aggregate. Many have umbrella excess limits that range from $2,000,000 to $5,000,000. Each physician who is credentialed to practice at USMD Arlington Hospital and USMD Fort Worth Hospital must maintain a minimum professional liability insurance of $200,000 per loss event and $600,000 policy aggregate. The physicians at UANT are required to maintain minimum professional liability insurance limits of $500,000 per occurrence and $1,500,000 in aggregate. MCNT physicians must maintain malpractice insurance with limits of up to $500,000 per occurrence and $1,500,000 in the aggregate.

If any of our consolidated subsidiaries and the health care providers we manage become subject to claims, their insurance coverage may not cover all claims against them or may not continue to be available at adequate levels of insurance. If one or more of these claims is successful but not covered by insurance or exceeded such insurance coverage, our business, financial condition, and results of operations could be adversely affected.

We do not have exclusive control over the distribution of cash from some of our subsidiaries and may be unable to cause all or a portion of the available cash flow from operations of these entities to be distributed.

We own minority investments in entities that own and operate certain healthcare facilities. These entities are also in part physician-owned, and in some cases, in part owned by other healthcare companies. With respect to some of these entities, we do not have exclusive authority over certain major decisions, including the distribution of available cash flow from those entities to their equity holders. We may not be able to resolve favorably any dispute regarding distributions or other matters with the other major equity holders of the entities with whom we share certain control. The cash flow we receive as a result of distributions made by the entities in which we have minority investments but do not control is not a material part of our consolidated operations. However, if we do not receive distributions of cash from these entities, our working capital could decrease, which could affect our liquidity and results of operations.

Risks Relating to Federal and State Laws and Regulations

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

The healthcare industry is subject to extensive federal and state regulation. 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, ongoing accreditation and other requirements, including those relating to:

•

the Contribution;

•

the composition of ownership of our facilities;

•

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

•

the expansion of services and the size of our facilities;

•

privacy and security;

•

building codes;

•

licensure, permitting, certification and accreditation;

•

billing and collection for services;

•

handling of medication;

•

federal and state healthcare fraud and abuse laws and regulations;

•

maintenance and protection of records; and

•

environmental protection.

We believe that we, our consolidated subsidiaries and the health care providers we manage are in material compliance with applicable laws and regulations. However, if we or any of these entities fail to comply with applicable laws and regulations, we and they could suffer civil or criminal penalties, including the loss of their licenses to operate and/or their ability to participate in Medicare, Medicaid and other government sponsored healthcare programs. 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 our consolidated

subsidiaries and the health care providers we manage to make significant changes in our facilities, equipment, personnel, services, capital expenditure programs and operating expenses. Current or future legislative initiatives or government regulation may reduce the demand for the services of our consolidated subsidiaries and the health care providers we manage, which could have a material adverse effect on our business, financial condition and results of operations.

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.

The healthcare industry is heavily regulated, and a number of proposals for healthcare reform have been made in recent years, some of which have included radical changes in the healthcare system. In addition, the Healthcare and Education Affordability Reconciliation Act of 2010 implemented reforms to the healthcare system which could materially affect the manner in which we do business now and in the future in ways that are not known or knowable. Future federal legislation could be enacted that could significantly reform healthcare in ways that we cannot predict. Reductions in the reimbursement rates for government paid health care services could reduce the revenue we receive for providing health care services to government beneficiaries. New government mandates regarding the provision of health care to the uninsured could force us to provide costly healthcare services to patients who are unable to pay for them. New privacy regulations or administrative reporting mandates could require the implementation of new and costly policies, procedures, and reporting processes. Future healthcare reform could result in material changes in the financing and regulation of the healthcare business. We are unable to predict what future legislation could be passed, or the effect of such changes on the way in which we conduct business or the results of our future operations, but future healthcare legislation or other changes in the administration of or interpretation of existing legislation regarding governmental healthcare programs could have an adverse effect on our business and the results of our operations.

We may be required to modify our agreements, operations, marketing and expansion strategies in order to comply with changes in law.

The healthcare industry is heavily regulated by statute and government agency regulation. Laws and regulations govern the structure of businesses that provide healthcare, the licensing, permitting, and operation of healthcare facilities, the billing of and collection for healthcare services, and the nature and extent of relationships between and among healthcare facilities, physicians, patients, and entities that pay for healthcare services. These laws are ever-changing and changes in these laws could affect the ability of our consolidated subsidiaries and of the health care providers we manage to continue providing services. These laws could also affect our contractual, ownership, and other business relationships with healthcare providers and physicians that we rely on to generate business for our consolidated subsidiaries and the health care providers we manage and could affect the ability of these entities to generate income from providing healthcare services in the market in which they operate. We regularly monitor developments in federal and state laws and regulations relating to our business. We may be required to modify existing contractual agreements, our operations, and/or our marketing and expansion strategies from time to time in response to changes in the law, and if we fail to appropriately monitor and comply with mandated changes in law, our business could be severely impacted. Although we attempt to structure our agreements, operations, and marketing and development strategies with the intent that they comply with all applicable law, we can provide no assurances that one or more such arrangements will not be challenged successfully, and/or that changes required by current or future laws will not have a material adverse effect on our business, financial condition, and results of operations.

Federal and state statutes and regulations relating to patient privacy and electronic data security could require significant expenditures to ensure compliance and the failure of our consolidated subsidiaries and the health care providers we manage to comply with these policies and procedures could negatively impact our financial results.

There are 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 healthcare 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, as amended (“HIPAA”) required health care providers to implement new systems and to adopt business procedures for transmitting healthcare information and for protecting the privacy and security of individually identifiable information. These laws are subject to constant change. We do not estimate the total financial or other impact of existing and future such regulations on our business, but continuing compliance with these regulations will likely require our consolidated subsidiaries and the health care providers we manage to spend substantial sums, including, among other things, purchasing new computer systems and software, which will increase their operating expenses and could negatively impact their financial results. Additionally, if they fail to comply with the privacy regulations, our consolidated subsidiaries and the health care providers we manage could suffer civil penalties and criminal penalties for willful and knowing violations, and could lose their ability to participate in Medicare, Medicaid or other federal and state healthcare programs. Healthcare providers also will continue to remain subject to any state laws that are more restrictive than the federal privacy regulations. These privacy laws vary by state and could impose additional penalties.

In addition, certain provisions of HIPAA criminalize situations that previously were handled exclusively civilly through repayments of overpayments, offsets and fines by creating new federal healthcare fraud crimes. Further, as with the federal laws, general state criminal laws may be used to prosecute healthcare fraud and abuse. We believe that the business arrangements and practices of our consolidated subsidiaries and of the health care providers we manage comply with existing healthcare fraud and abuse laws. However, a violation could subject them to penalties, fines and/or possible exclusion from Medicare or Medicaid. Such sanctions could significantly reduce the revenue or profits our consolidated subsidiaries or of the health care providers we manage and correspondingly, could significantly reduce our revenues.

If a federal or state agency enacts new laws or regulations regarding illegal remuneration under any government healthcare program, or interprets such laws and regulations in a different way, our consolidated subsidiaries and the health care providers we manage may be subject to civil and criminal penalties, experience a significant reduction in their revenues or be excluded from participation in the government healthcare programs.

The federal illegal remuneration statute, commonly called 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 federal 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. Violations of the federal anti-kickback statute may result in substantial civil or criminal penalties, as well as suspension or exclusion from participation in any government healthcare program. An exclusion, if applied to our consolidated subsidiaries and of the health care providers we manage, could result in significant reductions in their revenues, which could have a material adverse effect on our business. Further, a significant portion of the revenues of our consolidated subsidiaries and of the health care providers we manage result from Medicare and Medicaid payments, and these providers rely heavily on the Medicare-eligible population for patients. If they were to be suspended or excluded from participation in such programs, it is unlikely that they could ever attract a sufficient number of private-pay patients to operate profitably without reimbursement from government healthcare programs.

While we work to ensure that the business arrangements of our consolidated subsidiaries and of the health care providers we manage do not violate the federal anti-kickback statute, a government agency or a private party may assert a contrary position. Additionally, new federal or state laws may be enacted that would cause the relationships between these entities and their physician investors to become illegal or result in the imposition of penalties against us, our consolidated subsidiaries or the health care providers we manage. If any of our business arrangements with physician investors were deemed to violate the federal anti-kickback statute or similar laws, or if new federal or state laws were enacted rendering these arrangements illegal, our business and financial performance could be adversely affected.

Also, most of the states in which our consolidated subsidiaries and the health care providers we manage operate have adopted anti-kickback laws, many of which apply more broadly to all third-party payers, not just to federal or state healthcare programs. For example, we have significant operations in the State of Texas, and the Texas Legislature has enacted the Texas Illegal Remuneration Act, similar to the federal anti-kickback statute, which prohibits any person, including hospitals and physicians, from intentionally or knowingly offering to pay or agreeing to accept any remuneration, to or from a person or entities for securing or soliciting patients or patronage for or from a person licensed, certified, or registered by a state healthcare regulatory agency. Unlike the federal statute, which is limited to government programs such as Medicare and Medicaid, the Texas illegal remuneration statute applies to all payers and patients, including private payers, in the State of Texas. Other states have enacted similar statutes. If our business arrangements violate any of these state laws, we could be subject to significant civil and criminal penalties that could adversely affect our business, financial condition and results of operations.

Changes in the interpretation of physician self-referral laws or additional restrictions on financial arrangements between physicians and healthcare providers could significantly affect our business and results of operations.

Section 1877 of the Social Security Act (commonly known as the “Stark Law”) prohibits physicians from referring Medicare and Medicaid patients for certain “designated health services” reimbursable by the Medicare or Medicaid programs to entities with which the physicians (or their immediate family members) have a financial relationship. A financial relationship may be an ownership interest (through debt, equity, or otherwise) or a compensation arrangement, and may be direct or indirect. In addition to prohibiting the referral for services, the Stark Law bans billing and collecting for services rendered pursuant to a prohibited referral. These restrictions are absolute, without regards to the intention of the parties. They are inapplicable, however, if the financial relationship falls within a statutory or regulatory exception.

The Stark Law’s self-referral prohibitions apply to several categories of health services, including clinical laboratory services; physical therapy services; occupational therapy services; radiology services (including MRI, CT scans and ultrasound); radiation therapy services and supplies; durable medical equipment and supplies; parenteral and enteral nutrients, equipment and supplies; prosthetics, orthotics and prosthetic devices; home health services and supplies; outpatient prescription drugs; and inpatient and outpatient hospital services. Many of our consolidated subsidiaries and the health care providers we manage are substantially owned by physicians who utilize their healthcare facilities to provide professional medical services, and these entities provide many services that fit within the definition of “designated health services” and are thus subject to the Stark Law’s self-referral prohibitions.

The Stark Law requires a provider to timely refund any payments received for services furnished as a result of a prohibited referral. Significant civil monetary penalties may be assessed if timely refunds are not made or claims were submitted for services that the provider knew or should have known were furnished pursuant to prohibited referrals, or if providers use schemes in an attempt to circumvent the laws. In addition, under certain circumstances billing in violation of the Stark Law and the failure to timely refund any required refunds can constitute a violation of the Federal False Claims Act and subject a company to criminal prosecution. Violators may also be subject to exclusion from the Medicare and Medicaid programs. Such exclusion would have a material impact on our business.

Many physicians have a direct or indirect financial relationship with Holdings or one or more of our consolidated subsidiaries and the health care providers we manage. In fact, one of the reasons supporting the Contribution is the desire of Holdings, USMD, UANT, Ventures, MCNT and Impel to simplify the relationships among physicians and the various healthcare companies they own and operate to ensure compliance with all healthcare fraud and abuse laws. We monitor our internal operations and our financial relationships with physicians who are in a position to refer patients to our consolidated subsidiaries and the health care providers we manage for compliance with recognized exceptions to the Stark Law and, to the extent such operations and relationships are compliant, we do not prohibit such physicians from referring patients to our consolidated subsidiaries and the health care providers we manage.

We have also structured the Contribution to comply with all of the provisions of the “public company exception” of the Stark Law (as set forth in 42 U.S.C. 1395nn). This exception provides that physician ownership of an investment interest in a company will not trigger the Stark Law’s self-referral prohibitions if the investment securities, at the time a referral is made could be purchased on the open market; are listed on a national exchange (such as the NASDAQ Capital Market) and are in a corporation with shareholders’ equity exceeding $75 million at the end of the most recent fiscal year or on average during the previous three fiscal years. Holdings believes that as currently structured, the physician ownership interests in the form of our common stock will satisfy all of the elements of this exception and thus will not trigger the Stark Law’s self-referral prohibitions; however, there can be no guarantee that Holdings will continue to satisfy this exception or that the government will not modify the requirements of this exception. Furthermore, we cannot provide assurances that our other financial arrangements with referring physicians will not be reviewed and challenged by federal enforcement authorities and that, if challenged, we would prevail. In addition, the Stark Law and its regulations are subject to constant changes and we cannot provide any assurances that future Stark Law regulations or interpretations will not further restrict the ability of physicians to refer patients to our healthcare facilities. Any such restrictions could have a significant impact on our results of operations.

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 payers, have heightened and coordinated audits and administrative, civil and criminal enforcement efforts as part of numerous ongoing investigations of healthcare organizations. These investigations can relate to a wide variety of topics, including the following:

•

physician ownership of and referral to our facilities;

•

cost reporting and billing and collection practices and accuracy;

•

quality of care;

•

financial reporting;

•

financial relationships with referral sources; and

•

medical necessity of services provided.

The Centers for Medicare and Medicaid Services has begun contracting with Recovery Audit Contractors, which are private contractors hired to audit entities that participate in the Medicare and Medicaid program, in order to identify government program overpayments, of which the Recovery Audit Contractors receive a portion as a contingency fee payment.

In addition, the Office of the Inspector General of the Federal 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 fines the defendant must pay may be significant. 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. We are unaware of any current government investigations related to any of the healthcare facilities we own, operate, or manage, and we are unaware of any whistleblower actions against Holdings, our consolidated subsidiaries or the health care providers we manage currently being pursued by any private individual or government agency. Nevertheless, we cannot provide any assurances that a government agency or contractor will not initiate such an investigation in the future, or that if such an investigation is initiated, that the results of or the expenses associated with such an investigation would not have a significant impact on our results of operations.

Risks Relating to Ownership of Our Common Stock

An active trading market for our common stock may not develop, and you may not be able to resell your shares.

There is currently no public market for shares of our common stock. Although we will apply to have our common stock approved for quotation on the NASDAQ Capital Market, an active trading market for our shares may never develop or be sustained following the Contribution. In the absence of an active trading market for our common stock, holders may not be able to sell their common stock at the time that they would like to sell.

Our stock price may be volatile, and the market price of our common stock after the Contribution may fall.

The market price of our common stock could be subject to significant fluctuations, and it may decline below the price at which our shares initially trade. Furthermore, if an active trading market in our stock fails to develop, even trading activity at modest volumes could have a significant effect on the market price of our common stock. Market prices for securities of newly publicly held companies have historically been particularly volatile. As a result of this volatility, the price of our stock may fluctuate dramatically. Such fluctuations could be in response to, among other things, the factors described in this “Risk Factors” section or elsewhere in this Prospectus, or other factors, some of which are beyond our control, such as:

•

fluctuations in our financial results or outlook or those of companies perceived to be similar to us;

•

changes in estimates of our financial results or recommendations by securities analysts (to the extent our stock is following by such analysts);

•

changes in market valuations of similar companies;

•

changes in our capital structure, such as future issuances of securities or the incurrence of debt;

•

announcements by us or our competitors of significant contracts, acquisitions or strategic alliances;

•

regulatory developments;

•

litigation involving us, our general industry or both;

•

additions or departures of key personnel;

•

investors’ general perception of us; and

•

changes in general economic, industry and market conditions.

Furthermore, the stock markets have experienced price and volume fluctuations that have affected, and continue to affect, the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rate changes and international currency fluctuations, may negatively affect the market price of our common stock.

In the past, many companies that have experienced volatility in the market price of their stock have become subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

As a “controlled company” under the rules of the NASDAQ Capital Market, our shareholders will not have all of the corporate governance protections customarily available to shareholders of publicly held companies.

A company in which over 50% of the voting power is held by a single person qualifies as a “controlled company” under the NASDAQ Capital Market listing standards and, as such, is exempt from compliance with certain corporate governance requirements generally applicable to publicly traded companies. Because over 80% of the outstanding shares of our common stock will be held by Ventures after the Contribution, we are entitled, and intend, to qualify as a “controlled company” under the NASDAQ Capital Market listing standards. As such, if we are listed on the NASDAQ Capital Market, we will be exempt from compliance with NASDAQ Capital Market requirements that (1) the majority of our board of directors consist of independent directors, (2) the compensation of our executive officers be determined by the independent directors on our board of directors, and (3) our director nominees be selected by the independent directors on our board of directors. We intend to utilize these exemptions while we are a controlled company. As a result, we will not have a majority of independent directors, will not establish a nominating and corporate governance committee or a compensation committee and our executive compensation and director nominees will not be determined solely by our independent directors. Accordingly, our shareholders will not have all of the corporate governance protections that are customarily available to shareholders of publicly held companies that are not “controlled companies.”

We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could harm our results of operations.

As a public company, we have incurred and will continue to incur significant additional accounting, legal and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with corporate governance requirements, including requirements under Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the Securities and Exchange Commission and the NASDAQ Capital Market. The expenses incurred by public companies for reporting and corporate governance purposes have increased dramatically in recent years. We expect these rules and regulations to substantially increase our financial and legal compliance costs. We also expect that as we become a public company it will be more difficult and more expensive for us to obtain director and officer liability insurance. As a result, it may be difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.

Our internal controls over financial reporting may not be effective, which could result in a loss of investor confidence in our financial reports and in turn have an adverse effect on our stock price.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish a report by our management on our internal controls over financial reporting. Such report must contain, among other matters, an assessment of the effectiveness of our internal controls over financial reporting as of the end of the year, including a statement as to whether or not our internal controls over financial reporting are effective. This assessment must include disclosure of any material weaknesses in our internal controls over financial reporting identified by management. If we are unable to continue to assert that our internal controls are effective, our investors could lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline.

We will enter into an Investor Rights Agreement with Ventures which may substantially dilute the ability of other shareholders to meaningfully participate in the selection of directors and other corporate governance matters.

Effective on the closing date of the Contribution, Holdings and Ventures will enter into an Investor Rights Agreement pursuant to which Holdings agrees to follow certain procedures in nominating directors for election at any meeting of Holdings’ shareholders. The Investor Rights Agreement will require Holdings to nominate those persons that Ventures has designated to be members of the Holdings board of directors, such nomination process to be conducted in accordance with the Ventures partnership agreement. Holdings will also agree to use its reasonable best efforts to cause the shareholders of Holdings to vote in favor of such a slate of directors, and that any vacancy in the board of directors shall be filled in a manner that causes Holdings to remain in compliance with these requirements. In addition, Holdings anticipates that in the event the Holdings’ board of directors is expanded to include 11 directors, the Investor Rights Agreement will allow Ventures to nominate the initial 11^th director, who will be independent as defined by the SEC rules and the rules of the NASDAQ Capital Market. The obligations in the Investor Rights Agreement terminate in the event that Ventures owns less than 50.1% of the outstanding shares of common stock of Holdings. We believe the Investor Rights Agreement is essential to our success by ensuring a level of continued physician control over the selection of our directors. However, as a result of this delegation of authority, the ability of other individual shareholders to participate in the nomination of directors, and consequently other corporate governance matters, may be substantially limited.

The concentration of our capital stock ownership with insiders upon the completion of the Contribution will limit the ability of other shareholders to influence corporate matters.

Based the relative values, as of September 30, 2011, of the contributions made by the USMD shareholders and Ventures to Holdings had the Contribution been consummated at that date, Ventures and the USMD shareholders would have been allocated approximately 9,275,000 and 725,000 shares, respectively, of the 10 million shares of Holdings common stock issued in connection with the Contribution. The actual allocation of these shares will be adjusted following the closing to account for indebtedness, deferred payment obligations, working capital, certain agreed upon capital expenditures and changes to the ownership percentages of business units of each entity involved in the Contribution. Immediately following the completion of the Contribution, Ventures intends to distribute approximately 535,000 shares of Holdings common stock to its partners on a pro rata basis. As a result, Ventures is expected hold approximately 8,740,000 shares of Holdings common stock, or approximately 87% of the outstanding shares of Holdings common stock.

As discussed below in “THE TRANSACTION—U.S. Federal Tax Consequences of the Transaction,” we do not anticipate that Ventures will reduce this percentage ownership in the near future. This significant concentration of share ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with controlling shareholders. Also, subject to certain SEC regulations, Ventures could begin selling shares of our common stock. These sales, or the market perception that the holders of a large number of shares intend to sell shares, could significantly reduce the market price of our common stock.

In addition, because we anticipate that Ventures will hold approximately 87% of the outstanding shares Holdings common stock and because of its rights under the Investors Rights Agreement, Ventures will be able to control our management and affairs and matters requiring shareholder approval, including the election of directors and the approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership will have the effect of delaying or preventing a change of control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change of control would benefit our other shareholders.

If securities or industry analysts do not publish research or reports about us, our business or our market, or if they make adverse recommendations regarding our stock, our stock price and trading volume could decline.

Unless we complete an underwritten equity financing at some uncertain future date, we do not expect any industry or securities analysts to publish research or reports about us, our business, our market or our competitors. The absence of any such research or reports will dissuade many investors from purchasing our common stock, which will limit the development of a trading market in our common stock and could adversely affect its market price. If any of the analysts who may cover us at some future date make an adverse recommendation regarding our stock, or provide more favorable recommendations about our competitors, our stock price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

We do not expect to declare any dividends in the foreseeable future.

We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. We anticipate that any debt financings we secure will restrict our ability to pay dividends. In addition, the credit facilities of many of our subsidiaries contain restrictions on distributions.

Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Our certificate of incorporation and our bylaws contain provisions that could delay or prevent a change in control of our company. These provisions, as well as certain provisions of Delaware law, could also make it more difficult for shareholders to elect directors and take other corporate actions. These provisions include:

•

authorizing our board of directors to issue, without shareholder approval, preferred stock with rights senior to those of our common stock;

•

authorizing our board of directors to amend our bylaws and to fill board vacancies until the next annual meeting of the shareholders;

•

limiting the liability of, and providing indemnification to, our directors and officers; and

•

requiring advance notification of shareholder nominations and proposals.

These and other provisions in our certificate of incorporation and our bylaws and under Delaware law could discourage potential takeover attempts, reduce the price that investors might be willing to pay in the future for shares of our common stock and result in the market price of our common stock being lower than it would be without these provisions.

Risks Relating to the Contribution

USMD, UANT, Ventures, MCNT, and Impel are all privately held businesses, and their equity securities are not traded in any public market. We are newly formed and our securities are not yet traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of the businesses contributed by the USMD shareholders and Ventures, as well as the fair market value of the consideration issued by Holdings in exchange for a portion of these contributions. Although the percentage of Holdings common stock to be issued to the USMD shareholders and to Ventures was determined based on negotiations between the parties, it is possible that the fair market value of the consideration to be received by the USMD shareholders or by Ventures will be less than the fair market value of the assets and securities that were contributed in exchange for such common stock. Further, the parties agreed to measure the relative net enterprise values of the business

units contributed by them based upon financial data for the periods ending December 31, 2010, as adjusted on the closing date of the Contribution to account for certain agreed upon capital expenditures by the entities and to reflect changes in indebtedness, working capital and ownership percentages of the business lines and investments. As a result, any changes to the net enterprise value of these business units based on results of operations or financial conditions for periods after December 31, 2010 will not be reflected in the terms of the Contribution.

The information we provided to our fairness advisor to assess the fairness, from a financial point of view, of the relative allocation of the consideration to be paid in connection with the Contribution may be inaccurate.

The Contribution Agreement sets forth certain formulae for allocating the 10 million shares of Holdings stock between USMD shareholders who are contributing their shares of USMD common stock directly to Holdings and Ventures based upon the relative value of among USMD, Ventures, UANT, MCNT, and Impel. In the case of USMD, UANT and Ventures, these values were derived in part from the financial analyses conducted by VMG Health and the companies using the financial statements of USMD, UANT and Ventures for the fiscal years ended December 31, 2008, 2009 and 2010 and the financial forecasts and estimates for each of the business units and investments held by USMD, UANT and Ventures as prepared by each of USMD, UANT and Ventures. In the case of MCNT and Impel, these values were derived from the financial statements of MCNT and Impel for the fiscal years ended December 31, 2008, 2009 and 2010 and the financial forecasts and estimates for each of the business units and investments held by MCNT and Impel, as prepared by each of MCNT and Impel and reviewed by USMD and Ventures. VMG Health reviewed certain of MCNT’s and Impel’s assumptions and projections that were contained in the MCNT and Impel financial data, but VMG Health did not express any opinion or perform any valuation with respect to such financial data. The failure to utilize more current financial statements for the purposes of establishing relative values may result in limited usefulness of the fairness opinion in evaluating the fairness of the Contribution.

Based on its independent judgment and experience, our fairness advisor, VMG Health relied primarily on the Income Approach – Discounted Cash Flow Analysis method, and to a limited extent, the Cost Approach and Market Approach – Guideline Company Method, in evaluating the fairness, from a financial point of view, of the relative allocation of the consideration to be paid in connection with the Contribution. VMG Health relied primarily on the discounted cash flow analysis because of the lack of directly comparable companies or transactions by comparable companies as compared to USMD, UANT and Ventures. The lack of other methods for assessing the fairness of the proposed Contribution may result in limited usefulness of the fairness opinion in evaluating the fairness of the Contribution.

The equity interest holders of USMD and Ventures may not realize a benefit from the Contribution commensurate with the ownership dilution they will experience in connection with the Contribution.

If we are unable to realize the strategic and financial benefits currently anticipated from the Contribution, the equity interest holders of USMD and Ventures will have experienced substantial dilution of their ownership interest in connection with the Contribution without receiving any commensurate benefit.

We will not close the Contribution until we have complied with all of the provisions of the “public company exception” of the Stark Law (as set forth in 42 U.S.C. 1395nn), including the provisions which requires us to have a minimum of $75 million in shareholders’ equity.

Among the reasons USMD and Ventures desire to consummate the Contribution is a desire to qualify under the “public company exception” of the Stark Law. Under this exception, a physician may refer patients to an entity that he owns if, among other things, the entity is a corporation with shareholder equity of not less than $75 million. Consequently, one of the conditions to closing in the Contribution Agreement is that Holdings shareholders’ equity meet or exceed $75 million. Although we believe we will meet the $75 million threshold, there is no guarantee we will continue to meet this threshold until the date upon which we close the Contribution. Should we fail to maintain the minimum shareholders’ equity, we will not consummate the Contribution.

USMD, Ventures, UANT, MCNT and Impel have no history of combined operations. The anticipated benefits of the Contribution may not be realized and we may experience an increase in certain expenses.

The success of the Contribution will depend on, among other things, our ability to combine the businesses of USMD, UANT, Ventures, MCNT and Impel in a manner that does not materially disrupt existing relationships or otherwise result in decreased productivity, and that allows us to capitalize on the combined capabilities of all of these entities. If these objectives are not achieved, the anticipated benefits of the Contribution may not be realized fully or at all or may take longer to realize than expected.

USMD, UANT, Ventures, MCNT, and Impel have operated and, until the completion of the Contribution, will continue to operate independently. It is possible that the integration process could result in the disruption of their ongoing businesses or inconsistencies in standards, controls, procedures or policies that could adversely affect our ability to maintain relationships with third parties and employees or to achieve the anticipated benefits of the Contribution. Integration efforts among the entities will also divert management’s attention and resources. An inability to realize the full extent of, or any of, the anticipated benefits of the Contribution, as well as any delays encountered in the integration process, could have an adverse effect on our business and results of operations, which may affect the value of the shares of our common stock.

In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. Actual cost synergies, if achieved at all, may be lower than expected and may take longer to achieve than anticipated. If these challenges are not adequately addressed, USMD, UANT, Ventures, MCNT and Impel may be unable to successfully integrate their operations or realize the anticipated benefits of their integration.

Further, after the consummation of the Contribution, we anticipate that expenses related to physician compensation will increase relative to historical levels. Substantially all of the UANT physicians previously received professional services compensation from UANT in the form of partnership distributions. After the Contribution, these UANT physicians, and the MCNT physicians, will become employees of USMD Physician Services and will receive professional services compensation from USMD Physician Services in the form of salary. USMD Physician Services will enter into employment agreements with substantially all of the UANT and MCNT physicians, as more particularly described under “THE TRANSACTION—Subsequent Transfer of Business Units; Physician Employment Arrangements.” Although the terms of the physician employment agreements have not yet been finalized, we anticipate that these agreements will result in material increases in compensation expense from historic levels. We have estimated that the amount of this increase in compensation expenses would have been approximately $11 million in 2011, had the Contribution been consummated at the beginning of 2011. If we are unable to generate additional revenue or realize other cost savings sufficient to offset these increases in physician compensation, our financial condition and results of operations may be adversely affected.

USMD and Ventures have incurred and will continue to incur significant transaction costs in connection with the Contribution, some of which will be required to be paid even if the Contribution is not completed.

USMD and Ventures have incurred and will continue to incur significant transaction costs in connection with the Contribution. These costs are expected to total approximately $2 million and will be paid by the party incurring the costs if the Contribution is not completed. However, if the Contribution Agreement is terminated due to the failure of the USMD shareholders or of the partners of Ventures to approve the Contribution, the party failing to approve the contribution would be required to reimburse the other for certain out of pocket costs incurred up to a maximum of $500,000. In addition, if the Contribution is completed, Holdings has agreed to pay for the reasonable and documented out of pocket costs and expenses of MCNT and Impel incurred in connection with the MCNT and Impel mergers in an aggregate amount not to exceed $500,000, and Holdings has been advised that the maximum amount of such reimbursable aggregate expenses has already been exceeded by MCNT and Impel.

Substantially all of the directors, managers and executive officers of USMD, UANT and Ventures, and certain of the directors and executive officers of MCNT and Impel, have interests in the Contribution that may be different from, or in addition to, or conflict with, interests of other owners of USMD, UANT, Ventures, MCNT and Impel generally.

Substantially all of the directors, managers and executive officers of USMD and Ventures and certain directors and executive officers of MCNT and Impel have interests in the Contribution that may be different from, or in addition to, or conflict with interests, of other equity interest holders of USMD, Ventures, MCNT and Impel, generally. See “THE TRANSACTION—Interest in the Transaction of the Managing Partner of Ventures and the Directors and Officers of USMD” and “TRANSACTIONS WITH RELATED PERSONS” for more information about these potential conflicts of interest. These conflicts of interest could create a situation where the individual interests of a director, manager or officer conflicts with or is not aligned with the interests of other owners of USMD, UANT, Ventures, MCNT and Impel. Should this occur, there is no guarantee that such person will put the interests of our shareholders or the interests of the owners of USMD, UANT, Ventures, MCNT and Impel above his or her individual interests.

We must secure financing to replace credit facilities that certain of our subsidiaries or the health care providers we manage have obtained which require the personal guaranties of UANT’s equity holders. There are no assurances we will be able to secure such financing.

The existing credit facilities of certain of our subsidiaries and the health care providers we manage require the equity holders of UANT to personally guarantee the indebtedness of the entity. The Contribution Agreement requires us to refinance certain of those credit facilities and replace them with credit facilities which are not personally guaranteed by these equity holders. There can be no assurances that we will be successful at securing such alternative financing. If we are unable to secure such alternate financing, we will breach the terms of the Contribution Agreement and will be unable to complete the Contribution.

We must secure the consent of certain third parties to the Contribution and there are no assurances we can secure such consent.

Certain of the agreements USMD, Ventures, UANT, MCNT, and Impel have entered into with third parties prohibit certain of the actions to be taken as part of, or as a precursor to, the Contribution (for example, the sale of substantially all of UANT’s assets to Holdings) without the prior consent of the other party to such agreement. In addition, certain equity interests held by these parties may not be transferred to Holdings without the consent of one or more third parties. In order to complete the Contribution, we must secure the consent of these third parties and there can be no assurances that we will be able to obtain such consents. If we are unable to secure the necessary consents from these third parties, we may be unable to consummate the Contribution or, if we were to consummate the Contribution, would be in breach of these agreements.

The businesses and operations of USMD, UANT, Ventures, MCNT and Impel may contain contingent liabilities, both known and unknown. To the extent such liabilities come to fruition, they may have an adverse effect on our business and operations.

Acquisitions involve risks, including inaccurate assessment of undisclosed, contingent or other liabilities or problems. After the completion of the Contribution, we will own not only all of the assets, but also all of the liabilities of USMD, UANT, Ventures, MCNT and Impel. Although each of these entities conducted a due diligence investigation of the other and its known and potential liabilities and obligations, it is possible that undisclosed, contingent or other liabilities or problems may arise after the completion of the Contribution, which could have an adverse effect on our business, operating results and financial condition.

USMD and Ventures may waive one or more of the conditions to the Contribution without resoliciting shareholder or partner approval for the Contribution.

Under the Contribution Agreement, the obligation of Holdings, USMD and Ventures to consummate the Contribution are subject to, among other things, the following conditions:

•

the other parties have satisfied or performed all the terms, covenants and conditions of the Contribution Agreement;

•

the parties have received all required permits, licenses, contracts and third party consents, including the approval by the USMD shareholders and the Ventures partners;

•

the USMD board of directors and the Ventures Task Force have approved of the documents to be executed by the parties in connection with the Contribution;

•

the USMD board of directors, UANT board of directors and Ventures executive committee have received from VMG Health an opinion that the relative allocation of the consideration pursuant to the Contribution is fair, from a financial point of view, to the USMD shareholders and Ventures partners;

•

all or substantially all of the UANT physicians and MCNT physicians have entered into employment agreements with USMD Physician Services or an affiliate;

•

a post-effective amendment to the Original Registration Statement has been declared effective by the Securities and Exchange Commission and remains effective as of the closing of the Contribution, and the shares of Holdings common stock has been approved to be listed for quotation on the NASDAQ Capital Market; and

•

the parties have determined that ownership of the Holdings common stock does not constitute a financial relationship as that term is defined for purposes of 42 U.S.C. 1395nn, the federal physician self-referral statute and regulations, and that, after the Contribution, the operation of the businesses will not violate any state or federal healthcare law.

The USMD board of directors or the Ventures Task Force may, to the extent legally allowed, waive any or all of these conditions to the obligations of the parties to consummate the Contribution, either unilaterally or by mutual consent.

In the event of a waiver of a condition, the USMD board of directors and the Ventures Task Force will evaluate the materiality of any such waiver to determine whether amendment of this Prospectus and resolicitation of proxies is necessary. In the event that the USMD board of directors or the Ventures Task Force determine any such waiver is not significant enough to require resolicitation of proxies, they will have the discretion to complete the Contribution without seeking further shareholder or partner approval. The USMD board of directors and the Ventures Task Force have the ability to waive any of these conditions, except that the conditions requiring the approval of the shareholders of USMD and partners of Ventures of the Contribution cannot be waived without shareholder approval.

Risks Relating to Federal Income Taxes

PLEASE CONSULT WITH YOUR OWN TAX ADVISORS REGARDING THE FEDERAL INCOME TAX CONSEQUENCES OF THE CONTRIBUTION AND AN INVESTMENT IN HOLDINGS. YOU SHOULD READ THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME TAX RISKS ASSOCIATED WITH THE CONTRIBUTION AND AN INVESTMENT IN HOLDINGS IN CONJUNCTION WITH THE DISCUSSION SET FORTH UNDER THE CAPTION “THE TRANSACTION—U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION.”

The Internal Revenue Service may challenge our characterization of material tax aspects of the Contribution and an investment in Holdings.

The Contribution and an investment in Holdings common stock involve material income tax risks. You are urged to consult with your own tax advisor with respect to the federal, state and foreign tax considerations of the Contribution and an investment in Holdings common stock. We will not seek any rulings from the Internal Revenue Service (the “IRS”) regarding any of the tax issues discussed in this Prospectus. For a more complete discussion of the tax risks and tax considerations associated with the Contribution and investment in the common stock of Holdings, see “THE TRANSACTION—U.S. Federal Income Tax Consequences of the Transaction.”

The Contribution is structured as a partially tax free transaction, and this may not be realized.

Except to the extent of the options received by Ventures, the Contribution is intended to be a tax free transaction under Section 351 of the Internal Revenue Code of 1986, as amended (the “Code”). See “THE TRANSACTION—U.S. Federal Income Tax Consequences of the Transaction.” There are a number of requirements under Section 351 and related Code Sections that must be satisfied for any portion of the Contribution to be tax free, including, for example, that the contributing USMD shareholders and Ventures maintain control of at least 80% of the common stock of Holdings immediately after the Contribution. While we anticipate that all of these requirements will be met, the continuing satisfaction of some of these requirements is beyond our control and there are no assurances. If the requirements of Code Section 351 are not satisfied, the Contribution could be taxable to the USMD shareholders and Ventures to the extent that the value of the Holdings common stock and the options to purchase Holdings common stock they receive exceeds their respective adjusted cost basis in the USMD shares and the Venture assets that are contributed to Holdings. Even if the requirements of Code Section 351 are satisfied, it is anticipated that the receipt of the Holdings common stock options will be taxable in the amount of the fair market value of the Holdings common stock options. Ventures has advised us that its partnership agreement will require that any taxable gain Ventures recognizes as a result of its receipt of the Holdings common stock options will be specially allocated under the Ventures’ partnership agreement as further described under “THE TRANSACTION—U.S. Federal Income Tax Consequences of the Transaction.”

We may be audited, which could result in the imposition of additional tax, interest and penalties.

Our federal income tax returns may be audited by the IRS. Any audit of us could result in an audit of your tax return that may require adjustments of items unrelated to your investment in Holdings common stock. In the event of any such adjustments, you might incur attorneys’ fees, court costs and other expenses in connection with contesting deficiencies asserted by the IRS. You may also be liable for interest on any underpayment and penalties from the date your tax was originally due.

State and local taxes, and a requirement to withhold state taxes, may apply.

We have no plans to declare dividends on our common stock in the near future and intend to reinvest cash flow from operations into growing our business. If we do declare dividends, however, the state in which you reside may impose a tax on any dividends you may receive from us. You may also be required to file tax returns in some states and report your income attributable to the Contribution and your receipt of Holdings common stock and any other consideration. If we are required to withhold state taxes from the cash dividends you are to receive, then the amount of the net cash otherwise payable to you would be reduced. In addition, such collection and filing requirements at the state level may result in increases in our administrative expenses that would have the effect of reducing cash available to pay dividends. You are urged to consult with your own tax advisors with respect to the impact of applicable state and local taxes and state tax withholding requirements on an investment in Holdings common stock.

Legislative or regulatory action could adversely affect holders of our common stock.

In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of the federal income tax laws. Additional changes to the tax laws are likely to continue to occur, and we cannot assure you that any such changes will not adversely affect the taxation of your ownership of, and dividends paid to you with respect to, Holdings common stock. Any such changes could have an adverse effect on the value of the Contribution and investment in Holdings common stock or on the market value or the resale potential of Holdings common stock or the options to acquire Holdings common stock. You are urged to consult with your own tax advisor with respect to the impact of recent legislation on the Contribution and your investment in Holdings and the status of legislative, regulatory or administrative developments and proposals and their potential effect on the Contribution and an investment in Holdings common stock.

FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical facts, that are included in this Prospectus that address activities, events or developments that Holdings expects or anticipates to occur in the future are forward-looking statements. Such forward-looking statements may include statements regarding, among other things:

•

the proposed Contribution;

•

future financial and operating results;

•

benefits of the Contribution;

•

future opportunities of Holdings;

•

our growth strategies;

•

anticipated trends in our industry;

•

effects of regulatory developments;

•

our future financing plans; and

•

our anticipated needs for working capital.

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology.

Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “RISK FACTORS” on page 25 and matters described in this Prospectus generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Prospectus will in fact occur. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated from these forward-looking statements, even if new information becomes available in the future.

THE SPECIAL MEETING OF VENTURES PARTNERS

General

This Prospectus is being furnished to partners of Ventures on or about [ ], 2012.

Ventures is sending this Prospectus to its partners in connection with the solicitation of proxies by the managing partner of Ventures for use at the Ventures special meeting and any adjournments or postponements of the special meeting.

Date, Time and Place

Purposes of the Ventures Special Meeting

The purposes of the special meeting are to consider and act upon the following matters:

•

A proposal to approve the Contribution and Purchase Agreement, dated as of August 19, 2010, as amended on February 9, 2012, by and among Ventures, UANT, USMD and Holdings, a copy of which is attached as Annex A to this Prospectus, and the transactions contemplated thereby; and

•

A proposal to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the proposal listed above.

Partners also will consider and act on any other matters as may properly come before the special meeting or any adjournment or postponement thereof, including any procedural matters incident to the conduct of the special meeting.

Record Date and Voting Power

Voting and Revocation of Proxies

If you are a partner of record of Ventures as of the record date referred to above, you may vote in person at the special meeting or vote by proxy using the enclosed proxy card. Whether or not you plan to attend the special meeting, Ventures urges you to take the time now to read this Prospectus and vote and submit your proxy to ensure your vote is counted. You may revoke your proxy at any time before it is exercised and you still may attend the Ventures special meeting and vote in person if you already have voted by proxy.

All properly executed proxies that are not revoked will be voted at the special meeting and at any adjournments or postponements of the special meeting in accordance with the instructions contained in the proxy. If a partner executes and returns a proxy and does not specify otherwise, the partnership interests represented by that proxy will be voted “FOR” the proposal noted above.

Any Ventures partner of record voting by proxy has the right to revoke the proxy at any time before the proxy is voted at the special meeting. You can do this in one of three ways. First, you can send a written notice stating that you would like to revoke your proxy to the Chief Executive Officer of Ventures at 612 East Lamar Blvd., Suite 700, Arlington, Texas 76011. Second, you can complete a new proxy card and return it to the Chief

Executive Officer of Ventures 612 East Lamar Blvd., Suite 700, Arlington, Texas 76011. Third, you can attend the special meeting and vote in person. Simply attending the meeting, however, will not revoke a proxy; you must vote at the meeting.

Solicitation of Proxies

In addition to solicitation by mail, the managing partner, officers, employees and agents of Ventures may solicit proxies from Ventures partners by personal interview, telephone, telegram or other electronic means. Ventures will pay the costs of the solicitation of proxies by Ventures from the Ventures partners.

Other Matters

As of the date of this Prospectus, the managing partner of Ventures does not know of any business to be presented at the special meeting other than as set forth in the notice accompanying this Prospectus. If any other matters should properly come before the special meeting, or any adjournment or postponement of the special meeting it is intended that the partnership interests represented by proxies will be voted with respect to such matters in accordance with the judgment of the person voting the proxies.

MATTERS TO BE SUBMITTED TO A VOTE OF VENTURES PARTNERS

General

The managing partner has called this special meeting of Ventures partners in order to vote on a proposal to approve the Contribution Agreement and the transactions contemplated by the Contribution Agreement. If the proposal is approved by the Ventures partners, and is approved by the USMD shareholders in a separate meeting, and if the mergers with Ventures and each of UANT, MCNT and Impel are consummated, Ventures will contribute all of its assets, including all of its equity interest in USMD, UANT, MCNT and Impel, to Holdings in exchange for shares of Holdings common stock and options to purchase Holdings common stock.

Vote Required

The proposal to approve the Contribution Agreement will require the approval of at least 75% of the partners of Ventures.

Creation of Ventures Task Force

At the time Ventures was negotiating the Contribution Agreement, most of the Ventures partners had no financial interest in or business arrangements with USMD (other than their indirect ownership of the USMD common stock held by Ventures) or with Holdings. However, the managing partner of Ventures is the Chairman, President and CEO of USMD and Holdings and, as such, had interests in the transaction that may have been different from the interests of those unaffiliated Ventures partners. Recognizing this, Ventures, with the approval of the Ventures partners, appointed the Ventures Task Force, comprised of unaffiliated Ventures partners, for the purpose of negotiating the terms and conditions of the Contribution Agreement and making a recommendation to the Ventures partners with respect to the approval of the Contribution Agreement. The members of the Ventures Task Force, Keith Waguespack, M.D., Richard Scriven, M.D., Ira Hollander, M.D., Mark McCurdy, M.D. and Alex Gordon, M.D., are partners of UANT and Ventures who, at the time the Contribution Agreement was negotiated, did not own common stock of USMD and had no financial or compensation arrangements with USMD outside their indirect ownership of the USMD common stock held by Ventures.

Recommendations of Ventures’ Managing Partner and the Ventures Task Force

The Ventures Task Force has determined and believes that the Contribution Agreement and the transactions contemplated by it, including the contribution of all of Ventures’ assets to Holdings, is advisable, fair to, and in the best interests of Ventures and its partners and unanimously has approved the related Proposal. Ventures’ managing partner and the Ventures Task Force recommend that partners of Ventures vote “FOR” the approval and adoption of the Contribution Agreement and the transactions contemplated thereby.

THE SPECIAL MEETING OF USMD SHAREHOLDERS

General

This Prospectus is being furnished to shareholders of USMD on or about [ ], 2012.

USMD is sending this Prospectus to its shareholders in connection with the solicitation of proxies by the USMD board of directors for use at the USMD special meeting and any adjournments or postponements of the special meeting.

Date, Time and Place

Purposes of the USMD Special Meeting

The purposes of the special meeting are to consider and act upon the following matters:

•

A proposal to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the proposal listed above.

Shareholders also will consider and act on any other matters as may properly come before the special meeting or any adjournment or postponement thereof, including any procedural matters incident to the conduct of the special meeting.

Record Date and Voting Power

The close of business on [ ], 2012 has been fixed as the record date for the determination of USMD shareholders entitled to notice of, and to vote at, the special meeting or any adjournments or postponements of the special meeting. Only holders of record of USMD shares at the close of business on the record date are entitled to notice of, and to vote at, the special meeting.

At the close of business on the record date, USMD had 29,707,912 shares of its common stock outstanding and entitled to vote. Each share of USMD common stock entitles the holder thereof to one vote on each matter submitted for shareholder approval.

Voting and Revocation of Proxies

If you are a shareholder of record of USMD as of the record date referred to above, you may vote in person at the special meeting or vote by proxy using the enclosed proxy card. Whether or not you plan to attend the special meeting, USMD urges you to please take the time now to read this Prospectus and vote and submit your proxy to ensure your vote is counted. You may revoke your proxy at any time before it is exercised and you still may attend the special meeting and vote in person if you already have voted by proxy.

All properly executed proxies that are not revoked will be voted at the special meeting and at any adjournments or postponements of the special meeting in accordance with the instructions contained in the proxy. If a shareholder executes and returns a proxy and does not specify otherwise, the shares represented by that proxy will be voted “FOR” the proposals noted above.

Any USMD shareholder of record voting by proxy has the right to revoke the proxy at any time before the proxy is voted at the special meeting. You can do this in one of three ways. First, you can send a written notice stating that you would like to revoke your proxy to the Secretary of USMD at 6333 North State Highway 161, Suite 200, Irving, Texas 75038. Second, you can complete a new proxy card and return it to 6333 North State Highway 161, Suite 200, Irving, Texas 75038. Third, you can attend the special meeting and vote in person. Simply attending the meeting, however, will not revoke a proxy; you must vote at the meeting.

Solicitation of Proxies

In addition to solicitation by mail, the directors, officers, employees and agents of USMD may solicit proxies from USMD shareholders by personal interview, telephone, telegram or other electronic means. USMD will pay the costs of the solicitation of proxies by USMD from USMD shareholders.

Quorum

The presence at the special meeting, in person or by proxy, of the holders of a majority of the outstanding shares of USMD common stock as of the record date will constitute a quorum for the transaction of business at the special meeting. In general, shares of USMD common stock represented by a properly signed and returned proxy card will be counted as shares present and entitled to vote at the special meeting for purposes of determining a quorum. Abstentions are counted in determining whether a quorum is present.

Interested Directors

Three of the five directors on the USMD board of directors are considered interested directors under the Texas Business Organizations Code because they are partners of, and receive compensation from, Ventures or its affiliates. USMD considered the contributions made by these directors to be vital in the negotiation and structuring of the Contribution, but recognized there was a potential that the interests of these directors may be different from those of the USMD shareholders who did not have any ownership in or financial affiliation with Ventures. To alleviate any potential conflict of interest, USMD created a working group which included all five directors, including the two independent directors, as well as USMD’s chief financial officer and its legal counsel, neither of whom have any financial interests in Ventures. This working group unanimously determined that the Contribution was in the best interests of USMD prior to submitting the documents to the USMD board of directors for approval. Further, the USMD board of directors, along with the Ventures Task Force, retained an independent third party expert to determine and deliver an opinion that the consideration to be received was fair, from a financial point of view, to the USMD shareholders and Ventures. Finally, all of the directors, including the independent directors, voted unanimously to recommend the USMD shareholders approve the Contribution. However, it will be important for you to carefully review the disclosures contained in this Prospectus and form your own opinions about the benefits of the proposed Contribution.

Shareholders’ Agreement

The rights and obligations of all USMD shareholders are governed by a Shareholders’ Agreement dated January 1, 2007 by and among USMD and the shareholders (the “Shareholders’ Agreement”). The Shareholders’ Agreement contains drag-along rights which, under certain circumstances, give shareholders the right to require other shareholders to sell their shares of USMD common stock. Under the Shareholders’ Agreement, if the holders of a majority of the outstanding shares of USMD common stock desire to transfer all of their shares of USMD common stock to one or more related acquirers (the “Dragging Shareholders”), then those Dragging Shareholders have the right to require all of the other USMD shareholders to transfer all of their shares to the same acquirer, for the same consideration per share and on the same terms of transfer as the Dragging Shareholders are selling their shares. This means that, if the Contribution is approved by at least two-thirds of the USMD shareholders, then all shareholders, including any shareholders who do not wish to participate in the Contribution, will be contractually required to tender their shares in exchange for shares of Holdings common stock and/or Ventures partnership interests on the terms and conditions of the Contribution Agreement.

If the Contribution is approved at the special meeting of shareholders, but there are USMD shareholders who do not voluntarily agree to contribute their shares of USMD common stock to Holdings, the Dragging Shareholders can require such shareholders to transfer their shares of USMD common stock to Holdings and/or to Ventures by delivering written notice to such shareholders at least fifteen (15) days before the closing of the proposed transfer. A shareholder who is required to transfer its shares will not be required to make any representations and warranties to any other person in connection with the transfer, except as to: good title and the absence of liens with respect to its shares, the corporate or other existence of such shareholder, and the authority for and the validity and binding effect of, and the absence of any conflicts under, the charter documents and material agreements, as applicable, of such shareholder. No shareholder required to transfer its shares will be required to provide any indemnities in connection with its transfer of the shares, except with respect to any breach of the specific representations and warranties listed above.

Appraisal Rights

USMD shareholders have certain statutory appraisal rights as further described below. However, you should note that each USMD shareholder has executed a Shareholders’ Agreement (as noted above) under which the shareholder contractually granted USMD and the Dragging Shareholders the right to require a dissenting shareholder to transfer his shares to Holdings on the same terms as the Dragging Shareholders. You should also note that USMD and the Dragging Shareholders will seek to enforce these drag-along rights should any USMD shareholder seek to assert his statutorily prescribed appraisal rights. While we do not know with certainty if a court would enforce these drag-along rights, USMD believes it and the Dragging Shareholders would prevail in a legal proceeding to enforce the provisions of the Shareholders’ Agreement, including the drag-along rights, notwithstanding the shareholder’s election to perfect his statutory appraisal rights.

By following the specific procedures set forth in the Texas Business Organizations Code (“TBOC”), a USMD shareholder has a statutory right to dissent from the Contribution. If the Contribution is approved and consummated, any USMD shareholder who properly perfects his rights of dissent and appraisal will be entitled, upon completion of the Contribution, to receive an amount of cash equal to the fair value of his shares of USMD common stock rather than receiving the shares of Holdings common stock as contemplated in the Contribution Agreement. The following summary is not a complete statement of statutory rights of dissent and appraisal, and this summary is qualified by reference to the applicable provisions of the TBOC, which are reproduced in full in Annex c to this Prospectus. A USMD shareholder must complete each step in the precise order prescribed by the statute to perfect his rights of dissent and appraisal.

A USMD shareholder who desires to dissent from the Contribution must vote against the approval of the Contribution Agreement. However, a vote against the Contribution alone is insufficient to perfect his rights of dissent and appraisal. To perfect his rights, the dissenting shareholder must give USMD written notice that is: (1) addressed to USMD’s president and secretary; (2) demands payment of the fair value of the shares of USMD common stock for which the rights of dissent and appraisal are sought; (3) provides an address to which notice by USMD to the dissenting shareholder may be sent; (4) states the number and class of USMD shares of common stock owned by the dissenting shareholder; and (5) states the dissenting shareholder’s estimate of the fair value of the shares of USMD common stock. Such demand notice must be delivered to USMD at its principal executive offices prior to the special meeting. Within 20 days after making a demand, the dissenting shareholder must submit certificates representing his shares of USMD common stock to USMD at its principal executive offices for notation thereon that such demand has been made. Dissenting shareholders who fail to submit their certificates within such 20 day period will, at the option of USMD, lose their rights to dissent and appraisal unless a court, for good cause shown, directs otherwise.

If the Contribution is effected, each USMD shareholder who sent notice to USMD as described above and who votes against the Contribution will be deemed to have dissented from the Contribution. USMD will be responsible for discharging the rights of dissenting shareholders and must, within 10 days of the effective time of the Contribution, notify the dissenting shareholders in writing that the Contribution has been effected.

The fair value of the shares of USMD common stock will be the value of such shares on the date immediately preceding the date of the special meeting at which the Contribution Agreement is approved, excluding any appreciation or depreciation in anticipation of the Contribution.

Within 20 days after receipt of a dissenting shareholder’s demand notice as described above, USMD shall respond to the dissenting shareholder in writing as follows:

•

USMD can accept the amount claimed in the demand notice as the fair value of shares of USMD common stock, and pay such amount within 90 days after the effective time of the Contribution as long as the dissenting shareholder delivers endorsed certificates representing his shares of USMD common stock; or

•

USMD can reject the demand and include an estimate of the fair value of the shares of USMD common stock together with an offer to pay such amount for a period of at least 60 days after the offer is delivered to the dissenting shareholder. If the dissenting shareholder accepts such offer or if the parties reach an agreement on the fair value of the shares of USMD common stock, USMD will pay the accepted or agreed amount not later than 60 days after the date the offer is accepted or the agreement is reached as long as the dissenting shareholder delivers endorsed certificates representing his shares of USMD common stock.

In either case, the dissenting shareholder will cease to have any ownership interest in USMD following payment.

If a dissenting shareholder and USMD cannot agree on the fair value of the shares within 60 days after the offer described above is first delivered, the dissenting shareholder or USMD may, within 60 days after the expiration of the initial 60 day period, file a petition in an appropriate court of competent jurisdiction requesting a finding and determination of the fair value of the dissenting shareholder’s shares of USMD common stock. After a hearing concerning the petition, the court will determine which dissenting shareholders have complied with the provisions of the TBOC and have become entitled to payment for the fair value of their shares of USMD common stock and will appoint one or more qualified appraisers to determine the fair value of such shares of USMD common stock. The appraiser will determine such value and file a report with the court. Any party may object to all or part of an appraisal report. The court will then in its judgment determine the fair value of such shares of USMD common stock, and the judgment will be binding on both USMD and the dissenting shareholders. The fair value as determined by the court will be payable upon the surrender to USMD of the certificates representing shares of USMD common stock duly endorsed by the dissenting shareholders. Upon payment of the judgment, the dissenting shareholders will not have any interest in USMD or such shares of USMD common stock. All court costs and fees of the appraisers will be allocated between the parties in a manner that the court determines is fair and equitable.

Any dissenting shareholder who has made a written demand for payment of the fair value of his shares of USMD common stock will not be entitled to vote or exercise any other rights as a shareholder except the statutory rights of appraisal as described herein and the right to maintain an appropriate action to obtain relief on the ground that the Contribution is fraudulent. In the absence of fraud in the Contribution, a dissenting shareholder’s statutory right to appraisal is the exclusive remedy for the recovery of the value of his shares of USMD common stock or money damages to the shareholder with respect to such shares of USMD common stock.

Any dissenting shareholder who has made a written demand for payment of the fair value of his shares of USMD common stock may withdraw such demand at any time before payment for his shares of USMD common stock or before a petition has been filed with an appropriate court for determination of the fair value of such shares. If (a) a dissenting shareholder withdraws his demand notice, (b) a dissenting shareholder loses the right to relief as a dissenting shareholder, (c) a dissenting shareholder has not filed a petition timely with an appropriate court seeking relief as to the determination of the fair value of such shares of USMD common stock, or (d) a

court determines that the dissenting shareholder is not entitled to elect to dissent from the Contribution, such dissenting shareholder will lose the right of dissent and appraisal and the dissenting shareholder’s shares of USMD common stock will represent the right to receive shares of Holdings common stock as contemplated in the Contribution Agreement.

Other Matters

As of the date of this Prospectus, the USMD board of directors does not know of any business to be presented at the special meeting other than as set forth in the notice accompanying this Prospectus. If any other matters should properly come before the special meeting, or any adjournment or postponement of the special meeting it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the person voting the proxies.

MATTERS TO BE SUBMITTED TO A VOTE OF USMD SHAREHOLDERS

General

The board of directors has called this special meeting of USMD shareholders in order to vote on a proposal to approve the Contribution Agreement and the transactions contemplated by the Contribution Agreement. If the proposal is approved by USMD shareholders, and is approved by the Ventures partners in a separate meeting, USMD shareholders will contribute all of their shares of USMD common stock in exchange for shares of Holdings common stock, and Ventures will contribute all of its assets to Holdings in exchange for shares of Holdings common stock and Holdings stock options.

Vote Required

The Contribution must be approved by the affirmative vote of the holders of at least two-thirds of the outstanding shares of USMD common stock entitled to vote.

Recommendations of USMD Board of Directors

The USMD board of directors has determined and believes that the Contribution Agreement and the transactions contemplated thereby, including the contribution by the USMD shareholders of all of USMD’s common stock to Holdings, is advisable, fair to, and in the best interests of USMD and its shareholders and unanimously has approved the Proposal. The board of directors unanimously recommends that the USMD shareholders vote “FOR” the proposals listed above. It is important to note, however, that three of the five directors on the USMD board of directors are considered interested directors under the Texas Business Organizations Code because they are partners of, and receive compensation from, Ventures or its affiliates. As a result, the interests of these directors may be different from those of the USMD shareholders who do not have any ownership in or financial affiliation with Ventures. It will be important for you to carefully review the disclosures contained in this Prospectus and form your own opinions about the benefits of the proposed Contribution.

THE TRANSACTION

Background of the Transaction

Urologists John House and H. Patterson Hezmall, M.D. combined their solo urology medical practices in 1992 and began practicing medicine under the name Urology Associates of North Texas. Two years later, David Ellis, M.D. joined them and together the three physicians formed Urology Associates of North Texas, L.L.P. a limited liability partnership and professional medical urology group practice. Initially, UANT’s offices were located in Arlington, Texas. UANT provided clinical and related surgical urological services through UANT for the benefit of its patients, and utilized external ancillary service providers in the Arlington, Texas service area to provide its patients with needed diagnostic and therapeutic ancillary services. As the medical practice and the population in the service area grew, UANT sought ways to expand its clinical and ancillary service lines to include those medical services commonly required by its patients in order to exercise a higher degree of coordination and control over patient care.

In 1996, Dr. House and Dr. Paul Thompson, an urologist practicing in Missouri, formed U.S. Lithotripsy, L.P. (“USL”), for the purpose of providing lithotripsy services for the treatment of kidney stones. Between 1997 and 2002, UANT continued to admit new partners in order to expand its footprint in the Dallas/Fort Worth metropolitan area. During this same time, USL developed and operated lithotripsy partnerships to provide lithotripsy services for the benefit of UANT’s patients. By 2001, UANT was a 23 member physician group practice with several clinical offices in the Dallas/Fort Worth metropolitan area. The increase in the number of UANT physicians made it economically feasible for UANT to develop and operate, as extensions of its core clinical practice, additional ancillary medical service lines, including clinical and anatomical pathology, diagnostic imaging, cryotherapy, and outpatient ambulatory surgical services.

In 2002, the physician owners of USL formed U.S. Medical Development, Inc. (“USM”) and, in July 2002, USM acquired all of the outstanding ownership interests in USL and began managing the operations of USL through USGP, LLC, its wholly-owned subsidiary. At that time, USL owned a limited partnership interest in and served as the general partner of 15 lithotripsy partnerships, primarily located in the South Central United States.

By 2002, UANT had expanded to a 29 member urology group practice and began evaluating the ownership of a general acute-care hospital to provide inpatient and outpatient hospital services for the benefit of its patients. USM formed Mat-Rx Development, L.L.C. d/b/a USMD Hospital Division (the “USMD Hospital Division”) in July 2002 to evaluate and develop a joint venture to own and operate a general acute-care hospital in the Arlington, Texas service area. USMD Hospital Division formed USMD Hospital at Arlington, L.P. (“USMD Arlington Hospital”) in March 2003. In October 2003, USMD Arlington Hospital purchased from Texas Health Resources and certain of its wholly-owned affiliates substantially all of the assets used in the operation of the Arlington Memorial South Medical Center in South Arlington, Texas. USMD Hospital Division is the sole member of the general partner of USMD Arlington Hospital and owns a limited partner interest in USMD Arlington Hospital. UANT owns a 23% limited partner interest in USMD Arlington Hospital. USMD Hospital Division manages the operations of USMD Arlington Hospital under a long-term hospital management agreement and members of UANT serve on the board of directors of USMD Arlington Hospital.

In 2003, the federal government enacted legislation which, for an 18 month period, severely restricted the development of new physician owned hospitals, severely restricted the growth of existing physician owned hospitals, and prohibited existing physician owned hospitals from adding new direct or indirect physician members. UANT was an owner of USMD Arlington Hospital so this legislation effectively prohibited UANT from adding new physician members to its growing group practice. In order to permit UANT to add new physicians without violating the newly-enacted legislation, and in order to protect passive investment interests of UANT partners from potential exposure to liability stemming from UANT’s medical practice, the physician partners of UANT formed Ventures, and UANT transferred to Ventures several passive investment interests, including UANT’s ownership interest in USMD Arlington Hospital. When the federal moratorium on the growth of physician owned hospitals expired in 2005, the ownership of Ventures was adjusted to mirror the ownership of UANT, and remains that way today.

In July 2005, USMD Hospital Division formed USMD Hospital at Fort Worth, L.P. f/k/a Southwest Fort Worth Ambulatory Surgery Center, L.P. (“USMD Fort Worth Hospital”) to develop, construct, build, and operate a surgical facility in southwest Fort Worth, Texas. Initially, USMD Fort Worth Hospital planned to build an ambulatory surgery center, but based on projections, interest in the facility, and perceived competition in the service area, it ultimately constructed a general acute-care hospital. USMD Hospital Division owns a 20% minority interest in USMD Fort Worth Hospital, its wholly-owned subsidiary serves as the general partner of USMD Fort Worth Hospital, and it manages the operations of USMD Fort Worth Hospital pursuant to a long-term hospital management agreement. By 2005, UANT was affiliated with more than 48 urologists and owned a minority interest as a limited partner in USMD Fort Worth Hospital.

In November 2006, USM formed USMD Cancer Treatment Centers, LLC (“USMD CTC Division”) to assist physician group practices and other providers in developing and managing intensity modulated radiation therapy centers, which use high doses of controlled radiation to treat prostate cancer. At December 31, 2011 USMD CTC Division owned an interest in and/or provides management services to nine facilities, including facilities owned and operated by UANT and USMD Arlington Hospital.

Between 2004 and 2007, UANT developed several other ancillary service lines of its own, including a video urodynamics service line, four diagnostic imaging facilities, a clinical pathology laboratory, and a specialized anatomical uropathology laboratory. As UANT continued to evaluate opportunities to expand its medical service lines, USM would evaluate related opportunities to assist other medical providers in expanding their service lines in a similar fashion. UANT and USM shared directors and owners, so opportunities for new expansion and development were shared between the two companies. But because one entity provided professional medical services through licensed physicians, and the other company provided only related development and management services, the federal and state rules governing their businesses were markedly different. Further, individual physicians had purchased interests in USM, USL and USMD Hospital Division, and all direct and indirect financial arrangements between physicians, UANT and USM or any USM affiliate were subject to numerous and complex rules and regulations, which themselves were subject to frequent change. USM began to look at ways to simplify its ownership structure and its relationship with UANT and physicians in order to minimize the compliance risk that this structure and the regulatory environment created.

To accomplish this goal, in November 2006, USM formed USMD to consolidate the ownership of USMD Hospital Division, USL, and USM. As of December 31, 2007, USMD was owned by all of the prior owners of USMD Hospital Division and USM, and USMD owned all of the ownership interests of (i) USL (now referred to as “USMD Lithotripsy Division”); (ii) USMD Hospital Division; and (iii) USMD CTC Division.

In 2008, USMD began evaluating its ownership and operation of a physician group practice that would provide professional medical services through licensed physicians. The state of Texas has adopted a legal doctrine known as the “corporate practice of medicine,” which generally prohibits licensed physicians from entering into partnerships, employee relationships, fee-splitting, or other relationships with non-physicians where the physician’s practice of medicine is in any way directed by, or fees shared with, a non-physician. Under the Texas corporate practice of medicine doctrine, it is unlawful for any for- profit corporation to employ physicians that provide professional medical services. Texas does, however, permit the formation of a certified non-profit health organization, which may have as one of its purposes the delivery of healthcare to the public. This structure would permit USMD to form a Texas non-profit corporation and serve as its sole member, obtain certification of this corporation as a certified non-profit health organization and the certified non-profit health organization may employ physicians to provide professional medical services to the public.

In October 2008, USMD formed USMD Affiliated Services (“USMD Physician Services”) and sought certification of this entity by the Texas Medical Board as a certified non-profit health organization. The Texas Medical Board certified USMD Physician Services as a certified non-profit health organization in March 2009. USMD then began discussions with UANT about consolidating the UANT medical group practice into USMD Physician Services. The goal of this proposed business combination was to create an “integrated urology health services company” which was capable of providing for the benefit of urology patients the entire spectrum of

healthcare services they might require to effectively diagnose and treat their health issues. By integrating UANT’s broad array of clinical specialties and subspecialties, diagnostic imaging, clinical and anatomical pathology and cancer treatment facilities with USMD’s inpatient and outpatient facilities, advanced robotic and radio-surgery facilities, cancer treatment management and physics services, and lithotripsy services, USMD believed the resulting company could offer urology patients a single source urology health services system which would be controlled by physicians, who are in the best position to understand patient needs.

During this same time period, federal regulations that govern the referral of patients for health services between parties with financial arrangements were becoming increasingly complex and onerous, and the tenor of the narratives delivered by federal rulemaking agencies that published these regulations made clear that increased government regulation was a virtual certainty. Between 2006 and early 2009, federal agencies published regulations which: (1) effectively eliminated the ability of small and medium sized urology group practices to own and operate specialized uropathology labs and diagnostic imaging centers; (2) modified several Stark Law regulations that govern contractual relationships between physicians and entities to which they refer such that existing contractual relationships between the two were forced to terminate; (3) implemented a “stand in the shoes” provision to the Stark Law which extended the reach of certain the Stark Law’s self-referral prohibitions such that many long-term mutually beneficial relationships between urology group practices and other healthcare providers were forced to terminate; and (4) prohibited the development of new physician owned acute-care hospitals and significantly limited the ability of existing physician owned acute-care hospitals to expand their size and breadth of services. In addition, bills were introduced at both the federal and state level to prohibit large physician group practices from providing ancillary services such as imaging and pathology for the benefit and convenience of their patients, and to prohibit physicians from referring patients to hospitals they own and operate entirely.

At the same time that federal regulations were curtailing the ability of physician groups to expand their service lines, Congress was passing landmark healthcare legislation which included significant financial incentives for physicians and other healthcare providers to integrate into a single “accountable care organization” (“ACO”). As part of the Patient Protection and Affordable Care Act of 2010, groups of providers who organize as an ACO and agree to be accountable for the overall care of Medicare beneficiaries will be eligible to receive bundled payments as payment for patient episodes of care and will also be eligible to share in cost savings derived from the provision of care through the ACO itself. Ironically, Congress was endorsing and promoting the move to integrated healthcare delivery systems, but federal regulations made it virtually impossible to achieve if physicians were the owners of the integrated healthcare delivery system, and not merely its employees or contractors.

UANT and USMD were founded on a commitment to a healthcare delivery system controlled by physicians and one form of physician ownership of healthcare organizations appeared to be both viable and consistent with current and proposed federal regulations. The Stark Law, which generally prohibits a physician from referring patients to an entity he or she owns for certain healthcare services, includes a specific exception, a “public company exception,” which permits a physician to refer to an entity that he or she owns if, among other things, the form of ownership held by the physician is publicly-traded securities of a corporation with shareholder equity of no less than $75 million and the securities are listed on an electronic national or regional stock exchange with daily quotations. By combining into a single legal entity, UANT and USMD believed they could create an integrated urology health services company, controlled by physicians, which would provide better patient care under a structure Congress is endorsing. And by structuring their ownership of this integrated healthcare delivery system to comply with the Stark Law exception for ownership of publicly traded securities, UANT and USMD believed they could provide exceptional patient care without running afoul of federal regulations that govern the referral of patients between physicians and entities they own.

In early 2009, based on initial due diligence, USMD and UANT anticipated that the combined companies would qualify for the “public company exception” under the Stark Law in early 2011 because they estimated that their consolidated shareholders’ equity would surpass the $75 million minimum required by the Stark

Law. Also, USMD and UANT would each have the required audited financial statements as of December 31, 2009, thus allowing Holdings to have the required audited financial statements for reports of companies who are publicly held.

In April 2009, USMD, Ventures and UANT began to discuss the possibility of combining the operations of their businesses into one company. UANT and Ventures immediately recognized that the managing partner of UANT and Ventures, Dr. John House, owned common stock of USMD, served as a director of USMD and served as the chief executive officer of USMD, each of which created conflicts of interest with respect to his representation of Ventures and UANT in negotiating a business transaction with USMD. To address these conflicts of interest, the partners of UANT and Ventures created the Ventures Task Force by appointing four of their partners to represent the interests of the Ventures and UANT partners during the due diligence and negotiation processes. The members of the Ventures Task Force, Keith Waguespack, M.D., Richard Scriven, M.D., Ira Hollander, M.D., Mark McCurdy, M.D. and Alex Gordon, M.D., are partners of UANT and Ventures who, at the time the Contribution Agreement was negotiated, did not own common stock of USMD and had no financial or compensation arrangements with USMD outside their indirect ownership of the USMD common stock held by Ventures.

USMD recognized that three of the five directors, Drs. John House, Patrick Collini and James Saalfield, on the USMD board of directors were considered interested directors under the Texas Business Organizations Code because they have ownership interests in Ventures or its affiliates. However, USMD considered the contributions made by these directors to be vital in the negotiation and structuring of the Contribution. To alleviate any potential conflict of interest, USMD created a working group (the “USMD Working Group”) which included all five directors, including the two independent directors, as well as the chief financial officer and USMD’s legal counsel, neither of whom had any financial interests in Ventures. This working group was tasked with reviewing the Contribution Agreement and the Contribution structure and making a recommendation to the USMD board of directors.

The Ventures Task Force and the directors of USMD formed a ten member joint task force (the “Joint Task Force”) to discuss the potential combination of their businesses. The Joint Task Force reviewed the healthcare regulatory requirements associated with combining USMD, UANT and Ventures as well as the operating strategies, financing strategies and tax consequences of various structures for the business combination. The Joint Task Force met approximately 12 times during 2009, 20 times in 2010 and 32 times in 2011.

USMD, Ventures and UANT also recognized that due to the cross ownership between the companies and the lack of disinterested board members, it would be reasonable and appropriate for an independent firm to provide a fairness opinion with respect to the terms and conditions of the transaction. Accordingly, in July 2009, the USMD board of directors, UANT board of directors and Ventures executive committee engaged VMG Health to render a fairness opinion with respect to the transaction they were structuring.

In December 2009, the parties executed a letter of intent which described the general structure and timetable for pursuing the Contribution. The letter of intent reflected the following basic principles regarding the proposed Contribution:

•

UANT and Ventures would consolidate their businesses into Ventures;

•

The UANT physicians would enter into employment agreements with USMD Physician Services under which they would receive fair market value employment compensation;

•

The allocation of the consideration in a USMD/Ventures combination would be based upon the relative valuations of USMD, UANT and Ventures; and

•

The Contribution would be conditioned upon Holdings being able to effect the listing of its common stock on the NASDAQ Capital Market or otherwise meeting the “public company exception” of the Stark Law.

Certain of the USMD shareholders, including the Ventures’ partners, their immediate family members and the officers of USMD and UANT, intend to own a portion of their interests in Holdings indirectly through an ownership interest in Ventures. To achieve this result and as set forth in the Contribution Agreement, the contribution by those USMD shareholders to Holdings of that portion of their USMD common stock will first be contributed to Ventures in exchange for partnership interests in Ventures, and then contributed by Ventures to Holdings in exchange for shares of Holdings common stock. The purposes for this transaction structure are as follows:

•

To consolidate voting control of Holdings into one entity that is managed by the physician owners;

•

To enable Holdings to qualify as a “controlled company” for purposes of the governance rules of the NASDAQ Capital Market; and

•

To ensure that the desired federal income tax consequences of the combination would be achieved by causing at least 80% of the Holdings common stock to be owned by the persons who are party to the Contribution and not quickly resold in the public market.

During January and February 2010, counsel for the parties began drafting the various transaction documents. During this period, the parties further refined the Contribution structure and continued their respective due diligence investigations. In March 2010, two physicians who were directors of USMD and partners of UANT resigned their positions as board members of USMD and ceased providing professional medical services on behalf of UANT in order to pursue other professional interests. Both remain shareholders of USMD.

The Contribution structure was substantially finalized in mid-February, 2010. As a result of its deliberations, the Joint Task Force decided to form a new company, Holdings, into which UANT, USMD and Ventures could consolidate their operations. The structure of Holdings and its subsidiaries would be as set forth in the organizational chart in “INFORMATION ABOUT THE COMPANIES” on page 84. From February through April, UANT and USMD held a series of “town hall” meetings with groups of partners of UANT at which the Contribution was discussed in detail. Transaction documents were revised to reflect the comments received from the UANT partners at the town hall meetings.

The USMD Working Group unanimously determined that the Contribution was in the best interests of USMD and submitted the documents to the USMD board of directors for approval. In April 2010, the USMD board of directors approved the Contribution in principle. On April 27, 2010, the UANT and Ventures partners similarly approved the Contribution in principle. Both approvals were made subject to the satisfaction of the finalization of the Contribution Agreement and the satisfaction of the closing conditions to be set for therein, including the preparation of this Prospectus, the listing of Holdings common stock on the NASDAQ Capital Market and the final approval of the Contribution by the USMD shareholders and UANT partners.

During May through July 2010, the parties completed their due diligence investigations and the audits of their financial statements and finalized the Contribution Agreement and other transaction documents. The Contribution Agreement was executed on August 19, 2010. On September 8, 2010, VMG Health delivered to the USMD board of directors, UANT board of directors and Ventures executive committee its written opinion that, based upon and subject to the matters set forth in its opinion, the relative allocation established by the Original Contribution Agreement of the consideration to be received by the USMD shareholders and by Ventures, taken in the aggregate, is fair from a financial point of view to such USMD shareholders and Ventures.

In late 2010, the Joint Task Force, concerned that a fairness opinion based on August 31, 2009 financial information could be considered stale, decided it would be prudent and in the best interests of the shareholders of USMD and the partners of Ventures to update the valuations which served as the basis of the relative allocation of the consideration for the Contribution. In connection with the revised valuations, the USMD board of directors, UANT board of directors and Ventures executive committee engaged VMG Health to provide a new fairness opinion using financial information available through December 31, 2010. On February 2, 2011, VMG

Health delivered to the USMD board of directors, UANT board of directors and Ventures executive committee a new fairness opinion, based on financial information available as of December 31, 2010, that the relative allocation established by the Original Contribution Agreement of the consideration to be received by the USMD shareholders and by Ventures, taken in the aggregate, is fair from a financial point of view to such USMD shareholders and Ventures. Also in February 2011, the Joint Task Force recommended that the valuation schedules be updated to reflect the new valuations and these updated schedules were incorporated into the Original Contribution Agreement.

While the parties were finalizing terms of the Contribution and proceeding to satisfy the various closing conditions set forth in the Original Contribution Agreement, substantial activity was occurring among other physician group practices and health care providers located in the Dallas/Fort Worth metropolitan area. USMD management began independently investigating opportunities to broaden its service lines and breadth and identified a business combination with MCNT as a means to achieve this goal. In early 2010, USMD and Ventures management began discussions regarding possible business combinations with MCNT and Impel.

MCNT is a physician owned and controlled multi-specialty group practice comprised, as of December 31, 2011, of 145 physicians who provide a broad spectrum of professional health care services at 40 locations in the Dallas/Fort Worth metropolitan service area. Impel is a physician practice management company that handles all training, accounting, finance, operations, management, marketing, billing, collection and consulting services for MCNT. USMD and Ventures believed that a business combination with MCNT and Impel would allow Holdings to expand its combined business from an integrated urology health services company to a broader-based integrated health services company that provides professional health and related ancillary services across a much larger spectrum of health care specialties and subspecialties. The parties also believed this integration would better position the combined company to take advantage of recent federal health care initiatives that are widely expected to provide significant incentives to provide integrated health care services under an ACO structure.

While USMD, Ventures, and MCNT were discussing the possible combination of their businesses, USMD had also initiated discussions with selected private equity firms regarding a possible strategic investment in equity securities of Holdings. In May 2011, Holdings and USMD executed a non-binding term sheet with an unaffiliated private investment firm (the “Investment Firm”) which contemplated the Investment Firm’s making a $60 million investment in convertible preferred stock of Holdings. Although the transaction was subject to the satisfactory completion of a due diligence investigation, the Investment Firm specified in the term sheet that the transaction would be conditioned upon the inclusion of MCNT in the overall business combination.

USMD, Ventures, MCNT and Impel continued to discuss the terms and structure of their potential business combination, and on June 20, 2011, Holdings and USMD executed a non-binding term sheet with MCNT and Impel regarding a prospective business combination. The term sheet originally contemplated that the equity holders of MCNT and Impel would receive a combination of cash, notes and common stock of Holdings and that the transaction would be conditioned upon Holdings’ completing its equity financing with the Investment Firm. Further, while several alternative transaction structures were proposed and evaluated, MCNT and Impel ultimately required that any business combination with Holdings needed to occur as part of the Contribution and not in a subsequent or concurrent transaction.

Throughout the summer of 2011, Holdings continued negotiating terms of a transaction with MCNT, Impel and the Investment Firm. With no assurance that either of these potential transactions would result in a definitive agreement, USMD and Ventures convened special meetings of their respective equity holders on August 23, 2011 to approve the Contribution Agreement. Although the Contribution Agreement was duly approved at these meetings, several conditions precedent to the Contribution had not been satisfied at that time, including approval of the Holdings common stock for listing on a national securities exchange and the release of personal guarantees of certain bank indebtedness. These unsatisfied closing conditions and continued progress in discussions with MCNT, Impel and the Investment Firm caused USMD and Ventures to postpone the closing of the Contribution.

A principal impediment to negotiating terms of an investment by the Investment Firm was the Investment Firm’s post-closing equity valuation of Holdings. Specifically, the proposed subordinated indebtedness to be incurred in the Contribution and the proposed payment of cash consideration to UANT, MCNT and Impel resulted in a substantial reduction in the Investment Firm’s overall valuation of Holdings. Accordingly, in September 2011, USMD, Ventures and MCNT agreed to revise the structure of the Contribution transaction to eliminate the cash and subordinated debt components of consideration payable to UANT, MCNT and Impel, so that the transaction consideration to UANT, MCNT, and Impel would consist solely of common stock of Holdings. By doing this, the parties expected that the Investment Firm would assign a more favorable post-closing valuation to Holdings.

During this same period, MCNT and Impel also determined that, in order to achieve their desired involvement in the ongoing governance of Holdings, their participation in an all-equity transaction would need to be conditioned upon their ability to merge into Ventures, rather than to own common stock of Holdings directly. Accordingly, MCNT and Impel began to negotiate the terms of a satisfactory partnership agreement with the other partners of Ventures. MCNT and Impel representatives and the UANT Task Force separately met to negotiate these arrangements periodically during the third and fourth quarters of 2011.

After restructuring the Contribution transaction as an all-equity transaction, USMD continued to negotiate the terms of a definitive transaction with the Investment Firm. In early October, MCNT advised USMD and Ventures that it was willing to eliminate as a necessary condition of a transaction with Holdings the Investment Firm’s equity investment. In order to devote full attention to closing the Contribution, USMD and the Investment Firm mutually agreed to delay further negotiation regarding a definitive transaction between the two parties until after the Contribution has closed.

Between October and December 2011, USMD, UANT, Ventures, MCNT and Impel and their respective representatives negotiated the terms of definitive agreements. On December 1, 2011, Ventures and Holdings entered into a definitive agreement with MCNT (the “MCNT Merger Agreement”) pursuant to which a subsidiary of Ventures will merge with and into MCNT. In exchange for their equity interests in MCNT, the owners of MCNT will receive as merger consideration partnership interests in Ventures. On December 15, 2011, Ventures and Impel entered into a merger agreement in form and substance substantially similar to the MCNT Merger Agreement pursuant to which Impel will merge with and into a subsidiary of Ventures. In exchange for their equity interests in Impel, the owners of Impel will also receive as merger consideration partnership interests in Ventures.

The closing of the two merger agreements (collectively, the “MCNT Merger”) is conditioned, among other things, on the amendment of the Contribution Agreement such that immediately following the closing of the MCNT Merger, (i) certain shareholders of USMD will contribute all of their shares of USMD common stock to Ventures in exchange for limited partnership interests in Ventures, (ii) Ventures will contribute all of its assets, which shall include, but not be limited to, its equity interests in USMD, MCNT, Impel, and UANT, to Holdings in exchange for its allocated portion of the shares of Holdings common stock, and (iii) all other USMD shareholders will contribute their shares of USMD common stock to Holdings in exchange for their allocated portion of the shares of Holdings common stock. Accordingly, Holdings and Ventures executed the Amendment on February 9, 2012.

Fairness Opinion of VMG Health

Background of the Engagement

In July 2009, the USMD board of directors, UANT board of directors and Ventures executive committee engaged VMG Health as financial advisor to render a fairness opinion with respect to the Contribution based on the relative valuations of USMD, UANT and Ventures and their respective businesses. Under the terms of the VMG Health engagement, USMD, UANT and Ventures paid VMG Health an aggregate fee of $188,200, none of which was contingent upon the consummation of the Contribution. In addition, the parties agreed to reimburse VMG Health for its expenses, including fees, disbursements and other charges of counsel, and to indemnify VMG Health and related parties against liabilities, including liabilities under federal securities laws, relating to, or arising out of, its engagement.

On September 8, 2010, VMG Health delivered its initial written opinion to the USMD board of directors, UANT board of directors and Ventures executive committee to the effect that, as of such date and based upon and subject to the matters and assumptions set forth in such opinion, the relative allocation established by the Original Contribution Agreement of the consideration to be received by USMD shareholders and by Ventures, taken in the aggregate, was fair, from a financial point of view, to the USMD shareholders and to Ventures.

In November 2010, the USMD board of directors, UANT board of directors and Ventures executive committee engaged VMG Health to provide a new fairness opinion using updated financial information available through December 31, 2010. Under the terms of the November 2010 VMG Health engagement, USMD, UANT and Ventures paid VMG Health an aggregate fee of $76,000, none of which was contingent upon the completion of the Contribution. In addition, the parties agreed to reimburse VMG Health for its expenses, including fees, disbursements and other charges of counsel, and to indemnify VMG Health and related parties against liabilities, including liabilities under federal securities laws, relating to, or arising out of, its engagement.

On February 2, 2011, VMG Health delivered a second fairness opinion to the USMD board of directors, UANT board of directors and Ventures executive committee to the effect that, as of such date and based upon and subject to the matters and assumptions set forth in such opinion, the relative allocation established by the Original Contribution Agreement of the consideration to be received by the USMD shareholders and by Ventures, taken in the aggregate, was fair from a financial point of view to the USMD shareholders and Ventures.

In November 2011, the USMD board of directors, UANT board of directors and Ventures executive committee engaged VMG Health to further update its fairness opinion based upon the anticipated inclusion of MCNT and Impel in the Contribution. USMD, UANT and Ventures agreed to pay VMG Health an additional fee of $70,000 none of which is contingent upon the consummation of the Contribution. In addition, USMD, UANT and Ventures have agreed to reimburse VMG Health for its expenses, including fees, disbursements and other charges of counsel, and to indemnify VMG Health and related parties against liabilities, including liabilities under federal securities laws, relating to, or arising out of, its engagement. On February 9, 2012, VMG Health delivered a new fairness opinion to the USMD board of directors, UANT board of directors and Ventures executive committee to the effect that, as of such date and based upon and subject to the matters and assumptions set forth in such opinion, the relative allocation established by the Contribution Agreement of the consideration to be received by Ventures and USMD shareholders, taken in the aggregate, was fair from a financial point of view to Ventures and the USMD shareholders.

In addition to the fairness opinions delivered on September 8, 2010, February 2, 2011 and February 9, 2012, VMG Health has provided additional valuation and financial advisory services to USMD, UANT and Ventures in the past and is expected to provide such services in the future. For 2009, 2010 and 2011, USMD, UANT and Ventures have collectively paid VMG Health an aggregate of approximately $222,000 in fees for additional valuation and financial advisory services not related to the fairness opinions, and expect to pay approximately $59,000 in 2012 for such services.

The full text of VMG Health’s written fairness opinion, dated February 9, 2012, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B. VMG Health provided its opinion for the information and assistance of the USMD board of directors, UANT board of directors and Ventures executive committee in connection with their consideration of the Contribution. The VMG Health opinion is not a recommendation as to how any holder of USMD common stock or partner of Ventures should vote or make any election with respect to the Contribution or any other matter.

Assumptions and Methodologies Used

The USMD shareholders and the Ventures’ partners are encouraged to read the opinion carefully in its entirety. VMG Health’s opinion was provided for the benefit of the USMD board of directors, UANT board of

directors and Ventures executive committee, in connection with, and for the purpose of, their evaluation of the relative allocation of the consideration issued pursuant to the Contribution Agreement from a financial point of view and does not address any other aspect of the Contribution or any related transaction. The opinion does not address the relative merits of the Contribution or any related transaction as compared to other business strategies or transactions that might be available to USMD, UANT, Ventures, MCNT or Impel, or with respect to their underlying business decisions to effect the Contribution or any related transaction. The opinion does not constitute a recommendation to any holder as to how to vote or act with respect to the Contribution or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, VMG Health, among other things:

•

reviewed the Contribution Agreement;

•

reviewed the financial data of USMD, UANT and Ventures for the fiscal years ended December 31, 2008, 2009 and 2010;

•

reviewed financial forecasts and estimates for 34 separate business units and partnership interests held by USMD, UANT and Ventures for fiscal years 2012 through 2016 prepared by managements of USMD, UANT and Ventures;

•

held discussions with the senior managements of USMD, UANT and Ventures with respect to the business and prospects of USMD, UANT and Ventures;

•

reviewed and analyzed certain publicly available financial data for companies that VMG Health deemed relevant in evaluating USMD, UANT and Ventures;

•

reviewed and analyzed certain publicly available information for transactions that VMG Health deemed relevant in evaluating the relative allocations;

•

reviewed and analyzed selected operational metrics of USMD, UANT and Ventures using historical financial data of USMD, UANT and Ventures and financial forecasts and estimates relating to USMD, UANT and Ventures prepared by the managements of USMD, UANT and Ventures;

•

reviewed, but did not express any opinion on or perform any valuations with respect to, selected financial assumptions and projections identified by USMD, UANT and Ventures and contained in the financial data related to MCNT and Impel as of December 31, 2010; and

•

performed such other analyses, reviewed such other information and considered such other factors as VMG Health deemed appropriate.

For purposes of rendering its opinion described above, VMG Health relied upon and assumed, without assuming any responsibility for independent verification or investigation, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by VMG Health, and VMG Health did not assume any liability for any such information. In that regard, VMG Health assumed, with the consent of USMD, UANT and Ventures, the accuracy and completeness of any such information provided by or discussed with USMD, UANT, Ventures and their respective employees, representatives and affiliates or otherwise reviewed by VMG Health, including without limitation the MCNT and Impel financial data. With respect to the financial forecasts and estimates relating to USMD, UANT and Ventures utilized in VMG Health’s analyses, VMG Health was advised and, at the direction of the managements of USMD, UANT and Ventures and with USMD’s, UANT’s and Ventures’ consent, assumed, without independent verification or investigation, that such forecasts and estimates were reasonably prepared on bases reflecting the best available information, estimates and judgments of the managements of USMD, UANT and Ventures, as the case may be, as to the future financial condition and operating results of USMD, UANT and Ventures and such strategic benefits and that the financial results reflected in such forecasts and estimates would

be achieved at the times and in the amounts projected. With respect to certain financial assumptions and projections related to MCNT and Impel in the financial data of MCNT and Impel and identified to VMG Health by USMD, UANT and Ventures, VMG Health performed a limited review of, but did not express any opinion on or perform any valuations with respect to, such financial assumptions and projections. VMG Health also assumed, with USMD’s, UANT’s and Ventures’ consent, that the Contribution and related transactions would be consummated in accordance with their respective terms without waiver, modification or amendment of any material term, condition or agreement and in compliance with all applicable laws and other requirements and that, in the course of obtaining the necessary regulatory or third-party approvals, consents and releases with respect to the Contribution or any related transaction, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on USMD, UANT, Ventures or the Contribution. VMG Health neither made nor obtained any independent evaluations or appraisals of the assets or liabilities, contingent or otherwise, of USMD, UANT, Ventures, MCNT or Impel.

As a basis for negotiating the mergers with MCNT and Impel, the parties utilized the relative values of the USMD, UANT and Ventures businesses set forth in the Original Contribution Agreement as of December 31, 2010, measured against the values of MCNT and Impel as of such date as proposed by MCNT and Impel. The USMD board of directors, UANT board of directors and Ventures executive committee engaged VMG Health to review (but not to express any opinion on or perform any valuation with respect to) certain financial assumptions and projections contained in the financial data provided by MCNT and Impel, and to render a new fairness opinion as to the relative allocation of the consideration issued pursuant to the Contribution Agreement, as so amended, from a financial point of view, to Ventures and the USMD shareholders.

VMG Health’s opinion relates solely to the relative allocation of Holdings shares between Ventures and the USMD shareholders. VMG Health did not express any opinion as to the underlying valuation, future performance or long-term viability of USMD, UANT, Ventures, MCNT or Impel, the actual value of Holdings common stock or the price at which Holdings common stock would trade at any time. VMG Health expressed no view as to, and its opinion did not address, the underlying business decision of USMD, UANT, Ventures, MCNT or Impel to effect the Contribution or any related transaction, the relative merits of the Contribution or any related transaction as compared to any alternative business strategies that might exist for USMD, UANT, Ventures, MCNT or Impel, or the effect of any other transaction in which USMD, UANT, Ventures, MCNT or Impel might engage. VMG Health’s opinion was necessarily based on the information available to it and general economic, financial and stock market conditions and circumstances as they existed and could be evaluated by VMG Health on the date of its analyses, December 31, 2010. In addition, VMG Health did not express any opinion as to the impact of the transactions contemplated by the Contribution Agreement on the solvency or viability of USMD, UANT, Ventures, MCNT, Impel or Holdings or the ability of USMD, UANT, Ventures, MCNT, Impel or Holdings to pay their respective obligations when they come due, and its opinion did not address any legal, regulatory, tax or accounting matters. The credit, financial and stock markets were experiencing unusual volatility as of the date of VMG Health’s analyses and VMG Health expressed no opinion or view as to the potential effects, if any, of such volatility on USMD, UANT, Ventures, MCNT or Impel or the proposed Contribution. Although subsequent developments may affect its opinion, VMG Health does not have any obligation to update, revise or reaffirm its opinion. Except as described above, USMD, UANT and Ventures imposed no other instructions or limitations on VMG Health with respect to the investigations made or the procedures followed by it in rendering its opinion.

This summary is not a complete description of VMG Health’s opinion or the financial analyses performed and factors considered by VMG Health in connection with its opinion. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. VMG Health arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole, and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion. Accordingly, VMG Health believes that its analyses and this summary must be considered as a whole, and that

selecting portions of its analyses and factors or focusing on information presented in the summary, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying VMG Health’s analyses and opinion.

In performing its analyses, VMG Health considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its analyses, many of which are beyond the control of USMD, UANT and Ventures. No company or transaction used in the analyses is identical to USMD, UANT, Ventures or the Contribution, and an evaluation of the results of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies or transactions analyzed.

The forecasts and estimates contained in VMG Health’s analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than those suggested by its analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, the forecasts and estimates used in, and the results derived from, VMG Health’s analyses are inherently subject to substantial uncertainty.

The type and amount of consideration payable in the Contribution were determined through negotiation between USMD, UANT and Ventures, and the decisions to enter into the transaction were solely those of the USMD board of directors, the UANT board of directors, the Ventures managing partner and the Ventures Task Force. VMG Health’s opinion and financial analyses were only one of many factors considered by the USMD board of directors, the UANT board of directors, the Ventures managing partner and the Ventures Task Force in their evaluation of the Contribution and should not be viewed as determinative of the views of any party’s management with respect to the Contribution or any provisions of the Contribution Agreement.

Financial Analyses Performed

The following is a summary of the material financial analyses delivered by VMG Health to the USMD board of directors, UANT board of directors and Ventures executive committee in connection with rendering VMG Health’s fairness opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by VMG Health, nor does the order of analyses described represent relative importance or weight given to those analyses by VMG Health. The summaries alone do not constitute a complete description of VMG Health’s financial analyses.

In connection with its engagement, VMG Health analyzed the various healthcare business and partnership interests owned by USMD, UANT and Ventures as of December 31, 2010. The businesses and partnership interests included urology physician services, specialty hospitals, lithotripsy, diagnostic imaging, radiation therapy, and anatomical and clinical laboratories. VMG Health analyzed operational and financial data for each business or partnership interest held by each of USMD, UANT and Ventures and reviewed comparable companies and transactions related to each such business and partnership interest, in each case as of December 31, 2010. Due to the large number of businesses and partnership interests, and the lack of any comparable companies or transactions similar to the combined operations of any of USMD, UANT or Ventures, Holdings has not listed these comparable companies and transactions in this Prospectus, as they would not be meaningful. A summary of the methodologies used in the valuation process are listed below.

Market Approach – Guideline Company Method

The Guideline Company Method is a subset of the Market Approach and establishes value through a comparative analysis of similar publicly traded companies active in similar healthcare industry sectors. The comparison is based on published data regarding the public companies’ stock price and earnings, revenues, and

pricing multiples. VMG Health’s review revealed key differences between USMD, UANT and Ventures and publicly traded companies such as size, capital structure, access to capital, product diversification, geographic diversification, and risk. After review of available guideline companies in each appropriate healthcare market segment, VMG Health considered but did not rely on the Guideline Company Method to value the business units and partnership interests owned by USMD, UANT, and Ventures.

Market Approach – Merger and Acquisition Method

The Merger and Acquisition Method is a subset of the Market Approach and calculates a mathematical relationship between or among variables of similar transactions. VMG Health analyzed pricing multiples of historical transactions of similar healthcare companies in each specific healthcare segment. The majority of the available transaction data reviewed lacked comparability to the subject businesses because important elements of the transaction were omitted, including what exact assets are being acquired, what liabilities are being assumed, and what relevant agreements may be tied to the transaction. After a review of individual transactions in each appropriate healthcare segment, VMG Health partially relied on the Merger and Acquisition Method to value the USMD Arlington Hospital and USMD Fort Worth Hospital. VMG Health considered but did not rely on the Merger and Acquisition Method to value all other business units and partnerships of USMD, UANT, and Ventures.

Income Approach – Discounted Cash Flow Analysis

The Income Approach methodology uses a Discounted Cash Flow analysis to establish the value of a company under the premise that the value of a company may be quantified by the future economic benefit it creates. Application of the discounted cash flow analysis requires projection of the free cash flows of the business over its anticipated economic life, which are then discounted to present value using a risk adjusted rate of return (also called a discount rate). VMG Health applied and primarily relied on a Discounted Cash Flow analysis to value each healthcare business owned or operated by USMD, UANT, and Ventures, which incorporated discount rates ranging from 15.0% to 25.0%. To derive the discount rates used in the Discounted Cash Flow analysis, VMG Health used a weighted average cost of capital for each business unit or partnership interest, which incorporates the cost of debt and equity capital. The discount rate calculation included the following components: the risk free rate, the equity risk premium, the industry risk premium, the small company risk premium, and a specific company risk premium for each individual business unit or investment. The specific company risk quantifies the risk associated with the operations of the company, or the “systemic risk” of the company. The cost of debt is included in the calculation based on average industry capital structure.

Cost Approach

The Cost Approach, also known as the asset or build-up approach, is a method that attempts to value a business by identifying and valuing each tangible and intangible asset. The valuation premise used in this method may be one of the following: value in continued use as part of a going concern; value in place as part of a mass assemblage of assets; and, value in exchange as part of an orderly disposition or forced liquidation.

The Cost Approach can be considered to provide a “floor” or lowest minimum value related to a business. This method may be an appropriate method when the Market Approach and Income Approach produce a value lower than the Cost Approach. In determining the applicability of the Cost Approach, we must also consider the earnings generated by the business as indicated in its historical and projected financial statements. Under this approach, the identified tangible and intangible assets are valued based on the cost associated with “recreating” each asset.

VMG Health used the Cost Approach methodology in part to value the assets of the non-ancillary professional practice of UANT, but not for other business units or investments in partnership interests because this methodology did not adequately reflect the going concern and intangible asset values of such other units and investments.

As part of its financial advisory and valuation activities, VMG Health engages in the valuation of businesses and securities in connection with mergers and acquisitions, private placements, restructurings, and valuations for corporate and other purposes. VMG Health is experienced in these activities. VMG Health received a fee in connection with the delivery of its opinion. VMG Health has also provided in the past and is currently providing valuation and financial advisory services to USMD, UANT and Ventures, for which VMG Health has been paid or expects to be paid fees. In addition, USMD, UANT and Ventures reimbursed VMG Health for expenses incurred in connection with rendering its opinion and will reimburse VMG Health for additional expenses and indemnify VMG Health against potential liabilities arising out of its services provided pursuant to issuing its opinion. VMG Health may in the future provide financial advisory, investment banking, or other services to USMD, UANT, Ventures and Holdings or their respective affiliates for which VMG Health would expect to receive compensation.

Interests in the Transaction of the Managing Partner of Ventures and of the Directors and Officers of USMD, MCNT and Impel

Three of the five USMD current directors are persons who own a beneficial interest in UANT and Ventures. Dr. House currently beneficially owns approximately 19% of the common stock of USMD and beneficially owns an approximately 2.5% partnership interest in Ventures. In addition, Dr. Patrick Collini and Dr. James Saalfield, two current members of the USMD board of directors, are partners in Ventures. Drs. Collini and Saalfield each currently hold less than 1% of the common stock of USMD and an approximately 2.5% partnership interest in Ventures. None of the remaining officers of USMD currently hold partnership interests in Ventures, but Mr. Thomas Hall, the Chief Executive Officer of UANT, holds approximately 1% of the USMD common stock.

Karen Kennedy has a change of control severance agreement with Impel pursuant to which she will receive certain severance benefits in the event she is terminated within two years of the date of a change of control of Impel. The merger of Impel into a wholly-owned subsidiary of Ventures meets the definition of change in control under the agreement. Greg Cardenas has a severance agreement with USMD pursuant to which he will receive certain severance benefits in the event USMD terminates his employment without cause or Mr. Cardenas resigns his employment with good reason. In addition, although the terms of such agreements have not yet been finalized, Drs. John House, Steven Brock, Patrick Collini, Charles Cook, Russell Dickey, James Saalfield, Paul Thompson, Khang Tran and Richard Johnston will receive compensation from USMD Physician Services, a wholly-owned non-profit health organization, for their services as practicing physicians pursuant to a written physician employment agreement between each of them and USMD Physician Services that will be executed to

be effective as of the closing date of the Contribution. Further, although the terms of the employment agreement have not yet been finalized, Holdings will enter into a written employment agreement with Karen Kennedy for her role as the Chief Operations Officer of Holdings and the President of the USMD Physician Practice Management Division, such agreement to be effective as of the closing date of the Contribution.

Transaction Consideration and Adjustments

The consideration for the Contribution will consist of 10 million shares of Holdings common stock (allocated between Ventures and the holders of USMD common stock as indicated below) and options granted to Ventures to purchase shares of Holdings common stock.

Ventures will contribute all of its assets to Holdings in exchange for shares of Holdings common stock. Immediately prior to the Contribution, the equity owners of each of UANT, MCNT and Impel will cause each entity to merge with a separate subsidiary of Ventures. UANT, MCNT and Impel will be the surviving entities of their mergers and will become wholly-owned subsidiaries of Ventures. In addition, certain of the USMD shareholders will contribute all or a portion of their shares of USMD common stock to Ventures in order to become partners in Ventures. Ventures will then contribute its equity interests in USMD, UANT, MCNT and Impel as part of the contribution of its assets to Holdings. At the same time, the remaining USMD shareholders who continue to own shares of USMD common stock will contribute those shares to Holdings in exchange for shares of Holdings common stock.

The Contribution Agreement provides a formula and related schedules for allocating the number of shares of common stock that each USMD shareholder and Ventures will receive at the closing of the Contribution. The allocation of the shares is based on the net enterprise values of assets and businesses of USMD, UANT, Ventures, MCNT and Impel as agreed upon by the parties. In determining the net enterprise values of the individual business lines and investments, USMD, UANT, Ventures, MCNT and Impel prepared multi-year financial forecasts for each of their respective business lines and investments and provided these forecasts to each other for review and discussion. USMD, UANT and Ventures also provided their historical financial information and financial forecasts to VMG Health for VMG Health’s evaluation in connection with its fairness opinion. The parties further provided each other with information regarding their percentage ownership of certain investments, debt balances as of December 31, 2011, net working capital adjustments and deferred payment obligations.

The fair market values of the businesses and investments that comprise MCNT and Impel were determined based on arms’ length negotiation between USMD, MCNT and Impel. However, as a result of the substantial cross-ownership and interrelationship between USMD and UANT/Ventures, the agreed upon net enterprise values of the various businesses and investments that comprise USMD, UANT and Ventures was derived in part from the financial analyses conducted by VMG Health and the parties using the financial statements of USMD, UANT and Ventures for the fiscal years ended December 31, 2008, 2009 and 2010 and the financial forecasts and estimates for each of the business units and investments held by USMD, UANT and Ventures as prepared by each of the parties. The valuations were primarily based on an analysis using an income approach—discounted cash flow methodology. The analysis included each business unit’s assumptions regarding 1) the development of new businesses and organic growth rates specific to it, 2) in the case of the hospitals, the managed care reimbursement rates, 3) discount rates, which ranged from 15% to 25% and were developed by each business unit using a weighted average cost of capital analysis, and 4) the costs savings or increases, and any capital expenditure requirements, associated with any new initiatives developed by such business unit. See “THE TRANSACTION—Fairness Opinion of VMG Health.”

partners as of the closing date of the Contribution, (4) any changes in ownership percentages of the assets or investments held by USMD, UANT, Ventures, MCNT or Impel as of the closing date of the Contribution, and (5) the amount of any net working capital adjustments after September 30, 2011. The deferred payment obligations represent obligations of UANT to make certain payments to former partners associated with the redemption of their partnership interests. As of September 30, 2011, the parties determined that the net enterprise value of the contributions made to Holdings by USMD, UANT/Ventures, MCNT and Impel would have been $85.4 million, $99.7 million, $45.5 million and $13.2 million, respectively.

The following chart shows the calculation of these net enterprise values as of September 30, 2011 and is included here for illustrative purposes only:


			USMD Enterprise Value						UANT/Ventures Enterprise Value						Impel Enterprise Value						MCNT Enterprise Value
Entity	Total Equity Value		% Own			$ Value			% Own			$ Value			% Own			$ Value			% Own			$ Value
USMD Arlington Hospital	$	123,230,000		5	%	$	6,216,200			23	%	$	29,137,567
USMD Fort Worth Hospital	$	26,400,000		20	%	$	6,294,200			11	%	$	3,416,649
USMD Hospital Division	$	31,880,000		100	%	$	31,880,000
USMD CTC Division	$	27,450,000		100	%	$	27,450,000
USMD Lithotripsy Division
USMD Management	$	5,550,000		100	%	$	5,550,000
USMD Investments	$	9,790,000		Varies		$	9,803,000
UANT Cancer Treatment	$	46,290,000								100	%	$	46,290,000
UANT Imaging	$	4,730,000								100	%	$	4,730,000
UANT Lab	$	7,890,000								100	%	$	7,890,000
UANT Research	$	880,000								100	%	$	880,000
UANT Physician Practice	$	5,370,000								100	%	$	5,370,000
Metro Stone Management	$	9,160,000								89	%	$	8,111,924
Dallas Stone Management	$	9,030,000								34	%	$	2,839,514
N. Texas Stone Management	$	5,380,000								30	%	$	1,647,000
Waxahachie Surgery Center										4.5	%	$	41,000
Rocky Mountain Medical Center										0.9	%	$	180,000
Impel Management Services	$	6,562,000														100	%	$	6,562,000
Impel Consulting Experts	$	3,653,000														100	%	$	3,653,000
MCNT																						100	%	$	57,300,000

Gross Enterprise Value						$	87,193,400					$	110,532,654					$	10,215,000					$	57,300,000
Adjusted for: Total Debt						$	(7,950,000	)				$	(14,551,668	)				$	(313,163	)				$	(13,472,086	)
Deferred Payment Obligations						$	—					$	—					$	—					$	—
Approved Capital Expenditures						$	—					$	2,941,982					$	—					$	—
Working Capital						$	6,142,131					$	(727,993	)				$	3,322,590					$	(1,675,652	)

Net Enterprise Value						$	85,385,531					$	99,650,861					$	13,224,427					$	45,503,566
Total Value of Holdings																								$	243,764,485

Without giving effect to any further adjustments, as of September 30, 2011, Ventures would have allocated approximately 9,275,000 shares of Holdings common stock and the USMD shareholders who contribute their shares of USMD common stock directly to Holdings would have been allocated approximately 725,000 shares of Holdings common stock in exchange for their contribution of shares to Holdings. Immediately following the completion of the Contribution, Ventures intends to distribute approximately 535,000 shares of Holdings common stock to its partners on a pro rata basis. As a result of this distribution and without giving effect to any further adjustments, as of September 30, 2011, Ventures would have held approximately 8,740,000 shares of Holdings common stock.

The Contribution Agreement provides that 1,000,000 shares of Holdings common stock will be set aside at the closing of the Contribution until the adjustments described above are determined in accordance with the terms of the Contribution Agreement. In the event that USMD and Ventures are unable to agree upon the any of the adjustments noted above, they have agreed to submit such matter to a nationally recognizable accounting firm mutually agreed upon by the parties, who will make the final determination with respect to the correctness of the adjustments in light of the terms and provisions of the Contribution Agreement.

Contemporaneous Transactions

Currently, UANT and Ventures are affiliated entities with identical ownership and management. At December 31, 2011, Ventures’ assets consist of a 23.4% ownership interest in USMD Arlington Hospital, a 10.9% ownership interest in USMD Fort Worth Hospital and a 0.9% interest in Rocky Mountain Medical Center, LP (dba North Texas Hospital). Before the closing of the Contribution, Ventures, UANT, MCNT and Impel will take the following actions in preparation of the Contribution:

•

Ventures will file articles of conversion to convert from a Texas limited liability partnership to a Texas limited partnership;

•

UANT will file articles of conversion to convert from a Texas limited liability partnership to a Texas professional limited liability company;

•

MCNT will file articles of conversion to convert from a Texas professional association to a Texas corporation;

•

Subsequent Transfers of Business Units; Physician Employment Arrangements

As part of the Contribution, Ventures will contribute all of its assets directly to Holdings and, as a result, Holdings will directly own 100% of the equity interests of UANT, MCNT and Impel. After the Contribution is completed and as part of a restructuring to operate the businesses in a more efficient manner, Holdings intends to make subsequent transfers or contributions of certain business units of UANT, MCNT, Impel, and of its ownership interests in these entities to certain of its wholly-owned subsidiaries or entities in which it serves as a sole member. As part of this restructuring, Holdings intends to separate and operate independently from UANT, UANT’s cancer treatment business unit, its anatomical and clinical laboratory business unit, and its diagnostic imaging business unit. Holdings also intends to separate and operate independently from MCNT, MCNT’s clinical and anatomical pathology laboratory business operations. Holdings will then contribute UANT and MCNT, without these business units, to USMD Physician Services, a certified non-profit health organization, and the physicians who currently provide professional medical services on behalf of UANT and MCNT will on a go forward basis provide professional medical and surgical services and other limited ancillary services on behalf of USMD Physician Services in their capacity as employed physicians.

Effective as of the closing of the Contribution, USMD Physician Services will enter into employment agreements with substantially all of the physicians who currently provide professional medical services on behalf of UANT or MCNT. The terms of the physician employment agreements have not yet been finalized but we anticipate that the physicians will receive base compensation based on their production of “relative value units,” also known as RVUs. The RVU rate has not yet been established and will be subject to review to ensure the compensation paid is within the range of fair market value for the services provided. We also anticipate that the physicians will be eligible to receive quality and performance bonuses, based upon metrics not known at this time but to be agreed upon and subject to regulatory review. The UANT and MCNT physicians are not currently compensated for professional medical services on an RVU basis. However, we believe that the compensation per RVU to be paid to physicians under these employment agreements will be greater than the compensation those

physicians would have received for professional medical services had they been paid based upon their current compensation formulas. In the event that USMD Physician Services is unable to generate additional revenue or realize other cost savings sufficient to pay the physicians their aggregate employment compensation, Holdings intends to make supplemental contributions to USMD Physician Services to enable it to make such payments to the physicians, but only up to a certain agreed amount to be negotiated by the parties.

We expect that the maximum supplemental contribution we will be required to make to USMD Physician Services will be calculated as the difference between the fair market value payment per RVU that each physician is entitled to under the employment agreement and the net revenue per RVU that physician would have been paid had that RVU been generated by such physician during an agreed period of time prior to the closing of the Contribution, up to a maximum annual individual physician supplement currently estimated to approximate $91,000 per MCNT physician and $112,000 per UANT physician. Because these employment agreements have not been finalized, it is not possible to determine the actual amount of supplemental contributions Holdings may make to USMD Physician Services. However, we have estimated that the amount of the contribution, including contributions related to estimated quality and performance bonuses, would have been approximately $11 million in 2011, had the Contribution been consummated at the beginning of 2011.

In addition, Holdings anticipates that it will separate the administrative, managerial, and operational components of UANT and will combine these resources with Impel, resulting in a single physician practice management division currently to be named “USMD Physician Practice Management.” USMD Physician Practice Management intends to provide comprehensive administrative, operational, and managerial services to USMD Physician Services pursuant to a long term practice management agreement to be negotiated between the parties.

In the event that Holdings is unable to operate as a separate business unit all or part of any of the business units discussed above due to delays in the licensing, permitting, inspection, payer enrollment processes or for any other reason, UANT or MCNT, as they case may be, may be permitted to continue to operate those business units in a manner consistent with current business practices until Holdings is able to assume those operations.

Effective Time of Transaction

The Company expects Contribution to be effected in mid-2012.

Third-Party Consents

Certain of the written contracts and agreements USMD, UANT, MCNT, and/or Impel have entered into with third parties prohibit certain of the actions to be taken as part of the Contribution (for example, the sale of substantially all of UANT’s assets to Holdings) without the prior consent of the other party to such agreement. In order to complete the Contribution, we must secure the consents of these third parties. In addition, certain equity interest owned by UANT and Ventures, which are to be contributed to Holdings as part of the Contribution, may not be transferred from the current owner to a subsequent purchaser without the consent of one or more third parties, and in order to complete the Contribution, we will need to secure the consent of such third parties to the transfer of those equity interests to Holdings or an affiliate of Holdings.

U.S. Federal Income Tax Consequences of the Transaction

THE DISCUSSION OF U.S. FEDERAL AND STATE TAX ISSUES SET FORTH IN THIS PROSPECTUS IS NOT INTENDED OR WRITTEN TO BE LEGAL OR TAX ADVICE TO ANY PERSON AND IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY PERSON FOR THE PURPOSE OF AVOIDING ANY U.S. FEDERAL TAX PENALTIES THAT MAY BE IMPOSED ON SUCH PERSON. EACH USMD SHAREHOLDER, VENTURES AND THE VENTURE PARTNERS SHOULD SEEK ADVICE BASED ON SUCH PERSON’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISER.

General

The following is a general summary of the material federal income tax consequences of the Contribution and an investment in Holdings common stock based upon the opinion of legal counsel of Holdings. No information regarding state and local taxes is provided, other than a brief summary of some aspects of state tax law set forth under the heading “State and Local Taxes” below. Each prospective Holdings shareholder should consult his or her tax advisor concerning the impact that the Contribution and an investment in Holdings common stock may have on his or her federal income tax liability and the application of state and local income and other tax laws.

The following summary of the tax aspects is based on the Code, on existing Treasury Department regulations (“Treasury Regulations”), and on administrative rulings and judicial decisions interpreting the Code. Tax legislation may be enacted in the future that will affect Holdings and its shareholders. Legislative or administrative changes and judicial decisions could modify or change completely the statements expressed below concerning the federal income tax consequences of the Contribution or an investment in Holdings common stock. Additionally, the interpretation of existing laws and Treasury Regulations described below may be challenged by the IRS. If successful, such a challenge could result in adjustments to a shareholder’s individual return. No assurances can be given that the IRS will agree with the federal income tax consequences as described.

This discussion covers only income tax matters and does not address any other U.S. federal, state, local or foreign tax considerations. This discussion is necessarily general, and the actual tax and financial consequences for each prospective shareholder of Holdings will vary depending upon each shareholder’s individual circumstances. This discussion does not consider the particular circumstances of each prospective shareholder and is not intended to be applicable to all categories of shareholders, some of whom may hold their common stock as other than a capital asset, such as banks, thrifts, insurance companies, dealers in securities or persons who adopt a mark-to-market method of accounting.

The following summary of tax aspects generally assumes that the shareholder is an individual and a U.S. citizen or resident. The following discussion is only a summary and is limited to those areas of federal income tax law that are considered material. Accordingly, prospective shareholders are urged to consult their tax advisors about their individual circumstances. In evaluating an investment in Holdings common stock, a prospective shareholder should take into account the cost of obtaining such advice.

Tax Structure of the Contribution

For federal income tax purposes, the Contribution is intended to qualify as an exchange pursuant to Section 351 of the Code. If the Contribution qualifies as an exchange under Code Section 351, then the receipt of the Holdings common stock should not be taxable (though the receipt of the options to acquire Holdings common stock will be as described below). One requirement of Section 351 is that immediately after the Contribution, the contributing parties control Holdings. For these purposes, “control” means the ownership of 80% or more of the total combined voting power of all classes of stock entitled to vote, and 80% of the total number of shares of all other classes of stock of Holdings. We anticipate this requirement will be satisfied. However, if additional shares of capital stock of Holdings are issued by it, or if contributing parties convey their shares of Holdings common stock to other persons, such that the control test is not satisfied, then the Contribution could be a taxable transaction to all of the contributing parties.

A second requirement of Section 351 is that the contributing parties receive only common stock or certain types of preferred stock (“Qualifying Consideration”) in the exchange. In the Contribution, Ventures will receive shares of Holdings common stock and options to purchase shares of Holdings common stock. The options are not considered Qualifying Consideration. In a Section 351 exchange, if the transferor of property (in this case, Ventures) receives consideration other than Qualifying Consideration in the exchange, then the transferor must recognize any gain realized on the exchange but only up to the fair market value of the non-Qualifying Consideration it receives. Accordingly, should the aggregate fair market value of the consideration Ventures

receives exceed the adjusted basis of the assets it contributes as part of the Contribution, Ventures will realize a taxable gain and such gain will be recognized but only to the extent of the fair market value of the consideration that is not Qualifying Consideration. Ventures has advised us that under its partnership agreement, any taxable gain that Ventures recognizes upon the receipt of the Holdings common stock options will be allocated solely to the class of partnership interests to be issued to the partners of UANT.

Tax Implications to USMD Shareholders upon the Contribution of Common Stock to Ventures

For USMD shareholders who are contributing USMD common stock to Ventures prior to Ventures’ contribution of such stock to Holdings, the contribution of such stock to Ventures should be treated as a tax free exchange, and no income, gain or loss should be recognized for federal income tax purposes by such USMD shareholders pursuant to Section 721 of the Code. If Ventures makes a distribution of cash or property to the USMD shareholders that are partners in Ventures within two years following the USMD shareholders’ contribution of USMD common stock to Ventures, then such distribution may be treated as a payment from Ventures to such USMD shareholders in exchange for the USMD shares contributed to Ventures under the “disguised sale” rules of Section 707 of the Code and Treasury Regulations thereunder. See “Tax Implications to Ventures and its Partners.”

For federal income tax purposes, the tax basis of the partnership interest in Ventures received by a USMD shareholder will be the same as the tax basis of the shares of USMD common stock he or she contributed to Ventures, and the holding period of such partnership interest will include the period during which the holder held the USMD common stock that was contributed to Ventures, provided that the USMD common stock surrendered was held as a capital asset on the date of the exchange.

Tax Implications to USMD Shareholders Who Contribute Appreciated USMD Common Stock to Ventures

Under Section 704(c) of the Code, gain recognized by Ventures with respect to USMD common stock contributed to it by USMD shareholders, or with respect to the Holdings common stock it received in exchange for such USMD shares, will be allocated to those contributing USMD shareholders at the time the gain is recognized, but only to the extent such gain was attributable to appreciation that occurred prior to the contribution of such USMD shares to Ventures. The USMD shareholders who contributed the USMD shares to Ventures will be required to report the taxable gain on their individual tax returns and pay any corresponding tax.

Tax Implications of the Conversion of USMD Options into Holdings Options

Section 424 of the Code provides generally that the exchange of options in a corporate transaction will be tax free to the exchanging option holders if the economic position of the option holders does not improve as a part of the exchange, the rights of the option holders under the old option are cancelled and the optionee under the old option loses all rights under the old option. Under the Contribution Agreement, the option holders’ rights under the old options will be cancelled and all rights under such options terminated. To determine that there is no improvement in the economic position of the option holders, two formulas are applied. First, the excess of the aggregate fair market value of the new option shares less the exercise price for the new option shares may not exceed the excess of the aggregate fair market value of the old option shares less the exercise price for the old shares. Secondly, the quotient determined by dividing the exercise price of the new option shares by the aggregate fair market value of the new option shares must not be greater than the quotient determined by dividing the exercise price for the old option shares by the aggregate fair market value of the old option shares. It is anticipated that the exchange of options contemplated as a part of the Contribution will satisfy the requirements of Code Section 424 and will therefore be tax free to the exchanging option holders.

Tax Implications of the Contribution to Holdings and Its Subsidiaries

For federal income tax purposes, no gain or loss will be recognized by Holdings or its subsidiaries as a result of the Contribution.

Taxation of Holdings

Holdings will be treated as a regular “C” corporation for U.S. federal income tax purposes. Thus, the income, gains, losses, deductions and expenses of Holdings will not pass through to its shareholders, and all distributions by Holdings to its shareholders will be treated as dividends, returns of capital and/or gains.

Tax Implications to the USMD Shareholders

For federal income tax purposes, assuming the Contribution qualifies under Section 351 of the Code, no gain or loss will be recognized by the USMD shareholders (other than Ventures) on the exchange of their USMD common stock for shares of Holdings common stock pursuant to the Contribution. For federal income tax purposes, the aggregate tax basis of the shares of Holdings common stock received by each USMD shareholder pursuant to the Contribution will be the same as such shareholder’s aggregated tax basis in the USMD common stock surrendered in the Contribution, and the holding period of such Holdings common stock will include the period during which the shareholder held the USMD common stock surrendered in the Contribution, provided that the USMD common stock surrendered was held as a capital asset on the date of the exchange.

Tax Implications to Ventures and Its Partners

The tax implications to Ventures and its partners with respect to the shares of Holdings common stock that it receives will be the same as it is for the USMD shareholders. The mergers of UANT and MCNT into wholly-owned subsidiaries of Ventures should be treated for federal income tax purposes as if the equity owners of UANT and MCNT contributed their equity interests to Ventures with the tax consequences described above under “Tax Implications to USMD Shareholders upon the Contribution of Common Stock to Ventures.” The merger of Impel into a wholly-owned subsidiary of Ventures will be treated as if Impel contributed all of its assets and assigned all of its liabilities to Ventures in exchange for partnership interests in Ventures. Immediately thereafter, Impel is treated as having distributed all of its assets to it partners in complete liquidation.

Ventures has advised us that if Ventures makes a distribution of cash or property to its partners within two years of a contribution of property to Ventures by such partners, then such distribution may be treated as a payment from Ventures to such partners in exchange for the contributed property in what is referred to as a “disguised sale.” Ventures intends to distribute approximately 524,511 shares of Holdings common stock to its partners on a pro rata basis immediately following the consummation of the Contribution. This distribution could be characterized as a “disguised sale.” The disguised sale rules provide that any distribution of cash or property from Ventures within two years of a contribution of property to Ventures must be reported to the IRS and will be presumed to be a “disguised sale” unless the facts and circumstances clearly establish otherwise. Ventures has advised us that a partner in Ventures that takes the position that property distributed by Ventures to such partner within two years of a contribution of property to Ventures by such partner is not a disguised sale, will be required to disclose that position to the IRS on its federal income tax return. Ventures has further advised us that if a disguised sale occurs, the partners involved will recognize taxable gain in the amount the value of the property received exceeds the adjusted basis in the portion of the property deemed transferred.

Ventures and its partners are particularly urged to consult with their tax advisors concerning the extent to which the disguised sale rules would apply and whether the disclosure of the transaction to the IRS is necessary.

Tax Implications to Ventures upon Receipt of the Options

Holdings will grant to Ventures options to purchase the number of shares of Holdings common stock that is equivalent to 657,500 shares of USMD common stock so that Ventures’ interest in Holdings is not diluted by virtue of the existing USMD stock options. The receipt of the option will be taxable to Ventures (and accordingly, its partners) as set forth in “Tax Structure of the Contribution” above.

Sale or Other Disposition of Holdings Common Stock

A Holdings shareholder will generally recognize gain or loss upon the sale or other taxable disposition of such shareholder’s Holdings common stock equal to the difference between the amount realized and the shareholder’s adjusted tax basis in Holdings common stock. As noted above, the tax basis of the Holdings common stock the shareholder received in the Contribution will generally be the adjusted tax basis of the assets contributed to Holdings in exchange for such stock, decreased by actual distributions from Holdings that are treated as a non-taxable reduction in the tax basis of such shareholder’s common stock and increased by any taxable gain recognized as a part of the Contribution. Any gain or loss recognized from a sale or other taxable disposition of a shareholder’s Holdings common stock will be long-term capital gain or loss if the shareholder has held the common stock as a capital asset and the holding period applicable to such stock on the date of disposition is more than one year.

State and Local Taxes

In addition to the federal income tax consequences described above, prospective shareholders should consider potential state and local tax consequences of an investment in Holdings common stock. State and local laws often differ from federal income tax laws with respect to the treatment of specific items of income, gain, loss, deduction and credit. Holdings may be subject to state and/or local tax (including unincorporated business tax), depending on the location and scope of Holdings activities.

Other Tax Aspects

Apart from the federal income tax consequences of the Contribution discussed in this Prospectus, no attempt has been made to determine the tax consequences to a holder of USMD common stock or Ventures partnership interests under the laws of any foreign country, state or jurisdiction. Holders of USMD common stock may be subject to special federal income tax treatment or to other taxes, such as state or local income taxes that may be imposed by various jurisdictions, and also may be subject to intangible property, estate and inheritance taxes in their state of domicile. Each holder should consult his own tax advisors to determine the particular tax consequences of the Contribution to the holder.

TREASURY DEPARTMENT CIRCULAR 230 (“CIRCULAR 230”) NOTICE.

TO ENSURE COMPLIANCE WITH CIRCULAR 230, PROSPECTIVE INVESTORS ARE NOTIFIED THAT (A) ANY DISCUSSION OF FEDERAL TAX ISSUES CONTAINED OR REFERRED TO IN THIS REGISTRATION STATEMENT IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY PROSPECTIVE INVESTORS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THEM UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS WRITTEN IN CONNECTION WITH THE PROMOTION AND MARKETING BY HOLDINGS OF THE TRANSACTIONS OR MATTERS ADDRESSED IN THIS REGISTRATION STATEMENT; (C) COUNSEL TO HOLDINGS SHALL HAVE NO ACTIVE INVOLVEMENT IN THE PROMOTING, MARKETING OR RECOMMENDING OF AN INVESTMENT IN HOLDINGS AND THUS WILL RECEIVE NO COMPENSATION WITH RESPECT TO SUCH ACTIVITIES; AND (D) PROSPECTIVE INVESTORS SHOULD SEEK TAX ADVICE BASED UPON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

THE DISCUSSION OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE CONTRIBUTION. MOREOVER, THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS TAX CONSEQUENCES THAT MAY VARY WITH, OR ARE CONTINGENT UPON, INDIVIDUAL CIRCUMSTANCES. IN ADDITION, THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS

ANY NON-INCOME TAX OR ANY FOREIGN, STATE OR LOCAL TAX CONSEQUENCES OF THE CONTRIBUTION AND DOES NOT ADDRESS THE TAX CONSEQUENCES OF ANY TRANSACTION OTHER THAN THE CONTRIBUTION.

Anticipated Accounting Treatment

Holdings will account for the Contribution as acquisitions of UANT (including the accounts of Ventures), MCNT and Impel by USMD using the acquisition method of accounting in conformity with accounting principles generally accepted in the United States (“GAAP”). Under the acquisition method of accounting, the assets and liabilities of the acquired company are, as of completion of the Contribution, recorded at their respective fair values and added to those of the acquiring company, including an amount for goodwill representing the difference between the purchase price and the fair value of the identifiable net assets. Financial statements of Holdings issued after consummation of the Contribution will reflect the operations of USMD, UANT, Ventures, MCNT and Impel after the Contribution and Holdings will not restate consolidated historical financial position or results of operations of the companies.

All unaudited pro forma financial information contained in this Prospectus has been prepared based on certain acquisition method accounting assumptions and estimates to account for the Contribution. The measurement of the purchase price will be performed as of the date the Contribution is completed. See “Pro Forma Financial Data for Holdings” for additional information.

DESCRIPTION OF CONTRIBUTION AND PURCHASE AGREEMENT

Among other changes, the Amendment:

•

reflects the revised transaction structure of the Contribution, including the mergers of MCNT and Impel with and into subsidiaries of Ventures;

•

provides for the elimination of the $30 million subordinated note of Holdings that was previously contemplated to be issued in connection with the Contribution;

•

extends the outside closing date of the Contribution to August 31, 2012;

•

provides that the transaction will be conditioned upon the expiration of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; and

•

includes updated values of UANT and USMD, as well as the current values of the MCNT and Impel businesses, in the formulas for allocating the Shares to be issued in connection with the Contribution.

The representations and warranties described below and included in the Contribution Agreement were made by Ventures, UANT, USMD and Holdings to each other as of specific dates. The assertions embodied in those representations and warranties were made solely for purposes of the Contribution Agreement and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating the terms of the agreement. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to shareholders, or may have been used for the purpose of allocating risk between the parties rather than establishing matters as facts. The Contribution Agreement is described in this Prospectus only to provide you with information regarding the material terms and conditions of the Contribution Agreement, and not to provide any other factual information regarding Ventures, UANT, USMD and Holdings, or their respective businesses. Accordingly, you should not rely on the representations and warranties in the Contribution Agreement as characterizations of the actual state of facts about Ventures, UANT, USMD or Holdings, and you should read the information provided elsewhere in this Prospectus for information regarding Ventures, UANT, USMD and Holdings and their respective businesses as this summary may not contain all of the information that may be important to you. See “INFORMATION ABOUT THE COMPANIES” for additional information.

General

Unless the parties agree to a different closing date or the Contribution Agreement is terminated pursuant to its terms, the closing of the Contribution will take place on the fifth business day after the satisfaction or waiver of all conditions to the obligations of the parties to consummate the Contribution, as provided in the Contribution Agreement. The parties intend to consummate the Contribution in mid-2012 but, because the Contribution is subject to a number of conditions, neither Ventures nor USMD can predict exactly when the Contribution will be consummated or if it will be consummated at all.

At the closing, Ventures will deliver to Holdings the bills of sale, instruments of assignment and other conveyance documents as are necessary to transfer all of its assets to Holdings, and, in exchange, Holdings will issue and deliver to Ventures certificates representing shares of its common stock and option agreements. Also at the closing, those USMD shareholders who did not contribute their USMD shares to Ventures immediately prior to the closing of the Contribution will deliver to Holdings the bills of sale, assignments and other conveyance documents as are necessary to transfer their shares of USMD common stock to Holdings and, in exchange, Holdings will issue and deliver certificates representing shares of its common stock. Immediately prior to closing the Contribution, certain USMD shareholders will contribute their USMD shares to Ventures in exchange for partnership interests of Ventures and those same shares will be contributed by Ventures to Holdings in exchange for common stock.

Each of the parties will prepare and deliver all other documents as required by the Contribution Agreement or as otherwise customary or as the other parties may reasonably request for the purpose of consummating the Contribution.

Consideration

The Contribution Agreement provides a formula and related schedules for allocating the number of shares of common stock that each USMD shareholder and Ventures will receive at the closing of the Contribution. The formula will utilize the net enterprise values of the individual business lines and investment of USMD, UANT, Ventures, MCNT and Impel as agreed upon by the parties. The parties agreed to adjust these values to reflect (1) certain agreed upon capital expenditures by the entities, (2) subsequent changes in the amount of debt (on a consolidated basis to include debt held at the subsidiary level) owed by USMD, UANT/ Ventures, MCNT and Impel on the closing date of the Contribution, (3) the amount of deferred payment obligations to certain UANT partners as of the closing date of the Contribution, (4) any changes in ownership percentages of the assets or investments held by USMD, UANT, Ventures, MCNT or Impel as of the closing date of the Contribution, and (5) the amount of any net working capital adjustments after September 30, 2011. The deferred payment obligations represent obligations of UANT to make certain payments to a former partner associated with the redemption of his partnership interests.

Contribution by Ventures

Certain of the USMD shareholders, including the Ventures’ partners, their immediate family members and certain officers of USMD and UANT, intend to own all or a portion of their interests in Holdings indirectly through an ownership interest in Ventures. The equity holders of MCNT and Impel have also elected to own all or a portion of their interests in Holdings in this manner. The main purposes for this transaction structure are as follows:

•

To consolidate voting control of Holdings into one entity that is managed by the physician owners;

•

To enable Holdings to qualify as a “controlled company” for purposes of the governance rules of the NASDAQ Capital Market; and

•

The Contribution Agreement does not require that any person own its interests in Holdings through an ownership interest in Ventures, it being entirely a voluntary decision of each equity owner that has elected to do so, though the Contribution Agreement has been drafted to facilitate that decision.

Newly formed subsidiaries of Ventures will merge with and into each of UANT, MCNT and Impel prior to the consummation of the Contribution, and by virtue of such mergers, the equity holders of UANT, MCNT and Impel will receive partnership interests in Ventures. Also, immediately prior to the closing of the Contribution, those USMD shareholders who elect to contribute all or a portion of their shares of USMD common stock to Ventures will contribute those shares to Ventures in exchange for partnership interests in Ventures. Promptly upon the closing of the Contribution, Ventures will transfer all of its assets, which will then include its ownership interests in USMD, UANT, MCNT and Impel, to Holdings in exchange for shares of Holdings common stock and the Holdings stock options.

Stock Option Conversion

Representations and Warranties of the Parties

The Contribution Agreement contains customary representations and warranties of Ventures, UANT and USMD related to, among other things:

•

due organization, good standing and qualification;

•

corporate authority to enter into the Contribution Agreement and consummate the Contribution;

•

absence of conflicts with organizational documents and contracts and proper consents;

•

absence of material pending or threatened legal proceedings that could adversely affect the Contribution or result in a material adverse effect in their businesses;

•

ownership of, and good title to, the assets each party is contributing to Holdings;

•

conformity of the financial statements with GAAP and that the financial statements fairly present the financial condition and results of operations of the business;

•

absence of undisclosed liabilities;

•

validity, enforceability and status of agreements, contracts and commitments;

•

compliance with laws, including without limitation, regulatory compliance;

•

capitalization;

•

affiliated transactions; and

•

tax matters.

In addition, the Contribution Agreement contains customary representations and warranties of Holdings related to, among other things:

•

due organization, good standing and qualification;

•

corporate authority to enter into the Contribution Agreement and consummate the Contribution;

•

absence of conflicts with organizational documents and contracts and proper consents; and

•

capitalization.

The accuracy of these representations and warranties forms the basis of one of the conditions to the obligations of the parties to complete the Contribution. None of the representations and warranties of the parties survive the closing of the Contribution.

Covenants

Each of the parties agreed to undertake certain actions or uphold certain restrictions on it and its subsidiaries until the Contribution Agreement has been executed and the Contribution completed, including without limitation:

•

to satisfy all conditions precedent and to obtain any approvals, authorizations or consents necessary to consummate the Contribution;

•

to conduct its business in the ordinary course and to refrain from entering transactions not in ordinary course of business and from encumbering or disposing of material assets or incurring material liabilities;

•

to allow the other parties access to its premises, books, records and documents;

•

to provide notice to the other parties of any event or circumstance that could result in a breach of or inaccuracy in such party’s representations and warranties; and

•

to obtain releases for any guarantees made by partners of Ventures to third parties for any existing indebtedness.

Holdings has agreed to prepare and file with the SEC a registration statement on Form S-4, a proxy statement and a form of proxy and to use its reasonable best efforts to cause the Form S-4 to be declared effective as promptly as practicable. Ventures and USMD each agreed to use their reasonable best efforts to cause such forms to be disseminated to their respective equity holders at the earliest practicable date. Finally, Holdings agreed to prepare and submit to the NASDAQ Capital Market a listing application with respect to its shares of common stock and to use reasonable best efforts to obtain approval for such listing.

In the event that Holdings is unable to operate as a separate business unit all or part of any of the business units discussed above due to delays in the licensing, permitting, inspection, payer enrollment processes or for any other reason, UANT or MCNT will continue to operate those business units in a manner consistent with current business practices until Holdings is able to assume those operations.

Conditions to Completion of Transaction

•

each party has complied with and performed the terms, covenants and conditions of the Contribution Agreement;

•

the Contribution Agreement and the Contribution have been approved by the necessary percentages of USMD shareholders and Ventures partners;

•

Holdings has met the “public company exception” of the Stark Law as set forth in 42 U.S.C. 1395nn;

•

each of the transaction documents are approved by the Joint Task Force jointly established by Ventures and USMD to facilitate the closing of the Contribution;

•

substantially all of the physicians who are members of UANT and MCNT have entered into employment agreements with USMD Physician Services or an affiliate;

•

the Original Registration Statement was declared effective by the SEC; and

•

the shares of Holdings’ common stock were approved for quotation on the NASDAQ Capital Market.

Termination and Termination Fees

INFORMATION ABOUT THE COMPANIES

Generally

Holdings is a Delaware corporation formed on May 7, 2010 to facilitate the business combination of USMD, UANT, Ventures. On August 19, 2010, Holdings, USMD, Ventures and UANT entered into the Original Contribution Agreement, pursuant to which the entities agreed to combine their separate businesses into a single integrated health services company. It was originally contemplated that, immediately prior to the Contribution, a subsidiary of Ventures would merge with and into UANT, with UANT surviving as a wholly-owned subsidiary of Ventures, and certain of the USMD shareholders would contribute all or a portion of their shares of USMD common stock to Ventures in exchange for partnership interests in Ventures. Then, upon the closing of the Contribution, Ventures would contribute all of its assets, which would include its equity interests in USMD and UANT, and the remaining USMD shareholders would contribute their USMD shares, to Holdings in exchange for shares of Holdings common stock. Holdings described the Original Contribution Agreement in its Registration Statement on Form S-4 filed with the SEC on December 23, 2010 (File No. 333-171386) and declared effective by the SEC on July 25, 2011. On August 23, 2011, the shareholders of USMD and the partners of Ventures voted on and approved the Original Contribution Agreement.

On December 1, 2011, Ventures and Holdings entered into a merger agreement with MCNT, and on December 15, 2011, Ventures and Holdings entered into a merger agreement with Impel. Pursuant to these merger agreements, immediately prior to the closing of the Contribution, subsidiaries of Ventures will merge with and into each of MCNT and Impel, with MCNT and Impel surviving as wholly-owned subsidiaries of Ventures. As a result of these merger agreements, on February 9, 2012, Holdings, USMD, UANT and Ventures entered into the Amendment to reflect, among other changes, that Ventures will contribute to Holdings, in addition to its equity interests in USMD and UANT, its equity interests in MCNT and Impel as part of the Contribution. Holdings expects the Contribution to close in mid-2012.

UANT is a Texas limited liability partnership and a physician group practice that provides professional medical services in the medical specialty of urology. USMD is a for profit corporation that develops, operates, and manages entities that deliver diagnostic, therapeutic, and hospital-based healthcare services to patients with an emphasis on urological care. Ventures is a Texas limited liability partnership that was formed by the partners of UANT to hold certain passive investment interests of UANT. MCNT is multi-specialty physician practice group that provides professional medical services to patients throughout the Dallas/Fort Worth metropolitan area in the specialties of family medicine, internal medicine, obstetrics and gynecology, pediatrics, psychotherapy, sports medicine, rheumatology, endocrinology, infectious disease, geriatrics, neurology, podiatry, general surgery, allergy and immunology, travel medicine and diabetes education. Impel provides management, operational and administrative services primarily to MCNT.

Holdings intends to continue to own and operate the businesses that are currently owned and operated by USMD, UANT, Ventures, MCNT and Impel. The growth and success of Holdings in the near term largely depends on Holdings’ ability to:

•

consummate the Contribution;

•

increase the number of patients served by its subsidiaries and the health care providers it manages;

•

successfully open new facilities or expand existing facilities;

•

successfully integrate its acquired and/or managed facilities into existing operations; and

•

maintain productive relationships with physician and hospital partners.

In addition, Holdings hopes to vertically expand its business in the North Texas service area by developing or acquiring complementary physician group practices and ancillary healthcare service providers. Holdings hopes to horizontally expand its business in other strategic service areas by developing strategic alliances with large integrated practices and expanding the medical service lines of those medical groups in those service areas. Holdings believes that the opportunity to execute its business combination with USMD, UANT, Ventures,

MCNT and Impel and to develop or acquire targeted physician group practices and ancillary healthcare service providers will place it in a position to achieve its goal of becoming a regional or national integrated health services company.

Following the Contribution and certain subsequent reorganizations (as further described in “THE TRANSACTION”), the organizational structure of Holdings will be as follows:

LOGO

Industry Overview

Urology

Urology is a surgical specialty that focuses on health issues related to the urinary tracts of males and females, and on the reproductive systems of males. Urologists diagnose, treat, and manage patients with urologic disorders relating to the kidney, adrenal gland, ureter, urinary bladder, prostate, urethra, and the male reproductive organs. Although urology is classified as a surgical specialty, an urologist is required to have knowledge of internal medicine, pediatrics, gynecology, and other specialties because of the wide variety of clinical problems the urologist may encounter. The typical education track for a urologist is four years of medical school, one to two years of general surgery training, and then three or four years of residency in urology. Some urologists continue their education after residency in a focused area of subspecialty, typically referred to as a fellowship.

Urology involves the study and treatment of many different organs and organ systems of the human body, and accordingly is often broken down into several subspecialties. The common urologic subspecialties include, but are not limited to: endourology and stone disease, laparoscopic and robotic surgery, urologic oncology, male infertility and reproductive disorders, pediatric urology, female urology and urinary incontinence, neurourology, and renal transplantation. Urologic surgical and therapeutic procedures are performed in clinical office settings, ambulatory surgery centers, specialized cancer treatment centers, and in general acute-care hospitals. Urologists utilize many diagnostic modalities and healthcare services to diagnose and develop treatment options for patients with urologic healthcare issues. Diagnostic medical services relied upon by urologists include but are not limited to: clinical laboratory and anatomical pathology, x-ray, ultrasound, computed tomography, magnetic resonance imaging, and video urodynamics.

The majority of practicing urologists are general urologists and the most common disorders evaluated and treated include, but are not limited to: urinary tract infection, urinary obstruction, including an enlarged prostate, incontinence, infertility, prostate cancer, and stone disease.

Urinary tract infections (“UTI”) affecting every age group in both sexes comprise a significant portion of the urologic practice. According to Smith’s General Urology, 16th Edition, it is estimated that 150 million patients are diagnosed with UTI yearly. UTI can produce pain, frequent urination, and occasionally loss of kidney function. Advances in the understanding of the causes of UTI, the development of new diagnostic tests, and the introduction of new antibacterial drugs have allowed urologists to appropriately tailor specific treatment for each patient.

Urology arose as a specialty distinct from general surgery primarily as a result of improved endoscopic treatments for obstructive uropathy, which is the structural blockage of urine flow. Benign prostatic hyperplasia (“BPH”), an enlarged prostate, can obstruct the flow of urine from the bladder. BPH is the most common benign tumor in men and its incidence increases with age. According to Smith’s General Urology, 16th Edition, the prevalence of BPH in autopsy studies rises from 20% in men aged 41-50, to 50% in men aged 51-60, and to >90% in men older than 80. There are many choices for the treatment of an enlarged prostate including medication, office procedures, and invasive surgery. The rapidly evolving discipline of urodynamics is a significant resource in the diagnosis and treatment of urologic obstruction.

According to the website of the National Association for Incontinence, urinary incontinence is a major health issue that affects an estimated 200 million people worldwide. The direct cost of incontinence in the United States alone approaches $19.5 billion according to the article “Costs of Urinary Incontinence and Overactive Bladder in the United States,” published in the March 2004 issue of Urology. Incontinence can result in major medical and psychological morbidity and occurs most commonly in women. There is increasing appreciation of and focus on urologic problems seen primarily in women, including stress and urge incontinence, painful bladder conditions, and pelvic prolapse. The diagnosis and therapy of urinary incontinence and pelvis floor prolapse constitute a significant part of most urology practices. New therapies, both surgical and non-surgical, are constantly being developed.

Assisting patients with family planning by performing vasectomy and vasectomy reversal is a daily part of urology practice. In addition, male sexual dysfunction and male infertility have virtually become new subspecialties. Continued improvements in the medical management of male infertility require a high level of expertise in the area of reproductive physiology, endocrinology, and microsurgery.

Prostate cancer is the most common cancer in men. Estimates by the National Cancer Institute predict nearly 218,000 new cases of prostate cancer diagnosed in 2010. Newer diagnostic methods for the detection of prostate cancer have recently emerged and currently the diagnosis and treatment of practice cancer remains a significant portion of the urologic practice. Treatment options for prostate cancer include, but are not limited to: observation and surveillance, radiation, laparoscopic assisted robotic surgery, cryosurgery, and hormone treatment. The development of multimodal therapy, in which two or more treatment options are used concurrently, may further improve treatment results of this very common malignancy.

According to the National Kidney and Urologic Diseases Information Clearinghouse, the lifetime risk of developing kidney stones is close to 10% of the population. There are more than 1 million cases of kidney stones diagnosed each year in the United States and the incidence is increasing. Urologists are concerned with expedient diagnosis and efficient treatment of stones. The recent advancement of rigid and flexible ureteroscopy, percutaneous techniques, and extracorporeal shock wave lithotripsy have greatly improved the capacity of the urologist to deal with problems related to stone disease.

The specialty of urology is constantly changing. Much of this change has been the result of improved technology. An increasingly important niche in urology service providers is the mobile urologic unit. Urologic

mobile service providers supply minimally invasive urologic services from a mobile setting, thereby providing wider access to a broader set of people. Through mobile technology, hospitals are now able to provide services to their communities without the increased overhead costs associated with fixed site units. Patients can now benefit from new technology that is readily accessible in their own community.

Lithotripsy

Extracorporeal shock wave lithotripsy, or more commonly called lithotripsy, is a non-invasive procedure which uses shock waves to pulverize kidney stones. According to the National Kidney and Urologic Diseases Information Clearinghouse, an estimated 10% of Americans will suffer from kidney stones at some point in their life, and the incidence of kidney stones is increasing. A kidney stone is usually a hard mass that builds up gradually when various salt or mineral crystals deposit on the inner surfaces of the kidney. When stones grow so large that they cannot be passed out of the body easily, they obstruct the normal flow of urine, causing pain and possibly infection or kidney damage. Many stones are too large to pass out of the kidney while others may leave the kidney only to be lodged in the ureter, or rarely, at the outlet of the bladder. Kidney stone treatment methods include lithotripsy, drug therapy, endoscopic extraction or open surgery.

Treatment options for kidney stones vary depending on a number of factors, including: the composition of the stone, its location in the urinary tract system, and whether or not the stone causes urinary complications (i.e. blockage or infection). A large number of patients and physicians prefer lithotripsy over other treatment options because lithotripsy procedures are less invasive, require minimal anesthesia, and significant percentage kidney stones can be successfully treated with lithotripsy.

Lithotripsy is typically performed on an outpatient basis in an ambulatory surgery center or the outpatient department of a hospital, eliminating the need for lengthy hospital stays and extensive recovery periods associated with more invasive surgical procedures. Historically, the lithotripsy equipment required that the patient be submerged in a specially designed large tub of water. Modern technology, however, utilizes specially designed mobile treatment tables for the one hour procedure. High resolution x-ray systems and digital fluoroscopy assist in properly positioning the patient so the kidney or ureteral stone receives the strongest impact of the shock waves.

The lithotripter attempts to break up the stone with minimal collateral damage by using an externally-applied, focused high intensity acoustic pulse. The shock wave can be best characterized by a very rapid pressure ultrasound transmitted through the patient’s skin. The shock wave passes through the kidney and strikes the crystallized stone breaking up the stone into small particles. Eventually, the stone is flushed out of the kidney or ureter during normal urination.

Diagnostic Imaging

Diagnostic imaging involves the use of non-invasive procedures to generate representations of internal anatomy and functions that can be recorded on film or digitized for display on a video monitor to generate 3D morphological and functional images of the patient. Diagnostic imaging procedures facilitate the early diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often minimizing the cost and amount of care for patients. Diagnostic imaging services are typically provided in hospitals, physician practices or office/clinic settings, imaging centers or mobile imaging units. Diagnostic imaging procedures include:

•

Magnetic Resonance Imaging and Magnetic Resonance Spectroscopy

•

Computed Tomography

•

General Radiography and Fluoroscopy

•

Positron Emission Tomography

•

Nuclear Medicine

•

Ultrasound (Echography)

•

Mammography

•

Bone Densitometry

Radiation Therapy

The delivery of radiation therapy is a locally based service that can be broken down into two primary market providers – hospitals and free-standing facilities. Hospital-based services attend to inpatients, radiosurgery procedures and procedures requiring aftercare, such as interstitial placement of radiation sources. Free-standing facilities typically attend to an outpatient population. When radiation therapy is provided in a hospital-based center, it is normally referred to as outpatient treatment, while free-standing facilities are normally run and operated by private enterprises.

According to the American Society for Therapeutic Radiology and Oncology, approximately 50% to 60% of patients diagnosed with cancer receive radiation therapy and more than 23 million radiation therapy procedures are performed annually in the U.S on nearly one million patients for curative and palliative care. Radiation therapy is used to treat the most common types of cancer, including prostate, breast, lung and colorectal cancer, and involves exposing the patient to an external or internal source of radiation. Radiation therapy can be used to cure cancer by destroying cancer cells and, when curing cancer is not possible, to shrink tumors and reduce pressure, pain and relieve other symptoms of the cancer to enhance a patient’s quality of life.

Radiation therapy treatment covers a wide range of services for cancer patients that can be broken into three primary treatment phases: planning and simulation, external beam therapy and brachytherapy. In the planning and simulation phase, healthcare providers review the patient’s health history and access the best radiation therapy treatment modality, and develop a treatment or dosage plan.

The radiation therapy technology utilized by a radiation oncologist for external beam treatments is produced by a machine known as a linear accelerator. A normal course of external beam radiation therapy ranges from a single treatment for selected radiosurgery cases, up to 45 or more sessions for fractionated treatment, typically given daily on a five fractions per week schedule. Recent research has resulted in new and more effective algorithms for delivering radiation treatments. These advanced methods result in more effective treatments that minimize the harm to healthy tissues that surround the tumor and therefore result in fewer side effects.

Physicians employ a variety of technologies in conjunction with external beam therapy including conventional radiation therapy, intensity modulated radiation therapy (“IMRT”) and image guided radiation therapy (“IGRT”). Traditionally, conventional beam technologies (such as external beam radiation therapy) have been widely used throughout the oncology market. However, physicians have started embracing more complex procedures within the field.

IMRT is an advance in 3D treatment that allows radiation to more exactly conform to the target, while minimizing insult to normal critical structures. With IMRT it is further possible to limit the exact amount of radiation that is received by normal tissues that are near the tumor. In some situations, this may also allow a higher dose of radiation to be delivered to the tumor, increasing the chance of a cure.

IGRT is radiation treatment guided by imaging equipment, such as CT, ultrasound or stereoscopic X-rays, taken in the treatment room just before the patient is given the radiation treatment. Like IMRT, IGRT allows radiation to be delivered to tumors with more precision than was traditionally possible. IGRT allows the physician to better deliver the radiation dose directly to the cancer by using a variety of automated and tracking systems. Clinicians can obtain daily high-resolution imagery to pinpoint tumor sites, adjust patient positioning as necessary and complete a treatment, all within the standard treatment time period. By imaging the tumor daily, the physician can map the movement in tumor positioning and changes in tumor location or size, which permits

the physician to precisely locate the tumor while the patient is in the treatment position. This minimizes the volume of healthy tissue exposed to radiation during treatment, yet allows the delivery of higher doses of radiation to the tumor.

Internal Medicine

Internal medicine physicians are trained in the prevention and treatment of adult diseases. They provide medical services to patients from as early as age 16 through the “senior” years. Doctors of internal medicine focus on prevention and early detection of catastrophic illnesses. The services they provide include screening and treatment of cholesterol disorders, heart disease, hypertension, diabetes, osteoporosis, thyroid disorders and cancer, annual health exams and routine sick visits.

Family Medicine

Family medicine physicians offer healthcare services for all the members of patient families, including infants, women, men and children. Services include annual health exams, well visits, immunizations, screenings, preventive care and sick visits.

Geriatrics

Geriatrics is the branch of internal medicine that focuses on health care of the elderly. Geriatric physicians aim to promote health and to prevent and treat diseases and disabilities in older adults. There is no set age at which patients may be under the care of a geriatrician. Rather, this is determined by a profile of the typical problems requiring treatment by geriatricians. These problems include the so-called ‘geriatric giants’ of immobility, instability, incontinence and impaired intellect/memory. Health issues in older adults may also include delirium, impaired vision and hearing and addressing challenges posed by the use of multiple medications

Pediatrics

Pediatricians treat children from birth through age 18. Pediatricians serve children’s medical needs by focusing on prevention, childhood development, well visits, annual health exams, immunizations, preventive care and sick visits.

Obstetrics and Gynecology

Obstetrics and gynecology physicians are specialists who provide medical and surgical care to women. The physicians have particular expertise in pregnancy, childbirth, and disorders of the reproductive system. This includes preventative care, prenatal care, detection of sexually transmitted diseases, Pap test screening and family planning.

Allergy and Immunology

Allergy, asthma and immunology physicians treat both children and adult patients. They are trained in the evaluation, physical and laboratory diagnosis and management of disorders involving the immune system. Examples of such conditions include: asthma, anaphylaxis, rhinitis, eczema and adverse reactions to drugs, foods and insect stings as well as immune deficiency diseases (both acquired and congenital), defects in host defense and problems related to autoimmune disease, organ transplantation or malignancies of the immune system.

Endocrinology

Endocrinology is a sub-specialty within the field of internal medicine. Endocrinologists diagnose and treat diseases associated with internal glandular secretions or hormones. Included in this field is the treatment of diabetes, diseases of the thyroid, cholesterol disorders, hypertension, osteoporosis, disorders of the adrenal and pituitary glands, hormonal disorders causing infertility, low blood sugar, lack of development, low blood pressure and weight problems. Services provided include consultations, diagnostic evaluation, follow-up, hormone testing, provocative tests for hormone reserve, thyroid biopsies and nutritional evaluation and counseling.

General Surgery

General surgery physicians offer healthcare services for patients ages 16 and over. Services include thyroid and parathyroid surgeries, gallbladder surgery, hernia repairs, breast cancer-related procedures and other diseases, gastrointestinal surgeries, and office-based minor surgeries such as removal of cysts, moles, skin cancers and varicose vein surgery.

Infectious Disease

Infectious diseases are caused by pathogenic microorganisms such as bacteria, viruses, parasites or fungi; the diseases can be spread, directly or indirectly, from one person to another. Zoonotic diseases are infectious diseases of animals that can cause disease when transmitted to humans. Infectious disease physicians are trained to treat the following types of patients:

•

patients with an infection that is difficult to diagnose;

•

patients with an infection that is accompanied by high fever;

•

patients who do not respond to treatment;

•

a healthy person who plans to travel to a foreign country or a location where infection risk is high; and

•

when a patient has an illness that becomes a part of a patient’s overall care (for example, a patient with HIV/AIDS, hepatitus, tubercolosis, etc.)

In all of these cases, the specialized training and diagnostic tools of the infectious disease specialist can help determine the cause of infection as well as the best approach to treatment.

Neurology

Neurology is a medical specialty dealing with disorders of the nervous system. Specifically, this field deals with the diagnosis and treatment of all categories of disease involving the central, peripheral and autonomic nervous systems, including their coverings, blood vessels and all effector tissue, such as muscle. Neurologists are trained to investigate, diagnose, and treat neurological disorders.

Pain Management

Pain management physicians diagnose and evaluate patients with chronic pain. Treatment includes techniques such as electromyography, which may be used to supplement more standard history, physical, x-ray and laboratory examinations. Pain management physicians have expertise in the appropriate use of therapeutic exercise, prosthetics (artificial limbs), orthotics and mechanical and electrical devices. The goals of interventional pain management are to relieve, reduce, or manage pain and improve a patient’s overall quality of life.

Physical Medicine and Rehabilitation

Physical medicine and rehabilitation is the medical specialty concerned with evaluating, diagnosing, and treating patients with physical disabilities. These disabilities may arise from conditions affecting the musculoskeletal system such as neck and back pain, sports injuries or other painful conditions affecting the limbs, for example, carpal tunnel syndrome. Alternatively, the disabilities may result from neurological trauma or disease such as spinal cord injury, head injury or stroke. A physician certified in physical medicine and rehabilitation has the primary goal of achieving maximum restoration of physical, psychological, social and vocational function through comprehensive rehabilitation.

Podiatry

Doctors of podiatric medicine strive to improve the overall health of their patients by focusing on preventing, diagnosing, and treating conditions associated with the foot and ankle. They treat a variety of conditions and employ innovative treatments to improve the well-being of their patients.

Rheumatology

Rheumatologists are physicians who specialize in the treatment of Rheumatic diseases, dealing with health problems related to joints, soft tissues and connective tissues.

Sports Medicine

Sports medicine doctors specialize in the prevention, diagnosis and treatment of sports and/or exercise injuries.

Travel Medicine

Travel medicine physicians assist international travelers with their medical needs and requirements in a cost-effective approach. This approach includes recommended vaccinations, country-specific travel advisory information, travel medical supplies, and pre/post-travel evaluation and/or consultations.

Anatomical and Clinical Laboratories

Clinical laboratories screen and examine blood and other non-anatomical infectious materials to obtain information regarding the health of a patient for use in the diagnosis, treatment, and prevention of disease. Anatomical pathology laboratories screen and study human tissues for the same purposes. When the history and physical examination of a patient, other diagnostic information or the patient’s demographic profile, suggest the existence of a potential healthcare issue, tissue or material may be extracted from a patient and sent to a clinical or anatomical pathology laboratory for preparation and examination. Technicians utilize standard laboratory procedures to prepare samples for inspection and examination, and trained pathologists inspect the samples and render professional medical opinions regarding the presence or absence of data suggesting a potential healthcare issue. Treating physicians utilize clinical and anatomical pathological reports, in conjunction with other diagnostic and historical patient data, to render medical diagnoses and provide treatment options for diagnosed healthcare conditions. Urologists rely heavily on clinical and anatomical pathology to assist in the diagnosis and treatment of many urological conditions, including male and female infertility, and cancer of the prostate, reproductive organs, and kidneys.

Business of USMD

USMD owns and operates three healthcare management companies – USMD Hospital Division, USMD CTC Division and USMD Lithotripsy Division – that develop, acquire, own, operate and/or manage acute-care hospitals, cancer treatment centers and lithotripsy service providers.

USMD Hospital Division

USMD Hospital Division is a healthcare management services company formed to establish, acquire, operate and/or manage acute-care hospitals, ambulatory surgical centers or other healthcare facilities. At December 31, 2011, USMD Hospital Division beneficially owned a 5% interest in, and manages, USMD Arlington Hospital, and also owns a 20% interest in, and manages, USMD Fort Worth Hospital. USMD Hospital Division is the sole owner of the general partners of both hospitals and manages the hospital operations of both hospitals pursuant to long-term contractual management agreements.

On March 1, 2010, Texas Health Resources (“THR”), a large non-profit healthcare delivery system in North Texas, increased its limited partnership interest in USMD Arlington Hospital to 51% and purchased a 51% limited partnership interest in USMD Fort Worth Hospital. THR also obtained additional rights in the amended partnership agreements. As a result, effective March 1, 2010, USMD no longer controls these two hospitals and therefore no longer consolidates their assets, liabilities and results of operations. Since USMD does maintain significant influence over these two hospitals, it began using the equity method of accounting effective March 1, 2010.

USMD Arlington Hospital

USMD Arlington Hospital is a general acute-care hospital with 34 licensed beds. Its surgery unit is comprised of 18 day surgery beds, two procedure rooms and nine operating rooms, including four new, state-of-the-art surgical suites that are equipped with the latest integrated digital video systems and cutting edge technology, including three daVinci robots for use in robotic-assisted procedures. USMD Arlington Hospital’s inpatient units consist of 34 large private suites. All rooms include private bathrooms, full-size sofa beds for guests, hardwood floors, window treatments and amenities including DVD players, data ports and refrigerators. USMD Arlington Hospital currently performs inpatient and outpatient surgeries in a variety of specialties that include urology, neurosurgery, general surgery, gynecology, podiatry, plastic surgery, pain management and orthopedics.

USMD Arlington Hospital is a leader in prostate surgery and has one of the largest urological surgery programs and one of the largest robotic surgery programs in the country. In addition, USMD Arlington Hospital has one of the largest spine surgery programs in the Dallas/Fort Worth metropolitan area. Other services include an in-house clinical laboratory, diagnostic radiology, CT, MRI, nuclear medicine and ultrasound. The hospital also has an active emergency department. USMD Arlington Hospital’s total surgical case volume for 2010 and 2011 was 8,786, and 8,680, respectively. The top fifteen surgeons accounted for approximately 48% of USMD Arlington Hospital’s net patient services revenue in 2010 and for approximately 48% of its net patient services revenue in 2011.

In 2010, USMD Arlington Hospital’s surgical case mix based on volume was comprised primarily of urology, general surgery and pain management, which represented 43%, 16% and 12%, respectively, of the surgeries performed. In 2010, USMD Arlington Hospital’s surgical case mix based on net patient services revenue was comprised primarily of urology, neurosurgery and general surgery, which represented 38%, 17%, and 10%, respectively of its net patient services revenue.

In 2011, USMD Arlington Hospital’s total surgical case volume was comprised primarily of urology, general surgery and pain management, which represented 47%, 16% and 10% respectively, of the surgeries performed. In 2011, USMD Arlington Hospital’s surgical case mix based on net patient services revenue was comprised primarily of urology, neurosurgery and general surgery, which represented 35%, 17% and 11%, respectively, of its net patient services revenue.

USMD Arlington Hospital’s payer mix, based on utilization of services (gross revenue) in 2010, was 37% government-based reimbursed payers, 58% commercial insurers and 5% private pay. Aetna, Blue Cross, United

Healthcare and Cigna represented 54% of all utilization and 93% of all commercial payers. Focusing on these service lines, low nurse-to-patient ratios and the quality of the patient experience has made USMD Arlington Hospital a leader in patient satisfaction ranking among the top five percent of all hospitals in the Press Ganey database.

USMD Arlington Hospital’s payer mix, based on utilization of services (gross revenue) for 2011 was 36% government-based payers, 59% commercial insurers and 5% private pay. Blue Cross, United, Aetna and Cigna represented 54% of all utilization and 93% of all commercial payers.

At December 31, 2011, USMD Arlington Hospital had 237 full-time equivalent staff.

USMD Fort Worth Hospital

USMD Fort Worth Hospital is a general acute-care hospital located in Fort Worth, Texas. USMD Fort Worth Hospital opened in March 2008 and has six state-of-the-art operating rooms and eight licensed beds. USMD Fort Worth Hospital is the only hospital in the Fort Worth metropolitan area with all-physician pediatric and adult anesthesiology teams. The hospital’s 1:4 nurse-to-patient ratio has helped it attain an overall patient satisfaction rating in the top 5% of hospitals in the nation. The hospital’s surgical suites are prepared to accommodate general, orthopedic, spine, and plastic and reconstructive surgeries, as well as pediatric dental, pediatric and adult ENT, urology, gynecology, pain management, and podiatry.

USMD Fort Worth Hospital currently performs inpatient and outpatient surgeries in a variety of specialties that include urology, ENT, general surgery, gynecology, podiatry, plastic surgery, oral surgery and orthopedics. Other services include an in-house laboratory, diagnostic radiology, CT scans and ultrasound. USMD Fort Worth Hospital’s total surgical case volume in 2010 and 2011 was 5,274 and 5,284, respectively. The top fifteen surgeons accounted for 61% of USMD Fort Worth Hospital’s net patient services revenue in 2010 and 66% of its net patient services revenue in 2011.

In 2010, USMD Fort Worth Hospital’s surgical case mix based on volume is composed primarily of urology, ENT and orthopedics, which represented 47%, 16% and 17%, respectively of the surgeries it performed. In 2010, USMD Fort Worth Hospital’s surgical case mix based on net patient services revenue was comprised primarily of urology, orthopedics and ENT, which represented 37%, 38% and 9%, respectively, of net patient services revenue.

In 2011, USMD Fort Worth Hospital’s surgical case mix based on volume was comprised primarily of urology, orthopedics and ENT, which represented 47%, 18% and 15%, respectively; of the number of surgeries performed. In 2011, USMD Fort Worth Hospital’s surgical case mix based on net patient services revenue was comprised primarily of orthopedics, urology and ENT, which represented 45%, 30% and 10%, respectively, of its net patient services revenue.

USMD Fort Worth Hospital’s payer mix, based on utilization of services (gross revenue) in 2010, was 40% government-based reimbursed payers and 59% commercial insurers and 1% private pay. Aetna, Blue Cross and United Healthcare represented 48% of all utilization and over 81% of all commercial payers. Medicare and Medicaid fee-for-service represented 21% of all utilization. Medicare and Medicaid managed care utilization was 14%.

USMD Fort Worth Hospital’s payer mix, based on utilization of services (gross revenue) in 2011 was 42% government-based payers, 57% commercial insurers and 1% private pay. Blue Cross, United, Aetna and Cigna represented 52% of all utilization and 92% of all commercial payers. Medicare and Medicaid fee-for-service represented 22% of all utilization in 2011 and Medicare and Medicaid managed care utilization was 15%.

At December 31, 2011, USMD Fort Worth Hospital had 72 full-time equivalent staff.

USMD CTC Division

USMD CTC Division is a healthcare management services company that was formed to establish, acquire, operate and/or manage cancer treatment centers that specialize in the provision of intensity-modulated radiation therapy and radio surgery procedures. USMD provides other services, including equipment operation and administrative services such as scheduling, staffing, training, quality assurance, regulatory compliance and contracting. In addition to management and oversight services, USMD CTC Division also provides physicist and dosimetry services to the centers it manages. As of December 31, 2011, USMD CTC Division had six management agreements under which USMD CTC Division manages a total of nine radiation therapy centers located in Texas, Florida, Missouri and Arizona. USMD CTC Division charges each facility it manages a formula-based management fee for providing its management services.

USMD CTC Division also provides IGRT technical services for cancer treatment centers by: providing the technical (non-physician) personnel to operate a physician practice group’s IGRT equipment, leasing IGRT equipment to a physician practice group, providing services related to helping a physician practice group establish an IGRT treatment center and managing the IGRT treatment center.

USMD CTC Division holds a 30% ownership interest in Willowbrook Cancer Center, LLC (“Willowbrook”), a fully staffed and equipped cancer treatment center that is leased on a full-time basis to a urology medical group practice located in the Houston, Texas metropolitan area. Effective September 30, 2011, Willowbrook sold its operating assets (excluding cash and accounts receivable) to a third party for approximately $3.9 million. As part of the same transaction, the third party paid $3.7 million fee to USMD CTC Division to terminate the management agreement between Willowbrook and USMD CTC Division.

USMD Lithotripsy Division

USMD Lithotripsy Division (“USMD Lithotripsy Division”) is a healthcare management services company that was formed to establish, acquire, operate and/or manage joint venture entities that provide lithotripsy services to hospitals, ambulatory surgery centers, and/or physician offices. As of December 31, 2011 USMD Lithotripsy Division provided management services to 23 lithotripsy service providers, either pursuant to a management agreement or as a result of its role as general partner or managing member of such providers. The lithotripsy service providers are primarily located in the South Central United States.

USMD Lithotripsy Division holds an equity interest in, and serves as the general partner of, over 90% of the partnerships it manages. The typical ownership structure of these partnerships is comprised of USMD Lithotripsy Division or a wholly-owned subsidiary as the general partner and physicians as the limited partners. Total cases performed by the lithotripsy partnerships totaled approximately 11,682 during 2010 and 12,320 during 2011.

USMD Lithotripsy Division typically charges each partnership a formula-based fee for its management services. Such services include billing, collecting, accounting, contract negotiation, and human resources, among others. For each partnership it manages, USMD Lithotripsy Division provides and manages the required support staff.

Businesses of UANT and Ventures

UANT is a urological surgical physician practice group that provides professional and ancillary urological healthcare services to patients in the greater Dallas/Fort Worth metropolitan area. These healthcare services include general urology, male infertility and dysfunction, pediatric urology, incontinence, oncology, robotic and laparoscopic surgery, cryosurgery and ablation. UANT is one of the largest fully-integrated physician practice groups in the United States specializing in urology and has one of the largest robotic surgery programs in the United States. As of December 31, 2011 UANT’s medical group practice includes 53 physicians who practice at 24 different locations across the North Texas area and one pathologist who practices in Florida. UANT provides a full range of clinical services; ancillary services including diagnostic imaging, radiation therapy, video

urodynamics, clinical and anatomical pathology, clinical research; and a complete array of urological surgical services for the benefit of patients. In 2010, UANT’s clinics provided care to approximately 39,000 new patient visits and approximately 144,000 established patient visits. In 2011, its clinics provided care to approximately 39,000 new patient visits and approximately 147,000 established patient visits.

UANT has added physicians by hiring urologists directly out of residency or fellowship-trained urologists and by integrating with practicing physicians and existing physician groups through strategic business combinations. UANT has acquired up-to-date computer and telecommunications systems, including electronic medical records technology, to efficiently organize and access patient data and records. In 2006, UANT initiated a major internal quality enhancement program and appointed its first medical director to monitor the quality of care UANT’s physicians and services based on patient satisfaction, science based protocols and outcomes analysis.

UANT has established and maintains Urological Centers of Excellence. UANT’s commitment to Centers of Excellence is based on its experience that patients enjoy better outcomes and fewer complications when their specific healthcare needs are managed by physicians with advanced training and large case volumes in that specific urology subspecialty. UANT organizes its clinics and directs its patient care systematically to ensure patients are cared for by the most qualified and experienced urologists on staff. UANT’s Quality Management Program utilizes information technology to measure outcomes, patient satisfaction, safety and compliance with nationally recognized best practices. Each physician in a Center of Excellence is either fellowship-trained or has years of extensive experience in the subspecialty.

As of December 31, 2011, UANT had the following:


	December 31, 2011
Number of physicians		53
Number of fellows and mid-level providers		6
Number of sites		23
Number of physicians in each Center of Excellence:
Incontinence and Neurourology		5
Oncology, Robotics and Special Surgery		7
Pediatrics		3
Radiation Oncology		1
Sexual Dysfunction, Infertility and Men’s Health		3
Uro-Pathology		1

Since 2003, UANT has used a comprehensive electronic health record (“EHR”) package. A technologically-current EHR package allows UANT to easily share patient records within the group for secondary opinions and consultation. In addition, the EHR is electronically interfaced with internal and external labs to provide more efficient delivery of laboratory test results. UANT anticipates being in full compliance of the “meaningful use” requirements applicable to electronic health records under current federal law. In addition to using the EHR to comply with the meaningful use requirements, UANT participates in the Physician Quality Reporting Initiative programs sponsored by CMS. Since the initial year of 2007, UANT has qualified for an incentive payment from CMS by successfully complying with the program requirements.

UANT owns and operates its own radiation therapy center, known as the USMD Cancer Center, located on the campus of USMD Arlington Hospital. USMD Cancer Center began operations in its current form in July 2009. At December 31, 2011, 14 urologists and one radiation oncologist practiced at this location.

UANT’s diagnostic imaging services consist of x-ray, computed tomography and ultrasound. As of December 31, 2011, UANT employed six full-time certified technicians devoted to the delivery of UANT’s

diagnostic services. UANT also owns and operates both a clinical laboratory and an anatomical uropathology laboratory. At December 31, 2011, UANT employed one clinical pathologist on staff. UANT also maintains a clinical research department that participates in national and regional urological research studies.

In 2011, UANT expanded the physician assistant program by increasing the number of physician assistants from three to six. UANT expects this program will expand the capacity of the UANT physicians by allowing them to focus on the patients requiring more complicated diagnosis and procedures while the physician assistants focus on the less complicated or returning patients.

Collectively, UANT and Ventures hold equity investments in several other healthcare services businesses, including several healthcare businesses owned and operated by USMD. As of December 31, 2011, UANT’s and Ventures’ investments included:


	Percentage Ownership
UANT
Dallas Stone Management, LP (1)		6.9	%
Metro I Stone Management, LP (1)		88.5	%
North Texas Stone Management, LP (1)		30.0	%
Waxahachie Surgery Center (3)		4.5	%
Ventures
Rocky Mountain Medical Center, LP (dba North Texas Hospital) (2)		0.9	%
USMD Hospital at Arlington, L.P. (2)		23.4	%
USMD Hospital at Fort Worth, L.P. (2)		10.9	%

(1)	Each of these entities provides invasive and noninvasive lithotripsy services under arrangements to hospitals and ambulatory surgery centers located in the North Texas area.

(2)	Each of these entities owns and operates a licensed, general, acute care hospital in the North Texas area that provides diagnostic and therapeutic services on an inpatient and outpatient basis.

(3)	This entity owns and operates an ambulatory surgery center in the North Texas area that provides diagnostic and therapeutic services on primarily an outpatient basis.

The competition in the physician services market for UANT is highly fragmented and competitive. Although UANT is a large physician practice group, it represents less than half of the urologists in the Dallas/Fort Worth metropolitan area. As such, UANT faces significant competition for patients and patient referrals.

Business of MCNT

MCNT is a physician owned and physician controlled multi-specialty group with 40 sites located throughout the greater Dallas-Fort Worth metropolitan area. MCNT is the largest independently owned multispecialty group practice in the DFW metropolitan area. As of December 31, 2011, MCNT’s medical group practice included 145 physicians. MCNT’s clinics are managed by Impel.

History and Overview of Services

Founded by 20 physicians in Fort Worth and Arlington in 1995, MCNT’s initial focus was internal medicine and endocrinology. MCNT added obstetrics and gynecology in 1995 and 1996, family practice in 1997 and pediatrics in 1999. Geographically, MCNT expanded within the North Texas region to Cleburne at the end of 1995, and to Carrollton, North Dallas, and Plano in 1997. Since 1997, MCNT has continued to expand in North Texas to add locations and specialists in Denton, Flower Mound, Frisco, Hurst, and Mansfield. MCNT now provides a broad range of primary care services and its physicians practice primary care medicine in the internal medicine, family medicine, geriatrics, pediatrics, and obstetrics and gynecology fields. MCNT also owns and

operates an automated laboratory. MCNT provides X-ray, MRI and CT diagnostic services in Fort Worth, Texas and digital mammography in Arlington, Texas. Additionally, MCNT provides ancillary services, including bone densitometry, ultrasound, and stress testing and mobile imaging services (sonograms, echocardiograms and vascular studies) for adult medicine in most of its clinic locations. MCNT believes the availability of these ancillary services at most of its clinics allows patients to benefit from convenience and prompt customer service. MCNT’s specialist physicians include allergy and immunology, endocrinology, general surgery, infectious disease, neurology, pain management, physical medicine and rehabilitation, podiatry, rheumatology, sports medicine and travel medicine.

Physicians

The table below sets forth the breakdown by specialty of MCNT’s physicians as of December 31, 2011.


	December 31, 2011
Primary Care
Family Medicine		24
Geriatrics		1
Internal Medicine		46
Medicine/Pediatrics		9
Obstetrics and Gynecology		28
Pediatrics		15
Specialists
Allergy and Immunology		1
Endocrinology		4
Infectious Disease		1
Neurology		2
Physical Medicine and Rehabilitation		1
Podiatry		1
Psychology		1
Rheumatology		9
General Surgery		2

Total Physicians		145

Historically, MCNT has added physicians by hiring directly out of residency programs or, in the case of endocrinology, rheumatology, infectious disease, neurology, sports medicine, and allergy and immunology, by hiring fellowship-trained physicians in these fields.

Locations

MCNT’s clinics are located in five counties in North Texas, including Collin, Dallas, Denton, Johnson and Tarrant.

Patients

MCNT has experienced a steady growth of new patients per year, and as of the end of fiscal year 2011, MCNT had approximately 250,246 active patients. In 2011, MCNT had approximately 45,759 new patients. MCNT believes its growth in new patients is attributable in part to its having increased the number of physicians in each market and its continued growth of its primary care and medicine-based specialty capabilities within its current markets. As illustrated by the chart below, MCNT has seen consistent growth in its patient population. For the year ending December 31, 2011, MCNT had 687,896 billable encounters for 197,591 unique patients.


All Patients
Year	Billable Encounters	Unique Patients	% Growth
2005	473,136	132,423
2006	506,145	142,902		7.9%
2007	541,873	154,201		7.9%
2008	590,860	169,923		10.2%
2009	670,673	184,903		8.8%
2010	680,442	188,318		1.8%
2011	687,896	197,591		3.9%
Average Growth				6.9	%

The Medicare population is growing at an average of 4% each year, the end of fiscal year 2011 had a total of 29,157 active Medicare patients. Counting the number of Medicare patients with billable services by year since 2005, MCNT has averaged 6.9% growth in the number of unique Medicare patients. MCNT believes that it is well-positioned to expand its number of Medicare patients. The chart below shows the number of MCNT’s patients (grouped according to age) with billable encounters since December 19, 2009 that do not have Medicare as their primary insurance. Each of these patients represents an opportunity to roll into Medicare and sustain MCNT’s Medicare patient growth. In addition, as MCNT continues to recruit and hire new adult medicine physicians, MCNT believes the opportunity for increasing MCNT’s existing Medicare patient population is heightened.


Non-Medicare Patients by Age As of December 31, 2011
Patient Age		Unique Patients
60		3,629
61		3,311
62		3,377
63		3,343
64		3,614
65		3,171
66		2,302
67		1,582
68		1,426
69		1,073
70		1,003

Growth in a healthcare organization’s Medicare patient population provides additional opportunities for that organization to participate in programs such as Medicare Advantage, ACO formation, and shared-risk models. Many financial incentive programs are focused on Medicare patients as the overall cost of care for these patients exceeds that of non-Medicare patients. MCNT believes that a medical group that can provide high quality healthcare services to Medicare patients more efficiently than the marketplace is well positioned to take advantage of these incentive programs.

Industry Certifications

MCNT attained National Committee for Quality Assurance (“NCQA”) recognition for diabetes education in 2003, and provides diabetes education in one-on-one and group sessions. MCNT believes it is the first physician

group practice in the DFW metropolitan area to develop and implement a Patient Centered Medical Home (“PCMH”) project, where large benefits have been shown in improved care and lower costs. The focus of the PCMH model is to improve quality, patient satisfaction, and patient involvement while lowering the total cost of (“PCMH”) project, where large benefits have been shown in improved care and lower costs. care. Specifically, the focus of the PCMH model is to meet the Institute for Healthcare Improvement’s triple aims of improving the health of the population, enhancing the patient experience of care (including quality, access and reliability), and reducing, or at least controlling, the per capita cost of care. At its core, the PCMH model encourages a team approach to medicine and patient care. The team comprises registered nurses, nurse practitioners, physician assistants, clinical social workers and other trained staff. The focus is on higher risk patients and providing the support services necessary to keep them from unnecessary complications, hospitalizations and emergency room visits. The PCMH model also emphasizes prevention, education, patient involvement, elimination in gaps in care and care planning.

In the fall of 2009, MCNT began the first PCMH pilot project in Texas with Cigna, and a second project in February 2010 with Blue Cross, Blue Shield of Texas. NCQA certifies PCMHs at three levels (I, II, and III) with Level III as the highest rating. MCNT applied for and received NCQA certification for PCMH Level III in December 2010 for each of its 29 adult primary care clinics. MCNT has established physician committees to oversee the development of clinical protocols, patient management, patient satisfaction and performance metrics. All of MCNT’s primary care clinics (29 clinics out of 40 clinics, with over 80 physicians) are recognized by NCQA as Level III Patient-Centered Medical Homes. In addition, 54 of MCNT’s primary care physicians received recognition from NCQA’s Diabetes Physician Recognition Program (DPRP) for 2009. NCQA certification generally lasts for a period of three years. MCNT believes that all of its primary care physicians have adhered to the PCMH standards as set forth by NCQA.

Technology

MCNT utilizes an up-to-date computer technology and telecommunications systems. In 2000, MCNT installed NextGen electronic medical record system to capture clinical data, organize and access data and records, and convert patient charts from paper to electronic format. MCNT installed scanning solutions in 2002, the NextGen practice management system in 2004, and a science-based clinical protocol engine in 2005. MCNT began benchmarking physicians for cost and quality performance metrics and protocols in 2005 with two large managed care insurance companies. In 2007, MCNT appointed a permanent medical director to monitor the quality of care that MCNT’s physicians and services deliver based on patients’ satisfaction, science-based protocols and outcome analyses.

All of MCNT’s healthcare providers and support staff utilize NextGen EHR Enterprise Practice Management system (“EPM”), and Image Control System. These systems are interrelated and inter-accessible. MCNT relies on Impel to implement, maintain, train and service the needs of the MCNT providers regarding their use of the NextGen EPM/EHR systems. Impel has a robust IT department that upgrades and customizes the EHR templates in consultation with the MCNT physician-led EHR committee. In 2011, MCNT exceeded 11 million encounters in the EHR in connection with patient visits.

In addition, MCNT has an automated laboratory utilizing the Orchard laboratory system. The laboratory runs over 3,000,000 tests annually, and the results of these tests are linked immediately to the EHR. The laboratory specimens in MCNT’s clinics and the test results are typically available in the following clinic session. MCNT believes this arrangement allows for fast and accurate diagnosis and treatment of its patients.

MCNT also makes use of the NextMD secure communications portal. NextMD is a patient portal service that allows the patient on-line access to his or her physician’s office. NextMD technology provides for a single server secured by both a firewall and 128-bit encryption to safeguard the patient’s privacy. This secure portal enhances the physician-patient communication and allows for patients to receive lab results, medication refills, immunization records, return to work/school forms, and visit summaries through the web.

Business of Impel

Impel is a physician practice management company that handles all training, accounting, finance, operations management, marketing, billing and collection services for MCNT. Impel was formed in December 1994 by the founding physicians of MCNT and the Texas Health Resources (“THR”), formerly known as Harris Methodist Health System. THR owned preferred stock in Impel until 2000. In 2000, Impel bought out THR’s preferred stock and became an independent entity. Impel’s current ownership is comprised of most of the original physician partners of MCNT and two long standing members of Impel’s senior management. As of December 31, 2011, Impel managed each of MCNT’s 41 medical clinics, but does not manage any third party clinics.

Impel also provides EHR and EPM services through its wholly-owned subsidiary, Impel Consulting Experts, LLC (“ICE”). The consulting group has seven years of experience in implementing the NextGen EHR/EPM system, and provides physician and staff training. As of December 31, 2011, Impel had approximately 31 clients in 20 different states.

General Business Information

Employees

At December 31, 2011, USMD and its consolidated subsidiaries employed approximately 185 full-time employees and approximately 19 part-time employees. At such date, UANT and its consolidated subsidiaries employed 220 full-time employees and 10 part-time employees. As of December 31, 2011, MCNT employed 145 physicians, 35 mid-level providers and 625 employees. As of December 31, 2011 Impel had 36 employees.

Marketing

The sales and marketing efforts of both USMD and UANT are directed at physicians, the general public and managed care insurance companies who provide healthcare to their insured customers. USMD and UANT market their services and facilities to customers and referral sources by emphasizing:

•

the high level of patient and physician satisfaction with the facilities, which is based on surveys taken concerning our facilities;

•

the quality and responsiveness of the services provided;

•

the practice efficiencies provided by the facilities; and

•

the benefits of the affiliation(s) with hospital partners, if applicable.

USMD and UANT also directly negotiate agreements with third-party payers, 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 payer contracting is essential for the economic viability of most of their facilities.

MCNT’s marketing efforts are focused on physicians, the general public, businesses and their human resources departments and managed care insurance companies who provide healthcare to insured customers. MCNT markets its services, facilities, and physicians by emphasizing:

•

the high level of patient satisfaction with MCNT’s physician care and services as evidenced by patient surveys of MCNT’s facilities, staff and the quality of health care provided;

•

its 41 easy to access locations around the DFW metropolitan area;

•

the quality healthcare provided by its physicians and their staff as demonstrated by MCNT having received NCQA certification for PCMH Level III;

•

MCNT’s NextGen EPM/EHR systems;

100

•

the practice efficiencies MCNT believes it provides by relying on its economies of scale, its management team, electronic processes, and its use of NextMD; and

•

the benefits of offering multi-specialty care, including an integrated team approach to medicine, use of a single medical chart, and enhanced communication between physicians.

Impel does not market its management services as those services have historically been provided exclusively to MCNT. The majority of ICE’s business comes from client word-of-mouth and its professional services agreement with NextGen, which provides that ICE will provide independent contractor consulting services to other NextGen clients.

Competition

The healthcare management services market is highly competitive, mostly regional and highly fragmented. Most of our competitors have significant resources and market share is concentrated in large urban markets. As a integrated health services company, we compete with healthcare companies for patients, physicians and for contracts with insurers or managed care payers. Competition for insurers or managed care contracts is focused on the pricing, number of facilities in the market and affiliation with key physician groups in a particular market. We also compete with regional and local providers of healthcare services such as medical facilities, hospitals, clinics, individual practitioners, free-standing facilities and physicians practice groups. The largest physician practice group competitors are hospital owned foundations. There are two physician group practices in the Dallas/Fort Worth metropolitan area with over 100 members—Texas Health Physician’s Group with 420 physicians and physician extenders and Health Texas Provider Network with 459 members.

We are well-positioned to compete in these markets because of our alignment with key physicians in the DFW market and our broad array of healthcare services. These services include, but are not limited to, physician, acute-care hospital, radiation, cyber knife, imaging, lithotripsy, video urodynamic, clinical and anatomical pathology laboratory services.

We believe few companies on a national, regional or local basis currently provide an array of services that is comparable to the services provided by Impel. Many of Impel’s competitors have minimal experience with the NextGen EHR/EPM systems. Those companies that are experienced in these systems have fewer numbers of employees, are unable to leverage economies of scale and lack incumbent relationships with large physician groups. There are larger general consulting companies that are attempting to gain entry into the NextGen consulting space. Examples of these include Dell Healthcare and ACS Healthcare Solutions, but Impel believes these companies currently do not have personnel that are as qualified or experienced as Impel’s in developing, training and implementing NextGen platforms. This is illustrated by the fact that NextGen itself frequently sub-contracts with ICE to provide consulting services sold to its clients through its own internal consulting organization, NextGen Professional Consulting Services.

Impact of Certain Government Regulations

Government Reimbursement – Medicare

Holdings’ managed and/or owned healthcare service providers are subject to many laws and regulations at the federal, state and local government levels in the jurisdictions in which they operate. These laws and regulations generally apply to all healthcare service providers who accept assignment of benefits of government program beneficiaries, although there are some differences in requirements such as reimbursement, and licensing, that may be specific to certain types of service providers (i.e. hospital, free-standing center, physician practice, etc,). All of Holdings’ subsidiaries and managed entities participate in various government programs and Holdings fulfills its management responsibilities to all of its client providers, in part, by ensuring its clients subject to these requirements comply with all applicable regulatory, legislative, licensing, accreditation and other requirements.

101

Title XVIII of the Social Security Act authorizes Part A of the Medicare program. Medicare is the health insurance program that pays for inpatient care for covered persons (generally those aged 65 and older and the long-term disabled) administered by the Centers for Medicare and Medicaid Services (“CMS”). Healthcare providers participate in the Medicare program subject to certain conditions of participation and upon acceptance of an agreement by the Secretary of Health and Human Services (“HHS”). Only enumerated services, upon the satisfaction of certain criteria, are eligible for Medicare reimbursement. Many aspects of the Medicare program are subject to annual budget-related reductions, while the structure of the program itself often is amended by Congress.

Healthcare providers are paid for services provided to Medicare beneficiaries in accordance with predetermined rates published annually by CMS. Hospitals are paid for inpatient services based on predetermined rates for treating or performing various diagnoses and procedures which have been grouped into diagnosis-related groups (“DRGs”) applicable to each patient discharge, known as the prospective payment system (“PPS”). Under PPS, hospitals are reimbursed for inpatient operating costs on a per discharge basis at fixed rates established for identified diagnosis-related groups. These rates are adjusted according to national market basket and regional wage indexes, which is the estimate by HHS of the annual change in cost of goods and services used by hospitals in treating outpatients and are subject to reduction by Congress.

Hospitals are paid for outpatient services based on predetermined rates for performing various procedures identified by Current Procedural Terminology (“CPT”) and Healthcare Common Procedure Coding System (“HCPCS”) code sets under an outpatient prospective payment system (“OPPS”) fee schedule known as Ambulatory Payment Classifications (“APCs”) applicable to each CPT/HCPCS code. Under OPPS, hospitals are reimbursed for outpatient operating costs on a per procedure basis at fixed rates established for identified ambulatory payment classifications. These rates are adjusted according to national market basket and regional wage indexes, which is the estimate by HHS of the annual change in cost of goods and services used by hospitals in treating outpatients and are subject to reduction by Congress.

Physicians are paid for services provided to Medicare beneficiaries in accordance with a physician fee schedule that establishes on an annual basis predetermined rates for services provided based on a CPT code assigned to services. Other healthcare providers are paid for services provided to Medicare beneficiaries based on similar fee schedules established by CMS and adjusted on an annual basis.

Because rates for services provided are typically standard based on rates assigned to specific codes, in some cases, the payment received for a particular service provided may exceed the actual costs associated therewith, while in other cases the payment may be less than actual costs.

Government Reimbursement – Medicaid

Medicaid is a federal-state cooperative which is administered in Texas, subject to certain federal requirements, by the Texas State Department of State Health Services and its designated administration contractors. The administration of the program is accomplished through contracts and agreements with medical providers; Texas Medicaid & Healthcare Partnership, the claims administrator; MAXIMUS, the enrollment broker; various managed care organizations; the Institute for Child Health Policy, the quality monitor; and state agencies. Federal matching funds are available for a portion of the state’s Medicaid program expenditures. The primary beneficiaries of the Medicaid program are children, pregnant women, disabled individuals, and the elderly. Hospital benefits are available under the Medicaid program, within prescribed limits, to persons meeting certain maximum income levels and other need requirements. The Texas Medicaid Program implemented a diagnostic-related, group-based, prospective payment system effective September 1, 1986. Generally, reimbursement for outpatient hospital surgery is limited to the lesser of the amount reimbursed to an ambulatory surgical center for similar services, the hospital’s actual charge, or the allowable cost. Reimbursement of ambulatory surgery center procedures is based on the CMS-approved Ambulatory Surgical Code Groupings payment schedule.

102

Program Adjustments

A significant portion of Holdings’ revenue is dependent upon Medicare and Medicaid payments to the healthcare providers that we own, operate, and/or manage, and it is unlikely that Holdings could ever attract a sufficient number of private-pay patients to operate profitably without reimbursement from government healthcare programs. The Medicare and Medicaid programs are subject to statutory and regulatory changes, administrative rulings, interpretations and determinations, requirements for utilization review and new governmental funding restrictions, all of which may materially increase or decrease program payments as well as affect the cost of providing services and the timing of payment to facilities. The final determination of amounts earned under these programs can require many years, because of audits by the program representatives, providers’ rights of appeal, and the application of numerous technical reimbursement provisions. Until final adjustment, however, significant issues remain unresolved and any established reserves may not be sufficient to cover such adjustments. There can be no assurance that payments under governmental programs will be timely, will remain at levels comparable to present levels or will, in the future, be sufficient to cover the costs allocable to patients eligible for reimbursement pursuant to such programs.

General Healthcare Regulation

There is ever-increasing scrutiny by law enforcement authorities, the Office of Inspector General (“OIG”), HHS, CMS, the courts and Congress of arrangements between healthcare providers and potential referral sources to ensure that the arrangements are not designed as a mechanism to exchange remuneration for patient care referrals and opportunities. HHS, the courts and Congress have also demonstrated a willingness to look behind the formalities of an entity’s structure to determine the underlying purpose of payments between healthcare providers and potential referral sources. Enforcement actions have increased, as evidenced by recent Federal court decisions and activities initiated by the OIG.

Federal Illegal Remuneration Statute

The federal illegal remuneration statute applicable to Medicare, Medicaid, and all federal and state healthcare programs (except the Federal Employee Health Benefit Program) (“Government Programs”) prohibits the offer, payment, solicitation, or receipt of any remuneration, directly or indirectly, covertly or overtly, in cash or in kind, for (i) the referral of patients, or arranging for the referral of patients, for the provision of items or services for which payment may be made under the Government Programs; or (ii) the purchase, lease or order, or arranging for the purchase, lease or order, of any good, facility, service or item for which payment may be made under the Government Programs. Limited safe harbor regulations define a narrow scope of practices that will be exempted from federal prosecution or other enforcement actions. However, the safe harbor regulations do not exempt a wide range of activities engaged in by hospitals, physicians and others. Activities that fall outside of the safe harbor regulations are not per se illegal, but may subject the activity to a greater degree of scrutiny. A violation of the illegal remuneration statute constitutes a felony criminal offense, and applicable criminal sanctions include imprisonment of up to five years, fines up to $25,000, civil monetary penalties, and exclusion from the Medicare and Medicaid programs. Civil sanctions include up to $50,000 for each prohibited act and up to three times the total amount of remuneration offered, paid, solicited or received.

Any financial arrangement between a referring physician or other person in a position to influence the referral of patients for healthcare services and a provider of healthcare services must be evaluated to ensure that the financial arrangement either fits within a recognized safe harbor to the federal illegal remuneration statute or does not violate the statute under a traditional anti-kickback legal and compliance analysis. After the closing of the Contribution, Holdings will be beneficially owned by many physicians who are in a position to refer patients to healthcare facilities owned, operated, and/or managed by Holdings, which implicates the federal illegal remuneration statute. Holdings believes that the Contribution has been structured to minimize federal illegal remuneration statute compliance risks associated with physician ownership of the healthcare providers owned, operated, and/or managed by Holdings. We expect that, after the closing of the Contribution, Holdings will satisfy the elements of a safe harbor for investments in large, publicly-traded companies.

103

Some members of the Holdings board of directors and officers are physicians who may be in a position to refer patients to healthcare facilities owned and operated by Holdings. Federal illegal remuneration statute safe harbors exist for such arrangements, and Holdings will ensure that these and other financial arrangements between any physician and Holdings either satisfy the elements of an applicable safe harbor or do not otherwise violate the federal illegal remuneration statute.

In addition, certain facilities owned in part and operated by Holdings, specifically but not limited to USMD Arlington Hospital, USMD Fort Worth Hospital, and several lithotripsy service providers owned and operated by USMD Lithotripsy Division, are also directly owned in part by physicians. The financial arrangements between those physicians and all entities owned and operated by Holdings have also been structured to fit within safe harbors to, or otherwise not violate, the federal illegal remuneration statute, and we continually monitor healthcare laws and regulations for changes in the federal illegal remuneration statute.

Federal Self-Referral Statute

Section 1877 of the Social Security Act (commonly known as the “Stark Law”) prohibits physicians from referring Medicare and Medicaid patients for certain “designated health services” reimbursable by the Medicare or Medicaid programs to entities with which the physicians (or their immediate family members) have a financial relationship. A financial relationship may be an ownership interest (through debt, equity, or otherwise) or a compensation arrangement, and may be direct or indirect. In addition to prohibiting the referral for services, the Stark Law bans billing and collecting for services rendered pursuant to a prohibited referral. These restrictions are absolute, without regard to the intention of the parties. They are inapplicable, however, if the financial relationship falls within a statutory or regulatory exception.

The Stark Law potentially prohibits the referral of eleven categories of health services, including: clinical laboratory services; physical therapy services; occupational therapy services; radiology services (including magnetic resonance imaging, computed tomography scans and ultrasound); radiation therapy services and supplies; durable medical equipment and supplies; parenteral and enteral nutrients, equipment and supplies; prosthetics, orthotics and prosthetic devices; home health services and supplies; outpatient prescription drugs; and inpatient and outpatient hospital services. The Stark Law requires a provider to timely refund any payments received for services furnished as a result of a prohibited referral. Civil monetary penalties of $15,000 may be assessed for each instance of which timely refunds were not made or claims were submitted for services that the provider knew or should have known were furnished pursuant to prohibited referrals, and a $100,000 penalty may be assessed for circumvention schemes. Finally, violators may be subject to suspension or exclusion from the Medicare and Medicaid programs.

After the closing of the Contribution, many physicians who have an ownership interest in Holdings will be in a position to refer patients for the provision of services subject to the Stark Law to healthcare facilities owned, operated, and/or managed by Holdings. Holdings believes that the Contribution has been structured to minimize any risk that referrals from such physician to Holdings’ healthcare facilities will violate the Stark Law.

The Stark Law contains a specific statutory and regulatory exception for physician ownership of publicly traded securities. This exception provides that physician ownership of an investment interest in a company will not trigger the Stark Law’s self referral prohibitions if the investment securities, at the time a referral is made: could be purchased on the open market; are listed on a national exchange such as the NASDAQ Capital Market; are traded under an automated interdealer quotation system operated by the National Association of Securities Dealers; and are in a corporation with shareholders’ equity exceeding $75 million at the end of the most recent fiscal year or on average during the previous three fiscal years. Holdings believes that any physician ownership interest in the form of Holdings common stock will satisfy all of the elements of this exception and thus will not trigger the Stark Law’s self-referral prohibitions; however, there can be no guarantee that Holdings will continue to satisfy this exception or that the government will not modify the requirements of this exception in the future.

104

Some members of the Holdings board of directors and officers are physicians who may be in a position to refer patients to healthcare facilities owned and operated by Holdings. Stark Law exceptions exist for such arrangements, and Holdings will ensure that these and other financial arrangements between any physician and Holdings fits within a recognized exception if the physician in question is in any position to refer patients or otherwise generate business for Holdings.

Certain facilities partly owned and operated by Holdings, specifically USMD Arlington Hospital, USMD Fort Worth Hospital and several lithotripsy service providers, are also directly owned in part by physicians. While CMS does not currently consider lithotripsy a healthcare service subject to the Stark Law’s self-referral prohibitions, contracts between lithotripsy companies partly owned and hospitals partly owned by Holdings do create indirect financial arrangements between those physicians and Holdings. These financial arrangements have also been structured to fit within recognized exceptions to the Stark Law, and we continually monitor the Stark Law and all healthcare laws and regulations for changes. The Stark Law has been subject to extensive change and interpretation in recent years and we expect that the government will continue to revise current regulations and issue new regulations to curb what it feels are abuses within the healthcare industry.

False Claims Act Liability and Enforcement Actions

The federal False Claims Act, 31 U.S.C. § 3729, imposes civil money liability on persons or entities who, among other things: (i) knowingly present or cause to be presented a false or fraudulent claim for payment to the United States; (ii) knowingly use a false record or statement to obtain payment on a false or fraudulent claim paid by the United States; or (iii) engage in a conspiracy to defraud the United States by getting a false or fraudulent claim paid. The “knowing” standard under the False Claims Act requires that the person or entity have actual knowledge of the falsity of the claim or act in deliberate ignorance or reckless disregard of the truth or falsity of the claim. Sanctions under the False Claims Act include civil penalties of $5,000-$10,000 for each claim filed and treble damages. Notably, the False Claims Act allows private individuals, known as “qui tam plaintiffs” or “relators,” to bring civil actions on behalf of the government for violations of the False Claims Act and to receive a percentage of the government’s recovery, which varies depending on whether the government has intervened in the action. Many of the large recent settlements originated as qui tam actions; thus, the False Claims Act provides a potentially lucrative avenue for disgruntled employees with knowledge of improper billing practices. The False Claims Act is also the basis for enforcement actions by the OIG for HHS, the Department of Justice and U.S. Attorneys’ Offices.

Other Federal Medicare and Medicaid Related Fraud Provisions

Under the Civil Monetary Penalties law of the Social Security Act (“CMP Law”), civil money penalties may be imposed against any person who, among other prohibitions, knowingly presents or causes to be presented a claim (i) for items or services not provided as claimed (including upcoding); (ii) that is false or fraudulent; (iii) for services provided by an unlicensed physician; (iv) for items or services provided by a person excluded from participation in the Medicare and Medicaid programs; or (v) for items or services that are not medically necessary. Penalties include up to $10,000 for each item or service claimed plus an assessment of up to three times the amount claimed for each such item or service. The CMP Law applies to all Government Programs. Congress has also enacted a variety of provisions designed to control fraud and abuse in the Government Programs and to strengthen enforcement capabilities. HIPAA created new healthcare crimes, expanded the Medicare and Medicaid exclusion provisions to provide reciprocal exclusion of entities and individuals with ownership or controlling interests in such entities and increased civil monetary penalties for a variety of actions.

Privacy and Security of Health Information

Among other measures, HIPAA contains provisions that will require all health plans, all healthcare clearinghouses, and many healthcare providers (i.e., healthcare providers that transmit health information in an electronic form in connection with certain standard transactions) (collectively, the “Covered Entities”) to

105

implement very significant and costly policies, procedures and infrastructure designed to protect the privacy of each patient’s individual healthcare information. Many of the facilities we own and operate are considered a Covered Entity and are required to comply with current and future privacy rules and regulations.

Texas Laws

The Texas Legislature has enacted the Texas Illegal Remuneration Act, similar to the federal statute, which prohibits any person, including hospitals and physicians, from intentionally or knowingly offering to pay or agreeing to accept any remuneration directly or indirectly, overtly or covertly, in cash or in kind, to or from a person, firm, association of persons, partnership, or corporation for securing or soliciting patients or patronage for or from a person licensed, certified, or registered by a state healthcare regulatory agency. Unlike the federal statute, which is limited to Government Programs such as Medicare and Medicaid, the Texas illegal remuneration statute applies to all payers and patients in the State of Texas.

In 1997, the Texas Legislature enacted legislation to prevent Medicaid fraud. Effective September 1, 1997, civil penalties and injunctive relief are applicable for various fraudulent acts, performed with knowledge or intent, that relate to application or receipt of a benefit or payment under the Medicaid program. Civil remedies for a violation of the Medicaid fraud statute include revocation of a provider agreement; restitution of the unauthorized payment or benefit received, plus interest; and civil penalties from $1,000 to $15,000 for each unlawful act, plus twice the value of the unauthorized payment or benefit. Among the provisions adopted is the Medicaid False Claims Act, which is loosely patterned after the federal False Claims Act and allows private persons to bring a civil action based on certain unlawful acts set forth the Medicaid statute. The whistleblower provision also contains a prohibition against retaliation by employers against an employee who brings a whistleblower action. Because the unlawful acts that trigger the Medicaid False Claims Act are broader and more numerous than those under the federal False Claims Act, the Texas statute may provide additional incentives and methods for a private person to bring an action against a Medicaid provider.

Licensing Requirements

On a regular basis, healthcare providers and the facilities they operate are subject to numerous legal, regulatory, professional and private licensing, certification and accreditation requirements. Those requirements include but are not limited to, requirements relating to Medicare and Medicaid participation and payment, state licensing agencies, commercial payer rules and regulations, the Joint Commission on Accreditation of Healthcare Organizations, and other federal, state and local government agencies. Holdings and all of the entities and providers it owns, operates, and manages will endeavor to maintain all necessary licenses, certifications and accreditation. Renewal and continuance of certain of these licenses, certifications and accreditation are based on inspections, surveys, audits, investigations or other reviews, some of which may require or include affirmative action or response by Holdings. These activities generally are conducted in the normal course of business of healthcare facilities. Nevertheless, an adverse result could be the cause of loss or reduction in the facility’s scope of licensure, certification or accreditation or reduce payments received.

106

HOLDINGS’ MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Holdings’ Management’s Discussion and Analysis of Financial Condition and Results of Operations (“Holdings MD&A”) is an analysis of the financial condition and the results of operations of Holdings. The intent of Holdings’ MD&A is to provide the reader of Holdings’ financial statements with a narrative from the perspective of Holdings’ management on Holdings’ financial condition, results of operations, cash flows, liquidity and certain other factors that may affect Holdings’ future results. The Holdings MD&A should be read in conjunction with Holdings’ financial statements and related notes included in this Prospectus.

Executive Overview

Holdings is a Delaware corporation formed on May 7, 2010 to facilitate the business combination of USMD, UANT and Ventures. On August 19, 2010, Holdings, USMD, Ventures and UANT entered into the Original Contribution Agreement pursuant to which the entities agreed to combine their separate businesses into a single integrated health services company. It was originally contemplated that, immediately prior to the Contribution, a subsidiary of Ventures would merge with and into UANT, with UANT surviving as a wholly-owned subsidiary of Ventures, and certain of the USMD shareholders would contribute all or a portion of their shares of USMD common stock to Ventures in exchange for partnership interests in Ventures. Then, upon the closing of the Contribution, Ventures would contribute all of its assets, which would include its equity interests in USMD and UANT, and the remaining USMD shareholders would contribute their USMD shares, to Holdings in exchange for shares of Holdings common stock. Holdings described the Contribution in its Registration Statement on Form S-4 filed with the SEC on December 23, 2010 (File No. 333-171386) and declared effective by the SEC on July 25, 2011. On August 23, 2011, the shareholders of USMD and the partners of Ventures voted on and approved the Original Contribution Agreement.

On December 1, 2011, Ventures and Holdings entered into a merger agreement with MCNT, and on December 15, 2011, Ventures and Holdings entered into a merger agreement with Impel. Pursuant to these merger agreements, immediately prior to the closing of the Contribution, subsidiaries of Ventures will merge with and into each of MCNT and Impel, with MCNT and Impel surviving as wholly-owned subsidiaries of Ventures. As a result of these merger agreements, on February 9, 2012, Holdings, USMD, UANT and Ventures executed the Amendment to reflect, among other changes, that Ventures will contribute to Holdings, in addition to its equity interests in USMD and UANT, its equity interests in MCNT and Impel as part of the Contribution. Holdings expects the Contribution to close in mid-2012.

Through December 31, 2011, Holdings had no operations or cash flows except for the expenses associated with a share-based payment and periodic reporting to the SEC. Holdings’ only assets, liabilities and equity are related to these items. As such, except for certain forward-looking discussions, Holdings has not presented significant discussions of its results of operations or liquidity and capital resources.

Holdings will operate the businesses that are currently owned and operated by USMD, UANT, Ventures, MCNT and Impel. The growth and success of Holdings in the near term largely depends on Holdings’ ability to:

•

consummate the Contribution;

•

increase the number of patients served by its subsidiaries and the health care providers it manages;

•

successfully open new facilities or expand existing facilities;

•

successfully integrate its acquired and/or managed facilities into existing operations; and

•

maintain productive relationships with physician and hospital partners.

In addition, Holdings intends to vertically expand its business in the North Texas service area by developing or acquiring complementary physician group practices and ancillary healthcare service providers. Holdings plans to horizontally expand its business in other strategic service areas by developing strategic alliances with large

107

integrated practices and expanding the medical service lines of those medical groups in those service areas. Holdings believes that the opportunity to execute its business combination with USMD, UANT, Ventures, MCNT and Impel and to develop or acquire targeted physician group practices and ancillary healthcare service providers will place it in a position to achieve its goal of becoming a regional or national integrated health services company.

Key Developments

•

On August 19, 2010, Holdings, USMD, Ventures and UANT entered into the Original Contribution Agreement. On August 23, 2011, the USMD shareholders and Ventures partners approved the Original Contribution Agreement.

•

On December 1, 2011, Ventures and Holdings entered into a merger agreement with MCNT and on December 15, 2011, Ventures and Holdings entered into a merger agreement with Impel.

•

As a result of these merger agreements, on February 9, 2012, Holdings, USMD, UANT and Ventures entered into the Amendment to reflect, among other changes, that Ventures will contribute to Holdings, in addition to its equity interests in USMD and UANT, its equity interests in MCNT and Impel as part of the Contribution.

•

If the Contribution is completed, Holdings has agreed to pay for the reasonable and documented out of pocket costs and expenses of MCNT and Impel incurred in connection with the Contribution in an aggregate amount not to exceed $500,000. Such costs shall include without limitation fees paid by MCNT and Impel to attorneys and valuation, financial and investment banking advisors. Holdings has been advised that the maximum amount of such reimbursable aggregate expenses has been exceeded by MCNT and Impel.

Results of Operations

As of and for the years ended December 31, 2011 and 2010, Holdings had no operations or revenues. Expenses were limited to activity associated with the issuance of restricted common shares and expenses associated with the preparation and filing of periodic reports with the SEC. USMD, the entity that will be the accounting acquirer in the event the Contribution is consummated, is paying those expenses, and Holdings records related party payables to USMD for those expenses.

Liquidity and Capital Resources

As of and for the years ended December 31, 2011 and 2010, Holdings had no net cash flows.

In the event the Contribution is consummated, Holdings expects to utilize cash flows from the operations of its subsidiaries to fund operations and meet principal and interest payment obligations. Holdings will consider restructuring and consolidating the existing credit facilities of its subsidiaries.

Holdings currently has no commitments for capital expenditures. In the future, as part of Holdings’ overall business strategy, it intends to make strategic acquisitions of complementary healthcare facilities and physician practice groups, and Holdings may rely heavily on financing in order to fulfill this strategy. To the extent Holdings is unable to secure the necessary acquisition financing, it may be hampered or delayed in its ability to acquire such entities and, thus, may be unable to fulfill timely its acquisition strategy.

Off-Balance Sheet Arrangements

Holdings does not have any arrangements that qualify as off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

108

Critical Accounting Policies and Estimates

Holdings’ financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of Holdings’ financial statements requires management to make judgments and estimates that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures. Holdings bases its assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time its financial statements are prepared. On a regular basis, Holdings reviews the accounting policies, assumptions, estimates and judgments to ensure that its financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from Holdings’ assumptions and estimates, and such differences could be material.

Holdings discusses its significant accounting policies in Note 2, Summary of Significant Accounting Policies, of its December 31, 2011 financial statements included elsewhere in this Prospectus. Holdings believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating its reported financial results, and they require Holdings’ most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. Where Holdings’ management has provided sensitivity analyses in the ‘Effect if Actual Results Differ from Assumptions’ columns below, the variance assumptions used in those analyses are based on outcomes that management considers reasonably likely to occur.


Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions

Share-Based Payment

Holdings measures share-based payments to nonemployee suppliers of goods and services based on the fair value of goods or services received or the equity instruments granted, whichever is more reliably determinable. Holdings measures the fair value of the equity instruments issued to a nonemployee on the earlier of: (1) the performance commitment date, or (2) the date the services required under the arrangement have been completed. Prior to the final measurement date, Holdings measures share-based payments at their then-current fair values at each interim financial reporting date.	As a recently formed public entity with limited equity transaction history and shares that are not approved for quotation on a stock exchange, Holdings must make assumptions and apply judgment to determine the fair value of its share-based payments. These assumptions and judgments include estimating the fair value of Holdings’ common stock and forfeitures of share-based payments due to termination of employment. Changes in these assumptions can materially affect the fair value estimate. Holdings estimated the fair value of its common shares based on a valuation prepared in conjunction with the Contribution. Holdings estimated forfeitures based on current termination statistics of the award holders since the award date.	If actual results are not consistent with the assumptions, the share-based payment expense reported in Holdings’ financial statements may not be representative of the actual economic cost of the share-based payment. A 20% variance in estimated forfeitures would have changed stock compensation expense by 4%.

109

Recent Accounting Pronouncements

For information regarding recently issued and adopted accounting pronouncements, see Note 2, Summary of Significant Accounting Policies, to the financial statements of Holdings included elsewhere in this Prospectus.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

110

USMD’S MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

USMD’s Management’s Discussion and Analysis of Financial Condition and Results of Operations (“USMD MD&A”) is an analysis of the financial condition and the results of operations of USMD. The intent of the USMD MD&A is to provide the reader of USMD’s financial statements with a narrative from the perspective of USMD’s management on USMD’s financial condition, results of operations, cash flows, liquidity and certain other factors that may affect USMD’s future results. The USMD MD&A should be read in conjunction with USMD’s consolidated financial statements and related notes included in this Prospectus.

Executive Overview

USMD provides finance, revenue cycle, centralized business office, clinical, operational and business development services, or a selection of these management services, to healthcare providers. USMD owns and operates three healthcare management companies – USMD Hospital Division, USMD CTC Division and USMD Lithotripsy Division – formed principally to establish, invest in, operate and/or manage acute-care hospitals, cancer treatment centers and lithotripsy service providers. USMD’s revenues are comprised of management, operational and clinical services revenue received from contracts with certain health care providers and the revenue of consolidated lithotripsy entities. In addition, USMD generates income from equity in income of nonconsolidated affiliates that results from the allocation to USMD of its proportionate share of income of its nonconsolidated affiliates.

USMD Hospital Division is a healthcare management services company that has beneficial partnership interests of 5% and 20% in hospital partnerships located in Arlington and Fort Worth, Texas, respectively. USMD Hospital Division owns 100% of the general partners of both of these partnerships and manages their hospital operations pursuant to long-term contractual management agreements.

USMD Arlington Hospital owns and operates an acute care hospital that has 34 inpatient licensed beds. Its surgery unit is comprised of 18 day surgery beds, two procedure rooms and nine operating rooms. The hospital performs inpatient and outpatient surgeries in a variety of specialties that include urology, neurosurgery, general surgery, gynecology, podiatry, plastic surgery, pain management and orthopedics. Other services include an in-house laboratory, diagnostic radiology, computed tomography, magnetic resonance imaging, nuclear medicine and ultrasound. The hospital also has an emergency department. A wholly-owned subsidiary of USMD Hospital Division is the general partner of USMD Arlington Hospital. On March 1, 2010, THR, a large non-profit healthcare delivery system in North Texas, increased its limited partnership interest in USMD Arlington Hospital to 51% and obtained additional governing rights in the entity’s amended partnership agreement. As a result, effective March 1, 2010, USMD ceased to control the hospital partnership and therefore no longer consolidates its assets, liabilities and results of operations. Since USMD does maintain significant influence over USMD Arlington Hospital, it began accounting for the hospital partnership using the equity method of accounting effective March 1, 2010.

USMD Fort Worth Hospital owns and operates an acute care hospital that opened in March 2008 and has six operating rooms and eight licensed inpatient beds. The hospital performs inpatient and outpatient surgeries in a variety of specialties that include urology, ENT, general surgery, gynecology, podiatry, plastic surgery, oral surgery and orthopedics. Other services include an in-house laboratory, diagnostic radiology, computed tomography scans and ultrasound. A wholly-owned subsidiary of USMD Hospital Division is the general partner of USMD Fort Worth Hospital. On March 1, 2010, THR purchased a 51% limited partnership interest in USMD Fort Worth Hospital and obtained certain governing rights in the entity’s amended partnership agreement. As a result, effective March 1, 2010, USMD ceased to control the partnership and therefore no longer consolidates its assets, liabilities and results of operations. Since USMD does maintain significant influence over USMD Fort Worth Hospital, it began accounting for the hospital partnership using the equity method of accounting effective March 1, 2010.

111

USMD CTC Division is a healthcare management services company formed to develop, invest in, operate and/or manage cancer treatment centers providing radiotherapy solutions to advance cancer care. As of December 31, 2011, USMD CTC Division had six contractual agreements under which USMD CTC Division provided management services to nine operational cancer treatment centers located in Texas, Florida, Missouri and Arizona.

USMD Lithotripsy Division is a healthcare management services partnership formed to establish, invest in or acquire, operate and/or manage joint venture entities that provide lithotripsy services to hospitals, ambulatory surgery centers, and/or physician offices. As of December 31, 2011, USMD Lithotripsy Division provided management services to 23 lithotripsy service providers, either pursuant to a management agreement or as a result of its role as general partner or managing member of such providers. In addition, USMD Lithotripsy Division owns equity interests in substantially all of these lithotripsy service providers. The lithotripsy service providers are primarily located in the South Central United States. The balance sheets and results of operations of the entities for which USMD served as the general partner are included in USMD’s consolidated financial statements.

Sources of Revenue

Subsequent to deconsolidation of USMD Arlington Hospital and USMD Fort Worth Hospital, effective March 1, 2010, USMD Hospital Division primarily generates revenue from management services provided by USMD Hospital Division to USMD Arlington Hospital and USMD Fort Worth Hospital. Management fees are based on a percentage of each hospital’s adjusted net patient revenues, i.e., net patient service revenues and medical office building base rent minus bad debt expense. Hospital net patient service revenue depends on a variety of factors, such as surgical case volume, the case mix or intensity of utilization of services and the mix of third-party payer sources. USMD Hospital Division provides the hospitals with management, information technology and revenue cycle staff, and the hospitals pay USMD Hospital Division for the labor costs associated with staffing these functions. Billings for these services are included in management services revenue. For the year ended December 31, 2011, USMD Arlington Hospital and USMD Fort Worth Hospital accounted for 31% of net operating revenue. After deconsolidation and for the ten months ended December 31, 2010, USMD Arlington Hospital and USMD Fort Worth Hospital accounted for 33% of net operating revenue.

Prior to deconsolidation of USMD Arlington Hospital and USMD Fort Worth Hospital, USMD Hospital Division’s revenue was primarily generated from hospital patient services, which depended primarily on inpatient surgical occupancy levels, outpatient surgical case volume and within those activities, the case mix or intensity of utilization of services and the mix of third-party payer sources that insure the patient/beneficiary and reimburse the healthcare providers (i.e. government-based or commercial insurers). Gross revenue typically did not reflect what the hospitals were actually paid, but represented an indicator of resource utilization. Net patient service revenues were generated for services ordered by physicians and provided to patients, the charge and ultimate payment for such services was the result of negotiated payment rates for such services from commercial insurers, managed care health plans and prospectively set reimbursement rates established by government programs for their beneficiaries. Reimbursement rates pursuant to government-related programs for services rendered approximate the costs of providing such services. As such, USMD Hospital Division largely relied on business associated with non-governmental payers to generate operating income. Payments under negotiated payer agreements were based upon pre-determined payment formulas that may be based upon the actual cost of providing services, predetermined rates per diagnosis, fixed per diem rates or discounts from gross revenue. These payment formulas varied significantly among third-party payers and directly affected net patient service revenue.

USMD CTC Division primarily earns revenue through the provision of broad-based management and clinical (physics) services to cancer treatment centers. In addition, USMD CTC Division recognizes revenue that represents payment for certain operating expenses such as operations and revenue cycle staffing. Billings for these services are included in management services revenue.

112

USMD Lithotripsy Division primarily generates revenue through the provision of lithotripsy services to hospitals in nine states by its consolidated entities. USMD typically provides these lithotripsy services to its hospital, ambulatory surgery center and physician office clients based on contracted fee-for-service arrangements. USMD Lithotripsy Division also recognizes revenue that represents payment for certain operating expenses such as operations staffing and revenue cycle staffing and accounting services.

Key Developments

•

Effective March 1, 2010, THR purchased a 26% limited partnership interest in USMD Arlington Hospital from limited partners other than USMD, bringing its partnership interest to 51%. In addition, THR purchased an initial 51% limited partnership interest in USMD Fort Worth Hospital from partners other than USMD. USMD’s partnership interests in both hospitals were unchanged.

•

As a result of THR’s increased ownership in USMD Arlington Hospital and USMD Fort Worth Hospital, these hospitals began to utilize managed care contracts negotiated by THR with a phase-in period from April 2010 to June 2010. The new managed care contracts yield substantially higher reimbursement rates for patient services, resulting in higher net patient service revenue for both hospitals and favorably impacts associated USMD Hospital Division management fee revenue.

•

During late 2009 and 2010, USMD CTC Division began managing three new cancer treatment centers, two of which also utilize staffing services provided by USMD.

•

On August 19, 2010, Holdings, USMD, Ventures and UANT entered into the Original Contribution Agreement pursuant to which the entities agreed to combine their separate businesses into a single integrated health services company. It was originally contemplated that, immediately prior to the Contribution, a subsidiary of Ventures would merge with and into UANT, with UANT surviving as a wholly-owned subsidiary of Ventures, and certain of the USMD shareholders would contribute all or a portion of their shares of USMD common stock to Ventures in exchange for partnership interests in Ventures. Then, upon the closing of the Contribution, Ventures would contribute its assets, which would include its equity interests in USMD and UANT, and the remaining USMD shareholders would contribute their USMD shares, to Holdings in exchange for shares of Holdings common stock. The Original Contribution Agreement was approved by the USMD shareholders and Ventures partners on August 23, 2011.

•

On December 1, 2011, Ventures and Holdings entered into a merger agreement with MCNT and on December 15, 2011, Ventures and Holdings entered into a merger agreement with Impel. Pursuant to these merger agreements, immediately prior to the closing of the Contribution, subsidiaries of Ventures will merge with and into each of MCNT and Impel, with MCNT and Impel surviving as wholly-owned subsidiaries of Ventures.

•

As a result of these merger agreements, on February 9, 2012, Holdings, USMD, UANT and Ventures executed the Amendment to reflect, among other changes, that Ventures will contribute to Holdings, in addition to its equity interests in USMD and UANT, its equity interests in MCNT and Impel as part of the Contribution.

•

In connection with the Contribution, a valuation of the business units and ownership interests held by USMD, UANT, Ventures, MCNT and Impel was conducted as of December 31, 2010. This valuation indicated that the fair value of USMD’s investments in USMD Arlington Hospital and USMD Fort Worth Hospital had declined from the values established at March 1, 2010, the date of the deconsolidation. There were no prior indicators of impairment. The decline in the hospital partnerships’ fair values resulted from revisions in estimates relating to patient volumes, managed care reimbursement rates and the estimated discount factors. The managed care reimbursement rates USMD originally used to estimate the fair value of the hospitals were adjusted based on the actual managed care payment history, which became available to USMD in the fourth quarter of 2010. As a result of the change in estimates, the fair values of USMD Arlington Hospital and USMD Fort Worth Hospital were adjusted downward to reflect the impact of actual reimbursement rates and patient volume trends,

113

which were offset in part by a reduction in the discount factors from 16% to 15% at USMD Arlington Hospital and from 17% to 15% at USMD Fort Worth Hospital. As a result of the revised valuations, USMD recorded a $4.6 million impairment charge in the fourth quarter of 2010.

•

Effective September 30, 2011, Willowbrook Cancer Center, L.L.C. (“Willowbrook”), a nonconsolidated investee of USMD, sold its operating assets (excluding cash and accounts receivable) to a third party for approximately $3.9 million. As part of the same transaction, the third party paid a $3.7 million fee to USMD CTC Division to terminate the management agreement and Facility Development and Management Agreement between Willowbrook and USMD CTC Division. The termination fee was recorded in other operating revenue.

•

In connection with the Contribution, USMD conducted a valuation of its business units as of December 31, 2011. The valuation indicated that the fair market value of its investment in USMD Arlington Hospital had declined from the values established at December 31, 2010, the date of the previous valuation. There were no prior material indicators of impairment. The decline in USMD Arlington Hospital’s fair value resulted from a reduction in estimated patient volumes, particularly high acuity patients. Discount rates used in the 2011 valuations did not change from the 2010 valuations. At December 31, 2011, USMD recorded an impairment charge of $0.7 million to record its investment in USMD Arlington Hospital at its estimated fair value.

Key Drivers and Challenges

•

Given the current contracted managed care reimbursement rates at USMD Arlington Hospital and USMD Fort Worth Hospital, USMD believes the management fee revenue it receives is sufficient to fund its working capital and routine capital expenditure requirements with cash flow from operations. However, USMD may seek additional financing in order to fund its operations and business strategy and to refinance certain of its existing credit facilities. USMD’s debt capacity is currently constrained by its ability to service additional debt, the tight credit markets and limitations on indebtedness contained in its existing credit facility. See further discussion in the “Liquidity and Capital Resources” section of the USMD MD&A.

•

As the ongoing economic climate has increased the number of underinsured patients, and as the prevalence of high deductible insurance plans has increased, USMD anticipates that a higher percentage of revenues of USMD Arlington Hospital and USMD Fort Worth Hospital will be comprised of the patients’ share of cost. This shift in payer mix may have an unfavorable impact on hospital collection rates, which could have an unfavorable impact on USMD’s revenue-based management fees.

114

Results of Operations

The following table summarizes USMD’s results of operations for the periods indicated and is the basis for the discussions that follow (in thousands):


	Years Ended December 31,
	2011						2010
	Amount			Ratio			Amount			Ratio
Revenues:
Management services revenue	$	23,211			47.5	%	$	19,795			35.3	%
Net patient service revenue		—			0.0	%		14,896			26.6	%
Lithotripsy revenue		21,975			45.0	%		20,845			37.2	%
Other operating revenue		3,690			7.5	%		497			0.9	%

Net operating revenue		48,876			100.0	%		56,033			100.0	%

Operating expenses:
Salaries, wages and employee benefits		20,208			41.3	%		21,546			38.5	%
Medical supplies and services expense		376			0.8	%		5,072			9.1	%
Provision for doubtful accounts		35			0.1	%		1,760			3.1	%
Other operating expenses		8,660			17.7	%		8,778			15.7	%
Depreciation and amortization		916			1.9	%		1,943			3.5	%
Goodwill impairment		—			0.0	%		690			1.2	%

		30,195			61.8	%		39,789			71.0	%

Income from operations		18,681			38.2	%		16,244			29.0	%
Other income (expense), net		111			0.2	%		7,193			12.8	%

Income before provision for income taxes		18,792			38.4	%		23,437			41.8	%
Provision for income taxes		(2,838	)		-5.8	%		(4,449	)		-7.9	%

Net income		15,954			32.6	%		18,988			33.9	%
Less: net income attributable to noncontrolling interests		(13,296	)		-27.2	%		(11,563	)		-20.6	%

Net income attributable to USMD	$	2,658			5.4	%	$	7,425			13.3	%

115


	Annual Variance
	2011 vs. 2010
Revenues:
Management services revenue	$	3,416		17.3	%
Net patient service revenue		(14,896	)	-100.0	%
Lithotripsy revenue		1,130		5.4	%
Other operating revenue		3,193		642.5	%

Net operating revenue		(7,157	)	-12.8	%

Operating expenses:
Salaries, wages and employee benefits		(1,338	)	-6.2	%
Medical supplies and services expense		(4,696	)	-92.6	%
Provision for doubtful accounts		(1,725	)	-98.0	%
Other operating expenses		(118	)	-1.3	%
Depreciation and amortization		(1,027	)	-52.9	%
Goodwill impairment		(690	)	100.0	%

		(9,594	)	-24.1	%

Income from operations		2,437		15.0	%
Other income (expense), net		(7,082	)	-98.5	%

Income before provision for income taxes		(4,645	)	-19.8	%
Provision for income taxes		1,611		-36.2	%

Net income		(3,034	)	-16.0	%
Less: net income attributable to noncontrolling interests		(1,733	)	15.0	%

Net income attributable to USMD	$	(4,767	)	-64.2	%

Year ended December 31, 2011 Compared to Year Ended December 31, 2010

Effects of Deconsolidation of the Hospital Partnerships

As a result of the March 1, 2010 deconsolidation of USMD Arlington Hospital and USMD Fort Worth Hospital, due to considerable changes in the nature of the results and amounts that are included or not included in the consolidated results of operations, subsequent to deconsolidation, the historical results of operations and cash flows of USMD have limited comparability to prior periods that include consolidated hospital activity. Effective March 1, 2010, all results of USMD Arlington Hospital and USMD Fort Worth Hospital, including net patient service revenue and associated operating expenses, are no longer consolidated, and conversely, management services revenue earned from USMD Arlington Hospital and USMD Fort Worth Hospital that had previously been eliminated in consolidation is now included in USMD’s consolidated results of operations and cash flows. Following the historical presentations of USMD MD&A, USMD has presented supplementary pro forma USMD MD&A including deconsolidated pro forma results of operations and cash flows for the periods presented.

Revenues

Net operating revenue decreased 12.8% to $48.9 million for the year ended December 31, 2011, as compared to 2010, due primarily to reductions in net patient service revenue related to deconsolidation of USMD Arlington Hospital and USMD Fort Worth Hospital, offset by a $3.7 million gain on the early termination of USMD’s management contract by Willowbrook and increases in management services revenue and lithotripsy revenue.

Management services revenue includes revenue earned through the provision of management and operational staffing services to USMD’s managed entities. Management services revenue increased $3.4 million, or 17.3%, to $23.2 million for the year ended December 31, 2011, as compared to 2010, due to increases of $1.8

116

million in management services revenue from hospitals that had previously been eliminated in consolidation as well as $0.7 million at USMD Hospital Division related to the favorable impact of the THR managed care contracts, which became effective during the second quarter of 2010. USMD CTC Division management services revenue increased $0.3 million as a result of two new cancer treatment centers under contract in 2010. USMD is actively pursuing domestic and international investments and management contracts with radiation treatment centers.

Lithotripsy revenue consists of revenue of the consolidated lithotripsy entities, which increased 5.4%, or $1.1 million, to $22.0 million for the year ended December 31, 2011, from $20.9 million in 2010. Approximately $0.3 million of the increase was related to deconsolidation of USMD Arlington Hospital and USMD Fort Worth Hospital, which resulted in the activity of one lithotripsy entity that had been previously eliminated in consolidation being included in the consolidated results of operations. Excluding this newly consolidated entity, revenue of consolidated lithotripsy entities increased 4.2%, or $0.8 million, while case counts increased 5.5% as compared to the same period in 2010.

Other operating revenue includes the $3.7 million gain on the early termination of USMD CTC Division’s management contract by Willowbrook and is offset by a decrease of $0.4 million in other hospital revenue and miscellaneous revenue due to the deconsolidation of USMD Arlington Hospital and USMD Fort Worth Hospital. As of December 31, 2011, Willowbrook was in the process of collecting all outstanding receivables, winding up its business and dissolving. Pursuant to these events, USMD CTC Division no longer manages the operations of Willowbrook, and Willowbrook has ceased operations.

Operating Expenses

Salaries, wages and employee benefits as a percentage of revenue increased to 41.3% for the year ended December 31, 2011, from 38.5% in 2010, primarily due to the deconsolidation of USMD Arlington Hospital and USMD Fort Worth Hospital. Because the hospital management fee expense encompasses hospital back-office and management compensation costs, the deconsolidated hospital salaries, wages and benefits had a lower cost as a percentage of revenue than USMD’s remaining consolidated entities. Excluding other operating revenue from the gain on the termination of the Willowbrook management agreement, salaries, wages and employee benefits as a percentage of revenue increased to 44.7% from 38.5%. The $3.2 million decline due to the deconsolidation was offset by $0.3 million increases in certain 2011 variable bonuses accrued, staffing expense increases due to the two new cancer treatment centers that are staffed by USMD and the expansion of centralized financial reporting staff and other departments at the corporate offices.

Medical supplies and services expense decreased $4.7 million, primarily due to the deconsolidation of USMD Arlington Hospital and USMD Fort Worth Hospital.

Due primarily to the deconsolidation of USMD Arlington Hospital and USMD Fort Worth Hospital, the provision for doubtful accounts decreased $1.7 million for the year ended December 31, 2011, as compared to 2010. USMD’s divisions generally do not experience material bad debts.

Depreciation and amortization decreased $1.0 million primarily due to the deconsolidation of USMD Arlington Hospital and USMD Fort Worth Hospital.

Other operating expenses consist primarily of professional fees, rent and lease expenses, facilities expense, travel expense and other expense. Other operating expenses were flat for the year ended December 31, 2011, as compared to 2010, primarily due to the deconsolidation of USMD Arlington Hospital and USMD Fort Worth Hospital, offset by a $1.5 million increase in professional fees due to legal, audit and consulting costs associated with the Contribution and filing of the Registration Statement on Form S-4 and amendments thereto. In addition, travel expense increased $0.2 million and collection fees and other expenses increased $0.1 million each.

117

Other Income (Expense)

Other income decreased $7.1 million to $0.1 million for the year ended December 31, 2011, from $7.2 million in 2010. The variance primarily relates to fair value adjustments made in 2011 and 2010, which USMD explains under “Key Developments” in the “Executive Overview” section of USMD MD&A. In March 2010, USMD recorded a $12.4 million gain on the deconsolidation of USMD Arlington Hospital and USMD Fort Worth Hospital. The deconsolidation gain represented an adjustment of the investment in USMD Arlington Hospital and USMD Fort Worth Hospital to estimated fair market value at March 1, 2010. During the fourth quarter of 2010, USMD recorded a pretax charge of approximately $4.6 million to reduce the carrying value of USMD’s investments in USMD Arlington Hospital and USMD Fort Worth Hospital by $1.5 million and $3.1 million, respectively. At that time, hospital operations had improved substantially subsequent to the assignment of THR-managed care contracts to the hospitals beginning April 2010; however, the hospitals had not achieved the reimbursement rates estimated at the date of the hospital deconsolidation when investments in those hospitals were recorded at estimated fair value, resulting in the impairment. In connection with the Amendment, USMD conducted a valuation of its business units and partnership interests as of December 31, 2011, which valuation indicated that the fair value of USMD’s investment in USMD Arlington had declined $0.7 million from its carrying value. Prior to this, the Company had considered indicators of impairment, but believed variances in results would not materially reduce the valuation. The majority of the decline occurred in the last half of the year due to the retirement of a neurosurgeon in the fourth quarter. The valuation primarily relied on an income approach – discounted cash flow analysis and included assumptions for discount rates, cash flow projections, growth rates and terminal values. The decline in USMD Arlington Hospital’s fair value resulted from a reduction in estimated patient volumes, particularly high acuity patients. There was no change in the discount rate used in the valuation as compared to the valuation conducted as of December 31, 2010. USMD does not expect future impairments unless hospital payer mix and/or case mix changes negatively.

In addition, equity in income of nonconsolidated affiliates increased $0.3 million, including $0.7 million for the deconsolidated hospital partnerships offset by a $0.4 million reduction at a cancer treatment center that was sold and a $0.2 million loss in equity in income of nonconsolidated affiliates at the Company’s new Monterrey Mexico cancer treatment center that was incurring start-up costs prior to opening for patient visits. Interest expense, net decreased $1.2 million primarily due to deconsolidated partnership activity.

The income tax provision decreased $1.6 million to $2.8 million for the year ended December 31, 2011, from $4.4 million in 2010. The effective income tax rates were 15.1% and 19.0% for the year ended December 31, 2011 and 2010 respectively. USMD’s effective tax rates were 39.9% and 36.3% for the year ended December 31, 2011 and 2010, respectively, excluding the effect of net income attributable to noncontrolling interests. The decrease in the effective rate is primarily due to the impact of net income attributable to noncontrolling interest.

Net income attributable to noncontrolling interests increased $1.7 million to $13.3 million for year ended December 31, 2011, from $11.6 million for in 2010, primarily related to losses at the hospitals prior to the March 2010 deconsolidation and a $0.7 million increase in 2011 related to lithotripsy partnership interests.

118

Supplemental Pro Forma Results of Operations

In order to facilitate meaningful comparisons of the periods presented, USMD has presented pro forma results of operations for the years ended December 31, 2011 and 2010, as if USMD Arlington Hospital and USMD Fort Worth Hospital were deconsolidated effective December 31, 2009. The following table summarizes USMD’s pro forma results of operations and is the basis for the discussions that follow (in thousands):


	Years Ended December 31,
	2011						2010
	Amount			Ratio			Amount			Ratio
	(unaudited)
	(deconsolidation pro forma)
Revenues:
Management services revenue	$	23,211			47.5	%	$	21,616			50.6	%
Lithotripsy revenue		21,975			45.0	%		21,118			49.4	%
Other operating revenue		3,690			7.5	%		—			0.0	%

Net operating revenue		48,876			100.0	%		42,734			100.0	%

Operating expenses:
Salaries, wages and employee benefits		20,208			41.3	%		18,340			42.9	%
Medical supplies and services expense		376			0.8	%		435			1.0	%
Provision for doubtful accounts		35			0.1	%		7			0.0	%
Other operating expenses		8,660			17.7	%		5,912			13.8	%
Depreciation and amortization		916			1.9	%		1,165			2.7	%
Goodwill impairment		—			0.0	%		690			1.6	%

		30,195			61.8	%		26,549			62.1	%

Income from operations		18,681			38.2	%		16,185			37.9	%
Other income (expense)		111			0.2	%		(4,084	)		-9.6	%

Income before provision for income taxes		18,792			38.4	%		12,101			28.3	%
Provision for income taxes		(2,838	)		-5.8	%		(100	)		-0.2	%

Net income		15,954			32.6	%		12,001			28.1	%
Less: net income attributable to noncontrolling interests		(13,296	)		-27.2	%		(12,580	)		-29.4	%

Net income (loss) attributable to USMD	$	2,658			5.4	%	$	(579	)		-1.4	%

119


	Annual Variance
	2011 vs. 2010
Revenues:
Management services revenue	$	1,595		7.4	%
Lithotripsy revenue		857		4.1	%
Other operating revenue		3,690		100.0	%

Net operating revenue		6,142		14.4	%

Operating expenses:
Salaries, wages and employee benefits		1,868		10.2	%
Medical supplies and services expense		(59	)	-13.6	%
Provision for doubtful accounts		28		400.0	%
Other operating expenses		2,748		46.5	%
Depreciation and amortization		(249	)	-21.4	%
Goodwill impairment		(690	)	100.0	%

		3,646		13.7	%

Income from operations		2,496		15.4	%
Other income (expense)		4,195		-102.7	%

Income before provision for income taxes		6,691		55.3	%
Provision for income taxes		(2,738	)	2738.0	%

Net income		3,953		32.9	%
Less: net income attributable to noncontrolling interests		(716	)	5.7	%

Net income (loss) attributable to USMD	$	3,237		-559.1	%

Pro Forma Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Pro Forma Revenues

Net operating revenue increased $6.1 million, or 14.4%, for the year ended December 31, 2011, as compared to 2010, due primarily to income from termination of a management agreement at USMD CTC Division and increases in management services revenue and lithotripsy revenue.

Management services revenue increased $1.6 million or 7.4% to $23.2 million for the year ended December 31, 2011, from $21.6 million in 2010 due to increases of $1.2 million, $0.3 million and $0.1 million at USMD Hospital Division, USMD CTC Division and USMD Lithotripsy Division, respectively. The 7.4% increase in management services revenue at USMD Hospital Division was due to higher net patient service revenue at the hospitals due primarily to the mid-2010 assignment of THR managed care contracts. The 3.6% increase in USMD CTC Division management services revenue in 2011 is primarily the result of two cancer treatment centers under contract in 2010, offset by the termination of management services at one cancer treatment center in April 2011.

Lithotripsy revenue increased 4.1%, or $0.9 million, to $22.0 million for the year ended December 31, 2011, from $21.1 million for the same period in 2010 while case counts increased 5.5% as compared to the same period in 2010.

For the year ended December 31, 2011, USMD CTC Division recorded other operating income of $3.7 million related to the early termination of USMD CTC’s management agreement with Willowbrook. As of December 31, 2011, Willowbrook was in the process of collecting all outstanding receivables, winding up its business and dissolving. Pursuant to these events, USMD CTC Division no longer manages the operations of Willowbrook, and Willowbrook has ceased operations.

120

Pro Forma Operating Expenses

The 2011 other operating revenue reduced salaries, wages and employee benefits as a percentage of revenue. Excluding the USMD CTC Division, other operating revenue of $3.7 million, which did not have significant associated personnel costs, salaries, wages and employee benefits as a percentage of revenue, increased to 44.7%, from 42.9%. Salaries, wages and employee benefits, including bonus expense, have increased significantly at the corporate level as USMD builds its corporate personnel infrastructure. Offsetting these increases, stock compensation expense decreased $0.2 million. Effective September 1, 2011, the Company granted a newly hired executive options to purchase 1,050,000 shares of the Company’s common stock at an exercise price of $3.00. For the year ended December 31, 2011, USMD recorded $0.6 million in stock compensation expense related to this grant. USMD expects to incur $0.3 million of stock compensation expense for each of the three succeeding years related to this grant.

Other operating expenses consist primarily of professional fees, rent and lease expenses, facilities expense, travel expense and other expense. Other operating expenses increased $2.7 million to $8.7 million for the year ended December 31, 2011, from $5.9 million in 2010, primarily due to a $2.3 million increase in professional fees and other costs associated with the Contribution, the filing of the Holdings Registration Statement on Form S-4 and audit and other costs of being a public company. In addition, travel expense increased $0.2 million and certain operational costs increased $0.2 million.

Depreciation and amortization decreased $0.2 million to $0.9 million for the year ended December 31, 2011, from $1.1 million in 2010, due primarily to computer hardware and capitalized software assets that became fully depreciated in 2011. Depreciation is expected to increase slightly in 2012 due to the late December acquisition of $1.3 million of equipment by three consolidated lithotripsy partnerships.

Pro Forma Other Income (Expense)

Other income was $0.1 million for the year ended December 31, 2011, compared to other expense of $4.1 million in 2010. The variance primarily relates to a $4.1 million reduction in impairment charges in 2011, as compared to 2010 and an increase in equity in income of nonconsolidated affiliates.

USMD further explains impairment charges under “Key Developments” in the “Executive Overview” section of USMD MD&A. During the fourth quarter of 2010, USMD recorded a pretax charge of approximately $4.6 million to reduce the carrying value of USMD’s investments in USMD Arlington Hospital and USMD Fort Worth Hospital by $1.5 million and $3.1 million, respectively. At that time, hospital operations had improved substantially subsequent to assignment of THR-managed care contracts to the hospitals beginning April 2010; however, the hospitals had not achieved the reimbursement rates estimated at the date of the hospital deconsolidation when investments in those hospitals were recorded at estimated fair value, resulting in the impairment. In connection with the Amendment, USMD conducted a valuation of its business units and partnership interests as of December 31, 2011, which indicated that the fair value of USMD’s investment in USMD Arlington Hospital had declined by $0.7 million from its carrying value. Prior to this, the Company had considered indicators of impairment but believed variances in results would not materially reduce the valuation. The majority of the decline occurred in the last half of the year due to the retirement of a neurosurgeon in the fourth quarter. The valuation primarily relied on an income approach – discounted cash flow analysis and included assumptions for discount rates, cash flow projections, growth rates and terminal values. The decline in USMD Arlington Hospital’s fair value resulted from a reduction in estimated patient volumes, particularly high acuity patients. There was no change in the discount rate used in the valuation as compared to the valuation conducted as of December 31, 2010. USMD does not expect future impairments unless hospital payer mix and/or case mix changes negatively.

Equity in income of nonconsolidated affiliates increased $0.4 million, including $0.9 million from the deconsolidated hospital partnerships offset by a $0.4 million reduction at Willowbrook and a $0.2 million loss in equity in income of nonconsolidated affiliates at USMD’s new Monterrey, Mexico cancer treatment center that was incurring start-up costs prior to opening for patient visits.

121

USMD’s pro forma effective tax rates were 39.9% and 37.2% for the year ended December 31, 2011 and 2010, respectively, excluding the effect of net income attributable to noncontrolling interests.

Net income attributable to noncontrolling interests increased $0.7 million to $13.3 million for the year ended December 31, 2011, from $12.6 million in 2010, primarily related to a year over year increase in consolidated lithotripsy entity net income.

Liquidity and Capital Resources

The following table summarizes USMD’s cash flows for the periods indicated and is the basis for the discussions that follow (in thousands):


	Years Ended December 31,
	2011			2010
Cash flows from operating activities:
Net income	$	15,954		$	18,988
Net income to net cash reconciliation adjustments		1,578			(528	)
Change in operating assets and liabilities		577			1,761

Net cash provided by operating activities		18,109			20,221

Cash flows from investing activities:
Capital expenditures		(395	)		(68	)
Proceeds from sale of assets		86			—
Investments in nonconsolidated affiliates		(340	)		(260	)
Decrease in cash due to deconsolidation of subsidiaries		—			(4,790	)

Net cash used in investing activities		(649	)		(5,118	)

Cash flows from financing activities:
Repayments of long-term debt and capital lease obligations		(492	)		(2,949	)
Repayments of related party long-term debt		(429	)		(436	)
Distributions to noncontrolling interests, net of proceeds		(13,194	)		(12,231	)

Net cash used in financing activities		(14,115	)		(15,616	)

Net increase (decrease) in cash and cash equivalents		3,345			(513	)
Cash and cash equivalents at beginning of year		7,477			7,990

Cash and cash equivalents at end of year	$	10,822		$	7,477

122


	Annual Variance
	2011 vs. 2010
Cash flows from operating activities:
Net income	$	(3,034	)
Net income to net cash reconciliation adjustments		2,106
Change in operating assets and liabilities		(1,184	)

Net cash provided by operating activities		(2,112	)

Cash flows from investing activities:
Capital expenditures		(327	)
Proceeds from sale of assets		86
Investments in nonconsolidated affiliates		(80	)
Decrease in cash due to deconsolidation of subsidiaries		4,790

Net cash used in investing activities		4,469

Cash flows from financing activities:
Repayments of long-term debt and capital lease obligations		2,457
Repayments of related party long-term debt		7
Distributions to noncontrolling interests, net of proceeds		(963	)

Net cash used in financing activities	$	1,501

Year ended December 31, 2011 Compared to Year Ended December 31, 2010

Net cash provided by operating activities decreased $2.1 million for the year ended December 31, 2011, as compared to 2010, primarily due to a $1.1 million decrease in cash flow from working capital accounts combined with a $1.0 million decrease in net income after net income to net cash reconciliation adjustments.

Net cash used in investing activities decreased $4.5 million due primarily to deconsolidation of USMD Arlington Hospital and USMD Fort Worth Hospital offset primarily by a $0.3 million increase in capital expenditures. USMD expects to make capital investments of $1.6 million in 2012, primarily attributable to the replacement of lithotripters at its consolidated lithotripsy entities. The entities generally finance the acquisition of lithotripsy equipment.

Net cash used in financing activities decreased $1.5 million due to reductions in repayments of long-term debt offset by noncontrolling interest activity. Of the $2.5 million reduction in debt repayments, $0.4 million was attributable to payments made by USMD Fort Worth Hospital prior to the hospital deconsolidation. In addition, USMD paid off certain corporate debt obligations in 2010, resulting in a $2.1 million reduction in cash used for debt repayments in 2011. Cash flow from activity with noncontrolling interests decreased in 2011 as contributions decreased and distributions increased.

Capital Resources and Debt Obligations

USMD expects to continue to fund operations and meet principal and interest payment obligations utilizing cash flows from operations. Routine distributions from both managed hospitals serve as a critical source of cash flows for USMD. USMD Fort Worth Hospital made its first distribution in the third quarter of 2011. Hospital managed care contracted reimbursement rates that went into effect in mid-2010 have improved managed hospital profitability and may permit continued future routine distributions from USMD Arlington Hospital and USMD Fort Worth Hospital, subject to credit facility restrictions. USMD plans to secure equity financing, mezzanine financing and/or debt financing for acquisitions and potential restructuring of existing credit facilities. Part of USMD’s overall business strategy is to make strategic acquisitions of complementary healthcare facilities and physician practice groups and USMD may rely heavily on financing in order to fulfill this strategy. To the extent

123

USMD is unable to secure the necessary acquisition financing, it may be hampered or delayed in its ability to acquire such entities and, thus, may be unable to fulfill timely its acquisition strategy. On January 10, 2011, USMD executed a $1.0 million working capital line of credit with JPMorgan Chase Bank, N.A. that accrued interest at the Chase Bank Floating Rate plus one percent and matured on July 1, 2011. USMD did not draw any funds on this line of credit and chose not to renew the line of credit at maturity.

USMD believes it has reached its corporate debt capacity. No significant additional debt funding is available under existing corporate credit facilities and notes payable; however, USMD believes that demonstrated and sustained increases in profitability and cash reserves will permit lenders to extend credit in the future. Lithotripsy entities have demonstrated the ability to obtain financing to fund equipment purchases. The following table illustrates the components of USMD’s debt structure (in thousands):


	December 31,
	2011			2010
USMD Inc.
Subordinated notes payable	$	731		$	731
USMD Lithotripsy Division subordinated notes payable		7,258			7,687

		7,989			8,418
Consolidated lithotripsy entities
Notes payable		155			386
Capital lease obligations		1,060			1,321

		1,215			1,707

Total long-term debt and capital lease obligations		9,204			10,125
Less: current portion		(1,594	)		(892	)

Long-term debt and capital lease obligations, less current portion	$	7,610		$	9,233

The lithotripsy entities’ notes payable have certain debt covenant requirements. Events beyond the entities’ control can affect their ability to meet covenant requirements and a breach of any of these covenants could result in a default of the note(s) payable. Upon the occurrence of an event of default, amounts outstanding under those notes payable may become due and payable. As of December 31, 2011, the lithotripsy entities were in compliance with their contractually required debt covenants.

124

Supplemental Pro Forma Liquidity and Capital Resources

In order to facilitate meaningful comparisons of the periods presented, USMD has presented pro forma cash flows for the years ended December 31, 2011 and 2010 as if the hospitals were deconsolidated effective December 31, 2009. The following table summarizes USMD’s pro forma cash flows for the periods indicated and is the basis for the discussions that follow (in thousands):


	Years Ended December 31,
	2011			2010
	(unaudited)
	(deconsolidation pro forma)
Cash flows from operating activities:
Net income	$	15,954		$	12,001
Net income to net cash reconciliation adjustments		1,578			4,591
Change in operating assets and liabilities		577			2,546

Net cash provided by operating activities		18,109			19,138

Cash flows from investing activities:
Capital expenditures		(395	)		(75	)
Proceeds from sale of assets		86			—
Investments in nonconsolidated affiliates		(340	)		(260	)

Net cash used in investing activities		(649	)		(335	)

Cash flows from financing activities:
Repayments of long-term debt and capital lease obligations		(492	)		(2,545	)
Repayments of related party long-term debt		(429	)		(435	)
Distributions to noncontrolling interests, net of proceeds		(13,194	)		(12,295	)

Net cash used in financing activities		(14,115	)		(15,275	)

Net increase in cash and cash equivalents		3,345			3,528
Cash and cash equivalents at beginning of year		7,477			3,949

Cash and cash equivalents at end of year	$	10,822		$	7,477


	Annual Variance
	2011 vs. 2010
Cash flows from operating activities:
Net income	$	3,953
Net income to net cash reconciliation adjustments		(3,013	)
Change in operating assets and liabilities		(1,969	)

Net cash provided by operating activities		(1,029	)

Cash flows from investing activities:
Capital expenditures		(320	)
Proceeds from sale of assets		86
Investments in nonconsolidated affiliates		(80	)

Net cash used in investing activities		(314	)

Cash flows from financing activities:
Repayments of long-term debt and capital lease obligations		2,053
Repayments of related party long-term debt		6
Distributions to noncontrolling interests, net of proceeds		(899	)

Net cash used in financing activities	$	1,160

125

Pro Forma Year Ended December 31, 2011 Compared to Pro Forma Year Ended December 31, 2010

Net cash provided by operating activities decreased $1.0 million for the year ended December 31, 2011, as compared to 2010, primarily due to a $1.9 million decrease in cash flow from working capital accounts, offset by a $0.8 million increase in net income after net income to net cash reconciliation adjustments.

Net cash used in investing activities increased $0.3 million for the year ended December 31, 2011, as compared to 2010, primarily due to a $0.3 million increase in capital expenditures. USMD expects to make capital investments of $1.6 million in 2012, primarily attributable to the replacement of lithotripters at the consolidated lithotripsy entities. The entities generally finance the acquisition of lithotripsy equipment. No significant investment in IT-related capital expenditures is planned for 2012.

The $1.2 million decrease in net cash used in financing activities for the year ended December 31, 2011, as compared to the same period in 2010, is due to a $2.1 million decrease in debt repayments offset by a $0.9 million increase in lithotripsy entity distributions. USMD accelerated the repayment of certain debt obligations in 2010, resulting in a reduction in debt and cash used for debt repayments in 2011. The increase in distributions to lithotripsy entities was due to increased profitability at those entities.

Off-Balance Sheet Arrangements

As of December 31, 2011, USMD had issued guarantees to third parties of the indebtedness and other obligations of certain of its nonconsolidated investees. Should the investees fail to pay the obligations due, USMD could potentially be required to make maximum aggregate payments totaling $4.5 million. The guarantees provide for recourse against the investee; however, if USMD is required to perform under one or more guarantees, recovery of any amount would be unlikely. The remaining terms of these guarantees range from seven to 38 months. USMD records a liability for performance under financial guarantees, when, upon review of available financial information of the nonconsolidated affiliate, and in consideration of pertinent factors, management determines it is probable that USMD will have to perform under the guarantee and the liability is reasonably estimable. USMD has not recorded a liability for these guarantees, as USMD believes the likelihood that it will have to perform under these agreements is remote.

As of December 31, 2011, USMD did not have any retained or contingent interests in assets transferred to an unconsolidated entity or similar entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets.

As of December 31, 2011, USMD did not have any derivative instruments in accordance with Accounting Standards Codification Topic 815, Derivatives and Hedging.

As part of its ongoing business, USMD does not participate in transactions that generate relationships with entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of December 31, 2011, USMD was not party to any unconsolidated special purpose entities transactions.

Critical Accounting Policies and Estimates

USMD’s consolidated financial statements have been prepared in accordance with GAAP. The preparation of USMD’s consolidated financial statements requires management to make judgments and estimates that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures. USMD bases its assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time its consolidated financial statements are prepared. On a regular basis, USMD reviews the accounting policies, assumptions, estimates and judgments to ensure that its financial statements are

126

presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from USMD’s assumptions and estimates, and such differences could be material.

USMD discusses its significant accounting policies in Note 2, Summary of Significant Accounting Policies, of its December 31, 2011 consolidated financial statements included elsewhere in this Prospectus. USMD believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating its reported financial results, and they require USMD’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. Where USMD’s management has provided sensitivity analyses in the ‘Effect if Actual Results Differ from Assumptions’ columns below, the variance assumptions used in those analyses are based on outcomes that USMD’s management considers reasonably likely to occur.

127


Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions

Goodwill

USMD evaluates goodwill for impairment annually on December 31 and whenever events or changes in circumstances indicate the carrying value of the goodwill may not be recoverable. USMD tests for goodwill impairment at the reporting unit level, which we have determined is at the operating segment level. The impairment evaluation involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair value exceeds carrying value, then it is concluded that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, a second step is required to measure possible goodwill impairment. The second step includes hypothetically valuing the tangible and intangible assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit’s goodwill is compared to the carrying value of that goodwill. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, USMD recognizes an impairment loss in an amount equal to the excess, not to exceed the carrying value. For the goodwill impairment analysis conducted in 2011, USMD concluded that there was no impairment. As a result of USMD’s 2010 annual goodwill impairment test, a non-cash impairment charge of $0.7 million was recorded related to the USMD Lithotripsy Division reporting unit.	In estimating the fair value of reporting units, USMD management makes estimates and judgments about future cash flows and market valuations using a combination of income, cost and market approaches, as appropriate. USMD primarily relies on an income approach, specifically a discounted cash flow analysis, which includes assumptions for, among others, discount rates, cash flow projections, growth rates and terminal value rates, all of which require significant judgment. These types of analyses contain uncertainties because they require management to make assumptions and to apply judgment to estimate industry economic factors and the profitability of future business strategies. It is USMD’s policy to conduct impairment testing based on its current business strategy in light of present industry and economic conditions, as well as USMD’s future expectations.	USMD has not made material changes in the accounting methodology it uses to assess goodwill impairment during the past three years. USMD does not believe there is reasonable likelihood of material change in future estimates or assumptions USMD uses to test for impairment of goodwill. However, if actual results are not consistent with its estimates or assumptions, USMD may be at risk of a potentially material impairment charge. The estimated fair values of the hospital and lithotripsy reporting units significantly exceeded their carrying value.

128


Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions

Impairment of Long-Lived Assets Other Than Goodwill

Long-lived assets other than goodwill, which is separately tested for impairment, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When evaluating long- lived assets for potential impairment, USMD first compares the carrying value of the asset to the asset’s estimated future cash flows (undiscounted and without interest charges). If the estimated future cash flows are less than the carrying value of the asset, USMD calculates an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset’s estimated fair value, which may be based on estimated future cash flows (discounted and with interest charges). USMD recognizes an impairment loss if the amount of the asset’s carrying value exceeds the asset’s estimated fair value. If USMD recognizes an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis will be depreciated over the remaining useful life of that asset.	USMD’s impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows. As further discussed in “Key Developments” in the “Executive Overview” section of the USMD MD&A, in the fourth quarter of 2011, USMD recorded a $0.7 million impairment of its investments in USMD Arlington Hospital.	USMD has not made any material changes in the accounting methodology USMD uses to assess goodwill impairment loss during the past three years. USMD does not believe there is a reasonable likelihood of a material change in the future estimates or assumptions USMD uses to calculate long-lived asset impairment losses. However, if actual results are not consistent with USMD’s estimates and assumptions used in estimating future cash flows and asset fair values, USMD may be exposed to losses that could be material. To evaluate the sensitivity of the fair value calculations of USMD’s investments in USMD Arlington Hospital, USMD applied a hypothetical 10% unfavorable change in the weighted average cost of capital, which if utilized, would have increased the impairment charge by $0.4 million. A 10% favorable change in the weighted average cost of capital would have decreased the impairment charge by $0.6 million. Independently, USMD evaluated the sensitivity of the USMD Arlington Hospital fair value calculations by applying a hypothetical 10% addition/reduction of estimated future cash flows, which if utilized, would have resulted in a decrease/ increase of the impairment charge by $0.4 million.

129


Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions

Stock-Based Compensation

USMD determines the estimated fair value of its stock-based awards to employees and directors at the date of grant using the Black-Scholes option pricing model.	Option pricing models require management to make assumptions and to apply judgment to determine the fair value of USMD’s awards. These assumptions and judgments include estimating the future volatility of its stock price, the expected life of the option and the risk free interest rate. Changes in these assumptions can materially affect the fair value estimate. As a recently formed, non-public entity with limited equity transaction history, it was not practicable for USMD to estimate the volatility of its share price; therefore, USMD estimated volatility based on the historical and implied volatilities of a small group of companies considered peers. USMD concluded that the peers’ businesses were more characteristic of its business than industry indexes. The expected life of awards granted represents the period of time that USMD expects them to be outstanding based on the “simplified” method, which is allowed for companies that cannot reasonably estimate expected life of options based on historical share option exercise experience. The risk free interest rate is based on the implied yield of U.S. Treasury zero-coupon securities that correspond to the expected life of the option.	If actual results are not consistent with the assumptions used, the stock-based compensation expense reported in USMD’s financial statements may not be representative of the actual economic cost of the stock-based compensation. A 10% increase in estimated volatility would have increased stock compensation expense by 8.5%.

Recent Accounting Pronouncements

For information regarding recently issued and adopted accounting pronouncements, see Note 2, Summary of Significant Accounting Policies, to the financial statements of USMD included elsewhere in this Prospectus.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

130

UANT’S AND VENTURES’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UANT’s and Ventures’ Management’s Discussion and Analysis of Financial Condition and Results of Operations (“UANT MD&A”) is an analysis of the financial condition and the results of operations of UANT, including the accounts of Ventures. The intent of UANT’s MD&A is to provide the reader of UANT’s financial statements with a narrative from the perspective of UANT’s management on the financial condition, results of operations and liquidity of UANT and Ventures, and certain other factors that may affect their future results. The UANT MD&A should be read in conjunction with UANT’s combined financial statements and related notes included in this Prospectus.

Executive Overview

UANT is a urological surgical physician practice group that operates 24 clinics in the Dallas/Fort Worth metropolitan area with 59 physicians and mid-level providers. UANT specializes in the diagnosis and medical and surgical therapy of various adult and pediatric urologic conditions including diseases of the kidney, bladder, prostate and male reproductive system. UANT provides diagnostic anatomical pathology and clinical laboratory services with labs located in Texas and Florida. In addition, UANT provides imaging services in four locations in the Dallas Fort Worth area.

The following table illustrates key operating metrics and subspecialty focus of UANT:


	December 31,
	2011		2010
Number of physicians		53		49
Number of mid-level providers		6		3
Number of sites		23		22
Number of new patient visits		39,305		37,929
Number of existing patient visits		147,209		142,884
Number of physicians in the Centers of Excellence:
Incontinence and neurourology		5		5
Oncology, robotics and special surgery		7		7
Pediatrics		3		3
Radiation oncology		1		1
Sexual dysfunction, infertility and men’s health		3		2
Uro-pathology		1		1

UANT holds investments in the form of limited partnership interests in two hospitals (USMD Arlington Hospital and USMD Fort Worth Hospital) and smaller investments in two additional hospital/surgery center joint ventures and three lithotripsy partnerships. During 2009, UANT developed a radiation therapy Center of Excellence specializing in the provision of intensity-modulated radiation therapy and stereotactic radiosurgery. The radiation therapy center is located on the USMD Arlington Hospital campus. In October 2010, UANT increased capacity at the radiation therapy center by adding a second linear accelerator vault to accommodate increased demand for these services.

131

Sources of Revenue and Third-Party Reimbursement

UANT generates revenue primarily by providing clinical, surgical, diagnostic and therapeutic services to patients with urologic conditions. The following table presents the percentages of gross patient revenues by payer category for the periods indicated:


	Years Ended December 31,
	2011			2010
Government-related programs		31	%		28	%
Managed care and commercial payers		67	%		70	%
Self-pay		2	%		2	%

		100	%		100	%

UANT is paid for its services by governmental agencies, commercial insurers and the patients it serves. Net patient services revenue includes amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems and provisions of cost-based reimbursement and other payment methods. In addition, nongovernmental payers reimburse UANT using a variety of payment methodologies. Amounts UANT receives for treatment of patients covered by these programs are generally less than the standard billing rates and UANT accounts for the differences between the estimated program reimbursement rates and the standard billing rates as contractual allowance adjustments, which it deducts from gross revenues to arrive at net patient services revenue. Final settlements under some of these programs are subject to adjustment based on administrative review and audit by third parties. UANT accounts for adjustments to previous program reimbursement estimates as contractual allowance adjustments and reports them in the periods that such adjustments become known; these adjustments are generally insignificant. Collections from uninsured and underinsured patients continue to be an industry-wide issue but UANT has mitigated this risk by instituting cash-pay-up-front policies.

In the future, UANT expects the percentage of revenues received from the Medicare program to increase due to population demographics and the increase in prostate cancer treatments, including radiation therapy services. Historically, UANT’s radiation therapy patient population generally has a higher mix of Medicare beneficiaries than the overall patient population. The payment rates under the Medicare program for inpatient acute services are based on a prospective payment system, depending upon the procedures and services performed. These rates are indexed for inflation annually, although the increases have historically been less than actual inflation. Reductions in Medicare reimbursement rates may affect UANT’s net patient services revenue in the future.

Key Developments

•

During 2009, UANT opened its cancer treatment center on the campus of USMD Arlington Hospital and the number of patients treated in the radiation treatment facility increased substantially.

•

Effective March 1, 2010, THR purchased a 26% limited partnership interest in USMD Arlington Hospital from Ventures and other limited partners, which brought THR’s total limited partnership interest in USMD Arlington Hospital to 51%. Effective on that same date, THR purchased a 51% limited partnership interest in USMD Fort Worth Hospital from Ventures and other limited partners. As a result of these purchases, Ventures partnership interest in USMD Arlington Hospital was reduced from 36.0% to 22.6% and its partnership interest in USMD Fort Worth Hospital was reduced from 30.0% to 10.9%.

•

132

reimbursement rates for patient services, resulting in higher net patient service revenue for both hospitals and positively impacting UANT’s equity in earnings from investments in partnerships.

•

In October 2010, UANT increased capacity of the cancer treatment center at USMD Arlington Hospital by adding a second linear accelerator vault to accommodate increased demand in radiation therapy services.

•

On August 19, 2010, Holdings, USMD, Ventures and UANT entered into the Original Contribution Agreement, pursuant to which the entities agreed to combine their separate businesses into a single integrated health services company. It was originally contemplated that, immediately prior to the Contribution, a subsidiary of Ventures would merge with and into UANT, with UANT surviving as a wholly-owned subsidiary of Ventures, and certain of the USMD shareholders would contribute all or a portion of their shares of USMD common stock to Ventures in exchange for partnership interests in Ventures. Then, upon the closing of the Contribution, Ventures would contribute all of its assets, which would include its equity interests in USMD and UANT, and the remaining USMD shareholders would contribute their USMD shares, to Holdings in exchange for shares of Holdings common stock. The Original Contribution Agreement was approved by the USMD shareholders and Ventures partners on August 23, 2011.

•

In 2011, UANT expanded its physician assistant (“PA”) program by increasing the number of PA’s from three to six. The partnership expects that this program will expand the current capacity of UANT physicians by allowing them to focus on more complicated procedures while the PA’s see the less complicated established patients.

•

During 2011, UANT entered into operating leases for new and expanded clinic space that significantly increased the total square footage rented by UANT. In addition, with each of these offices, UANT invested in significant leasehold improvements, furniture, fixtures and medical and office equipment to equip these offices and overall operations. The total amount of such capital expenditures in 2011 was $4.6 million.

133

Results of Operations

The following table summarizes UANT’s results of operations for the periods indicated and is the basis for the discussions that follow (in thousands):


	Years Ended December 31,
	2011						2010
	Amount			Ratio			Amount		Ratio
Net patient services revenue	$	55,541			100.0	%	$	50,129		100.0	%
Expenses:
Salaries and benefits		17,544			31.6	%		15,095		30.1	%
Incentive plan payments to partners		9,882			17.8	%		8,818		17.6	%
Medical supplies and services		3,886			7.0	%		3,171		6.3	%
Bad debt expense		1,280			2.3	%		1,214		2.4	%
Depreciation and amortization		3,524			6.3	%		2,888		5.8	%
Other		10,708			19.3	%		9,178		18.3	%

Total expenses		46,824			84.3	%		40,364		80.5	%

Operating income		8,717			15.7	%		9,765		19.5	%
Other income (expense):
Equity in earnings from investments in partnerships		5,721			10.3	%		4,569		9.1	%
Gain on disposal of assets		85			0.2	%		7,035		14.0	%
Other income (expense), net		1,091			2.0	%		878		1.8	%

		6,897			12.4	%		12,482		24.9	%

Net income	$	15,614			28.1	%	$	22,247		44.4	%


	Annual Variance
	2011 vs. 2010
Net patient services revenue	$	5,412			10.8	%
Expenses:
Salaries and benefits		2,449			16.2	%
Incentive plan payments to partners		1,064			12.1	%
Medical supplies and services		715			22.5	%
Bad debt expense		66			5.4	%
Depreciation		636			22.0	%
Other		1,530			16.7	%

Total expenses		6,460			16.0	%

Operating income		(1,048	)		-10.7	%
Other income (expense):
Equity in earnings from investments in partnerships		1,152			25.2	%
Gain on disposal of assets		(6,950	)		-98.8	%
Other income (expense), net		213			24.3	%

		(5,585	)		-44.7	%

Net income	$	(6,633	)		-29.8	%

134

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Net Patient Services Revenue

Net patient services revenue increased 10.8% to $55.5 million for the year ended December 31, 2011, from $50.1 million in 2010, primarily due to the continued growth in volume at UANT’s in-house radiation therapy Center of Excellence. Bringing these services in-house has allowed UANT’s physicians greater access to premium therapeutic equipment and personnel at the geographic center of UANT’s core practice area. In October 2010, UANT doubled capacity at the radiation therapy center by adding a second linear accelerator vault. In addition, UANT’s core medical practice increased total patient visits, new patient visits and charges per patient, which contributed to the increase in net patient services revenue.

Expenses

Salaries and benefits increased $2.4 million to $17.5 million for the year ended December 31, 2011, from $15.1 million in 2010, primarily due to the addition of the second linear accelerator vault at the radiation therapy center in October 2010. Other increases were due to recent additions of employed physicians in the later part of 2011 and the expansion of the PA program in late 2010 and early 2011 and included these salaries as well as an associated increase in staff to support these providers. The recent increase in employed providers also increases salaries as a percent of revenues, to 31.6% from 30.1%, since these providers are building their respective practices and because the associated increased revenue is not being generated by partners but by employed providers who have associated salary and benefits costs.

Incentive plan payments to partners represent payments to UANT partners made on a basis other than their respective ownership percentage. The partnership calculates the incentive plan pool based on a percentage of net income, as defined. Incentive plan payments to partners increased $1.1 million to $9.9 million for the year ended December 31, 2011 from $8.8 million in 2010. Effective October 2010, the percentage on which the incentive plan pool is calculated increased from 25% to 35%.

Medical supplies and services increased as a percentage of revenue to 7.0% for the year ended December 31, 2011 from 6.3% in 2010. The increase was primarily due to the higher utilization and unit costs of drugs, which drove up the total cost of drugs as a percentage of revenue in 2011, specifically the drug prescribed for the treatment of prostate cancer. Other causes for the increase were the additional outside medical service costs associated with research studies performed in early 2011 and the increase in the use of scribe services in early 2011. The scribe services provide real time transcription of the physician’s clinical notes in the electronic health record. The scribe program began in 2010 and as implementation continues, UANT expects associated costs will increase in early 2012 and level out in the latter part of 2012.

Bad debt expense as a percentage of revenue decreased to 2.3% in 2011 from 2.4% in 2010. Historical bad debt write-offs as a percentage of gross revenue, a primary component of bad debt expense, have decreased resulting in lower expense calculations for the year ended December 31, 2011 as compared to 2010. As the economy improved in 2011, UANT believes that patients were better able to pay for their portion of billed services.

Depreciation expense increased $0.6 million to $3.5 million for the year ended December 31, 2011, from $2.9 million in 2010, primarily due to radiation therapy center assets added in October 2010 and the 2011 tenant improvements, new equipment and furniture and fixtures purchased for the new office space.

Other operating expenses consist primarily of rent, computer and telecommunication expenses, insurance, marketing expenses, equipment maintenance and service contracts, professional fees and other expenses. Other operating expenses increased $1.5 million to $10.7 million for the year ended December 31, 2011, primarily due to costs associated with the growth of the cancer treatment center. This includes service contracts on the radiation therapy equipment that began after the first year of service, an increase in management fees commensurate with

135

the expansion of radiation therapy services, increases in marketing expenses to promote the cancer center and increased property taxes mostly due to the additional cancer center equipment. In addition, travel and meeting expenses increased related to the annual physician retreat and UANT has experienced a general increase in telecommunication and computer expenses.

Other income (expense)

Total other income, net decreased $5.6 million to $6.9 million for the year ended December 31, 2011, from $12.5 million in 2010, primarily related to a $7.0 million gain on sale of assets recorded in 2010, offset by a $1.2 million increase in equity in earnings from investments in partnerships and a $0.2 million increase in other income. The gain on sale of assets was the result of the sale of partnership interests in USMD Arlington Hospital and USMD Fort Worth Hospital. The increase in equity in earnings from investments in partnerships was due to an increase in earnings at USMD Arlington Hospital and USMD Fort Worth Hospital, primarily related to an improvement in managed care contracted rates experienced by the hospitals under the THR umbrella, effective mid-2010. Other income consists primarily of emergency room consult coverage fees paid by hospitals and incentive payments from government and commercial payers for meeting certain performance parameters.

Liquidity and Capital Resources

The following summarizes UANT’s cash flows for the periods indicated and is the basis for the discussions that follow (in thousands):


	Years Ended December 31,
	2011			2010
Cash flows from operating activities:
Net cash provided by operating activities	$	11,724		$	13,729

Cash flows from investing activities:
Capital expenditures		(4,156	)		(4,841	)
Equity distributions from equity-method investees		5,062			2,872
Proceeds from disposal of partnerships, net		285			8,689

Net cash provided by investing activities		1,191			6,720

Cash flows from financing activities:
Proceeds from issuance of long-term debt		4,511			5,148
Repayments of long-term debt		(5,391	)		(5,503	)
Distributions to partners, net of contributions		(13,448	)		(19,895	)

Net cash used in financing activities		(14,328	)		(20,250	)

Increase (decrease) in cash and cash equivalents		(1,413	)		199
Cash and cash equivalents at beginning of year		3,367			3,168

Cash and cash equivalents at end of year	$	1,954		$	3,367

136


	Annual Variance
	2011 vs. 2010
Cash flows from operating activities:
Net cash provided by operating activities	$	(2,005	)

Cash flows from investing activities:
Capital expenditures		685
Equity distributions from equity-method investees		2,190
Proceeds from disposal of partnerships, net		(8,404	)

Net cash provided by investing activities		(5,529	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		(637	)
Repayments of long-term debt		112
Distributions to partners, net of contributions		6,447

Net cash used in financing activities	$	5,922

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

The $2.0 million decrease in cash provided by operating activities was attributable to a $0.3 million decrease in cash flow from net income after net income to net cash reconciliation adjustments and a $1.7 million net decrease in cash flow due to changes in working capital accounts.

The $5.5 million decrease in cash provided by investing activities was primarily attributable to $9.2 million received in 2010 from the sale of hospital partnership interests offset by a $2.2 million increase in equity distributions from equity method investees and a $0.5 million decrease in capital contributions to partnership investments. Hospital managed care contracted reimbursement rates that went into effect in mid-2010 have improved profitability at the investee hospitals and may permit continued future routine distributions from USMD Arlington Hospital. USMD Fort Worth Hospital made distributions totaling $0.1 million in 2011. UANT expects distributions from the lithotripsy investee partnerships to remain stable. Capital expenditures in 2011 relate to leasehold improvements and furniture and equipment purchases as UANT rebuilds, expands and equips four of its offices. Capital expenditures in 2010 include construction costs and equipment purchases associated with the second radiation therapy vault. For the remainder of 2012, UANT expects to equip and build out three additional smaller offices, replace and upgrade current medical equipment, expand the software licensing required for the recent expansion of providers and purchase computer software and equipment. UANT anticipates total 2012 expenditures to range between $2.6 million and $3.0 million.

The $5.9 million decrease in net cash used in financing activities was due to a $6.4 million decrease in distributions to physician partners and a $0.1 million decrease in debt repayments offset by a $0.6 million decrease in proceeds from the issuance of debt. The decrease in distributions to partners relates to the nonrecurring 2010 sale of the USMD hospitals’ limited partnership interests. The decrease in debt repayments relates to a nonrecurring $1.0 million lump sum repayment of loans in 2010 relating to the original investment in the USMD hospitals; the repayments were required by the bank in order to allow for the one-time distribution of the sale proceeds to the partners. Excluding the lump sum payment, debt repayments increased $0.9 million in 2011 over 2010. Borrowings in 2011 and 2010 primarily financed the capital expenditures described above. The Partnership borrowed an additional $0.4 million through March 2012 to fund the final construction and equipment costs for the four new offices. The Partnership expects to enter into additional debt borrowings of approximately $2.8 million during the remainder of 2012, which UANT will use to equip and build out three offices, replace and upgrade current medical equipment, expand the software licensing required for the recent expansion of providers and for additional and replacement computer software and equipment.

137

Capital Resources and Debt and Lease Obligations

UANT has historically secured bank debt and capital leases to finance its investments in technology, partnership interests, medical and office equipment and leasehold improvements. Maturities of UANT’s long-term debt and capital lease obligations at December 31, 2011 are as follows (in thousands):


Years ending December 31,	Long-Term Debt		Capital Leases		Total
2012	$	5,819	$	122	$	5,941
2013		4,142		27		4,169
2014		2,186		—		2,186
2015		1,765		—		1,765
2016		919		—		919
Thereafter		151		—		151

Total	$	14,982	$	149	$	15,131

UANT plans to finance short-term needs for capital expenditures via cash flow from operations, distributions from limited partnership interests and bank financing. During 2011, UANT terminated its advance loan utilized to finance 2010 capital expenditures and refinanced the $0.7 million outstanding balance with a term loan to be repaid over five years. To fund 2011 capital expenditures, UANT entered into an advance promissory note with a limit of $4.9 million and at December 31, 2011, UANT had borrowed $4.5 million under the note. UANT will begin paying principal and interest on the advance note in April 2012 and expects to pay off the loan in 60 months.

As of December 31, 2011, UANT was in compliance with its credit facility covenants. UANT expects that cash flows from operations, hospital partnership distributions and the aforementioned advance note will enable the Partnership to meet and exceed covenant requirements, meet debt service requirements and permit continued distributions to its physician partners.

The Partnership leases certain medical office space and medical equipment under noncancelable operating leases expiring between the years 2012 and 2021. Effective May 2011, the Partnership expanded and renewed for ten years its lease of medical office space in Fort Worth, Texas. Effective October 2011, the Partnership relocated and expanded its medical office space in Grapevine, Texas and extended its related operating lease for seven years. Future minimum lease payments under noncancelable operating lease agreements at December 31, 2011 are as follows (in thousands):


Years ending December 31,
2012	$	2,526
2013		2,316
2014		1,900
2015		1,802
2016		1,679
Thereafter		5,249

Total	$	15,472

138

Off-Balance Sheet Arrangements

UANT Ventures along with other partners of USMD Fort Worth Hospital have guaranteed, in proportion to their limited partnership interest in the hospital partnership, $5.0 million and $6.2 million of USMD Fort Worth Hospital debt as of December 31, 2011 and 2010, respectively. UANT Ventures along with other partners of USMD Arlington Hospital have guaranteed, in proportion to their limited partnership interest in the hospital partnership, USMD Arlington Hospital building, land, and equipment acquisition notes payable of $37.6 million and $41.8 as of December 31, 2011 and 2010, respectively.

Should USMD Fort Worth Hospital and USMD Arlington Hospital fail to pay the obligations due, UANT could potentially be required to make maximum aggregate payments totaling $9.4 million. The guarantees provide for recourse against the investee; however, if UANT were required to perform under one or more guarantees, recovery of any amount would be unlikely. The remaining terms of these guarantees range from seven to 38 months. UANT records a liability for performance under financial guarantees, when, upon review of available financial information of the nonconsolidated affiliate, and in consideration of pertinent factors, management determines it is probable that UANT will have to perform under the guarantee and the liability is reasonably estimable. UANT has not recorded a liability for these guarantees, as UANT believes the likelihood that it will have to perform under these agreements is remote.

The individual partners of UANT Ventures along with other partners of USMD Fort Worth Hospital have guaranteed $0.8 million of USMD Fort Worth Hospital building and land acquisition notes payable and other debt as of December 31, 2011 and 2010.

Critical Accounting Policies and Estimates

UANT’s combined financial statements have been prepared in accordance with GAAP. The preparation of UANT’s combined financial statements requires management to make judgments and estimates that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures. UANT bases its assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time its combined financial statements are prepared. On a regular basis, UANT reviews the accounting policies, assumptions, estimates and judgments to ensure that its financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from the assumptions and estimates UANT has made, and such differences could be material.

UANT discusses its significant accounting policies in Note 1, Summary of Significant Accounting Policies, of its combined financial statements. UANT believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating its reported financial results, and they require its most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. Where UANT management has provided sensitivity analyses in the Effect if Actual Results Differ from Assumptions columns below, the variance assumptions used in those analyses are based on outcomes that UANT management considers reasonably likely to occur.

139


Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions

Revenue Recognition

Net patient services revenue is reported at the estimated net realizable amounts due from patients, governmental and nongovernmental third-party payers and others under reimbursement agreements with third-party payers and includes an estimate of revenue earned but not billed. UANT records adjustments to estimated revenue in future periods as claims are filed and payments received. UANT accounts for the differences between the estimated patient and program reimbursement rates and its standard billing rates as contractual allowance adjustments, which UANT deducts from gross revenue to arrive at net patient services revenue. All physician practice and ancillary services contractual allowance calculations are subject to monthly review by management to ensure reasonableness and accuracy.	Net patient services revenue includes amounts estimated by management to be reimbursable by payers. The process of estimating contractual allowances requires us to estimate the payment amount based on payer contract provisions. The key assumption in this process is the estimated contractual reimbursement percentage, which is based on historical paid claims data. Due to the complexities involved in these estimates, actual payments UANT receives could be different from the amounts UANT estimates and records.	If the actual contractual reimbursement percentage under government programs and managed care contracts differed by 1% from UANT’s estimated reimbursement percentage, net patient services revenue for the year ended December 31, 2011 would have changed by approximately $0.6 million. Final settlements under some of these programs are subject to adjustment based on administrative review and audit by third parties.

140


Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions

Allowance for Doubtful Accounts

Accounts receivable primarily consist of amounts due from third-party payers and patients of UANT’s physician practices. The primary collection risks relate to uninsured patient accounts, including patient accounts for which the primary insurance carrier has paid the amounts covered by the applicable agreement, but patient responsibility amounts (deductibles, coinsurance amounts and copayments) remain outstanding. Bad debt expense and the allowance for doubtful accounts relate primarily to amounts due directly from patients. UANT writes off uncollectible accounts once collection efforts are exhausted.	UANT estimates the allowance for doubtful accounts by reserving a percentage of all self-pay accounts receivable without regard to aging category, based on collection history, adjusted for expected recoveries and, if present, anticipated changes in trends. UANT management relies on the results of detailed reviews of historical collection and write-off data as a primary source of information in estimating the collectability of its accounts receivable. UANT performs this analysis monthly, utilizing rolling twelve-month accounts receivable collection and write-off data. UANT also regularly reviews its overall reserve adequacy by monitoring historical cash collections as a percentage of trailing net revenue less bad debt expense. UANT believes its monthly updates to the allowance for doubtful accounts provide reasonable valuations of its accounts receivable. To date, these routine changes in estimates have not resulted in material adjustments to its allowance for doubtful accounts, bad debt expense or period-to-period comparisons of its results of operations.	Adverse changes in the percentage of UANT’s patients having adequate health insurance coverage, general economic conditions, payer mix, or trends in federal, state, and private employer health insurance coverage could affect the estimate of the allowance for doubtful accounts, collection of accounts receivable, cash flows and results of operations. If the actual bad debt percentage differed by 10% from its estimated bad debt rate, net income and net accounts receivable for the year ended December 31, 2011 would have changed by approximately $0.1 million.

The concentration of gross accounts receivable by payer group is as follows:


	December 31,
	2011			2010
Government-related programs		28	%		33	%
Managed care and commercial payers		62	%		54	%
Self-pay		10	%		13	%

		100	%		100	%

141


Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions

Goodwill

UANT evaluates goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying value of the goodwill may not be recoverable. UANT tests for goodwill impairment at the reporting unit level, which is at the operating segment level or one level below the operating segment. The impairment evaluation involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair value exceeds carrying value, then it is concluded that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, a second step is required to measure possible goodwill impairment. The second step includes hypothetically valuing the tangible and intangible assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit’s goodwill is compared to the carrying value of that goodwill. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, UANT recognizes an impairment loss in an amount equal to the excess, not to exceed the carrying value. No impairment of goodwill was recognized during UANT’s 2011 or 2010 annual goodwill impairment tests.	In estimating the fair value of reporting units, management makes estimates and judgments about future cash flows and market valuations using a combination of income and market approaches. UANT primarily relies on an income approach, specifically a discounted cash flow analysis, which includes assumptions for, among others, discount rates, cash flow projections, growth rates and terminal value rates, all of which require significant judgment. The discount rate utilized in 2011 was 15%. These types of analyses contain uncertainties because they require management to make assumptions and to apply judgment to estimate industry economic factors and the profitability of future business strategies. It is UANT’s policy to conduct impairment testing based on its current business strategy in light of present industry and economic conditions, as well as its future expectations.	UANT has not made any material changes in the accounting methodology it uses to assess goodwill impairment during the past two years. UANT does not believe there is a reasonable likelihood of material change in the future estimates or assumptions it uses to test for impairment of goodwill. However, if actual results are not consistent with its estimates or assumptions, UANT may be at risk of an impairment charge that could be material. The estimated fair value of UANT’s single reporting unit significantly exceeded its carrying value as of December 31, 2011.

142


Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions

Impairment of Long-Lived Assets Other Than Goodwill

Long-lived assets other than goodwill, which are separately tested for impairment, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When evaluating long-lived assets for potential impairment, UANT first compares the carrying value of the asset to the asset’s estimated future cash flows (undiscounted and without interest charges). If the estimated future cash flows are less than the carrying value of the asset, UANT calculates an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset’s estimated fair value, which may be based on estimated future cash flows (discounted and with interest charges). UANT recognizes an impairment loss if the amount of the asset’s carrying value exceeds the asset’s estimated fair value. If UANT recognizes an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis will be depreciated (amortized) over the remaining useful life of that asset. In 2011 and 2010, there were no indicators that the carrying value of long-lived assets were not recoverable	UANT’s impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.	UANT has not made any material changes in the accounting methodology it uses to assess impairment loss during the past two years. UANT does not believe there is a reasonable likelihood of a material change in the future estimates or assumptions it uses to calculate long-lived asset impairment losses. However, if actual results are not consistent with its estimates and assumptions used in estimating future cash flows and asset fair values, UANT may be exposed to losses that could be material.

143

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-04. The FASB’s primary objective was to collaborate with the International Accounting Standards Board to develop common requirements for measuring fair value and disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Standards. ASU 2011-04 (i) expands and enhances disclosures about fair value measurements and (ii) clarifies the FASB’s intent about the application of existing fair value measurement requirements in certain circumstances. Public companies are required to adopt the provisions of ASU 2011-04 on a prospective basis during interim and annual periods beginning after December 15, 2011 and early adoption of the amended accounting guidance is not permitted. For non-public entities, the amendments are effective for annual periods beginning after December 15, 2011 and early application is permitted. UANT continues to review ASU 2011-04; however, UANT does not believe that adoption will have a material impact on its combined financial statements or the notes thereto.

In July 2011, the FASB issued ASU No. 2011-07, Health Care Entities (Topic 954): Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities (“ASU 2011-07”). In accordance with ASU 2011-07, UANT will be required to present its provision for doubtful accounts related to patient service revenue as a deduction from revenue, similar to contractual discounts. Accordingly, UANT’s revenues will be reported net of both contractual discounts as well as its provision for doubtful accounts related to patient service revenues. Additionally, ASU 2011-07 will require UANT to make certain additional disclosures designed to help users understand how contractual discounts and bad debts affect recorded revenue in both interim and annual financial statements. ASU 2011-07 requires retrospective application and is effective for public companies for fiscal years beginning after December 15, 2011, and interim periods within those fiscal years. For nonpublic entities, the amendments are effective for the first annual period ending after December 15, 2012, and interim and annual periods thereafter. The ASU permits early adoption. The adoption of ASU 2011-07 is not expected to impact UANT’s financial position, results of operations or cash flows, however, upon adoption and as required by this ASU, UANT will reclassify the provision for bad debts related to prior period patient service revenue as a deduction from patient service revenue.

In September 2011, the FASB issued ASU 2011-08, which permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value before applying the two-step quantitative goodwill impairment model that is currently in place. If it is determined through the qualitative assessment that a reporting unit’s fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing companies to go directly to the quantitative assessment. This update is effective for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2011, which will require UANT to adopt these provisions in 2012. UANT is reviewing ASU 2011-08 and does not believe that adoption will have a material impact on its combined financial statements or the notes thereto.

UANT does not believe any other recently issued, not yet effective, accounting standards will have a material effect on its combined financial position, results of operations, or cash flows.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

144

MCNT’S AND IMPEL’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MCNT’s and Impel’s Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MCNT MD&A”) is an analysis of the combined financial condition and the results of operations of MCNT and Impel. The intent of the MCNT MD&A is to provide the reader of MCNT’s financial statements with a narrative from the perspective of MCNT’s and Impel’s managements on the combined financial condition, results of operations and liquidity of MCNT and Impel, and certain other factors that may affect their future results. The MCNT MD&A should be read in conjunction with the MCNT and Impel combined financial statements and related notes included in this Prospectus.

Executive Overview

MCNT is a multi-specialty physician practice group with 145 physicians and 37 mid-level providers operating in 40 clinics in the Dallas/Fort Worth metropolitan area. As part of its care delivery model, MCNT runs a highly complex laboratory as well as MRI/CT imaging, ultrasound, stress echocardiogram and other diagnostic testing services. The group consists of the following physicians by specialty:


	December 31,
	2011		2010
Primary care
Family medicine		24		21
Geriatrics		1		1
Internal medicine		46		46
Medicine/pediatrics		9		8
Obstetrics and gynecology		28		24
Pediatrics		15		13
Specialists
Allergy and immunology		1		—
Endocrinology		4		4
Infectious disease		1		1
Neurology		2		2
Physical medicine and rehabilitation		1		—
Podiatry		1		1
Psychology		1		1
Rheumatology		9		9
General surgery		2		—
Total physicians		145		131

Impel manages MCNT’s clinical, operational, information technology and traditional back office duties including billing and collection, accounting and human resource management. Impel has a long-term contractual agreement with MCNT to provide these services. Impel also provides hourly or project-based training and implementation services to other medical groups and hospitals systems. Demand for these services has grown as medical groups move to incorporate electronic medical records and practice management systems as a key part of their future technology platform. Federal government incentives through initiatives like meaningful use further stimulate demand in the near term.

MCNT currently operates in a professional fee-for-service environment. In general, a patient is seen by their provider for either a well-visit or a sick-visit. This is also referred to as a “patient encounter.” The provider then submits a claim to the patient’s insurer who evaluates and reimburses the provider in accordance with a contractually agreed upon fee schedule. The patient may also be required to participate in payment for services

145

rendered via a co-pay, co-insurance or self-pay depending on the services provided and the coverage provisions. MCNT generates revenues primarily through patient visits in its clinics, obstetrics and gynecological and other surgical services performed in hospitals and diagnostic testing services.

The table below presents patient encounter volumes for the periods indicated:


	Years Ended December 31,
	2011		2010
Patient Encounters		635,935		627,403

Patient volumes increased by 1.4% for the year ended December 31, 2011 versus 2010. The increase was due to additional availability of patient appointment times as a result of having a higher number of physicians on staff.

In order to better manage and control the patient experience, MCNT intends to broaden its physician base to include providers who treat common chronic conditions and who can provide general surgical care. Traditionally, these services were referred out to other physician groups, however; upon referral, MCNT lost the ability to effectively manage to the quality standards and outcomes desired for its patients.

MCNT was an early adopter of electronic medical record technology in 2000 and electronic practice management technology in 2004. To date, MCNT has in excess of 11 million patient encounters maintained in its database. There has been a significant push by the Center for Medicare and Medicaid Services and the managed care payers to drive development of the ability to exchange healthcare data among the provider community regardless of affiliation. One reason is to allow any healthcare provider with full access to a patient’s health record including patient history and diagnostic testing results with the intent of improving quality of care and reducing cost through elimination of duplicate testing. MCNT’s extensive expertise positions the company as a leader in helping to develop standards of data exchange within its own provider community.

MCNT determines member physician compensation by aggregating all revenues net of allowances for the period and then deducting the physician’s share of direct and indirect site and administrative expenses. MCNT bases nonmember physician compensation on contractual agreements with bonus payments associated with achieving certain performance metrics.

Sources of Revenue and Third-Party Reimbursement

The following table presents MCNT’s approximate percentages of gross patient revenues derived from Medicare, Medicaid, managed care and other third-party payers and self-pay patients for the periods indicated:


	Years Ended December 31,
	2011			2010
Government-related programs		25	%		28	%
Managed care and commercial payers		73	%		70	%
Self-pay		2	%		2	%

		100	%		100	%

Net patient service revenue includes amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems and provisions of cost-based reimbursement and other payment methods. In addition, MCNT is reimbursed by nongovernmental payers using a variety of payment methodologies. Amounts MCNT receives for treatment of patients covered by these programs are generally less that the standard billing rates. MCNT accounts for the differences between the estimated program reimbursement

146

rates and the standard billing rates as contractual allowance adjustments, which it deducts from gross revenues to arrive at net patient services revenue. Final settlements under some of these programs are subject to adjustment based on administrative review and audit by third parties. MCNT accounts for adjustments to previous program reimbursement estimates as contractual allowance adjustments and reports them in the periods that such adjustments become known. To date, these adjustments have been generally insignificant. Collections from uninsured and underinsured patients continue to be an industry-wide issue but MCNT has mitigated his risk by instituting cash-pay-up-front policies.

MCNT is widely recognized as a leader in quality initiatives and is currently participating in two pilot projects focused on Patient Centered Medical Home. MCNT’s quality initiatives have garnered recognition as noted below:

•

All 29 Primary Care Clinics achieved highest recognition as NCQA (National Committee for Quality Assurance) Level III Patient Centered Medical Homes;

•

54 primary care physicians were recognized by NCQA’s Diabetes Physician Recognition Program;

•

Diabetes self management training program recognized by the American Diabetes Association; and,

•

107 MCNT physicians were qualified for meaningful use in 2011.

Key Developments

•

On December 1, 2011, MCNT entered into a merger agreement with Ventures and Holdings and on December 15, 2011, Impel entered into a merger agreement with Ventures and Holdings. Pursuant to these merger agreements, subsidiaries of Ventures will merge with and into each of MCNT and Impel, with MCNT and Impel surviving as wholly-owned subsidiaries of Ventures. The consummations of the mergers are subject to a number of closing conditions, including the satisfaction of all of the closing conditions under the Contribution Agreement.

Key Drivers and Challenges

•

Impact of economy – The ongoing difficulties in the economy including unemployment with resulting loss in medical coverage may cause MCNT patients to postpone necessary medical treatment and medications including maintenance of chronic care conditions. This can lead to a deterioration in patient health and potentially increase cost for remediation in the future.

•

MCNT anticipates that as a large portion of the population that has historically not had adequate medical care due to lack of coverage benefits gains coverage under the Patient Protection and Affordable Care Act, there will be an increase in the number of primary care patients who have chronic disease conditions that have been un-treated or under-treated. It may prove challenging to ensure the patients are compliant with their care directives.

•

Increase in cost to patient – as medical insurance costs continue to escalate, more companies are shifting the burden of costs to the insured employee members through higher deductibles, co-pay and coinsurance for physician visits and pharmaceutical costs. As a result, patients may elect to defer or eliminate necessary care for nonemergent chronic disease management and well-care health maintenance visits.

•

Over the past ten years there has been a consolidation of managed care payers. Currently, approximately 71% of MCNT’s net revenues are paid by four commercial payers and 93% including government payments. The high concentration of revenue in a small number of payers can add risk and adverse leverage during contract negotiations for future reimbursement rates.

147

Results of Operations

The following table summarizes MCNT’s and Impel’s results of operations for the periods indicated and is the basis for the discussions that follow (in thousands):


	Years Ended December 31,
	2011						2010
	Amount			Ratio			Amount			Ratio
Revenues:
Net patient service revenue	$	100,674			92.3	%	$	94,745			92.7	%
Management fee and other revenue		8,347			7.7	%		7,409			7.3	%

Total net revenue		109,021			100.0	%		102,154			100.0	%

Operating expenses:
Salaries, taxes and employee benefits		72,870			66.8	%		67,146			65.7	%
Supplies		11,643			10.7	%		10,452			10.2	%
Other operating and general and administrative expenses		15,933			14.6	%		15,134			14.8	%
Professional and contract services		4,453			4.1	%		3,380			3.3	%
Bad debt expense		906			0.8	%		1,685			1.6	%
Depreciation and amortization		2,247			2.1	%		2,140			2.1	%

		108,052			99.1	%		99,937			97.8	%

Income from operations		969			0.9	%		2,217			2.2	%
Other income (expense), net		(346	)		-0.3	%		(521	)		-0.5	%

Income before provision for income taxes		623			0.6	%		1,696			1.7	%
Provision for income taxes		(325	)		-0.3	%		(407	)		-0.4	%

Net income	$	298			0.3	%	$	1,289			1.3	%


	Annual Change
	2011 vs. 2010
Revenues:
Net patient service revenue	$	5,929			6.3	%
Management fee and other revenue		938			12.7	%

Total net revenue		6,867			6.7	%

Operating expenses:
Salaries, taxes and employee benefits		5,724			8.5	%
Supplies		1,191			11.4	%
Other operating and general and administrative expenses		799			5.3	%
Professional and contract services		1,073			31.7	%
Bad debt expense		(779	)		-46.2	%
Depreciation and amortization		107			5.0	%

		8,115			8.1	%

Income from operations		(1,248	)		-56.3	%
Other income (expense), net		175			-33.6	%

Income before provision for income taxes		(1,073	)		-63.3	%
Provision for income taxes		82			-20.1	%

Net income	$	(991	)		-76.9	%

148

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Revenues

Net patient service revenue increased by $5.9 million, or 6.3%, for the year ended December 31, 2011 as compared to 2010. Patient encounter volume grew 1.4% and net patient services revenue per encounter grew 4.8%. The increase in net revenue per encounter is a result of MCNT’s medicine and surgical sub-specialists representing a larger portion of patient encounter volumes at a higher reimbursement rate due to the more specialized nature of their work. MCNT believes that this trend will continue as physicians within its practice provide higher-acuity care for management of chronic disease instead of referring patients to other medical groups as was done previously.

Management fee revenue, which includes Impel consulting/service revenues and management fees charged to non-MCNT physician groups, increased $0.9 million for the year ended December 31, 2011 as compared to 2010. Other revenue, which includes hospital guarantees, medical directorship fees, capitation payments, bonus payments from commercial payers for meeting performance initiatives, meaningful monies paid by CMS for meeting EHR guidelines and income from increases in deferred compensation plan assets, increased by $0.9 million as a result of MCNT achieving CMS meaningful use guidelines and other performance-based bonus payments. Consulting services revenue increased $0.3 million, offset by a decline in revenue associated with the termination of a non-MCNT contract in April 2010.

Operating Expenses

Salaries, taxes and employee benefits increased to 66.8% of net revenue for the year ended December 31, 2011 versus 65.7% in 2010. The increase is due to compensation paid to newer physicians who are not yet experiencing patient volumes sufficient to generate enough revenues to fully cover their expenses.

Supplies expense includes the cost of drugs, vaccines, medications and laboratory supplies and increased $1.2 million due to higher utilization of diagnostic laboratory testing and increased administration of drugs and vaccines.

Other operating and general and administrative expenses increased $0.8 million for the year ended December 31, 2011 as compared to 2010. This increase was driven by a modest increase in rent expense due to additional space being leased as part of MCNT’s increased physician headcount, partially offset by savings due to other office consolidation.

Professional and contract services includes expenses associated with certain laboratory testing provided by third party vendors, professional radiologic and diagnostic test interpretation, and legal and accounting services. These expenses increased by $1.1 million for the year ended December 31, 2011, as compared to 2010, primarily due to transaction-related expenses associated with the proposed merger.

Bad debt expense declined by $0.8 million in 2011, as compared to 2010, due to improved collection efforts on outstanding accounts receivable.

Other Income (Expense), net

Other expense, net decreased $0.2 million for the year ended December 31, 2011, as compared to 2010, primarily due to decreases in the value of life insurance assets associated with MCNT’s deferred compensation plan.

The provision for income taxes declined $0.1 million for the year ended December 31, 2011 due primarily to lower pre-tax income in 2011 as compared 2010.

149

Liquidity and Capital Resources

The following summarizes MCNT’s and Impel’s combined cash flows for the periods indicated and is the basis for the discussions that follow (in thousands):


	Years Ended December 31,
	2011			2010
Cash flows from operating activities:
Net income	$	298		$	1,289
Net income to net cash reconciliation adjustments		2,837			3,622
Change in operating assets and liabilities		749			(836	)

Net cash provided by operating activities		3,884			4,075

Cash flows from investing activities:
Purchases of property and equipment		(1,091	)		(1,008	)
Investments in certificates of deposit		(8	)		(12	)
Investments in life insurance policies		(390	)		(380	)

Net cash used in investing activities		(1,489	)		(1,400	)

Cash flows from financing activities:
Payments on line of credit, long-term debt and capital lease obligations, net of proceeds		(805	)		(305	)
Distributions to members		(1,291	)		(294	)
Redemption of common stock and membership interests, net of issuances		(5	)		(98	)

Net cash used in financing activities		(2,101	)		(697	)

Net increase in cash and cash equivalents		294			1,978
Cash and cash equivalents at beginning of year		3,443			1,465

Cash and cash equivalents at end of year	$	3,737		$	3,443


	Annual Change
	2011 vs. 2010
Cash flows from operating activities:
Net income	$	(991	)
Net income to net cash reconciliation adjustments		(785	)
Change in operating assets and liabilities		1,585

Net cash provided by operating activities		(191	)

Cash flows from investing activities:
Purchases of property and equipment		(83	)
Investments in certificates of deposit		4
Investments in life insurance policies		(10	)

Net cash used in investing activities		(89	)

Cash flows from financing activities:
Payments on line of credit, long-term debt and capital lease obligations, net of proceeds		(500	)
Distributions to members		(997	)
Redemption of common stock and membership interests, net of issuances		93

Net cash used in financing activities	$	(1,404	)

150

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Net cash provided by operating activities decreased by $0.2 million to $3.9 million for the year ended December 31, 2011, as compared to 2010, primarily due to a $1.0 million decrease in net income, an increase in accounts receivable partially offset by a reduction in the provision for doubtful accounts, and increases in accrued liabilities associated with commercial payer bonus plans and meaningful monies which were subsequently paid out in the first quarter of 2012.

Net cash flows used in investing activities increased $0.1 million for the year ended December 31, 2011, as compared to 2010, due to an increase in capital expenditures. MCNT and Impel expect combined capital expenditures to be approximately $1.0 million annually for the foreseeable future, primarily for furniture, fixtures, computers and diagnostic equipment used in the clinic locations.

Net cash flows used in financing activities increased $1.4 million for the year ended December 31, 2011, as compared to 2010, primarily due to a $1.0 million increase in distributions to Impel members. The balance was driven by higher net payments on debt and capital leases.

Capital Resources and Debt and Lease Obligations

MCNT and Impel have historically secured bank debt and capital leases to finance its investments in technology, partnership interests, medical and office equipment and leasehold improvements. Maturities of MCNT’s and Impel’s long-term debt and future minimum capital lease payments at December 31, 2011 are as follows:


Years Ending December 31,	Notes Payable		Capital Leases		Total
2012	$	410	$	330	$	740
2013		429		126		555
2014		450		82		532
2015		441		66		507
2016		407		29		436
Thereafter		1,112		—		1,112

Total	$	3,249	$	633	$	3,882

MCNT and Impel plan to finance short-term needs for capital expenditures via cash flow from operations and bank financing.

As of December 31, 2011, MCNT was not in compliance with its net equity debt covenant. In April 2012, MCNT obtained a waiver of the December 31, 2011 violation and any future violation of the same covenant through January 31, 2013.

Off-Balance Sheet Arrangements

MCNT and Impel have no off-balance sheet arrangements that may have a current or future material effect on their combined financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates

MCNT’s and Impel’s combined financial statements have been prepared in accordance with GAAP. The preparation of these combined financial statements requires the MCNT and Impel management teams to make

151

judgments and estimates that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures. MCNT and Impel base their assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time the combined financial statements are prepared. On a regular basis, MCNT and Impel review the accounting policies, assumptions, estimates and judgments to ensure that its financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from MCNT’s and Impel’s assumptions and estimates, and such differences could be material.

A discussion of significant accounting policies is included in “Note 2: Summary of Significant Accounting Policies” of the December 31, 2011 combined financial statements included elsewhere in this Prospectus. MCNT and Impel believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating their combined reported financial results, and these accounting policies require their most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. Where MCNT and Impel management have provided sensitivity analyses in the Effect if Actual Results Differ from Assumptions columns below, the variance assumptions used in those analyses are based on outcomes that MCNT and Impel management considers reasonably likely to occur.


Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions
Revenue Recognition

MCNT reports net patient service revenue at the estimated net realizable amounts due from patients, governmental and nongovernmental third-party payers, and others under reimbursement agreements with third-party payers, and includes an estimate of revenue earned but not billed. MCNT records adjustments to estimated revenue in future periods as claims are filed and payments received. To date, these adjustments have generally been insignificant. MCNT accounts for the differences between the estimated patient and program reimbursement rates and its standard billing rates as contractual allowance adjustments, which MCNT deducts from gross revenue to arrive at net patient services revenue. All physician practice and ancillary services contractual allowance calculations are subject to monthly review by management to ensure reasonableness and accuracy.	Net patient service revenue includes amounts estimated by management to be reimbursable by payers. The process of estimating contractual allowances requires MCNT to estimate the amount expected to be received based on payer contract provisions. The key assumption in this process is the estimated contractual reimbursement percentage, which is based on payer classification and historical paid claims data. Due to the complexities involved in these estimates, actual payments MCNT receives could be different from the amounts MCNT estimates and records.	If the actual contractual reimbursement percentage under government programs and managed care contracts differed by 1% from MCNT’s estimated reimbursement percentage, net patient service revenue for the year ended December 31, 2011 would have changed by approximately $1.6 million. Final settlements under some of these programs are subject to adjustment based on administrative review and audit by third parties.

152



Allowance for Doubtful Accounts

Accounts receivable primarily consist of amounts due from third-party payers and patients of MCNT’s physician practices. The primary collection risks relate to uninsured patient accounts, including patient accounts for which the primary insurance carrier has paid the amounts covered by the applicable agreement, but patient responsibility amounts (deductibles, coinsurance amounts and copayments) remain outstanding. Bad debt expense and the allowance for doubtful accounts relate primarily to amounts due directly from patients. MCNT writes off uncollectible accounts once collection efforts are exhausted.	MCNT estimates the allowance for doubtful accounts by reserving a percentage of self-pay and third-party payers’ balances based on collection history, the aging category of the receivable and other collection indicators specific to the individual balances. MCNT management relies on the results of detailed reviews of historical collection and write-off data as a primary source of information in estimating the collectability of its accounts receivable. MCNT also regularly reviews its overall reserve adequacy by monitoring historical cash collections as a percentage of trailing net patient service revenue less bad debt expense. MCNT believes its monthly updates to the estimated allowance for doubtful accounts provide reasonable valuations of its accounts receivable. To date, these routine changes in estimates have not resulted in material adjustments to its allowance for doubtful accounts, bad debt expense or period-to-period comparisons of its results of operations.	Adverse changes in the percentage of MCNT’s patients having adequate health insurance coverage, general economic conditions, payer mix, or trends in federal, state, and private employer health insurance coverage could affect the estimate of the allowance for doubtful accounts, collection of accounts receivable, cash flows and results of operations. If the actual bad debt percentage differed by 10% from the estimated bad debt rate, combined net income and net accounts receivable for the nine months ended December 31, 2011 would not have changed materially.

The concentration of gross accounts receivable by payer group is as follows:


	Years Ended December 31,
	2011			2010
Government-related programs		24	%		27	%
Managed care and commercial payers		74	%		71	%
Self-pay		2	%		2	%

		100	%		100	%

Recently Issued Accounting Pronouncements

153

Reporting Standards. ASU 2011-04 (i) expands and enhances disclosures about fair value measurements and (ii) clarifies the FASB’s intent about the application of existing fair value measurement requirements in certain circumstances. Public companies are required to adopt the provisions of ASU 2011-04 on a prospective basis during interim and annual periods beginning after December 15, 2011 and the ASU does not permit early adoption. For non-public entities, the amendments are effective for annual periods beginning after December 15, 2011 and the ASU permits early adoption. MCNT and Impel continue to review ASU 2011-04; however, they do not believe that adoption will have a material impact on their combined financial statements or the notes thereto.

In July 2011, the FASB issued ASU 2011-07. In accordance with ASU 2011-07, MCNT will be required to present its provision for doubtful accounts related to patient service revenue as a deduction from revenue, similar to contractual discounts. Accordingly, MCNT’s revenues will be reported net of both contractual discounts as well as its provision for doubtful accounts related to patient service revenues. Additionally, ASU 2011-07 will require MCNT to make certain additional disclosures designed to help users understand how contractual discounts and bad debts affect recorded revenue in both interim and annual financial statements. ASU 2011-07 requires retrospective application and is effective for public companies for fiscal years beginning after December 15, 2011, and interim periods within those fiscal years. For nonpublic entities, the amendments are effective for the first annual period ending after December 15, 2012, and interim and annual periods thereafter. The ASU permits early adoption. The adoption of ASU 2011-07 is not expected to impact MCNT’s financial position, results of operations or cash flows, however, upon adoption and as required by this ASU, MCNT will reclassify the provision for bad debts related to prior period patient service revenue as a deduction from patient service revenue.

MCNT and Impel do not believe any other recently issued, not yet effective, accounting standards will have a material effect on their combined financial position, results of operations, or cash flows.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

154

UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL DATA FOR HOLDINGS

The following unaudited pro forma condensed combined financial information is based on the historical financial statements of Holdings, the historical consolidated financial statements of USMD, and the historical combined financial statements of UANT and Ventures and MCNT and Impel, adjusted to give effect to pro forma events that are (1) directly attributable to the Contribution, (2) factually supportable, and (3) with respect to the statements of operations/income, expected to have a continuing impact on the combined results of operations. The historical statements of operations are also adjusted to give effect to direct, incremental costs of the Contribution as nonrecurring charges directly related to the Contribution. Pro forma adjustments give effect to the Contribution as an acquisition of UANT, Ventures, MCNT and Impel by USMD into Holdings. The pro forma information does not give effect to any synergies that may be realized as a result of the Contribution, nor does it give effect to any nonrecurring restructuring charges that may be incurred as a result of the integration of USMD, UANT, Ventures, MCNT and Impel.

Holdings was formed in May 2010 in anticipation of the Contribution and has not commenced operations. Currently, Holdings’ primary obligation is to consummate the Contribution upon satisfaction of conditions to the closing and Holdings does not anticipate commencing operations until the Contribution has been consummated. The financial statements of UANT include the accounts of Ventures, and the financial statements of MCNT include the accounts of Impel.

The unaudited pro forma condensed combined balance sheet as of December 31, 2011 gives effect to the Contribution as if it occurred on December 31, 2011 and combines the historical balance sheets of Holdings, USMD, UANT and Ventures, and MCNT and Impel as of December 31, 2011. The Holdings, USMD, UANT and Ventures and MCNT and Impel pro forma balance sheet information was derived from their respective audited December 31, 2011 balance sheets included elsewhere in this Prospectus.

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2011 is presented as if the Contribution had been consummated on January 1, 2011 and combines the historical results of Holdings, USMD, UANT and Ventures, and MCNT and Impel for the year ended December 31, 2011. The historical results of Holdings, USMD, UANT and Ventures and MCNT and Impel for the year ended December 31, 2011 were derived from their respective audited statements of operations/income for the year ended December 31, 2011. These financial statements are included elsewhere in this Prospectus. Holdings has made certain reclassification adjustments to conform historical reported balances to the unaudited pro forma condensed combined financial statement’s basis of presentation.

Holdings will account for the Contribution in accordance with accounting guidance for business combinations, which will result in the recognition of assets acquired and liabilities assumed at fair value as of the acquisition date, which is the closing date of the Contribution. For the purposes of preparing the unaudited pro forma information, the assets and liabilities of USMD, UANT, Ventures, MCNT and Impel have been measured based on various estimates using assumptions that the USMD, UANT, Ventures, MCNT and Impel managements believe are reasonable and that are further supported by a third-party fairness opinion. The purchase price allocation is final subject to working capital, ownership, capital expenditure and debt adjustments to be concluded upon at the close date.

The unaudited pro forma condensed combined financial information of Holdings has been prepared for illustrative purposes only and is not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had USMD, UANT, Ventures, MCNT and Impel been a combined company during the specified periods. The unaudited pro forma condensed combined financial information, including the notes thereto, is qualified in its entirety by reference to, and should be read in conjunction with, the historical financial statements of Holdings, USMD, UANT and Ventures and MCNT and Impel for the year ended December 31, 2011.

155

UNAUDITED PRO FORMA

CONDENSED COMBINED BALANCE SHEET

(As of December 31, 2011)


	Holdings Historical			USMD Inc. Historical			UANT and Ventures Historical		MCNT and Impel Historical			Contribution Pro Forma Adjustments			Note Reference	Pro Forma Combined
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	10,822		$	1,954	$	3,737		$	—			$	16,513
Certificates of deposit-restricted		—			—			—		3,065			—				3,065
Accounts receivable, net of allowance for doubtful accounts		—			3,624			3,540		9,607			(97	)	(A)		16,674
Affiliate accounts receivable		—			1,174			—		—			—				1,174
Deferred tax assets, current		—			116			—		399			—				515
Prepaid expenses and other current assets		44			235			1,684		1,209			—				3,172

Total current assets		44			15,971			7,178		18,017			(97	)			41,113
Property and equipment, net		—			3,070			14,865		7,022			—				24,957
Investments in nonconsolidated affiliates		—			11,930			7,982		—			22,707		(C),(F)		42,619
Goodwill		—			8,335			4,988		—			86,841		(F)		100,164
Intangible assets, net		—			306			—		—			21,777		(F)		22,083
Deferred tax assets, less current portion		62			808			—		2,634			—				3,504
Cash surrender value of life insurance policies		—			—			—		2,764			—				2,764
Other assets		—			—			33		120			—				153

Total assets	$	106		$	40,420		$	35,046	$	30,557		$	131,228			$	237,357

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	81		$	243		$	2,971	$	1,800		$	(97	)	(A)	$	4,998
Accrued payroll		—			1,534			1,700		7,748			—				10,982
Other accrued liabilities		44			2,742			—		3,198			1,556		(E)		7,540
Line of credit		—			—			—		1,417			—				1,417
Current portion of long-term debt and capital lease obligations		—			1,594			5,941		706			—				8,241
Other current liabilities		—			278			—		775			—				1,053

Total current liabilities		125			6,391			10,612		15,644			1,459				34,231
Long-term debt and capital lease obligations, less current portion		—			7,610			9,190		3,110			—				19,910
Deferred tax liabilities, less current portion		—			3,914			—		—			—				3,914
Deferred compensation		—			—			—		7,895			—				7,895
Deferred rent, less current portion		—			—			—		4,533			—				4,533
Other liabilities		—			1,057			—		112			—				1,169

Total liabilities		125			18,972			19,802		31,294			1,459				71,652
Equity:
Members’ and stockholders’ equity (deficit):
Members’ equity		—			—			—		3,133			(3,133	)	(F)		—
Common stock		—			310			—		—			(210	)	(F)		100
Additional paid-in capital		178			7,404			—		7			147,161		(F)		154,750
Retained earnings (accumulated deficit)		(197	)		10,571			—		(3,877	)		2,321		(E),(F)		8,818
Accumulated other comprehensive loss		—			(19	)		—		—			—				(19	)
Treasury stock		—			(1,184	)		—		—			—				(1,184	)

Total members’ and stockholders’ equity (deficit)		(19	)		17,082			—		(737	)		146,139				162,465
Partners’ capital		—			—			15,244		—			(15,244	)	(F)		—
Noncontrolling interests in subsidiaries		—			4,366			—		—			(1,126	)	(C)		3,240

Total equity		(19	)		21,448			15,244		(737	)		129,769				165,705

Total liabilities and equity	$	106		$	40,420		$	35,046	$	30,557		$	131,228			$	237,357

See accompanying notes to the unaudited pro forma condensed combined financial statements, which are an integral part of these financial statements.

156

UNAUDITED PRO FORMA

CONDENSED COMBINED STATEMENT OF OPERATIONS

(For the year ended December 31, 2011)


	Holdings Historical			USMD Inc. Historical			UANT and Ventures Historical			MCNT and Impel Historical			Contribution Pro Forma Adjustments			Note Reference	Pro Forma Combined
	(in thousands)
Revenue:
Management services revenue	$	—		$	23,211		$	—		$	8,347		$	(1,213	)	(A)	$	30,345
Net patient service revenue		—			—			55,541			100,674			—				156,215
Lithotripsy revenue		—			21,975			—			—			—				21,975
Other operating revenue		—			3,690			—			—			1,669		(B)		5,359

Net operating revenue		—			48,876			55,541			109,021			456				213,894

Operating expenses:
Salaries, wages and employee benefits		—			20,208			27,426			72,870			10,979		(A),(H),(I)		131,483
Medical supplies and services expense		—			376			3,886			11,643			—				15,905
Provision for doubtful accounts		—			35			1,280			906			—				2,221
Other operating expenses		303			8,660			10,708			20,386			(3,584	)	(A),(E)		36,473
Depreciation and amortization		—			916			3,524			2,247			1,147		(G)		7,834

Total operating expenses		303			30,195			46,824			108,052			8,542				193,916

Income (loss) from operations		(303	)		18,681			8,717			969			(8,086	)			19,978
Other income (expense):
Interest expense, net		—			(846	)		(602	)		(346	)		—				(1,794	)
Equity in income of nonconsolidated affiliates		—			1,715			5,721			—			(2,240	)	(D)		5,196
Other income (expense), net		—			(758	)		1,778			—			(1,669	)	(B)		(649	)

Total other income (expense), net		—			111			6,897			(346	)		(3,909	)			2,753

Income (loss) before provision for income taxes		(303	)		18,792			15,614			623			(11,995	)			22,731
(Provision) benefit for income taxes		106			(2,838	)		—			(325	)		(2,052	)	(J)		(5,109	)

Net income (loss)		(197	)		15,954			15,614			298			(14,047	)			17,622
Less: net income attributable to noncontrolling interests		—			(13,296	)		—			—			2,240		(D)		(11,056	)

Net income (loss) attributable to Holdings	$	(197	)	$	2,658		$	15,614		$	298		$	(11,807	)		$	6,566

See accompanying notes to the unaudited pro forma condensed combined financial statements, which are an integral part of these financial statements.

157

NOTES TO UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL INFORMATION

Note 1 – Basis of Pro Forma Presentation

The unaudited pro forma condensed combined financial information is based on the historical financial statements of Holdings, the historical consolidated financial statements of USMD and the historical combined financial statements of UANT and Ventures and MCNT and Impel, adjusted to give effect to pro forma events that are (1) directly attributable to the Contribution, (2) factually supportable, and (3) with respect to the statements of operations/income, expected to have a continuing impact on the combined results of operations. The historical statements of operations are also adjusted to give effect to direct, incremental costs of the Contribution as nonrecurring charges directly related to the Contribution. Pro forma adjustments give effect to i) the Contribution as an acquisition of UANT, Ventures, MCNT and Impel by Holdings.

The unaudited pro forma condensed combined balance sheet as of December 31, 2011 gives effect to the Contribution as if it occurred on December 31, 2011 and combines the historical balance sheets of Holdings, USMD, UANT and Ventures, and MCNT and Impel as of December 31, 2011. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2011 is presented as if the Contribution had been consummated on January 1, 2011 and combines the historical results of Holdings, USMD, UANT and Ventures, and MCNT and Impel for the year ended December 31, 2011.

Holdings prepared the pro forma financial information in accordance with accounting guidance for business combinations, which will result in the recognition of assets acquired and liabilities assumed at fair value as of the acquisition date, which is the closing date of the Contribution. For the purposes of preparing the unaudited pro forma information, the assets and liabilities of USMD, UANT, Ventures, MCNT and Impel have been measured based on various estimates using assumptions that the managements of USMD, UANT, Ventures, MCNT and Impel believe are reasonable and that are further supported by a third-party fairness opinion. The purchase price allocation is final subject to working capital, ownership, capital expenditure and debt adjustments to be concluded upon at the close date.

Note 2 – Purchase Price Allocation

Holdings prepared the allocation of the purchase price in the of December 31, 2011 unaudited pro forma condensed combined balance sheet based on management’s best estimates of the fair value of assets acquired and liabilities assumed based on a valuation as of December 31, 2011, further supported by a fairness opinion. The purchase price allocation gives effect to the Contribution as an acquisition of UANT, Ventures, MCNT and Impel by USMD into Holdings. Allocation of the purchase price to the net assets acquired and liabilities assumed of UANT, Ventures, MCNT and Impel is as follows, subject to final closing adjustments to be made in accordance with the terms of the Contribution Agreement (in thousands):


Current assets	23,754
Property and equipment	16,717
Investments	45,297
Other assets	3,991
Identifiable intangible assets	21,777
Goodwill	91,829
Current liabilities	(13,996	)
Long-term debt	(28,335	)

Net assets acquired and liabilities assumed	161,034

For the purpose of these pro forma condensed combined financial statements, the carrying value of all assets acquired, except for identifiable intangible assets and goodwill, and all liabilities assumed, approximates fair

158

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION – (Continued)

value. The constituent entities determined an estimated net enterprise value of each business unit of UANT, Ventures, MCNT and Impel primarily using an income approach—discounted cash flow methodology. The analysis included each business unit’s assumptions regarding 1) the development of new businesses and organic growth rates specific to it, 2) managed care reimbursement rates where applicable, 3) discount rates of 15.8% for UANT and Ventures, and 19.3% and 20.6% for MCNT and Impel, respectively, each developed by the individual business unit using a weighted average cost of capital analysis, and 4) the costs savings or increases, and any capital expenditure requirements, associated with any new initiatives developed by such business unit. See “THE TRANSACTION—Transaction Consideration and Adjustments.”

Identifiable intangible assets, excluding goodwill, consist of the following:


	Fair Value		Amortization Period
Noncompete agreements		6,369	Ten years
Trade name		10,303	Indefinite
Management agreements		5,105	Ten years

Note 3 – Pro Forma Adjustments

The pro forma information does not give effect to any synergies that may be realized as a result of the Contribution, nor does it give effect to any nonrecurring restructuring charges that may be incurred as a result of the integration of Holdings, USMD, UANT, Ventures, MCNT and Impel. Holdings expects to incur future increases in compensation, legal and consultative expenses of approximately $1.5 million annually in the development of its integrated healthcare system leadership team and its public company infrastructure. The pro forma adjustments are as follows (in thousands):

(A)

To eliminate management services charges incurred by UANT with USMD CTC Division. Upon consummation of the Contribution, these management services charges will eliminate in consolidation. The effects on the pro forma statement of operations for the year ended December 31, 2011 include a reduction to management services revenue of $1,213 and reductions to salaries, wages and employee benefits and other operating expense of $442 and $771, respectively. The effect on the pro forma balance sheet at December 31, 2011 was $97.

(B)	To reclassify other income activity to other operating revenue to conform to USMD’s statement of operations presentation.

(C)	To eliminate equity investments by UANT in three lithotripsy partnerships due to the consolidation of these entities in the USMD consolidated financial statements. The effect on the pro forma balance sheet at December 31, 2011 was $1,126.

(D)

To eliminate equity in income of nonconsolidated affiliates received by UANT from three lithotripsy partnerships due to the consolidation of these entities in the USMD consolidated financial statements and to eliminate the related noncontrolling interest deduction. The effect on the pro forma statement of operations for the year ended December 31, 2011 was $2,240.

(E)

To eliminate direct, incremental costs of the Contribution as nonrecurring charges directly related to the transaction. The pro forma statement of operations includes an adjustment to eliminate $2,813 of direct, incremental Contribution transaction costs incurred for the year ended December 31, 2011. The pro forma balance sheet includes a pro forma adjustment to reflect estimated future direct, incremental Contribution transaction costs of $1,556. The transaction costs include professional fees and other costs directly related to the Contribution.

159

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION – (Continued)

(F)	To account for the purchase price allocation.

Increase in investments in nonconsolidated affiliates of $23,833.

ii.

Increase in goodwill of $86,841.

iii.

Increase in intangible assets of $21,777.

iv.

Increase in additional paid in capital of $147,161 and elimination of $15,244 of partnership capital and $744 of equity.

Convert USMD and MCNT common stock, Impel members’ equity and UANT partnership capital to equity in Holdings. Upon consummation of the Contribution Agreement, Holdings will have approximately ten million shares of common stock issued and outstanding at a par value of $0.01 per share.

(G)	To account for amortization of $1,147 per year for noncompete agreements and management agreements included in the Contribution. The effect on the pro forma statement of operations for the year ended December 31, 2011 was $1,147.

(H)

To reclassify UANT physician professional-services-based compensation previously paid as distributions of the partnership to salaries expense of Holdings. After the consummation of the Contribution, the physicians who previously received professional-services-based compensation from UANT in the form of distributions will become employees of USMD Physician Services, and these physician employees will receive equivalent professional-services-based compensation from UANT in the form of W-2 wages. The effect on the pro forma statement of operations for the year ended December 31, 2011 was $374.

(I)

Historical and pro forma adjusted salaries of physician employees are likely not representative of future compensation arrangements. In connection with the closing of the Contribution, each physician will enter into an employment agreement with USMD Physician Services. The terms of the employment agreements are being negotiated but Holdings anticipates that future physician compensation arrangements will be based on fair market value. The effect on the pro forma statement of operations for the year ended December 31, 2011 was an estimated increase in salary expenses of $11,047. In addition, the overall arrangement contains a base increase in future years that would have increased salaries, wages and employee benefits in 2011 by $0.4 million.

(J)	To adjust the provision for income tax to account for UANT, Ventures and Impel as corporations subject to federal income tax and to estimate the federal income tax effect of the pro forma adjustments.

Note 4 – Commitments and Contingencies

UANT, MCNT and Impel intend to distribute approximately $5.0 million of cash immediately prior to the Contribution and the cash will not be a component of net working capital subsequent to the Contribution.

160

MANAGEMENT FOLLOWING THE TRANSACTION

Executive Officers and Directors

Holdings was formed in 2010 for the purpose of effecting the Contribution, and accordingly all of its current directors and executive officers were recently appointed. After the closing of the Contribution, the directors and executive officers of Holdings will be as follows:


Name	Age		Position
John House, M.D. *		57	Chairman of the Board, Chief Executive Officer and President
Steven Brock, M.D.		59	Director
Breaux Castleman *		71	Director
Patrick Collini, M.D. *		48	Director
Charles Cook, M.D. *		55	Director
Russell Dickey, M.D.		52	Director
Gary L. Rudin*		63	Director
James Saalfield, M.D. *		67	Director
Paul Thompson, M.D. *		55	Director
Khang Tran, M.D.		40	Director
Karen Kennedy*		60	Chief Operations Officer and President, USMD Physician Practice Management Division
Christopher Dunleavy *		47	Chief Financial Officer
Richard Johnston, M.D.*		63	Chief Physician Officer
Gordon Davis *		59	Chief Accounting Officer
Greg Cardenas *		48	Secretary and General Counsel

*	Current directors or officers of Holdings.

John House, M.D. – Dr. House, a board certified urologic surgeon, is the co-founder and Managing Partner of UANT and the founder and Chairman of the Board of USMD. Dr. House is also a diplomat of the American Board of Urology. He has been engaged in the practice of medicine since 1988. As founder, he brings unique knowledge and perspective of the companies’ strategy and business to the our board of directors.

Steven D. Brock, M.D. – Dr. Brock is board certified in Internal Medicine and has practiced medicine since 1981. He received his undergraduate degree from Texas Tech University in 1974 and his medical degree from The University of Texas Medical Branch at Galveston (“UTMB Galveston”) in 1978. Dr. Brock completed his internship then residency in Internal Medicine in 1981 at UTMB Galveston. He is a founding member of MCNT and serves on the Medical Executive Committee of USMD Arlington Hospital. Since 1997 he has served as the President of Impel. We believe Dr. Brock’s qualifications to serve on our board of directors include his many years of experience in managing a healthcare related entity.

Breaux Castleman – Mr. Castleman served as chairman of the board of directors of Mela Sciences, Inc. (a publicly held medical device company) from 2003 to 2011. Since 2001, he has also served as president, chief executive officer and chairman of the board of directors of Syntiro Healthcare Services, Inc. (a care management, wellness and disease management company). Mr. Castleman also serves as a director of FemPartners, Inc., Fanfare Entertainment LLC and Carden Transport Services LLC., all privately-held companies. Previously he held positions as President of the Scripps Clinic, President of Caremark International’s Physician Resource Group, and CEO of the Kelsey-Seybold Clinic. We believe Mr. Castleman’s qualifications to serve on our board of directors include his extensive executive experience as well as his knowledge of the responsibilities of boards of directors.

Patrick Collini, M.D. – Dr. Collini, a board certified urologic surgeon, has been engaged in the practice of medicine since 1997 and joined UANT in 2000. Dr. Collini served as the Chairman of the Quality Assurance

161

Committee of Medical Center of Arlington (2002-2006) and of USMD Arlington Hospital (2004-2008). In addition, Dr. Collini served as the Chairman of the Department of Surgery at Methodist Mansfield Medical Center from 2006-2008, served as its President of its Medical Staff and on its Corporate Medical Board. Dr. Collini attended Baylor College of Medicine and completed an internship in general surgery at the University of Kentucky, where he also finished his urologic surgery residency. We believe Dr. Collini’s qualifications to serve on our board of directors include his many years of experience in the healthcare industry.

Charles Cook, M.D. – Dr. Cook is a board certified orthopedic surgeon subspecializing in disorders of the foot and ankle. Engaged in private practice since 1988, he currently serves as managing partner of Orthopedic Specialist in Dallas, Texas. He received his undergraduate degree from LSU and medical degree from LSU Medical School, where he served as class officer and Alpha Omega Alpha president. He served as Clinical Assistant Professor at University of Texas Southwestern Medical Center in Dallas and continues to serve as teaching staff at the John Peter Smith Hospital orthopedic training program in Fort Worth, TX. Dr. Cook founded, and has served since its inception as president, of Orthopedic Surgery Association of North Texas. Dr. Cook has served as a Director of USMD since 2007 and was director of US Medical Development, Inc. (a predecessor to USMD). We believe Dr. Cook’s qualifications to serve on our board of directors include his extensive experience in the healthcare industry.

Russell Dickey, M.D. – Dr. Dickey is a board certified obstetrician/gynecologist who has been in private practice in Arlington, Texas since 1990. Dr. Dickey graduated from the University of Texas Southwestern Medical School in 1986. He completed his residency training at the University of Texas Southwestern Parkland Memorial Hospital in 1990. There, he was selected as a Chief Resident and also won the Outstanding Teaching Resident award. Dr. Dickey has served in numerous leadership positions in the Arlington medical community, including Chairman of the OB/Gyn department at Arlington Memorial Hospital and Chief of Staff at USMD Arlington Hospital. Dr. Dickey has served on the board of directors of USMD Arlington Hospital since its inception. Dr. Dickey also serves as the Chairman of Strategic Planning for MCNT and is a member of the MCNT board of directors. We believe Dr. Dickey’s qualifications to serve on our board of directors include his extensive experience in medical practice.

Gary L. Rudin – Mr. Rudin has over 30 years of experience in the information technology and services business. At EDS, in 30 years, he rose through the ranks to Senior Corporate VP overseeing hundreds of customer relationships while managing three of the seven industries, Health Care, Government, and Energy, plus the geographies of Canada and Latin America. Mr. Rudin also sat on the Global Operations Council which oversaw all operations of EDS and later became the CIO. Mr. Rudin has previously served on the boards of the Tomas Rivera Policy Institute, Dallas Opera, Drake University, and Northwood Club. He currently serves on the Board of Sentinel Data Solutions, a privately-held IT services corporation for the collections industry. Mr. Rudin is also an IT and leadership development consultant. We believe Mr. Rudin’s qualifications to serve on our board of directors include his extensive executive and IT experience as well as his knowledge of the responsibilities of directors.

James Saalfield, M.D. – Dr. Saalfield, a board certified urologic surgeon, has been engaged in the practice of medicine since 1977. He is also a diplomat of the American Board of Urology and served as Clinical Instructor in Urology at Southwestern Medical School from 1979 to 1992. Dr. Saalfield served as president of the Medical and Surgical Clinic of Irving for nine years prior to joining UANT. He also was chairman of the membership and credentials committee of Baylor Hospital-Irving for two years. We believe Dr. Saalfield’s qualifications to serve on our board of directors include his many years of experience in the healthcare industry.

Paul Thompson, M.D. – Dr. Thompson is a urologist who has practiced medicine for over 20 years. He practiced in Missouri for almost 19 years, where he served as Chief of Surgery and Chief of Staff at Southeast Missouri Hospital. Since 2008, he has served as Chief Executive Officer of Cenegenics Dallas-Fort Worth, a certified age management medical practice. Dr. Thompson is one of the authors for the certifying exam in Age

162

Management Medicine. Dr. Thompson has served as a Director of USMD since 2007 and prior to that was a director of US Medical Development, Inc. (a predecessor to USMD). We believe Dr. Thompson’s qualifications to serve on our board of directors include his many years of experience in the healthcare industry.

Khang Tran, M.D. – Dr. Tran is a board certified internist who has been engaged in the practice of medicine since 2000. He received his undergraduate degree from Southern Methodist University and medical degree from University of Texas Southwestern Medical School. He joined MCNT in 2000 after completing a residency at the University of Texas Southwestern Parkland Memorial Hospital. Since 2005, Dr. Tran has been a member of MCNT’s Board of Directors and the Chairman of MCNT’s Finance Committee. Dr. Tran was appointed the Chief of the Department of Internal Medicine at The Medical Center of Plano in 2005. Subsequently, Dr. Tran served as the Chief of Staff and was a member of the Board of Trustees of The Medical Center of Plano from 2009-2010. He is currently the Medical Director for Primary Care Services at The Medical Center of Plano. We believe Dr. Tran’s qualifications to serve on our board of directors include his many years of experience in the healthcare industry.

Karen Kennedy – Ms. Kennedy is currently the Chief Executive Officer of Impel, and the Chief Administrative Officer of MCNT. She earned her undergraduate degree at UCLA and a Master’s of Public Health degree from UCLA School of Public Health. At Presbyterian Intercommunity Hospital in Whittier, California, she served as Director of Marketing and Planning and then served as Vice President of Business Development. Prior to joining Impel in October 1994, Ms. Kennedy served as Senior Executive for the Gallatin Medical Foundation of Downey, California, a multi- specialty medical group. Ms. Kennedy also served as the president of Women in Health Administration of Southern California during 1992. Ms. Kennedy is a board member of the Center for Non-Profit Management and a member of the International Board of Visitors for the Neeley School of Business at Texas Christian University.

Christopher Dunleavy – Mr. Dunleavy, a certified public accountant, has served as Chief Financial Officer for USMD and its predecessors since 2004. He served as Chief Financial Officer for Baylor Heart and Vascular Hospital, LLP from 2001 to 2004 and as Senior Director of Strategic Planning for Sodexho Marriott Services, Inc. from 2000 to 2001.

Richard C. Johnston, M.D. – Dr. Johnston graduated from Texas Tech University School of Medicine in 1975 and completed his Internal Medicine residency in 1978 at Austin Breckenridge Hospital. He has been in private practice in the Dallas/Fort Worth area since 1978, and since 2006 he has served as the President of MCNT. Dr. Johnston served as the first Chief of Staff at Las Colinas Medical Center where he now has a full-time internal medicine practice. In 2004, Dr. Johnston’s group practice combined with MCNT. Dr. Johnston currently is active in the North Texas Healthcare Summit and For The Health of Texas, the goals of which are to improve community health.

Gordon Davis – Mr. Davis, a certified public accountant, has served as the Chief Financial Officer for USMD Hospital Division since 2006. From 1998 to 2006, he was an independent consultant for healthcare companies. Prior to 1998, he served three Dallas area hospitals in various hospital financial managerial roles.

Greg Cardenas – Mr. Cardenas currently serves as Holdings’ Corporate Secretary and General Counsel and serves as Secretary and General Counsel of USMD. Prior to September 1, 2011, Mr. Cardenas served as primary outside legal counsel to both USMD and UANT and their predecessors since 2000. Since 1995, prior to his current position at Holdings, Mr. Cardenas was in private law practice with an emphasis in healthcare transactional, regulatory and compliance matters. Mr. Cardenas received his J.D., magna cum laude, from Texas Tech University School of Law in 1995, and received a B.B.A. in Finance from Texas A&M University in 1986.

Each of the directors and officers of Holdings will hold office until a successor is elected or qualified or until his earlier death, resignation, or removal. There are no family relationships among any of our executive officers and directors.

163

Investor Rights Agreement

Board Composition and Diversity Policies

Holdings has not implemented a formal policy regarding diversity. However, as part of its periodic self-assessment process, the board of directors will determine the diversity of special skills and characteristics necessary for the optimal functioning of the board of directors in its oversight role over both the short-term and long-term periods.

Holdings does not have any specific, minimum qualifications for service on the board of directors. As substantially all of Holdings common stock will be owned by Ventures, the board of directors has determined that it is not necessary for Holdings to have a nominating committee or committee performing similar functions. However, Holdings will seek to have directors with sound business judgment and knowledge in his or her field of expertise. Identified and described below are additional key experiences, qualifications and skills that are important to Holdings’ business and that are considered in the selection of directors, which factors may change from time to time.

•

Industry experience and education. We seek to have directors with relevant education, business expertise and experience as executives, directors, investors, or in other leadership positions in the healthcare industry.

•

Business experience. We believe that we benefit from having directors with a substantial degree of recent business experience.

•

Leadership experience. We believe that directors with experience in significant leadership positions provide us with strategic insights. These directors generally possess a practical understanding of organizations, long-term strategy, risk management and the methods to drive change and growth, as well as the ability to identify and develop these qualities in others.

•

Finance experience. We seek directors with an understanding of finance and financial reporting processes. We use financial measures to evaluate our performance as well as our attainment of financial performance targets. In addition, the board of directors and the audit committee oversee the public disclosures required of us that include financial statements and related information.

Director Independence

Upon the consummation of the Contribution, Ventures will own a substantial majority of Holdings common stock and will be able by itself to elect all of the members of the board of directors of Holdings. In addition, Ventures and Holdings will execute an Investor Rights Agreement that has been negotiated between the parties, Under the Investor Rights Agreement, Holdings anticipates that Ventures will have the right to designate ten directors of Holdings, and Holdings will agree to nominate and support the election of such designees. In the

164

event the Holdings’ board of directors is expanded to include 11 directors, the Investor Rights Agreement will allow Ventures to nominate the initial 11^th director, who will be independent as defined by the SEC rules and the rules of the NASDAQ Capital Market.

Under the rules of the NASDAQ Capital Market, Holdings will be a “controlled company” as a result of the supermajority control of Holdings by Ventures. As a “controlled company,” the Holdings board of directors is not required to have a majority of its members be “independent,” as such term is defined by the listing standards of the NASDAQ Capital Market.

With respect to the Holdings board of directors, Drs. House, Brock, Collini, Dickey, Saalfield and Tran are employees of USMD, UANT and/or MCNT and, accordingly, would not be considered to be “independent.” A seventh director, Dr. Thompson, is not an employee of USMD or UANT; however, he is not considered “independent” due to USMD’s indebtedness to Dr. Thompson incurred in connection with USMD’s 2007 purchase of partnership interests in USL held by Dr. Thompson. The board of directors has determined that the remaining three members, Dr. Cook, Mr. Castleman and Mr. Rudin, are “independent” as such term is defined by the listing standards of the NASDAQ Capital Market.

The board of directors intends to review the independence of each “independent” director annually to confirm that the director continues to meet the independence requirements of the NASDAQ Capital Market for quotation and the rules of the SEC. No member of the board of directors will be considered independent unless the board determines that he or she has no material relationship with Holdings and its subsidiaries (either directly or as a partner, shareholder or officer of an organization that has a relationship with Holdings or its subsidiaries). The board of directors will not determine any director to be “independent” if he or she has or has had any of the relationships set forth in the NASDAQ Capital Market listing rules during the time periods specified in such rules.

Director Compensation

Upon the closing of the Contribution, each director on our board of directors will receive annual compensation for his services as director of $40,000, and will receive compensation of $1,500 for each meeting in which he participates telephonically and $3,000 for each meeting in which he participates in person. In addition, each director is eligible to receive options to purchase up to 25,000 shares of Holdings common stock, but only upon the achievement by Holdings of certain financial performance targets.

The chairman of the board will receive additional annual compensation of $40,000 for his services as chairman. The chairman of the audit committee will receive additional annual compensation of $30,000 for serving as the chairman of the audit committee, and each of the remaining members of the audit committee will receive additional annual compensation of $15,000 for service on the audit committee. While it is expected that the annual compensation to be paid to all directors for their services will be in the form of a cash stipend, the board of directors has authorized the Company to make payment in the form of equity securities of Holdings in the discretion of the chairman of the board.

Until the Contribution is consummated, those directors who currently serve as directors on the USMD board of directors will continue to receive compensation for their services on the USMD board and Breaux Castleman and Gary Rudin, each of whom do not serve on the USMD board of directors, will receive $400 per hour for their services on the Holdings board of directors. In addition, Breaux Castleman will receive a one-time $15,000 stipend for his services to the Audit Committee of the Board between January 1 and the date of the closing of the Contribution, and Charles Cook will receive a one-time $40,000 stipend for his services as Chairman of the Audit Committee of the Board between January 1 and the date of the closing of the Contribution.

In addition, although the terms of such agreements have not yet been finalized, Drs. John House, Steven Brock, Patrick Collini, Russell Dickey, James Saalfield and Khang Tran will receive compensation from USMD Physician Services, a wholly-owned non-profit health organization, for their services as practicing physicians

165

pursuant to a written physician’s employment agreement between each of them and USMD Physician Services that will be executed to be effective as of the closing date of the Contribution.

Board Committees and Governance

The board of directors of Holdings has established an audit committee, comprised of Dr. Cook (chair), Mr. Castleman and Mr. Rudin. The audit committee will recommend to the board of directors the appointment of Holdings’ independent auditors, review and approve the scope of the annual audits of our financial statements, review our internal control over financial reporting, review the findings and recommendations of the regulatory compliance committee, review and approve any non-audit services performed by the independent auditors, review the findings and recommendations of the internal and independent auditors and will periodically review major accounting policies. It operates pursuant to a charter that was adopted by the board of directors and is posted on our corporate website at www.usmdinc.com. The board of directors has determined that Mr. Castleman is qualified as a “financial expert” under the provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC.

As a “controlled company” under the rules of the NASDAQ Capital Market, we are not required to establish a compensation committee and have not done so.

The entire board of directors will be engaged in risk management oversight. At the present time, the board of directors has not established a separate committee to facilitate its risk management oversight responsibilities. The board of directors will continue to monitor and assess whether such a committee would be appropriate. The audit committee will assist the board of directors in its oversight of our risk management and the process established to identify, measure, monitor, and manage risks, in particular major financial risks. The board of directors will receive regular reports from management, as well as from the audit committee, regarding relevant risks and the actions taken by management to adequately address those risks.

Our board leadership structure does not separate the Chairman and Chief Executive Officer roles into two positions. We believe this structure is appropriate given the current ownership structure whereby Ventures owns the controlling majority of our common stock. Our board of directors also believes that the Chief Executive Officer, being responsible for setting our strategic direction, should also preside over the board meetings where such strategic direction is being discussed.

Limitation of Liability of Directors

As permitted by the Delaware General Corporations Law, Holdings’ certificate of incorporation and bylaws provide that a director of the corporation will not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except in certain limited circumstances. Holdings will maintain standard policies of insurance under which coverage is provided, subject to the terms and conditions of such policies: (1) to its directors and officers against loss arising from claims made by reason of breach of duty or other wrongful act; and (2) to Holdings with respect to payments that may be made by it to such officers and directors pursuant to the above indemnification provisions or otherwise as a matter of law.

There is currently no pending litigation or proceeding involving any of Holdings’ directors, officers, employees or agents in which indemnification by us is sought, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

Code of Conduct and Non-Retaliation Policy

The board of directors has adopted a Code of Conduct that applies to its directors, officers (including its chief executive officer, chief financial officer, controller and other persons performing similar functions), and management employees. The Code of Conduct is available on our website at www.usmdinc.com. We intend to post any material amendments or waivers of, our Code of Conduct that apply to our executive officers, on this website. In addition, our Non-Retaliation Policy is available on our website at www.usmdinc.com.

166

HOLDINGS EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid by USMD, UANT, Ventures, MCNT and Impel for the fiscal year ended December 31, 2011 to the persons who will be our chief executive officer and two other most highly compensated executive officers. We refer to these persons as our “named executive officers” elsewhere in this Prospectus.


Name and Principal Position	Year		Salary			Bonus			All Other Compensation			Total
John House, M.D.		2011	$	441,742	(a)	$	100,000	(b)	$	0		$	541,742
Chief Executive Officer

Karen Kennedy		2011	$	315,120	(c)	$	115,000		$	14,400	(d)	$	444,520
Chief Operations Officer

Christopher Dunleavy		2011	$	274,807		$	72,562		$	10,170	(e)	$	357,539
Chief Financial Officer

(a)

This reflects the compensation Dr. House receives as the Chairman of the Board and CEO of USMD. In addition to acting as the CEO of USMD, Dr. House is also a physician partner at UANT. As such, Dr. House receives certain distributions, which are not reflected in the compensation table, from UANT for his services as a physician in UANT’s medical practice. Dr. House receives a base compensation of $180,000 for his services as CEO of USMD and, in addition, is paid an amount equal to any reduction in his share of UANT distributable income resulting from his involvement and time commitments at USMD. This is achieved through a reconciliation at year-end. For 2011, this adjustment was $201,742.

(b)	This reflects bonuses paid for Dr. House’s services as the CEO and Chairman of the Board of USMD.

(c)

This reflects the compensation Ms. Kennedy receives as the Chief Executive Officer of Impel. In addition to acting as the CEO of Impel, Ms. Kennedy is also a member at Impel. As such, Ms. Kennedy receives certain distributions, which are not reflected in the compensation table, from Impel as a result of her ownership of membership interests of Impel.

(d)	Other compensation includes an annual vehicle allowance.

(e)	Other compensation includes amounts related to the discounted redemption of previously earned paid time off back to the company and an allowance for monthly cellular phone usage.

Holdings will enter into a written employment agreement with Karen Kennedy for her role as the Chief Operations Officer of Holdings and the President of the USMD Physician Practice Management Division. The terms of the agreement have not been finalized but the agreement will be effective as of the closing date of the Contribution.

USMD Physician Services will enter into employment agreements with substantially all of the physicians who currently provide professional medical services on behalf of UANT or MCNT. The terms of the physician employment agreements have not yet been finalized but we anticipate that the physicians will receive base compensation based on their production of RVUs. The RVU rate has not yet been established and will be subject to review to ensure the compensation paid is within the range of fair market value for the services provided. We also anticipate that physicians will be eligible to receive quality and performance bonuses, based upon metrics not known at this time but to be agreed upon and subject to regulatory review. The UANT and MCNT physicians are not currently compensated for professional medical services on an RVU basis. However, we believe that the compensation per RVU to be paid to the physicians under these employment agreements will be greater than the compensation they would have received for professional medical services had they been paid based upon their current compensation formulas. See “THE TRANSACTION—Subsequent Transfer of Business Units; Physician Employment Arrangements.”

It has been our goal to design compensation for the named executive officers based on the prevailing market conditions in the Southwestern United States for a company of our size in the healthcare industry. Because our

167

executive compensation structure is keyed to the growth of our business rather than the achievement of short-term performance measures, we do not believe that there are risks arising from our compensation policies and practices that are reasonably likely to have a material adverse effect on our business. In addition, the current percentage ownership of our shares by senior management ensures that their interests are aligned with those of our other shareholders.

Outstanding Equity Awards at Fiscal Year End – 2011

The following table sets forth information regarding equity based awards granted by USMD as of December 31, 2011 to our named executive officers. On the date the Contribution closes, all outstanding stock options granted under the USMD Inc. 2007 Long Term Incentive Plan will be assumed under the USMD Holdings, Inc. 2010 Equity Compensation Plan and deemed to constitute stock options granted under the USMD Holdings, Inc. 2010 Equity Compensation Plan. The exercise price and number of shares issuable under these Holdings options will be determined by use of a conversion formula that is based on the number of shares of USMD common stock outstanding relative to the number of shares of Holdings common stock that will be outstanding upon the Contribution.


Name	Number of Securities Underlying Unexercised Options - (#) Exercisable (1)		Number of Securities Underlying Unexercised Options - (#) Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options		Option Exercise Price		Option Expiration Dated
John House, M.D.		—		—		—		—		—
Chief Executive Officer
Karen Kennedy		—		—		—		—		—
Chief Operations Officer
Christopher Dunleavy		50,000		—		—	$	2.00		1/1/2014
Chief Financial Officer		50,000		—		—	$	3.00		1/1/2015

(1)

Based on the number of shares of USMD common stock outstanding as of December 31, 2011, the USMD options owned by Mr. Dunleavy would have converted into options to purchase 11,792 shares of Holdings common stock, one-half at an exercise price equal to $16.96 per share and the other half at an exercise price equal to $25.44 per share.

Severance and Change of Control Benefits

Karen Kennedy has a change of control severance agreement with Impel. Under this agreement, in the event that, within 24 months after a change of control of Impel, Impel or its successor terminates Ms. Kennedy’s employment without cause or Ms. Kennedy resigns her employment with good reason, she will be entitled to (a) any unpaid salary and other accrued benefits, (b) a payment equal to her annual target bonus amount established under Impel’s annual bonus plan, (c) a payment equal to two times her annual base salary at the time of termination or change of control, whichever is higher, (d) a payment equal to two times her annual target bonus amount under Impel’s annual bonus plan or her actual annual bonus for the preceding year, whichever is higher, (e) payments for continued medical coverage for 24 months, and (f) executive placement services to be paid by Impel or its successor. The merger of Impel into a wholly-owned subsidiary of Ventures meets the definition of change in control under the agreement.

Greg Cardenas has a severance agreement with USMD. Under this agreement, in the event USMD terminates Mr. Cardenas’s employment without cause or Mr. Cardenas resigns his employment with good reason, he will be entitled to any unpaid salary and other accrued benefits and a separation payment. If the termination or resignation occurs within 24 months of the date his employment commenced, Mr. Cardenas is entitled to receive

168

a separation payment equal to either the base salary owed to him from the date of termination to the third anniversary of the date his employment commenced or two year’s base salary, whichever is lower. If the termination or resignation occurs more than 24 months after the date his employment commenced, Mr. Cardenas is entitled to receive a separation payment equal to one year’s base salary.

In addition, we anticipate entering into severance agreements with our other executive officers, including each of the named executive officers. Although these agreements are currently under negotiation, we anticipate that the terms of the agreement will provide that, upon termination of an executive officer’s employment (other than a termination for cause by us or a voluntary termination by the executive officer without good reason) after a change of control transaction, the executive officer would be entitled to an amount equal to his or her annual base compensation at the time of termination. In the case of Dr. House, our chief executive officer and president, the amount he would receive upon termination would be equal to the average base compensation paid to him for serving as chief executive officer over the previous twelve month period. We anticipate the severance agreements will also contain a covenant of confidentiality and nondisclosure from the executive officer and that each executive officer will be required to execute a release of claims as a condition of receiving the severance benefit.

169

TRANSACTIONS WITH RELATED PERSONS

In addition to the director and executive officer compensation arrangements discussed above under “Holdings Executive and Director Compensation,” the following is a description of transactions since January 1, 2008, to which USMD has been a party in which the amount involved exceeded or will exceed $120,000 and in which any of the persons who will serve as our directors, executive officers, beneficial holders of more than 5% of our capital stock, or entities affiliated with them, had or will have a direct or indirect material interest.

USMD is indebted to John House, M.D. (our Chairman, President and Chief Executive Officer) and Paul Thompson, M.D. (a member of our board of directors) in connection with the 2007 redemption of their partnership interests in U.S. Lithotripsy L.P. The highest amounts of indebtedness under these notes during the period from January 1, 2010 through December 31, 2011 were $4,435,165 to Dr. House and $2,220,075 to Dr. Thompson, and the note balances as of December 31, 2011 were $4,206,474 to Dr. House and $2,105,601 to Dr. Thompson. The notes are payable in equal monthly payments of principal and interest (9% per annum) through December 31, 2021. Principal paid during 2011 was $248,564 and $124,422, respectively, to Dr. House and $140,290 and $92,263, respectively, to Dr. Thompson. Interest paid during 2011 was $390,866 and $195,653, respectively, to Dr. House and $208,498 and $147,793, respectively, to Dr. Thompson.

170

BENEFICIAL OWNERSHIP OF HOLDINGS STOCK

The following table sets forth information known to Holdings with respect to the beneficial ownership of its common stock on a pro forma basis giving effect to the Contribution, unless otherwise noted, by:

•

each shareholder known to Holdings that will own beneficially more than 5% of Holdings common stock upon consummation of the Contribution;

•

each of the directors currently serving and each individual who will serve on Holdings’ board of directors upon consummation of the Contribution;

•

each of Holdings’ current executive officers and each individual who will serve as an executive officer of Holdings upon consummation of the Contribution; and

•

all individuals who will serve as directors and executive officers of Holdings upon consummation of the Contribution, as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. Shares of common stock relating to options, warrants or convertible securities currently exercisable, or exercisable within 60 days of the assumed projected closing date of the Contribution are deemed outstanding for computing the percentage of the person beneficially owning such securities but are not deemed outstanding for computing the percentage of any other person.

As more particularly described under “THE TRANSACTION—Transaction Consideration and Adjustments,” the allocation among the holders of the 10,000,000 shares of common stock to be issued pursuant to the Contribution is subject to various closing adjustments. For purposes of the table below, we have assumed that Ventures will distribute approximately 535,000 of the 9,275,000 shares we estimate that it will receive as a result of the Contribution to its partners, and will hold the remaining 8,740,000 shares of Holdings common stock, and that the USMD shareholders who are contributing directly to Holdings will receive approximately 725,000 shares of Holdings common stock. Except as otherwise indicated, each person or entity named in the table has sole voting and investment power with respect to all shares of our capital stock shown as beneficially owned, subject to applicable community property laws.


Name and Address of Beneficial Owner (1)	Shares Beneficially Owned (2)		Percentage Ownership
5% or more beneficial owners:
UANT Ventures, L.L.P. (3)		8,818,228		87.19	%
John House, M.D.(4)		780,583		7.78	%
Directors (excluding Dr. House):
Steven Brock, M.D.		31,231		0.31	%
Breaux Castleman		—		—
Patrick Collini, M.D. (5)		130,480		1.30	%
Charles Cook, M.D.		109,772		1.09	%
Russell Dickey, M.D.		42,893		0.43	%
Gary Rudin		—		—
James Saalfield, M.D. (6)		135,531		1.35	%
Paul Thompson, M.D.		430,974		4.29	%
Khang Tran, M.D.		20,345		0.20	%
Named Executive Officers (excluding Dr. House):
Karen Kennedy		12,596		0.13	%
Christopher Dunleavy (7)		96,907		0.97	%
Executive officers and directors as a group (12 persons) (8)		1,791,112		17.82	%

(1)	Unless otherwise noted, the address of each person listed is 6333 North State Highway 161, Suite 200, Irving, Texas 75038.

171

(2)	Includes for each executive officer or director who is a partner of Ventures their pecuniary interest in the shares and options owned by Ventures.

(3)	Includes 77,524 shares of Holdings common stock issuable upon Ventures’ exercise of the options it will receive from Holdings pursuant to the Contribution Agreement that are exercisable within 60 days.

(4)

As the managing partner of Ventures, Dr. House may be deemed to beneficially own all of the shares of common stock beneficially owned by it. Dr. House disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. Includes 1,971 shares of Holdings common stock issuable upon exercise by Ventures of the options it will receive from Holdings pursuant to the Contribution Agreement that are exercisable within 60 days.

(5)	Includes 1,971 shares of Holdings common stock issuable upon exercise by Ventures of the options it will receive from Holdings pursuant to the Contribution Agreement that are exercisable within 60 days.

(6)	Includes 1,971 shares of Holdings common stock issuable upon exercise of outstanding stock options exercisable within 60 days.

(7)	Includes 11,791 shares of Holdings common stock issuable upon exercise of outstanding stock options exercisable within 60 days.

(8)	Includes 17,704 shares of Holdings common stock issuable upon exercise of outstanding stock options exercisable within 60 days.

172

DESCRIPTION OF HOLDINGS CAPITAL STOCK

Certain provisions of Holdings’ certificate of incorporation and bylaws are summarized or referred to below. The summaries do not purport to be complete, do not relate to or give effect to the provisions of statutory or common law, and are qualified in their entirety by express reference to Holdings’ certificate of incorporation and bylaws.

General

Holdings’ authorized capital stock as stated in Holdings’ certificate of incorporation, as amended, consists of 49,000,000 shares of common stock, $.01 par value per share, and 1,000,000 shares of preferred stock, $0.01 par value per share.

Common Stock

As of December 31, 2011, there were 37,300 shares of Holdings common stock issued and outstanding. We expect to issue approximately 10,040,000 shares of common stock and have approximately 640 shareholders upon the consummation of the Contribution. The holders of shares of common stock have no subscription, redemption, sinking fund or conversion rights. In addition, the holders of shares of common stock have no preemptive rights to maintain their percentage of ownership in future offerings or sales of Holdings’ stock. The holders of shares of common stock have no cumulative voting rights and have one vote per share in all elections of directors and on all other matters submitted to a vote of Holdings’ shareholders. Subject to the rights of holders of preferred stock, holders of common stock are entitled to receive dividends, as and when declared by the Holdings board of directors out of funds legally available to pay dividends. Upon liquidation, dissolution or winding up of Holdings’ affairs and after distribution to holders of preferred stock, if any, the remaining assets of Holdings available for distribution will be distributed among the holders of common stock ratably in proportion to the numbers of shares of common stock held by them. The shares of common stock currently outstanding are fully paid and nonassessable.

Preferred Stock

The board of directors, may issue from time to time up to 1,000,000 shares of preferred stock in one or more classes or series, to establish the number of shares to be included in any of these series and to fix the designations, powers, preferences and rights of the shares of each of these classes or series and any qualifications, limitations or restrictions thereof, including dividend rights and preferences over dividends on the common stock, conversion rights, voting rights, redemption rights, the terms of any sinking fund and rights upon liquidation.

Dividend Policy

Holdings does not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of the board of directors, subject to applicable laws and compliance with certain covenants under applicable bank agreements which restrict or limit our ability to pay dividends, and will depend on Holdings’ consolidated financial condition, results of operations, capital requirements, general business conditions and other factors that the board of directors may deem relevant.

Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws

Our certificate of incorporation and our bylaws contain certain provisions that could have the effect of delaying, deterring or preventing another party from acquiring control of us. These provisions and certain provisions of Delaware law, which are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking

173

to acquire control of us to negotiate first with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate more favorable terms with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us.

Undesignated Preferred Stock. As discussed above, our board of directors has the ability to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of our company.

Requirements for Advance Notification of Shareholder Nominations and Proposals. Our bylaws establish advance notice procedures with respect to shareholder proposals and the nomination by shareholders of candidates for election as directors. These provisions may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

No Cumulative Voting. Our certificate of incorporation and bylaws do not permit cumulative voting in the election of directors. Cumulative voting allows a shareholder to vote a portion or all of its shares for one or more candidates for seats on the board of directors. Without cumulative voting, a minority shareholder may not be able to gain as many seats on our board of directors as the shareholder would be able to gain if cumulative voting were permitted. The absence of cumulative voting makes it more difficult for a minority shareholder to gain a seat on our board of directors to influence our board’s decision regarding a takeover.

Delaware Anti-Takeover Statute. We are subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested shareholder for a period of three years following the date the person became an interested shareholder unless:

•

prior to the date of the transaction, our board of directors approved either the business combination or the transaction which resulted in the shareholder becoming an interested shareholder;

•

upon completion of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, calculated as provided under Section 203; or

•

at or subsequent to the date of the transaction, the business combination is approved by our board of directors and authorized at an annual or special meeting of shareholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested shareholder.

Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested shareholder. An interested shareholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested shareholder status, did own 15% or more of a corporation’s outstanding voting stock. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that Section 203 may also discourage attempts that might result in a premium over the market price for the shares of common stock held by shareholders.

The provisions of Delaware law and the provisions of our certificate of incorporation and bylaws, as amended upon the closing of the Contribution, could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they might also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions might also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that shareholders might otherwise deem to be in their best interests.

174

Transfer Agent and Registrar

The transfer agent and registrar for our common stock will be Computershare Trust Company, N.A. The transfer agent’s address is 250 Royall Street, Canton, Massachusetts 02021, and its telephone number is 781-575-2000.

Listing

We have applied to have our common stock listed on the NASDAQ Capital Market under the symbol “USMD.”

175

COMPARISON OF RIGHTS OF HOLDERS OF USMD COMMON STOCK AND HOLDINGS COMMON STOCK

The rights of USMD shareholders are governed by USMD’s Certificate of Formation (“USMD’s Certificate of Formation”) and the Bylaws of USMD (“USMD’s Bylaws”), each as amended, restated, supplemented or otherwise modified from time to time, and the laws of the State of Texas, and specifically the TBOC. The rights of Holdings shareholders are governed by Holdings’ Certificate of Incorporation (“Holdings’ Certificate of Incorporation”) and the Bylaws of Holdings (“Holdings’ Bylaws”), each as amended, restated, supplemented or otherwise modified from time to time, and the laws of the State of Delaware, and specifically the Delaware General Corporation Law (the “DGCL”).

After the Contribution, all of the USMD shareholders (except for certain USMD shareholders who are making a deemed contribution to Ventures) will become shareholders of Holdings and accordingly their rights will be governed by Holdings’ Certificate of Incorporation and the Holdings Bylaws, each as amended, restated, supplemented or otherwise modified from time to time, and the laws of the State of Delaware. While the rights and privileges of USMD shareholders are, in many instances, comparable to those of the shareholders of Holdings, there are some differences. The following is a summary of the material differences as of the date of this Prospectus between the rights of the USMD shareholders and Holdings shareholders. These differences arise from differences between the respective charter documents and bylaws of USMD and Holdings, and the differences between the TBOC and the DGCL.

The following discussion of these differences is only a summary of the material differences and does not purport to be a complete description of all the differences. Please consult the TBOC, DGCL and the respective governing documents, each as amended, restated, supplemented or otherwise modified from time to time, of USMD and Holdings for a more complete understanding of these differences.

Authorized Capital Stock

USMD. TBOC requires that a corporation’s certificate of formation set forth the aggregate number of shares the corporation is authorized to issue and, if the corporation is authorized to issue only one class of shares, the par value of each share. If a corporation is authorized to issue more than one class or series of shares, the certificate of formation must state the designation, aggregate number of shares, par value of each share (or a statement that the share is without par value) and the preferences, limitations and relative rights of the shares of each class or series of shares. Although the TBOC does not allow the certificate of formation to grant the board of directors with the right to establish classes of shares without shareholder approval, it does grant the board of directors the right to establish series of shares. In such instances, the certificate of formation should also state any authority granted to the board of directors to establish a series of shares and to set and determine the preferences, limitations and relative rights.

The authorized capital stock of USMD is 50,000,000 shares of common stock, par value $0.01 per share. As of December 31, 2011, 29,707,912 shares of USMD common stock were issued and outstanding and 1,757,500 shares of USMD common stock were subject to issued and outstanding options under the USMD Inc. 2007 Long Term Incentive Plan. USMD’s Certificate of Formation authorizes only one class of common stock and the board of directors does not have the authority to establish any series of shares.

Holdings. DGCL requires that a corporation’s certificate of incorporation set forth the total number of shares of all classes of capital stock, the number of shares of each class, the par value of each class (or a statement that the class of shares is without par value). The certificate of incorporation must state the designation and the powers, preferences and rights and qualifications, limitations and restrictions of the shares. DGCL also permits a corporation’s certificate of incorporation to allow its board of directors to issue, without shareholder approval, classes or series of stock and to designate the voting powers, preferences, rights and qualifications, limitations or restrictions for such class or series.

176

The authorized capital stock of Holdings is 50,000,000 shares, of which 1,000,000 shares are designated as preferred stock with a par value of $0.01, and 49,000,000 shares are designated as common stock with a par value of $0.01. As of December 31, 2011, there were 37,300 shares of Holdings common stock were issued and outstanding. Holdings’ Certificate of Incorporation grants the Holdings’ board of directors the power to issue preferred stock and to designate the voting powers, preferences, rights, qualifications, limitations and restrictions on the preferred stock. See “Terms of Holdings Common Stock” for a summary of the rights, preferences, privileges and restrictions of Holdings common stock.

Dividends/Distributions

USMD. Under the TBOC, the board of directors of a corporation may authorize a distribution to the shareholders. The distribution amount cannot exceed the amount of the corporation’s surplus (defined as the difference of total assets less total liabilities less stated capital) and cannot render the corporation insolvent after the distribution. USMD’s Bylaws expressly grant the board of directors the authority to authorize a distribution.

Holdings. Under the DGCL, the board of directors may declare and pay dividends upon shares of its capital stock out of its surplus (defined as the difference of total assets less total liabilities less stated capital) or net profits (if there is no surplus). Holdings’ Certificate of Incorporation provides that the board of directors, in establishing a class or series of preferred stock, is authorized to fix the dividend rate, if any, for such class or series. The Certificate of Incorporation also empowers the board of directors to declare and pay dividends to the holders of Holdings common stock out of the funds legally available for the payment of dividends.

Board of Directors

Number of Directors

USMD. The TBOC provides that a corporation must have at least one director and that the number of directors shall be fixed by or in the manner provided in the corporation’s charter or bylaws. USMD’s Bylaws provide that the board of directors shall consist of not less than one, nor more than seven directors, who do not need to be shareholders or residents of the State of Texas. The number of directors may be increased or decreased by the affirmative vote of a majority of the directors. There are currently five directors serving on USMD’s board of directors.

Holdings. The DGCL provides that a corporation must have at least one director and that the number of directors shall be fixed by or in the manner provided in the corporation’s charter or bylaws. The Holdings Bylaws provide that the board of directors shall consist of such number of directors, not less than one nor more than 12, as may be determined from time to time by resolution of the board of directors. The number of directors of Holdings is currently fixed at seven.

Classification of Board of Directors

USMD. Under the TBOC, a corporation’s charter or bylaws may provide for a classified board. The statute provides that all or some of the board of directors be divided into two or three classes. Each class will have the same or a similar number of directors as each other class and each class will have staggered terms of office. USMD does not have a classified board of directors and each director is elected annually to serve a one year term.

Holdings. Under the DGCL, a corporation’s certificate of incorporation or bylaws may provide that the board of directors may be divided into two or three classes and have staggered terms of office. Holdings does not have a classified board of directors and each director is elected annually to serve a one year term.

177

Vacancies on the Board of Directors

USMD. Under the TBOC, a director vacancy may be filled by the affirmative vote of the majority of the remaining directors (even if less than a quorum) or by shareholders at an annual or special meeting. Additionally, under TBOC, a directorship to be filled by reason of an increase in the number of directors may be filled by the shareholders (at an annual or special meeting) or by the board of directors for a term of office continuing only until the next election of one or more directors by the shareholders. However, the board of directors may not fill more than two such vacancies during the period between any two successive annual meetings of shareholders. USMD’s Bylaws provide that vacancies may be filled by the vote of a majority of the remaining directors, even is less than a quorum. Any director elected to fill a vacancy will be elected for the unexpired term of his predecessor in office. Any vacancy created by reason of a increase in the number of directors will be filled by the vote of a majority of directors, election at an annual or special meeting of the shareholders, provided that the board of directors may fill no more than two such vacancies during the period between any two successive annual meetings of shareholders.

Holdings. The DGCL provides that vacancies and newly created directorships resulting from a resignation or any increase in the authorized number of directors to be elected by the shareholders having the right to vote as a single class may be filled by a majority of the directors then in office or by a sole remaining director, unless the certificate of incorporation or the bylaws of a corporation provide otherwise. Under the Holdings’ Bylaws, vacancies, including vacancies resulting from an increase in the number of directors, may be filled by the majority vote of the remaining directors, though less than a quorum, or by a sole remaining director. Each director so elected will serve until the next election of directors.

Removal of Directors

USMD. Under the TBOC, except as otherwise provided by the charter or bylaws, at any meeting of shareholders called expressly for that purpose, the holders of a majority of the shares then entitled to vote may vote to remove any director or the entire board of directors, with or without cause. USMD’s Bylaws provide that any director may be removed, with or without cause, at any annual or special meeting of shareholders by the affirmative vote of a majority of the number of shares of shareholders present in person or by proxy at such meeting and entitled to vote for the election of such director.

Holdings. Under the DGCL, any or all of the directors of a corporation with an unclassified board may be removed from office by the holders of a majority of the shares then entitled to vote at an election of directors. Holdings Bylaws provide that the entire board, or any individual director, may be removed from office by the vote of the shareholders entitled to vote on such removal, without assigning cause.

Voting Rights

Voting Rights Generally

USMD. The TBOC provides that, unless a corporation’s certificate of formation specify otherwise: the holders of a majority of the shares entitled to vote at a shareholder meeting that are present or represented by proxy will constitute a quorum for the shareholder meeting; in all manners other than election of directors or unless as otherwise specified in the TBOC, the affirmative vote of the holders of the majority of shares entitled to vote, and who voted for, against, or expressly abstained with respect to, the matter at a shareholder meeting at which a quorum is present will be an act of the shareholders; and directors will be elected by a plurality of the votes cast by holders of shares entitled to vote in the election at a shareholder meeting in which a quorum is present.

USMD’s Certificate of Formation and Bylaws provide the holders of a majority of the shares issued and outstanding and entitled to vote at a shareholder meeting, present in person or represented by proxy, will constitute a quorum for the transaction of business. With respect to any matter other than the election of directors

178

or unless otherwise specified in the TBOC, the affirmative vote of the holders of a majority of the shares entitled to vote on that matter and represented in person or by proxy at a shareholder meeting at which a quorum is present will be an act of the shareholders. Unless otherwise provided in a written agreement of shareholders, the directors will be elected by a plurality of the votes cast by the holders of shares entitled to vote in the election of directors at a shareholder meeting in which a quorum is present.

Holdings. The DGCL states that, unless a corporation’s certificate of incorporation or bylaws specify otherwise: each share of its capital stock is entitled to one vote; a majority of voting power of the shares entitled to vote, present in person or represented by proxy, will constitute a quorum at a shareholder meeting; in all manners other than election of directors, the affirmative vote of the majority of the voting power of the shares, present in person or represented by proxy at the meeting and entitled to vote on the subject matter, will be an act of the shareholders; and directors will be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.

Holdings’ Certificate of Incorporation and Holdings Bylaws provide that, except as provided by the board of directors with respect to any class or series of preferred stock, the entire voting power and all voting rights is vested exclusively in the common stock. Each holder of shares of common stock is entitled to one vote for each share standing in his name on the Holdings’ corporate books. The Holdings Bylaws provide that the presence, in person or represented by proxy, of holders of shares having a majority of the voting power represented by all issued and outstanding shares entitled to vote at the meeting will be a quorum at a shareholder meeting. Further, the Holdings Bylaws provide that the vote of holders of a majority of the shares entitled to vote, present in person or represented by proxy at such meeting, will decide any matter brought before such meeting, other than the election of directors or as otherwise specified in the DGCL. Directors will be elected by a plurality of the votes cast by the holders of shares entitled to vote in an election of directors at a meeting of shareholders at which a quorum is present. Each shareholder will be entitled to cast a vote for each share having voting power held by such shareholder.

Cumulative Voting

USMD. Under the TBOC, a corporation’s charter may permit shareholders to cumulate their votes for directors. USMD’s Certificate of Formation does not provide for cumulative voting and each shareholder is entitled to one vote per share.

Holdings. Under the DGCL, a corporation’s charter may permit shareholders to cumulate their votes for directors. Holdings’ Certificate of Incorporation does not provide for cumulative voting for directors. Except as provided by the Holdings board of directors with respect to any class of series of preferred stock, the entire voting power and al voting rights are vested exclusively in the common stock. Each holder of common stock is entitled to one vote per share.

Voting on Business Combinations

USMD. The TBOC requires the affirmative vote of the holders of at least two-thirds of the shares entitled to vote to approve a merger, share exchanges or conversions, or the sale of all or substantially all of the corporation’s assets, except in certain specific situations. Mergers, share exchanges or conversions, and asset sales of or by USMD are governed in accordance with the TBOC.

Holdings. Under the DGCL, except for certain specific situations, a plan of merger, share exchange or transaction involving a sale, lease exchange or other disposition of all or substantially all of a corporation’s property, must be approved by a majority of all outstanding shares entitled to vote on the transaction. Plans of merger, stock exchanges and assets sales of or by Holdings are governed in accordance with the DGCL.

179

Shareholder Actions

Shareholder Action by Written Consent

USMD. Under the TBOC, shareholders can take action without holding a meeting, providing notice, or taking a vote if each shareholder entitled to vote on the action signs a written consent to such action or, if the corporation’s certificate of formation so provides, shareholders can take action without holding a meeting, providing notice, or taking a vote if the shareholders having at least the minimum number of votes that would be necessary to take such action at a meeting at which holders of all shares entitled to vote on the action were present and voted. USMD’s Certificate of Formation does not provide for shareholder actions by less than unanimous consent and, consequently, actions taken by written consent must be consented to by all of the shareholders.

Holdings. Under the DGCL, any action that may be taken at a meeting of shareholder may be taken without a meeting, without prior notice and without a vote, if the holders of the outstanding stock having not less than the minimum number of votes that would be required to take such action at a shareholder meeting consent in writing. A corporation can modify this statutory default in its certificate of incorporation. Holdings’ Certificate of Incorporation does not modify the statutory default and shareholders are empowered to act by written consent as set forth in the DGCL.

Special Meetings of Shareholders

USMD. Under the TBOC, special meetings of the shareholders may be called by the board of directors, the President or others permitted by the certificate of formation or bylaws or by holders of the percentage shares specified in the certificate of formation (provided that this percentage must be at least 10% but not greater than 50%). USMD’s Certificate of Formation does not specify any persons who have the power to call a special meeting and does not empower for the shareholders to call a special meeting, therefore, only the board of directors and the president of USMD have the power to call a special meeting of shareholders.

Holdings. The DGCL permits special meetings of shareholders to be called by the board of directors and such other persons, including shareholders, as the certificate of incorporation or bylaws may provide. Holdings’ Bylaws provide that special meetings of the shareholders may be called by the chairman of the board of directors, a majority of the board of directors, the president or at the request in writing of the shareholders owning a majority of the amount of the entire capital stock of Holdings issued and outstanding and entitled to vote.

Advance Notice Requirements of Shareholder Nominations and Proposals

USMD. USMD’s Bylaws do not contain any specific provisions relating to the introduction of business as annual or special meetings by shareholders.

Holdings. Holdings’ Bylaws provide that shareholders may bring business, including shareholder proposals and director nominations, before an annual meeting if the shareholder has given timely written notice to the corporation of the business to be brought. To be considered timely, the shareholder’s notice must be addressed to Holdings’ secretary and must be received by the corporation at its principal executive offices not less than 120 calendar days prior to the anniversary date on which Holdings first mailed its proxy materials for the immediately preceding annual meeting or, if the annual meeting is not within 30 calendar days of anniversary of last year’s annual meeting, not less than 10 calendar days following the date on which the public announcement of the date of the meeting. The notice must contain, in reasonable detail, a description of the business desired to be brought before the annual meeting, among other things. If the notice is to recommend a person to be considered as a potential nominee for election as director, the shareholder must provide information regarding the director nominee and such nominee’s signed consent.

180

Rights of Dissenting Shareholders

USMD. For a summary of the rights of dissenting shareholders under the TBOC and for the rights of dissenting shareholders outlined in USMD’s charter documents, see the section entitled “The Special Meeting of USMD Shareholders – Appraisal Rights.”

Holdings. The DGCL provides that appraisal rights are available to dissenting shareholders in connection with certain mergers or consolidations. However, unless a corporation’s certificate of incorporation otherwise provides, the DGCL does not provide for appraisal rights if: (1) the shares of the corporation are (a) listed on a national securities exchange or (b) held of record by more than 2,000 shareholders; or (2) the corporation is the surviving corporation and no vote of its shareholders is required for the merger. However, notwithstanding the foregoing, the DGCL provides that appraisal rights will be available to the shareholders of a corporation if the shareholders are required by the terms of a merger agreement to accept for such stock anything except: (i) shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; (ii) shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders; (iii) cash in lieu of fractional shares or fractional depository receipts; or (iv) any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts as described above. The DGCL does not provide appraisal rights to shareholders with respect to the sale of all or substantially all of a corporation’s assets or an amendment to a corporation’s certificate of incorporation, although a corporation’s certificate of incorporation may so provide. The DGCL provides, among other procedural requirements for the exercise of the appraisal rights, that a shareholder’s written demand for appraisal of shares must be received before the taking of the vote on the matter giving rise to appraisal rights, when the matter is voted on at a meeting of shareholders. The appraisal rights of Holdings shareholders are governed in accordance with the DGCL.

Amendment of Charter Documents

Amendment to Certificate of Formation

USMD. Under the TBOC, an amendment a corporation’s certificate of formation must be approved by the affirmative vote of the holders of at least two-thirds of the outstanding shares entitled to vote on the amendment, unless the certification of formation provides for a different vote requirement. Holders of the outstanding shares of a class or series are entitled to vote as a separate class, and must separately approve the amendment by the affirmative vote of the holders of at least two-thirds of the outstanding shares of the class or series, if the amendment would: increase or decrease the number of authorized shares or the par value of the shares of a series or class; exchange, reclassify or cancel all or part of the shares of the class or series; exchange (or create a right of exchange) all or part of the shares of another class or series into the shares of the class or series; change the designations, preferences, limitations or relative rights of the shares of the class or series; change the shares of the class or series into the same or a different number of shares of the same class or series or another class or series; create a new class or series of shares with, or increase the rights and preference of a class or series with current rights and preferences inferior to the class or series to have, rights and preferences equal or superior to the class or series; divide the shares of the class into series and set and determine the designation of the series and the variations in the relative rights and preferences between the series; limit or deny existing preemptive or cumulative voting rights of the class or series; cancel or modify the dividends of the class or series that have accrued but have not been declared; or modify the certificate of formation to include or delete any provisions required or permitted in the charter of a close corporation. USMD’s Certificate of Formation does not contain any modifying the statutory requirements to amend the Certificate of Formation and the USMD Certificate of Formation may be amended as provided under by the TBOC.

Holdings. Under the DGCL, an amendment to the corporation’s certificate of incorporation must be approved by the affirmative vote of the holders of a majority of the outstanding stock entitled to vote on the amendment. If the amendment would increase or decrease the aggregate authorized shares or par value of a class

181

or series or adversely alter or change the powers, preferences or rights of the class or series, then the amendment must be also approved by the affirmative vote of the holders of a majority of the outstanding stock of the class or series, unless, in the case of an increase or decrease in the number of authorized shares of the class, the certificate of incorporation provides that no such class vote is required. Holdings’ Certificate of Incorporation reserves the corporation’s right to amend or repeal any provision contained in the certification of incorporation, in the manner prescribed by statute, and all of rights conferred upon shareholders by the certificate of incorporation are subject to this reservation.

Amendment of Bylaws

USMD. Under the TBOC, the board of directors may amend or repeal the bylaws, or adopt new bylaws, without shareholder approval, unless the corporation’s certificate of formation or the TBOC reserves such power exclusively to the corporation’s shareholders or, in amending, repealing or adopting a specific bylaw, the shareholders expressly provide that the board of directors cannot amend, repeal or readopt that bylaw. USMD’s Bylaws provide that the shareholders or the board of directors may amend or repeal the bylaws or may adopt new bylaws.

Holdings. The DGCL provides that the shareholders entitled to vote have the power to adopt, amend or repeal bylaws of a corporation. The corporation’s certificate of incorporation can give the board of directors the power to adopt, amend or repeal the bylaws but cannot eliminate those rights of the shareholders. Holdings’ Bylaws provide that the shareholders, or the board of directors if provided in the certification of incorporation, may alter, amend or repeal the bylaws or may adopt new bylaws. Holdings’ Certificate of Incorporation does empower the board of directors to adopt, amend or repeal the Bylaws.

Limitation of Liability of Directors and Officers

USMD. Under the TBOC, a certificate of formation may provide that a director is not liable, or is liable only to the extent provided in the certificate of formation, to the corporation or its shareholders for monetary damages for an act or omission by the person if such person’s capacity as a director, except to the extent the person is found liable under applicable law for: a breach in that person’s duty of loyalty to the corporation or its shareholders; an act or omission not in good faith that constitutes a breach of the duty of the person to the corporation or involves intentional misconduct or a knowing violation of the law; a transaction from which the person received improper benefit; or an act or omission for which the liability of the governing person is expressly provided by applicable statute. USMD’s Certificate of Formation does not contain any provisions limiting the liability of its directors.

Holdings. Under the DGCL, a certificate of incorporation may eliminate or limit the personal liability of a director to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, provided that those provisions cannot eliminate or limit the director’s liability for: breach of director’s duty of loyalty to the corporation and its shareholders; acts and omissions not in good faith or which involve intentional misconduct or knowing violation of law; liability arising from the unlawful payment of a dividend, stock purchase or stock redemption; or for any transaction from which the director derived an improper personal benefit. Holdings’ Certificate of Incorporation limits the directors’ liability for breach of his fiduciary duty to the corporation or its shareholders to the fullest extent permitted by the DGCL.

Indemnification of Directors and Officers

USMD. The TBOC permits a corporation to indemnify any director or officer who is a party to a legal proceeding because he is a director of the corporation against claims and expenses actually incurred by him in connection with the proceeding; provided, however, that the director conducted himself in good faith; reasonably believed that his conduct was in the best interests of the corporation; and, in the case of a criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful. The TBOC also provides that a corporation is required to indemnify any director or officer of the corporation who is a party to a legal proceeding

182

by reason of his services to the corporation if the director or officer is successful on the merits or otherwise in the defense of such proceeding. In addition, under the TBOC, a corporation may purchase and maintain, on behalf of its directors and officers, insurance with respect to any liability asserted against or incurred by such persons, whether or not the corporation would have the power under applicable law to indemnify such persons. The TBOC permits a corporation to indemnify a director for reasonable expenses actually incurred by the director in connection with the proceeding if the director has not been found liable to the corporation or to have received an improper personal benefit. Additionally, the TBOC permits a corporation to pay reasonable expenses of a director in advance of the final disposition of a proceeding for which indemnification may be provided if certain conditions are met. The TBOC allows a corporation to indemnify and advance expenses to its officers, employees and other agents to the same extent that it allows a corporation to indemnify and advance expenses to directors. USMD’s Certificate of Formation and Bylaws authorize indemnification of officers, directors, employees and agents to the fullest extent authorized or permitted by applicable law.

Holdings. The DGCL empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, employee or agent of the corporation against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The DGCL also empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification may be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Anti-Takeover Provisions

USMD. The TBOC provides that a corporation with 100 or more shareholders may not engage in certain business combinations, including mergers and asset sales, with a person who holds 20% or more of a corporation’s voting shares (an “affiliated shareholder”) for a period of three years from the date such person became an affiliated shareholder, unless the board of directors has prior approved the business combination or transaction in which the shareholder became an affiliated shareholder or the business combination was approved by the affirmative vote of at two-thirds of the corporations’ outstanding voting stock not owned by the affiliated shareholder. A corporation may elect to opt out of these provisions. USMD has not made such an election.

Holdings. Section 203 of the DGCL provides generally that any person who acquires 15% or more of a corporation’s voting stock (thereby becoming an “interested shareholder”) may not engage in a wide range of “business combinations” with the corporation for a period of three years following the time the person became an interested shareholder, unless: (1) the board of directors has prior approved the business combination or transaction in which the shareholder became an interested shareholder; (2) upon completion of the transaction, the interested shareholder owned at least 85% of the voting stock outstanding; or (3) after the transaction, the business combination was approved by the board of directors and by the affirmative vote of at least two-thirds of the corporations’ outstanding voting stock not owned by the interested shareholder. These restrictions do not apply if the corporation’s certificate of incorporation expressly opts out of Section 203. Holdings has not adopted provisions to its certificate of incorporation to opt out of Section 203 and Holdings will be governed by Section 203.

183

LEGAL MATTERS

Hallett & Perrin, P.C., Dallas, Texas will provide USMD and Ventures with opinions as to the legal matters in connection with the securities Holdings is offering and certain tax matters in connection with the Contribution.

EXPERTS

The audited financial statements of USMD Holdings, Inc., USMD Inc. and its subsidiaries, and of Urology Associates of North Texas, L.L.P. and its subsidiaries included in this Prospectus and elsewhere in the registration statement have been so included in reliance up on the reports of Grant Thornton LLP, independent registered public accountants, upon the authority of said firm as experts in giving said reports.

The combined financial statements of MCNT and Impel and subsidiaries set forth in this registration statement as of December 31, 2011 and for the two years then ended have been audited by BKD, LLP, independent registered public accounting firm, as set forth in their report thereon, included herein. Such financial statements are set forth herein in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

SHAREHOLDER PROPOSALS FOR THE 2013 ANNUAL MEETING

Shareholder proposals that are intended to be presented at Holdings’ 2013 Annual Meeting must have been received no later than [ ]. In order to be properly presented, any such proposal must meet all the other requirements as specified in the Holdings Bylaws. In addition, the proxy solicited by the board of directors for the 2013 Annual Meeting will confer discretionary authority to vote on any shareholder proposal presented at that meeting, unless we receive notice of such proposal on or before [ ].

184

INDEX TO USMD HOLDINGS, INC.’s FINANCIAL STATEMENTS

USMD HOLDINGS, INC. FINANCIAL STATEMENTS



Report of Independent Registered Public Accounting Firm			F-2

Balance Sheet as of December 31, 2011			F-3

Statement of Operations for the year ended December 31, 2011			F-4

Statement of Stockholders’ Deficit for the year ended December 31, 2011			F-5

Statement of Cash Flows for the year ended December 31, 2011			F-6

Notes to the Financial Statements			F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

USMD Holdings, Inc.

We have audited the accompanying balance sheet of USMD Holdings, Inc. (the “Company”) as of December 31, 2011, and the related statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2011. 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 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. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit 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, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of USMD Holdings, Inc. as of December 31, 2011, and the results of its operations and its cash flows for the year ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

/s/ Grant Thornton LLP

Dallas, Texas

March 30, 2012

F-2

USMD HOLDINGS, INC.

BALANCE SHEET

(In thousands, except share data)


	December 31, 2011
ASSETS
Current assets:
Income tax receivable	$	44

Total current assets		44
Deferred tax asset, noncurrent		62

Total assets	$	106

LIABILITIES AND EQUITY
Current liabilities:
Due to related party	$	81
Accrued liabilities		44

Total current liabilities		125

Total liabilities		125

Commitments and contingencies

Stockholders’ deficit:
Common stock, $0.01 par value, 49,000,000 shares authorized; 37,900 shares issued and outstanding at December 31, 2011		—
Additional paid-in capital		178
Accumulated deficit		(197	)

Total stockholders’ deficit		(19	)

Total liabilities and stockholders’ deficit	$	106

See accompanying notes to financial statements.

F-3

USMD HOLDINGS, INC.

STATEMENT OF OPERATIONS

(In thousands, except share and per share data)


	Year Ended December 31, 2011
Revenue:
Net operating revenue	$	—
Operating expenses:
Share-based payment expense		178
Other operating expenses		125

Total operating expenses		303

Loss from operations		(303	)

Loss before benefit for income taxes		(303	)
Income tax benefit		106

Net loss	$	(197	)

Net loss per common share:
Basic	$	(5.28	)
Diluted	$	(5.28	)

Weighted average common shares outstanding:
Basic		37,300
Diluted		37,300

See accompanying notes to financial statements.

F-4

USMD HOLDINGS, INC.

STATEMENT OF STOCKHOLDERS’ DEFICIT

(In thousands)


	Common Stock				Additional
	Shares Outstanding		Par Value $ 0.01		Paid-in Capital		Accumulated Deficit			Total Defecit
Balance at January 1, 2011		—	$	—	$	—	$	—			—
Net loss		—		—		—		(197	)		(197	)
Share-based payment expense		37		—		178		—			178

Balance at December 31, 2011		37	$	—	$	178	$	(197	)	$	(19	)

See accompanying notes to financial statements.

F-5

USMD HOLDINGS, INC.

STATEMENT OF CASH FLOWS

(In thousands)


	Year Ended December 31, 2011
Cash flows from operating activities:
Net loss	$	(197	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based payment expense		178
Deferred income tax benefit		(62	)
Change in operating assets and liabilities:
Income tax receivable		(44	)
Accounts payable and accrued liabilities		125

Net cash used in operating activities		—
Cash flows from investing activities:
Net cash used in investing activities		—

Cash flows from financing activities:
Net cash used in financing activities		—

Net increase in cash and cash equivalents		—
Cash and cash equivalents at beginning of year		—

Cash and cash equivalents at end of year	$	—

See accompanying notes to financial statements.

F-6

USMD HOLDINGS, INC.

Notes to Financial Statements

December 31, 2011

Note 1 – Description of Business and Basis of Presentation

USMD Holdings, Inc. (“Holdings”) is a Delaware corporation formed on May 7, 2010 to facilitate the business combination of USMD Inc., a Texas corporation (“USMD”), Urology Associates of North Texas, LLP, a Texas limited liability partnership (“UANT”), and UANT Ventures, L.L.P., a Texas limited liability partnership (“Ventures”). Holdings was a dormant company with limited activity until July 2011. On August 19, 2010, Holdings, USMD, Ventures and UANT entered into a Contribution and Purchase Agreement (such agreement, the “Original Contribution Agreement,” and such transaction, the “Contribution”). Immediately prior to the Contribution, a subsidiary of Ventures would merge with and into UANT, resulting in UANT’s becoming a wholly-owned subsidiary of Ventures, and certain of the USMD shareholders will contribute all or a portion of their shares of USMD common stock to Ventures in order to become partners in Ventures. When the Contribution is consummated, Ventures would contribute its assets, which would include its equity interests in USMD and UANT, and the USMD shareholders who continue to own shares of USMD common stock, would contribute those USMD shares to Holdings in exchange for shares of Holdings common stock. Holdings described the Contribution in its Registration Statement on Form S-4 filed with the Securities and Exchange Commission (the “SEC”) on December 23, 2010 (File No. 333-171386) and declared effective by the SEC on July 25, 2011. On August 23, 2011, the shareholders of USMD and the partners of Ventures voted on and approved the Original Contribution Agreement.

On December 1, 2011 and December 15, 2011, Ventures and Holdings entered into definitive agreements (the “Merger Agreements”) with The Medical Clinic of North Texas, P.A., a Texas professional association (“MCNT”) and Impel Management Services, L.L.C., a Texas limited liability company (“Impel”), respectively. The Merger Agreements provide that subsidiaries of Ventures will merge with and into each of MCNT and Impel (the “Mergers”) as part of the Contribution, resulting in each of MCNT and Impel becoming wholly-owned subsidiaries of Ventures. In exchange for their equity interests in MCNT and Impel, the owners of MCNT and Impel will receive partnership interests in Ventures.

As a result of these Merger Agreements, on February 9, 2012, Holdings, USMD, UANT and Ventures entered into an amendment to the Original Contribution Agreement (the “Amendment”) to reflect, among other changes, that Ventures will contribute to Holdings in addition to its equity interests in USMD and UANT, its equity interests in MCNT and Impel as part of the Contribution. Holdings expects the Contribution to close in mid-2012.

Holdings’ financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Note 2 – Summary of Significant Accounting Policies

Share-Based Payments to Non-Employees: Holdings measures share-based payments to nonemployee suppliers of goods and services based on the fair value of goods or services received or the equity instruments granted, whichever is more reliably determinable. Holdings measures the fair value of the equity instruments issued to a nonemployee on the earlier of: (1) the performance commitment date, or (2) the date the services required under the arrangement have been completed. Prior to the final measurement date, Holdings measures share-based payments at their then-current fair values at each interim financial reporting date.

Income Taxes: Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary 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

F-7

USMD HOLDINGS, INC.

Notes to Financial Statements-(Continued)

December 31, 2011

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 based on all available evidence, both positive and negative, and the weight of that evidence to the extent such evidence can be objectively verified, management determines it is more likely than not that all or a portion of the deferred tax assets may not be realized. Primary factors considered include historical earnings, estimates of current and expected future earnings, availability, or lack thereof, of taxable income in prior carryback periods that would limit realization of tax benefits, prudent and feasible tax planning strategies and current and future ownership changes.

Management considers many factors when evaluating Holdings’ uncertain tax positions, and such judgments are subject to periodic review. Tax benefits associated with uncertain tax positions are recognized in the period in which one of the following conditions is satisfied: (1) the more likely than not recognition threshold is satisfied; (2) the position is ultimately settled through negotiation or litigation; or (3) the statute of limitations for the taxing authority to examine and challenge the position has expired. Tax benefits associated with an uncertain tax position are derecognized in the period in which the more likely than not recognition threshold is no longer satisfied. Holdings’ policy is to record interest and penalties related to income tax matters as income tax expense.

The determination and evaluation of Holdings’ provision for income taxes and analysis of uncertain tax positions items requires significant judgment and knowledge of federal and state income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and, if necessary, any valuation allowances that may be required for deferred tax assets. While Holdings believes it has adequately provided for its income tax receivables or liabilities and deferred tax assets or liabilities in accordance with applicable income tax guidance, adverse determinations by taxing authorities or changes in tax laws and regulations could have a material adverse effect Holdings’ financial condition, results of operations or cash flows.

Use of Estimates: The preparation of financial statements requires management to make estimates and certain assumptions that affect the reported amounts of assets and liabilities, disclosed contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include the fair value of share-based payments. While management believes current estimates are reasonable and appropriate, actual results could differ from these estimates.

Recently Issued or Adopted Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2011-04, Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). The FASB’s primary objective was to collaborate with the International Accounting Standards Board to develop common requirements for measuring fair value and disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Standards. ASU 2011-04 (i) expands and enhances disclosures about fair value measurements and (ii) clarifies the FASB’s intent about the application of existing fair value measurement requirements in certain circumstances. Public companies are required to adopt the provisions of ASU 2011-04 on a prospective basis during interim and annual periods beginning after December 15, 2011. Holdings adopted this guidance effective January 1, 2012. There was no impact to Holdings’ financial position, results of operations or cash flows upon adoption of this guidance.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220)—Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 eliminates the option to present components of other

F-8

USMD HOLDINGS, INC.

Notes to Financial Statements-(Continued)

December 31, 2011

comprehensive income as part of the statement of changes in stockholders’ equity. Instead, ASU 2011-05 requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. While the options for presenting other comprehensive income change under the guidance, other portions of the current guidance will not change. ASU 2011-05 is required to be applied retrospectively and is effective for public companies for fiscal years beginning after December 15, 2011, and interim periods within those fiscal years. Early adoption is permitted. Holding’s adopted this guidance effective with its reporting as of and for the three and nine months ended September 30, 2011. There was no impact to Holding’s financial position, results of operations or cash flows upon adoption of this guidance. In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (“ASU 2011-12”). ASU 2011-12 deferred the guidance on whether to require entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement where net income is presented and the statement where other comprehensive income is presented for both interim and annual financial statements. ASU 2011-12 reinstated the requirements for the presentation of reclassifications that were in place prior to the issuance of ASU 2011-05 and did not change the effective date for ASU 2011-05. Holdings adopted ASU 2011-012 upon issuance. There was no impact to Holdings’ financial position, results of operations or cash flows upon adoption of this guidance.

In July 2011, the FASB issued ASU No. 2011-07, Health Care Entities (Topic 954): Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities (“ASU 2011-07”). In accordance with ASU 2011-07, Holdings will be required to present its provision for doubtful accounts related to patient service revenue as a deduction from revenue, similar to contractual discounts. Accordingly, Holdings’ patient service revenues will be reported net of both contractual discounts as well as its provision for doubtful accounts related to patient service revenues. Additionally, ASU 2011-07 will require Holdings to make certain additional disclosures designed to help users understand how contractual discounts and bad debts affect recorded revenue in both interim and annual financial statements. ASU 2011-07 requires retrospective application and is effective for public companies for fiscal years beginning after December 15, 2011, and interim periods within those fiscal years. The ASU permits early adoption. Holdings adopted ASU 2011-07 effective January 1, 2012 and there was no impact on Holdings’ financial position, results of operations or cash flows.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”), which permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value before applying the two-step quantitative goodwill impairment model that is currently in place. If it is determined through the qualitative assessment that a reporting unit’s fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing companies to go directly to the quantitative assessment. This update is effective for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2011. Holdings adopted ASU 2011-08 effective January 1, 2012 and there was no impact on Holdings’ financial position, results of operations or cash flows. Holdings does not believe that adoption will have a material impact on its goodwill impairment testing or results therefrom, financial statements or notes thereto.

Holdings believes the Accounting Pronouncements noted above will be applicable to the Company after the consummation of the Contribution. Holdings does not believe any other recently issued, not yet effective, accounting standards will have a material effect on its financial position, results of operations, or cash flows.

F-9

USMD HOLDINGS, INC.

Notes to Financial Statements-(Continued)

December 31, 2011

Note 3 – Share-Based Payment

Pursuant to its 2010 Equity Compensation Plan (“2010 Plan”), Holdings may grant equity awards to officers, key employees, nonemployee directors and nonemployee service providers in the form of stock options, restricted stock and stock appreciation rights. The terms of the 2010 Plan provide for the reservation of up to 1,000,000 shares of common stock for issuance under the 2010 Plan, including a maximum of 900,000 shares issued pursuant to stock options and 100,000 shares issued pursuant to restricted stock and stock appreciation rights. At December 31, 2011, Holdings had reserved 962,100 shares for grant under the 2010 Plan.

In July 2011, in accordance with the 2010 Plan, Holdings awarded 100 restricted shares of its common stock to each of 389 employees of USMD and UANT. The restrictions lapse upon the earlier of the completion of the Contribution described in Holdings’ post-effective amendment to its Registration Statement on Form S-4 or the second anniversary date of the award. Until the restrictions lapse, the shares cannot be sold, assigned, pledged or otherwise transferred, voluntarily or involuntarily and are subject to forfeiture upon termination of employment.

At December 31, 2011, in accordance with FASB Accounting Standards Codification (“ASC”) 505-50, Holdings determined the total current lowest aggregate fair value of the restricted shares to be $0.8 million. The per-share fair value is based on the estimated fair value of Holdings as calculated in the valuation prepared as of December 31, 2011 and as discussed in the associated fairness opinion and Holdings’ post-effective amendment to its Registration Statement on Form S-4. At each reporting period until the restrictions lapse, Holdings will remeasure the awards at their then-current lowest aggregate fair value and recognize the requisite amortized share-based payment expense. Holdings recorded stock compensation expense of $0.2 million through December 31, 2011 related to this issuance, which is included in share-based payment expense on the statement of operations. The fairness opinion contemplates the successful completion of the Contribution as described in the post-effective amendment to the Form S-4 and accompanying prospectus. If the Contribution does not close or otherwise fails to occur, the estimated fair value of the restricted common shares is likely zero. The valuation and accompanying fairness opinion do not take into account any subsequent changes in the results of operations or financial condition of the underlying business entities; however, Holdings does not believe the fair value of the shares has materially changed from that date. Information regarding nonvested restricted common share activity for the year ended December 31, 2011 is as follows:


Nonvested Restricted Common Shares	Number of Shares			Weighted- Average Grant- Date Fair Value
Outstanding as of January 1, 2011		—
Granted		38,900		$	14.19
Vested		—
Forfeited		(1,600	)		14.19
Expired		—

Outstanding as of December 31, 2011		37,300			14.19

Because nonemployees hold the restricted common shares, the fair value of the restricted common shares and resulting share-based payment expense fluctuate with the estimated or actual market price of Holdings’ common shares. The grant-date fair value of the restricted common shares was based on the estimated fair value of Holdings as calculated in the valuation prepared as of December 31, 2010 and as discussed in the associated fairness opinion and Holdings’ Registration Statement on Form S-4 . As a result of modifications to the Contribution described in Holdings’ post-effective amendment to its Registration Statement on Form S-4 , the

F-10

USMD HOLDINGS, INC.

Notes to Financial Statements-(Continued)

December 31, 2011

estimated fair value of Holdings’ common shares increased to $24.29 at December 31, 2011. As of December 31, 2011, at a fair value of $24.29, the maximum amount of share-based payment expense related to nonvested restricted common shares that Holdings will have to recognize over the remaining 19 month term is $0.6 million.

Note 4 – Income Taxes

Significant components of the income tax benefit are as follows (in thousands):


	Year Ended December 31, 2011
Current:
Federal	$	44
State		—

Total current		44

Deferred:
Federal		62
State		—

Total deferred		62

Income tax benefit	$	106

A reconciliation of the actual tax rate to the statutory U.S. tax rate is as follows:


	Year Ended December 31, 2011
Federal statutory rate		35.0	%
State income taxes, net of federal benefit		—

Effective tax rate for income from operations		35.0	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts reported for income tax purposes at the enacted tax rates in effect when the differences reverse. The components of deferred tax assets and liabilities are as follows (in thousands):


	Year Ended December 31, 2011
Deferred tax assets:
Share-based payment	$	62

Total deferred tax assets	$	62

Holdings has performed an evaluation and concluded that there are no significant uncertain tax positions requiring recognition in Holdings’ financial statements. The evaluation was performed for the tax years that remain subject to examination by major tax jurisdictions as of December 31, 2011, which includes the 2011 tax year.

F-11

USMD HOLDINGS, INC.

Notes to Financial Statements-(Continued)

December 31, 2011

Note 5 – Loss per Share

Basic loss per share is based on the weighted-average number of common shares outstanding and diluted loss per share is based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. The following table presents a reconciliation of the numerators and denominators of basic and diluted loss per share and the computation of basic and diluted loss per share attributable to Holdings (in thousands, except share and per share data):


	Year Ended December 31, 2011
Numerator:
Net loss attributable to Holdings	$	(197	)

Denominator:
Weighted-average common shares outstanding		—
Effect of potentially dilutive securities:
Restricted common shares		37,300

Weighted-average common shares outstanding assuming dilution		37,300

Loss per share attributable to Holdings
Basic	$	(5.28	)
Diluted	$	(5.28	)

The only shares issued and outstanding are the restricted common shares, which include a continued service vesting requirement resulting in contingently issuable shares. As of December 31, 2011, 16 holders of Holdings’ restricted common shares had terminated employment with USMD or UANT, reducing contingently the amount of issuable common shares from 38,900 to 37,300.

Note 6 – Commitments and Contingencies

Shareholder and Partner Votes and Commitment to Enter into a Businesses Combination

As discussed in Note 1, on August 23, 2011, the shareholders of USMD and the partners of UANT and Ventures voted on and approved the Contribution transaction described in Holdings’ Form S-4 registration statement and accompanying prospectus. Holdings expects to close the Contribution in mid 2012, subject to the satisfaction of certain closing conditions. In addition, in December 2011, Ventures and Holdings entered into Merger Agreements with MCNT and Impel. On February 10, 2012, Holdings filed a post-effective amendment to its Form S-4 registration statement describing the transaction.

Note 7 – Related Party Transactions

USMD currently pays for Holdings’ expenses, which are recorded on Holdings’ balance sheet as due to related party. These expenses consist of expenses associated with the preparation and filing of periodic reports and the post-effective amendment to Form S-4 with the SEC. If the Contribution fails to occur, it is unlikely Holdings will have the ability to pay amounts due. At December 31, 2011, $81,000 is due to USMD Inc. and is recorded in related party payables on Holdings balance sheet.

F-12

INDEX TO USMD INC.’s FINANCIAL STATEMENTS

USMD INC. CONSOLIDATED FINANCIAL STATEMENTS



Report of Independent Registered Public Accounting Firm			F-14

Consolidated Balance Sheets as of December 31, 2011 and 2010			F-15

Consolidated Statements of Operations for the years ended December 31, 2011 and 2010			F-16

Consolidated Statements of Comprehensive Income			F-17

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2011 and 2010			F-18

Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010			F-19

Notes to the Consolidated Financial Statements			F-20

F-13

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

USMD Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of USMD Inc. and Subsidiaries (collectively the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2011. 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 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. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit 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, 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 financial statements referred to above present fairly, in all material respects, the financial position of USMD Inc. and Subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

/s/ Grant Thornton LLP

Dallas, Texas

March 30, 2012

F-14

USMD INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	December 31,
	2011			2010
ASSETS
Current assets:
Cash and cash equivalents	$	10,822		$	7,477
Accounts receivable, net of allowance for doubtful accounts of $428 and $393 at December 31, 2011 and 2010, respectively		3,624			2,917
Affiliate accounts receivable		1,174			1,694
Deferred tax assets, current		116			168
Prepaid expenses and other current assets		235			143

Total current assets		15,971			12,399
Property and equipment, net		3,070			2,219
Investments in nonconsolidated affiliates		11,930			11,682
Goodwill		8,335			9,804
Intangible assets, net		306			343
Deferred tax assets, less current portion		808			445

Total assets	$	40,420		$	36,892

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	243		$	404
Accrued payroll		1,534			1,459
Other accrued liabilities		2,742			1,765
Other current liabilities		278			—
Current portion of long-term debt		886			234
Current portion of related party long-term debt		469			429
Current portion of capital lease obligations		239			229

Total current liabilities		6,391			4,520
Other long-term liabilities		1,057			—
Long-term debt, less current portion		—			883
Related party long-term debt, less current portion		6,789			7,258
Capital lease obligations, less current portion		821			1,092
Deferred tax liabilities		3,914			5,011

Total liabilities		18,972			18,764

Commitments and contingencies

Equity:
USMD Inc. stockholders’ equity:
Common stock, $0.01 par value, 50,000,000 shares authorized; 30,982,196 shares issued and 29,707,912 shares outstanding at December 31, 2011 and 2010		310			310
Additional paid-in capital		7,404			6,825
Retained earnings		10,571			7,913
Accumulated other comprehensive loss		(19	)		—
Treasury stock at cost, 1,274,284 shares at December 31, 2011 and 2010		(1,184	)		(1,184	)

Total USMD Inc. stockholders’ equity		17,082			13,864
Noncontrolling interests in subsidiaries		4,366			4,264

Total equity		21,448			18,128

Total liabilities and equity	$	40,420		$	36,892

See accompanying notes to condensed consolidated financial statements.

F-15

USMD INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


	Years Ended December 31,
	2011			2010
Revenue:
Management services revenue	$	23,211		$	19,795
Lithotripsy revenue		21,975			20,845
Net patient service revenue		—			14,896
Other operating revenue		3,690			497

Net operating revenue		48,876			56,033

Operating expenses:
Salaries, wages and employee benefits		20,208			21,546
Medical supplies and services expense		376			5,072
Provision for doubtful accounts		35			1,760
Other operating expenses		8,660			8,778
Depreciation and amortization		916			1,943
Goodwill impairment		—			690

Total operating expenses		30,195			39,789

Income from operations		18,681			16,244
Other income (expense):
Interest income (expense), net		(846	)		(2,079	)
Equity in income of nonconsolidated affiliates		1,715			1,424
Impairment of investments in nonconsolidated affiliates		(758	)		(4,585	)
Other income (expense), net		—			12,433

Total other income (expense)		111			7,193

Income before provision for income taxes		18,792			23,437
Provision for income taxes		(2,838	)		(4,449	)

Net income		15,954			18,988
Less: net income attributable to noncontrolling interests		(13,296	)		(11,563	)

Net income attributable to USMD Inc	$	2,658		$	7,425

Earnings per share attributable to USMD Inc.
Basic	$	0.09		$	0.25
Diluted	$	0.09		$	0.25

Weighted average common shares outstanding
Basic		29,708			29,708
Diluted		29,777			29,776

See accompanying notes to condensed consolidated financial statements.

F-16

USMD INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)


	Years Ended December 31,
	2011			2010
Net income	$	15,954		$	18,988
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax benefit of $10		(19	)		—
Unrealized loss on interest rate swap		—			(22	)
Elimination of accumulated unrealized loss on interest rate swap due to deconsolidation of USMD Arlington and USMD Fort Worth		—			245

Total other comprehensive income (loss)		(19	)		223

Comprehensive income		15,935			19,211
Less: comprehensive income attributable to noncontrolling interests		(13,296	)		(11,563	)

Comprehensive income attributable to USMD Inc. common stockholders	$	2,639		$	7,648

See accompanying notes to condensed consolidated financial statements.

F-17

USMD INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)


	USMD Inc. Common Stockholders’
	Common Stock											Treasury Stock
	Shares Outstanding		Par Value		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Shares		Cost			Total USMD Inc.			Noncontrolling Interests in Subsidiaries			Total Equity
Balance at December 31, 2009		30,982	$	310	$	6,224	$	(223	)	$	488		1,274	$	(1,184	)	$	5,615		$	18,524		$	24,139
Net income		—		—		—		—			7,425		—		—			7,425			11,563			18,988
Unrealized loss on interest rate swap		—		—		—		(22	)		—		—		—			(22	)		(90	)		(112	)
Stock compensation expense		—		—		601		—			—		—		—			601			—			601
Elimination of unrealized loss on interest rate swap due to deconsolidation		—		—		—		245			—		—		—			245			(245	)		—
Effect of deconsolidation of subsidiaries		—		—		—		—			—		—		—			—			(13,257	)		(13,257	)
Capital contributions from noncontrolling interests		—		—		—		—			—		—		—			—			750			750
Distributions to noncontrolling interests		—		—		—		—			—		—		—			—			(12,981	)		(12,981	)

Balance at December 31, 2010		30,982		310		6,825		—			7,913		1,274		(1,184	)		13,864			4,264			18,128
Net income		—		—		—		—			2,658		—		—			2,658			13,296			15,954
Foreign currency translation adjustments, net of tax		—		—		—		(19	)		—		—		—			(19	)		—			(19	)
Stock compensation expense		—		—		579		—			—		—		—			579			—			579
Capital contributions from noncontrolling interests		—		—		—		—			—		—		—			—			157			157
Distributions to noncontrolling interests		—		—		—		—			—		—		—			—			(13,351	)		(13,351	)

Balance at December 31, 2011		30,982	$	310	$	7,404	$	(19	)	$	10,571		1,274	$	(1,184	)	$	17,082		$	4,366		$	21,448

See accompanying notes to condensed consolidated financial statements.

F-18

USMD INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Years Ended December 31,
	2011			2010
Cash flows from operating activities:
Net income	$	15,954		$	18,988
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts		35			1,760
Depreciation and amortization		916			1,943
Gain on deconsolidation of subsidiaries		—			(12,425	)
Unrealized loss on interest rate swap		—			493
Gain on sale of assets		(86	)		(8	)
Equity in earnings of nonconsolidated affiliates		(1,715	)		(1,424	)
Distributions from nonconsolidated affiliates		1,020			710
Stock compensation expense		579			601
Impairment on investments and goodwill		758			5,275
Deferred income tax provision (benefit)		71			2,547
Change in operating assets and liabilities:
Restricted cash		—			24
Accounts receivable		(222	)		(367	)
Prepaid expenses and other assets		(92	)		410
Accounts payable		(161	)		185
Accrued liabilities		1,052			1,509

Net cash provided by operating activities		18,109			20,221

Cash flows from investing activities:
Capital expenditures		(395	)		(68	)
Proceeds from sale of assets		86			—
Investments in nonconsolidated affiliates		(340	)		(260	)
Decrease in cash due to deconsolidation of subsidiaries		—			(4,790	)

Net cash used in investing activities		(649	)		(5,118	)

Cash flows from financing activities:
Repayments of long-term debt and capital lease obligations		(492	)		(2,949	)
Repayments of related party long-term debt		(429	)		(436	)
Capital contributions from noncontrolling interests		157			750
Distributions to noncontrolling interests		(13,351	)		(12,981	)

Net cash used in financing activities		(14,115	)		(15,616	)

Net increase (decrease) in cash and cash equivalents		3,345			(513	)
Cash and cash equivalents at beginning of year		7,477			7,990

Cash and cash equivalents at end of year	$	10,822		$	7,477

Supplemental information:
Cash paid during the year for:
Interest, net of related parties	$	168		$	904
Interest to related parties		674			721
Income tax		3,635			939
Noncash transactions:
Assets acquired under capital lease obligations and other long-term liabilities	$	1,335		$	1,347

See accompanying notes to condensed consolidated financial statements.

F-19

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Note 1 – Description of Business

USMD Inc. and its wholly-owned subsidiaries (“USMD” or the “Company”) provide finance, revenue cycle, centralized business office, clinical, operational and business development services, or a selection of these management services to healthcare providers. USMD owns and operates three healthcare management subsidiaries– Mat-RX Development, L.L.C. (“USMD Hospital Division”), USMD Cancer Treatment Centers, L.L.C. (“USMD CTC Division’) and U.S. Lithotripsy, L.P. (“USMD Lithotripsy Division”) –that were formed principally to establish, invest in or acquire, operate and/or manage acute-care hospitals, cancer treatment centers and lithotripsy service providers. USMD is a holding company that owns, either directly or through a wholly-owned subsidiary, 100% of the following subsidiaries:

•

USMD Hospital Division is a healthcare management services company that has a beneficial partnership interest of 5% in USMD Hospital at Arlington, L.P., a Texas limited partnership (“USMD Arlington”) which owns a general acute care hospital in Arlington, Texas. USMD Hospital Division also has a beneficial partnership interest of 20% in USMD Hospital at Fort Worth, L.P., a Texas limited partnership (“USMD Fort Worth”) which owns a general acute care hospital in Fort Worth, Texas. USMD Hospital Division beneficially owns 100% of the equity interests of the general partners of both of these partnerships and manages their hospital operations pursuant to long-term contractual management agreements. Effective March 1, 2010, Texas Health Resources (“THR”), a large non-profit health system in North Texas, purchased a 26% limited partnership interest in USMD Arlington from limited partners other than USMD, bringing its partnership interest in USMD Arlington to 51%. In addition, THR purchased an initial 51% limited partnership interest in USMD Fort Worth from partners other than USMD. USMD’s partnership interests in both hospital partnerships were unaffected. THR also obtained additional governing rights in the amended partnership agreements for the two partnerships. As a result, effective March 1, 2010, USMD determined that it no longer controlled these two partnerships and therefore no longer consolidates their assets, liabilities and results of operations. Since USMD does maintain significant influence over these two partnerships, it began using the equity method of accounting effective March 1, 2010.

•

USMD CTC Division is a healthcare management services company formed to develop, invest in, operate and/or manage cancer treatment centers providing radiotherapy solutions to advance cancer care. As of December 31, 2011, USMD CTC Division had six contractual agreements under which it provided management services to eight operational cancer treatment centers located in Texas, Florida, Missouri and Arizona.

•

USMD Lithotripsy Division is a healthcare management services partnership formed to establish, invest in, operate and/or manage joint venture entities that provide lithotripsy services to hospitals, ambulatory surgery centers, and/or physician offices. As of December 31, 2011, USMD Lithotripsy Division provided management services to two lithotripsy service providers, and served as the general partner, managing member or limited partner in 20 other active lithotripsy service providers, primarily located in the South Central United States. The balance sheets and results of operations of the entities for which USMD served as the general partner are included in USMD’s consolidated financial statements.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation: The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the accounts of USMD Inc., its wholly-owned subsidiaries, entities more than 50% owned and

F-20

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

other limited partnerships controlled by the Company. The Company consolidates limited partnerships in situations where it is the general partner and the limited partners do not have sufficient rights to overcome the general partner’s presumption of control. The Company eliminates all significant intercompany accounts and transactions in consolidation.

The Company uses the equity method to account for investments in entities it does not control, but has the ability to exercise significant influence over operating and financial policies. Consolidated net income attributable to USMD includes the Company’s share of the net earnings of these entities.

The Company uses the cost method to account for investments in entities it does not control and for which it does not have the ability to exercise significant influence over operating and financial policies. In accordance with the cost method, the Company records these investments at the lower of cost or fair value, as appropriate.

Concentrations and Credit Risk: Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents and accounts receivable. Deposits held with financial institutions often exceed federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents.

Accounts receivable are stated at net realizable value and are uncollateralized. At December 31, 2011 and 2010, USMD Arlington and USMD Fort Worth accounted for 76% and 69% of affiliate accounts receivable, respectively. For the year ended December 31, 2011, USMD Arlington and USMD Fort Worth accounted for 22% and 9%, respectively, of net operating revenue. After deconsolidation and for the ten months ended December 31, 2010, USMD Arlington and USMD Fort Worth accounted for 24% and 9%, respectively, of net operating revenue.

Cash and Cash Equivalents: Cash equivalents include highly liquid investments with maturities of three months or less when purchased. Cash and cash equivalents consist primarily of bank deposit accounts.

Allowance for Doubtful Accounts: The allowance for doubtful accounts is based on management’s assessment of the collectability of customer accounts. The Company regularly reviews this allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances and current economic conditions that may affect a customer’s ability to pay. Uncollectible accounts are written off once collection efforts are exhausted. A summary of the Company’s accounts receivable allowance for doubtful accounts activity is as follows (in thousands):


	Balance at Beginning of Year		Provision for Doubtful Accounts		Write-offs			Effect of Deeconsolidation of Subsidiaries			Balance at End of Year
For the years ended December 31,
2011	$	393		35		—			—		$	428
2010	$	4,740		1,760		(1,965	)		(4,142	)	$	393

F-21

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

Property and Equipment, Net: Property and equipment are recorded at cost and depreciated over the estimated useful lives of the assets using the straight-line method. Leasehold improvements are depreciated over the lease term or the asset life, whichever is shorter. Routine maintenance and repairs are charged to operating expense as incurred. Expenditures that increase capacities or extend useful lives are capitalized. Upon sale or retirement, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the consolidated statement of operations. At December 31, 2011, estimated useful lives of assets are as follows:


Major movable equipment			3-10 years
Furniture and equipment			3-10 years
Leasehold improvements			6 years
Software			5 years

Impairment of Long-Lived Assets and Other Intangible Assets: The Company evaluates its long-lived assets (excluding goodwill) and identifiable acquired intangible assets with finite useful lives for possible impairment whenever circumstances indicate that the carrying amount of the asset, or related group of assets, may not be recoverable from estimated future undiscounted cash flows. An impairment loss is recognized when the carrying amount of the asset or group of assets exceeds the respective fair value. Fair value of assets is estimated based on appraisals, established market values of comparable assets or internal estimates of discounted future cash flows. The Company’s estimates of future cash flows are based on assumptions and projections it believes to be reasonable and supportable. No impairment charges were required during the fiscal years ended December 31, 2011 and 2010.

Goodwill and Other Intangible Assets: Goodwill represents the excess of the purchase price and related costs over the fair value of net tangible and identifiable intangible assets acquired in business combinations. Goodwill is not subject to amortization, but is tested for impairment on an annual basis, or more frequently if circumstances indicate a potential impairment. Such circumstances may include an adverse change in the business climate or a change in the assessment of future operations of a reporting unit. Goodwill is tested for impairment at a reporting unit level. Goodwill impairment reviews are determined using a two-step process. The first step of the process requires a comparison of the fair value of each reporting unit that has goodwill associated with its operations and its carrying amount. If the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not impaired. If the carrying amount exceeds the estimated fair value, impairment is indicated. An impairment loss would be recorded if the carrying amount of goodwill exceeds its implied fair value. Implied fair value is the excess of the fair value of the reporting unit over the fair value of all recognized and unrecognized assets and liabilities. The Company performed its annual goodwill impairment evaluation as of December 31, 2011 and no impairment was deemed necessary.

The Company amortizes the cost of intangible assets with finite useful lives over their respective estimated useful lives to their estimated residual value. At December 31, 2011, none of the Company’s finite useful lived intangible assets have an estimated residual value.

Interest Rate Swaps: From time to time, the company may enter into interest rate swap agreements. Interest rate swaps are recorded on the consolidated balance sheet and measured at fair value regardless of the purpose or intent for holding them. The accounting for changes in the fair value of a swap depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, whether it is a hedging or trading swap. Changes in the fair value of interest rate swaps held by the Company that qualify as cash flow hedges are included in other comprehensive income (loss) and reclassified into earnings in the period in which the hedged transaction affects earnings. Changes in the fair value of interest rate swaps held by the Company which do not

F-22

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

qualify as part of a hedging relationship are recorded in current period earnings. The Company’s policy is to not hold or issue swaps or derivatives for trading purposes.

Revenue Recognition: The Company earns management services revenue through the provision of management services to its managed entities. Management fee revenues are recognized based on a defined percentage of cash collections or adjusted net revenues of the Company’s managed entities. These terms and percentages are contractually defined and the Company recognizes revenue when the contractual terms and revenue recognition criteria are met. The Company may also provide certain managed entities with management, medical professional, information technology, revenue cycle and/or other finance staff. Revenue for these services is included in management services revenue and is recognized as the services are provided and revenue recognition criteria are met.

The Company provides lithotripsy services to hospitals and other medical facilities in the geographic service areas where the Company owns, operates, and manages lithotripsy service providers. Lithotripsy revenue is recognized as services are provided and reported based on actual contract price or estimated net realizable amounts.

In 2011, other operating revenue includes revenue from a fee to terminate a management agreement between USMD CTC Division and a managed entity. In 2010, other operating revenue includes miscellaneous operating revenue of USMD Arlington and USMD Fort Worth prior to deconsolidation. Other operating revenue is generally recognized as contractual terms are met or as services are provided.

During 2010, net patient service revenue was recognized as services were provided and reported at the estimated net realizable amounts due from patients, third-party payers, and others. There was no patient services revenue during 2011.

Stock-Based Compensation: Stock-based payments to employees, including grants of employee stock options, are recognized in the financial statements based on their estimated grant-date fair value and amortized on a straight-line basis over the vesting period.

Management considers many factors when evaluating the Company’s uncertain tax positions, and such judgments are subject to periodic review. Tax benefits associated with uncertain tax positions are recognized in the period in which one of the following conditions is satisfied: (1) the more likely than not recognition threshold

F-23

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

is satisfied; (2) the position is ultimately settled through negotiation or litigation; or (3) the statute of limitations for the taxing authority to examine and challenge the position has expired. Tax benefits associated with an uncertain tax position are derecognized in the period in which the more likely than not recognition threshold is no longer satisfied. The Company’s policy is to record interest and penalties related to income tax matters as income tax expense.

The determination and evaluation of the Company’s provision for income taxes and analysis of uncertain tax positions items requires significant judgment and knowledge of federal and state income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and, if necessary, any valuation allowances that may be required for deferred tax assets. While the Company believes it has adequately provided for its income tax receivables or liabilities and deferred tax assets or liabilities in accordance with applicable income tax guidance, adverse determinations by taxing authorities or changes in tax laws and regulations could have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

Translation of Foreign Currencies: The financial statements of the Company’s foreign affiliate in Mexico 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 as a component of accumulated other comprehensive income (loss).

Fair Value Measurements: Fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The basis for these assumptions establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

•

Level 1 – Observable inputs such as quoted prices in active markets;

•

Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

•

Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of three valuation techniques. The three valuation techniques are as follows:

•

Market approach – Prices and other market-related information involving identical or comparable assets or liabilities;

•

Cost approach – Amount that would be required to replace the service capacity of an asset (i.e., replacement cost); and

•

Income approach – Techniques to convert future amounts to a single present amount based on market expectations (including present value techniques, option pricing models and lattice models).

Investments in Nonconsolidated Affiliates: Investments in entities the Company does not control but in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee are accounted for under the equity method. Equity method investments are recorded at original cost and adjusted periodically to recognize the Company’s proportionate share of the investees’ net income or losses after the date of investment, additional contributions made, dividends or distributions received, and impairment

F-24

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

losses resulting from adjustments to net realizable value. The Company records equity method losses in excess of the carrying amount of an investment when the Company guarantees obligations or is otherwise committed to provide further financial support to the affiliate. The Company uses the cost method to account for equity investments for which the equity securities do not have readily determinable fair values and for which the Company does not have the ability to exercise significant influence. Under the cost method of accounting, equity investments are carried at cost and are adjusted only for other-than-temporary declines in fair value, additional investments, or distributions deemed to be a return of capital.

Noncontrolling Interests in Subsidiaries: The consolidated financial statements include all assets, liabilities, revenues, and expenses of less-than-100%-owned affiliates that the Company controls. Accordingly, the Company has recorded noncontrolling interests in the earnings and equity of such entities. The Company records adjustments to controlling interests for the allocable portion of income or loss to which the noncontrolling interests’ holders are entitled based upon the portion of the subsidiaries they own. Contributions from and distributions to holders of noncontrolling interests are adjusted to the respective noncontrolling interests holders’ balance.

Advertising Expense: The Company expenses all advertising costs when incurred. The Company incurred $8,000 and $266,000 in advertising expense for the years ended December 31, 2011 and 2010, respectively, which is included in other operating expenses in the accompanying consolidated statements of operations.

Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and certain assumptions that affect the reported amounts of assets and liabilities, disclosed contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include the allowance for doubtful accounts, certain assumptions used in impairment analyses, depreciable lives of assets, fair value of investments in nonconsolidated affiliates, fair value of interest rate swaps, fair value of stock options and contingency and litigation reserves. While management believes current estimates are reasonable and appropriate, the Company cannot predict future events and their effects with certainty; accordingly, the Company’s accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the Company’s consolidated financial statements will change as new events occur, as better data becomes available, as additional information is obtained, and as the operating environment changes. The Company evaluates and updates assumptions and estimates on an ongoing basis and may employ outside experts to assist in evaluations, as considered necessary. Actual results could differ materially from those estimates.

Recently Issued or Adopted Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2011-04, Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). The FASB’s primary objective was to collaborate with the International Accounting Standards Board to develop common requirements for measuring fair value and disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Standards. ASU 2011-04 (i) expands and enhances disclosures about fair value measurements and (ii) clarifies the FASB’s intent about the application of existing fair value measurement requirements in certain circumstances. Public companies are required to adopt the provisions of ASU 2011-04 on a prospective basis during interim and annual periods beginning after December 15, 2011. For nonpublic companies, ASU 211-04 is effective for annual periods beginning after December 15, 2011. Early adoption of the amended accounting guidance is not permitted. USMD adopted ASU 2011-04 effective January 1, 2012. There was no impact to USMD’s financial position, results of operations or cash flows upon adoption of this guidance.

F-25

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

In June 2011, the FASB issued ASU 2011-5, Comprehensive Income (Topic 220) — Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 eliminates the Company’s elected option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. Instead, ASU 2011-05 requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. While the options for presenting other comprehensive income change under the guidance, other portions of the current guidance will not change. ASU 2011-05 is required to be applied retrospectively and is effective for public companies for fiscal years beginning after December 15, 2011, and interim periods within those fiscal years. ASU 2011-05 is effective for nonpublic companies for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted. The Company implemented this guidance effective with its reporting as of and for the year ended December 31, 2011 by presenting consolidated statements of comprehensive income (loss) immediately following the consolidated statements of operations. This guidance had no other impact on the Company.

In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (“ASU 2011-12”). ASU 2011-12 deferred the guidance on whether to require entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement where net income is presented and the statement where other comprehensive income is presented for both interim and annual financial statements. ASU 2011-12 reinstated the requirements for the presentation of reclassifications that were in place prior to the issuance of ASU 2011-05 and did not change the effective date for ASU 2011-05. The Company adopted ASU 2011-12 upon issuance and there was no impact on its financial position, results of operations or cash flows upon adoption.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”), which permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value before applying the two-step quantitative goodwill impairment model that is currently in place. If it is determined through the qualitative assessment that a reporting unit’s fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing companies to go directly to the quantitative assessment. This update is effective for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2011, which requires the Company to adopt these provisions in 2012; however, early adoption is permitted. The Company adopted ASU 2011-08 effective January 1, 2012 and does not believe that adoption will have a material impact on its goodwill impairment testing or results therefrom, consolidated financial statements or notes thereto.

USMD does not believe any other recently issued, not yet effective, accounting standards will have a material effect on its consolidated financial position, results of operations, or cash flows.

F-26

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

Note 3 – Investments in Nonconsolidated Affiliates

The net carrying values and ownership percentages of nonconsolidated affiliates accounted for under the equity method are as follows (dollars in thousands):


	December 31, 2011					December 31, 2010
	Investment		Ownership Percentage			Investment		Ownership Percentage
USMD Arlington	$	5,513		5.000	%	$	6,162		5.000	%
USMD Fort Worth		6,203		20.024	%		5,286		20.024	%
Other		214		4%-34	%		193		4%-40	%

	$	11,930				$	11,641

The net carrying value of investments accounted for under the cost method was $-0- and $41,000 at December 31, 2011 and 2010, respectively.

2011 Activity

In March 2011, the Company terminated its 40% membership interest in and management agreement with a limited liability company formed to provide radiation therapy services in the state of New York and recorded an impairment charge of $48,000 to reduce its carrying value in the investment to zero, its estimated fair value. During the second quarter of 2011, the Company concluded that its cost method investment in a lithotripsy service provider was impaired and the Company recorded an impairment charge of $41,000 to reduce its investment to zero, its estimated fair value. During the fourth quarter of 2011, the Company recorded a pretax charge of $669,000 to reduce the carrying value of partnership interests in USMD Arlington (see Note 9). These impairments are included in impairment of investments in nonconsolidated affiliates on the consolidated statement of operations.

In June 2011, the Company invested $340,000 in a radiation oncology company in Monterrey, Mexico. Because the Company has the ability to exercise significant influence over the management and operations of the investee, the Company accounts for the investment under the equity method of accounting.

Effective September 30, 2011, Willowbrook Cancer Center, LLC a Texas limited liability company (“Willowbrook”), sold its operating assets (excluding cash and accounts receivable) to a third party, and as part of the same transaction, paid to USMD CTC Division a fee to terminate the management agreement and Facility Development and Management Agreement between Willowbrook and USMD CTC Division. USMD CTC Division recognized income of $3.7 million on termination of this contract, which is recorded in other operating revenue on the consolidated statement of operations.

On December 31, 2011, partnership agreements for three managed lithotripsy entities expired. On January 1, 2012, USMD entered into new partnership agreements with those entities. USMD continues to account for these entities under the equity method of accounting. Terms of the new agreement for one of the entities necessitate consolidation accounting and beginning January 1, 2012 USMD consolidates the entity’s balance sheet and results of operations. The other two entities are included in USMD’s consolidated financial statements as they were under the previous partnership agreements.

F-27

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

2010 Activity

In September 2010, the Company invested $260,000 in a New York limited liability company that intended to operate a radiation oncology facility in return for a 40% membership interest and concurrently signed an agreement to manage the facility.

During the fourth quarter of 2010, the Company recorded a pretax charge of approximately $4.6 million to reduce the carrying value of partnership interests in the hospital partnerships (see Note 9). The $4.6 million asset impairment consists of approximately $1.5 million related to the Company’s investment in USMD Arlington and approximately $3.1 million related to the Company’s investment in USMD Fort Worth.

Other

At December 31, 2011, the carrying value of the investments in USMD Arlington and USMD Fort Worth is greater than the Company’s equity in the underlying net assets of the hospitals by $9.2 million due primarily to recording the investments at estimated fair value upon deconsolidation of the hospital partnerships, offset by the subsequent impairment of the investments.

At December 31, 2011, the Company’s consolidated retained earnings includes $0.5 million of undistributed earnings from nonconsolidated affiliates accounted for under the equity method.

Summarized combined financial information for the Company’s nonconsolidated affiliates accounted for under the equity method is as follows (in thousands):


	December 31,
	2011		2010
Current assets	$	31,829	$	29,817
Noncurrent assets		78,258		80,730
Current liabilities		19,280		19,558
Noncurrent liabilities		57,866		63,787

	Years Ended December 31,
	2011		2010
Revenue	$	132,412	$	109,322
Income from operations		26,601		22,754
Income from continuing operations		26,334		18,272
Net income		20,739		18,272

Note 4 – Property and Equipment

Property and equipment consist of the following (in thousands):


	December 31,
	2011			2010
Buildings and leasehold improvements	$	118		$	104
Major movable equipment		7,519			6,474
Furniture and equipment		1,352			1,270
Software		1,169			954

Gross property and equipment		10,158			8,802
Less: accumulated depreciation and amortization		(7,088	)		(6,583	)

Property and equipment, net	$	3,070		$	2,219

F-28

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

Property and equipment depreciation and amortization expense for the years ended December 31, 2011 and 2010 was $0.9 million and $1.7 million, respectively.

Assets recorded under capital lease arrangements included in property and equipment consist of the following (in thousands):


	December 31,
	2011			2010
Major movable equipment	$	1,334		$	1,334
Furniture and equipment		13			13

Gross assets recorded under capital leases		1,347			1,347
Less: accumulated amortization		(318	)		(59	)

Net assets recorded under capital leases	$	1,029		$	1,288

Amortization expense pertaining to property, plant and equipment under capital lease arrangements is included with depreciation and amortization expense in the consolidated statements of operations.

Note 5 – Goodwill and Other Intangible Assets

The following table summarizes the changes in the carrying amount of goodwill for each reporting unit during 2011 and 2010 (in thousands):


	USMD Lithotripsy Division			USMD Management Operations			USMD Arlington			USMD Fort Worth			Total
Balance at January 1, 2010
Goodwill	$	5,587		$	5,474		$	1,573		$	342		$	12,976
Reduction due to deconsolidation		—			—			(1,573	)		(342	)		(1,915	)
Impairment		(690	)		—			—			—			(690	)
Transfer to intangible asset		—			(567	)		—			—			(567	)

Balance at December 31, 2010	$	4,897		$	4,907		$	—		$	—		$	9,804

Tax benefit applied to goodwill		(1,469	)		—			—			—			(1,469	)

Balance at December 31, 2011	$	3,428		$	4,907		$	—		$	—		$	8,335

Calculation of the gain on deconsolidation of the partnerships included $1.9 million of goodwill attributable to the deconsolidated partnerships. This amount was included as a component of investment carrying value and removed from goodwill upon deconsolidation. As a result of the Company’s 2010 annual goodwill impairment test, a non-cash impairment charge of $0.7 million was recorded related to the USMD Lithotripsy Division reporting unit for the year ended December 31, 2010. The impairment resulted from a decrease in projected operating margin due to reductions in projected revenue combined with higher operating expenses. In estimating the fair value of the Company’s reporting units, management makes estimates and judgments about future cash flows and market valuations using a combination of income and market approaches, respectively, defined as Level 3 inputs under the fair value measurement hierarchy. In performing its impairment analyses, the Company relied primarily on an income approach, specifically a discounted cash flow analysis, which includes assumptions for, among other factors, discount rates, cash flow projections, growth rates and terminal value rates, all of which require significant judgment. The Company updates specific assumptions at the date of each impairment test to incorporate current industry and Company-specific risk factors from the perspective of a market participant.

F-29

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

Intangible assets consist of the following (in thousands):


	December 31,
	2011			2010
Management agreements:
Gross carrying amount	$	567		$	567
Accumulated amortization		(261	)		(224	)

Intangible assets, net	$	306		$	343

Aggregate amortization expense for the years ended December 31, 2011 and December 31, 2010, totaled $37,000 and $224,000, respectively. In early 2010, the Company renewed USMD Arlington and USMD Fort Worth management agreements for ten-year terms. The Company expects to incur annual amortization expense of $37,500 related to the management agreements for each of the next five years.

Note 6 – Other Accrued Liabilities

Other accrued liabilities consist of the following (in thousands):


	December 31,
	2011		2010
Accrued expenses	$	1,097	$	424
Accrued bonus		974		521
Federal income tax payable		109		564
Other accrued expenses		562		256

	$	2,742	$	1,765

Note 7 – Long-Term Debt, Capital Lease Obligations and Other Long-Term Liabilities

Long-term debt consists of the following (in thousands):


	December 31,
	2011			2010
USMD Inc.
Subordinated notes payable	$	731		$	731
USMD Lithotripsy Division subordinated notes payable		7,258			7,687

		7,989			8,418

Consolidated lithotripsy entities
Notes payable		155			386
Capital lease obligations		1,060			1,321

		1,215			1,707

Total long-term debt and capital lease obligations		9,204			10,125
Less: current portion		(1,594	)		(892	)

Long-term debt and capital lease obligations, less current portion	$	7,610		$	9,233

F-30

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

USMD Inc.

Subordinated Notes Payable

On May 12, 2008, the Company issued a $760,000 subordinated note payable to a former officer and shareholder of the Company to repurchase shares of the Company’s common stock held by the individual. The note payable is secured by the shares of common stock repurchased and matures on April 30, 2012. At December 31, 2011 and 2010, outstanding borrowings under the note payable were $731,000. Interest accrues at a fixed rate of 9.00% and is payable monthly.

USMD Lithotripsy Division Subordinated Notes Payable

Effective January 1, 2007, U.S. Lithotripsy L.P., a predecessor to USMD Lithotripsy Division, acquired the remaining 59.4% of partnership interests from four then-current members of the Company’s Board of Directors (two of which are current members of the Company’s Board of Directors), the acting President of U.S. Lithotripsy L.P. and an unrelated party (the “Predecessor Owners”). In exchange, U.S. Lithotripsy L.P. paid cash of $1.2 million and issued notes payable totaling $9.7 million to the Predecessor Owners. At December 31, 2011 and 2010, the entire balances of USMD Lithotripsy Division Subordinated Notes Payable are due to these related parties. Borrowings under the notes are secured by substantially all present and future assets of U.S. Lithotripsy L.P. and the partnership interests redeemed as part of the transaction.

Monthly principal and interest payments of $92,000 are due on the notes through maturity on December 31, 2021. Interest accrues at a fixed rate of 9.00%, subject to a premium of 1.00% under certain payment options available to the Company. At December 31, 2011 and 2010, outstanding borrowings under the notes totaled $7.3 million and $7.7 million at a fixed rate of 9.0%, respectively.

Other

On January 1, 2007 and February 15, 2007, the Company entered into two senior secured notes payable with Bank of Texas, N.A., which were modified at various dates during 2008 and 2009. The Company used borrowings under the senior secured notes to fund working capital and substantially all present and future assets of the Company secured the notes. The notes were paid in full on December 22, 2010.

On January 10, 2011, the Company executed a $1.0 million line of credit agreement with Chase Bank. The line of credit matured on July 1, 2011 and was not renewed.

Consolidated Lithotripsy Entities

Notes Payable

Two lithotripsy entities consolidated by the Company have notes payable (the “LP Notes”) with financial institutions totaling $155,000, which mature at various dates through 2012 and bear fixed and variable interest rates. The weighted average interest rate of these notes was 4.50% and 5.05% at December 31, 2011 and 2010, respectively. Borrowings from the LP Notes were used to purchase equipment. The individual LP Notes are generally secured by the assets of the individual entity and guaranteed by the respective owners. The LP Notes are subject to various financial and non-financial covenants, including, in some instances, minimum debt service coverage ratios. As of December 31, 2011, one of the entities was not in compliance with all such covenants. The entity subsequently received a waiver for the December 31, 2011 covenant violation. All other entities were in compliance with their covenants.

F-31

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

Other Long-Term Liabilities

Effective late December 2011, three consolidated lithotripsy entities purchased equipment totaling $1.3 million. Financing agreements were not finalized at December 31, 2011; however, the entities have executed agreements in the first quarter of 2012 to finance the full amount of the purchased equipment. As such, at December 31, 2011, the Company has classified the estimated $1.0 million long-term portion of amounts due as other long-term liabilities on the consolidated balance sheet. The estimated $0.3 million current amount due is included in other current liabilities on the consolidated balance sheet.

Maturities of USMD Inc. long-term debt are as follows as of December 31, 2011 (in thousands):


Year Ending December 31,
2012	$	1,355
2013		513
2014		561
2015		614
2016		671
Thereafter		4,430

Total	$	8,144

Capital Lease Obligations

During 2010, one of the Company’s lithotripsy entities entered into capital leases for two lithotripters and associated transportation equipment totaling $897,000. Monthly payments of $18,000 are due over a five-year term. During 2010, one of the Company’s lithotripsy entities entered into a capital lease for a lithotripter totaling $450,000. Monthly payments of $9,000 are due monthly over a five-year term.

The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of December 31, 2011, are as follows:


Year Ending December 31,
2012	$	318
2013		317
2014		318
2015		282
2016		8
Thereafter		—

Total minimum lease payments		1,243
Less: amounts representing estimated taxes, maintenance and insurance amounts included in the total above		—

Net minimum capital lease payments		1,243
Less: amount representing interest		(183	)

Present value of minimum lease payments		1,060
Less: current portion		239

Capital lease obligations, less current portion	$	821

F-32

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

Interest expense, net consists of the following (in thousands):


	Years Ended December 31,
	2011			2010
Interest and commitment fees	$	849		$	1,600
Unrealized loss on change in fair value of interest rate swap		—			493
Interest income		(3	)		(14	)

Total interest expense, net	$	846		$	2,079

Note 8 – Interest Rate Swaps

Changes in the fair value of interest rate swaps held by the Company that qualify as cash flow hedges are included in other comprehensive income (loss) and reclassified into earnings in the period in which the hedged transaction affects earnings. Changes in the fair value of interest rate swaps held by the Company that do not qualify as part of a hedging relationship are recorded in current period earnings. The Company’s policy is to not hold or issue swaps or derivatives for trading purposes.

At December 31, 2011 and 2010, the Company is not party to any interest rate swaps.

Interest Rate Swaps Not Designated as Hedging Instruments

In order to limit the variability of interest payments caused by changes in the London Inter-Bank Offered Rate (“LIBOR”), when they were consolidated entities of USMD, USMD Arlington and USMD Fort Worth were party to five interest rate swaps intended to convert certain of their long-term debt variable interest rates to fixed rates. Prior to deconsolidation of these hospital partnerships, for the two months ended February 28, 2010, the Company recorded an unrealized loss of $0.5 million on the changes in fair value of the interest rate swaps, which is included in interest income (expense), net on the consolidated statement of operations.

Interest Rate Swaps Designated as Cash Flow Hedges

When it was a consolidated entity of USMD, USMD Fort Worth was party to an interest rate swap as a cash flow hedge of future interest payments on $12.97 million of its long-term debt. The swap was designated as a cash flow hedge under GAAP and effectively converted a LIBOR-based variable rate to a synthetic fixed rate of 5.23%. Effective March 1, 2010, in conjunction with deconsolidation of the partnerships, the Company eliminated the swap from its records and reversed the total accumulated other comprehensive loss of $245,000, inclusive of a 2010 year to date unrealized loss of $22,000.

Note 9 – Fair Value Measurements

Financial Instruments Measured at Fair Value on a Nonrecurring Basis

The Company measures its nonfinancial assets including property and equipment, goodwill, other intangible assets and investments in nonconsolidated affiliates at fair value on a nonrecurring basis and the assets are subject to fair value adjustment in certain circumstances. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges or similar adjustments made to the carrying value of the applicable assets.

F-33

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

2011

As previously described in Note 3, Investments in Nonconsolidated Affiliates, the Company measured at fair value certain investments in nonconsolidated affiliates. During 2011, the Company recorded a pretax charge of $669,000 to reduce the carrying value of its partnership interests in USMD Arlington to its estimated fair value. In connection with the Company’s commitment to enter into a business combination (see Notes 13 and 16), a valuation of the Company’s business units and partnership interests was conducted as of December 31, 2011 that indicated that the fair value of USMD’s investment in USMD Arlington had declined from its carrying value. The valuation primarily relied on an income approach – discounted cash flow analysis and included assumptions for discount rates, cash flow projections, growth rates and terminal values. The valuation is considered a Level 3 fair value measurement under the fair value hierarchy. The decline in USMD Arlington fair value resulted from revisions in estimates relating to patient volumes and case mix.

2010

On March 1, 2010, in connection with deconsolidation of USMD Arlington and USMD Fort Worth, the Company recorded the investments in these partnerships at their estimated fair market value based on a valuation of the Company’s business units and ownership interests. This adjustment resulted in a gain on deconsolidation of $12.4 million, which is recorded in other income (expense). The valuation primarily relied on an income approach – discounted cash flow analysis and included assumptions for discount rates, cash flow projections, growth rates and terminal values. The valuation is a Level 3 fair value measurement under the fair value hierarchy.

In connection with the Company’s commitment to enter into a business combination (see Notes 13 and 16), a valuation of the Company’s business units and partnership interests was conducted as of December 31, 2010 that indicated that the fair value of USMD’s investments in USMD Arlington and USMD Fort Worth had declined from the values established at March 1, 2010, the date of the deconsolidation. The valuation primarily relied on an income approach – discounted cash flow analysis and included assumptions for discount rates, cash flow projections, growth rates and terminal values. The valuation is considered a Level 3 fair value measurement under the fair value hierarchy. The decline in the hospital partnership fair values resulted from revisions in estimates relating to patient volumes, managed care reimbursement rates and estimated discount factors. As a result of the updated valuation, USMD recorded an impairment charge in the fourth quarter of 2010 of $4.6 million.

Fair Value of Other Financial Instruments

Other financial instruments consist mainly of cash and cash equivalents, accounts receivable, accounts payable and long-term liabilities. The carrying value and estimated fair value of the Company’s other financial instruments that do not approximate fair value due to their short-term or variable-rate nature are as follows (in thousands):


	December 31, 2011				December 31, 2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
USMD Inc. subordinated notes payable	$	731	$	743	$	731	$	776
USMD Lithotripsy Division subordinated notes payable		7,258		9,388		7,687		9,672
Consolidated lithotripsy entities notes payable		59		60		179		184
Capital lease obligations		1,060		1,067		1,321		1,321
Other long-term liabilities		1,335		1,335		—		—

F-34

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

The Company determines the fair value of its long-term debt and other long-term liabilities using discounted cash flows based primarily on borrowing rates currently available to it for similar debt or debt for which the Company could use the proceeds to retire existing debt. Quoted market prices are not available for the Company’s long-term debt. The Company’s consolidated lithotripsy entities enter into capital leases or notes payable for equipment; borrowing rates are based on individual partnership creditworthiness. At December 31, 2011, the Company estimated current borrowing rates for the capital leases by adjusting the discount factor of the capital lease obligation at December 31, 2011 by the variance in borrowing rates between the inception dates and balance sheet date. Management noted no significant events that would otherwise affect the borrowers’ creditworthiness. At December 31, 2010, carrying value of the capital lease obligations approximates fair value due to recent lease inception. At December 31, 2011, the carrying value of other long-term liabilities approximates fair value due to recent inception.

Note 10 – Income Taxes

Significant components of the provision (benefit) for income taxes are as follows (in thousands):


	Years Ended December 31,
	2011			2010
Current:
Federal	$	2,891		$	1,875
State		(22	)		27

Total current		2,869			1,902

Deferred:
Federal		(31	)		2,547
State		—			—

Total deferred		(31	)		2,547

Provision for income taxes	$	2,838		$	4,449

A reconciliation of the actual tax rate to the statutory U.S. tax rate is as follows:


	Years Ended December 31,
	2011			2010
Federal statutory rate		35.0	%		35.0	%
State income taxes, net of federal tax benefit		(0.1	)		0.1
Net income attributable to noncontrolling interests		(24.8	)		(17.3	)
Benefit applied to goodwill		0.5			—
Other comprehensive income		0.1			—
Other		4.4			1.2

Effective tax rate for income from operations		15.1	%		19.0	%

F-35

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011


	December 31,
	2011			2010
Deferred tax assets:
Intangible assets	$	70		$	85
Property and equipment		30			56
Facilitative acquisition costs		362			15
Stock-based compensation		453			251
Other compensation		114			166
Other		(105	)		40

Total deferred tax assets		924			613

Deferred tax liabilities:
Goodwill		58			(1,308	)
Partnership investments		(3,815	)		(3,539	)
Property and equipment		(157	)		(85	)
Other		—			(79	)

Total deferred tax liabilities		(3,914	)		(5,011	)

Net deferred tax liabilities	$	(2,990	)	$	(4,398	)

Current deferred tax assets	$	116		$	168
Noncurrent deferred tax assets		808			445
Noncurrent deferred tax liabilities		(3,914	)		(5,011	)

Net deferred tax liabilities	$	(2,990	)	$	(4,398	)

The Company has performed an evaluation and concluded that there are no significant uncertain tax positions requiring recognition in the Company’s consolidated financial statements for any year presented, nor have any changes occurred in uncertain tax positions in any year presented. The evaluation was performed for the tax years that remain subject to examination by major tax jurisdictions as of December 31, 2011, which includes the tax years 2006 through 2011.

Note 11 – Share-Based Compensation

Pursuant to its 2007 Long Term Incentive Plan (the “Plan”), the Company may grant equity awards to officers, key employees, nonemployee directors and nonemployee service providers in the form of stock options, restricted stock and certain other incentive awards. The terms of the Plan provide for up to 3,250,000 shares of common stock to be granted. At December 31, 2011, the Company had 1,492,500 shares available to be granted under the Plan. All stock options have been granted with an exercise price equal to or in excess of the estimated market value of the Company’s common stock on the date of grant. Options granted in 2010 expire five years from the grant date and were fully vested upon issuance.

During 2011, pursuant to the Plan, the Company granted a newly hired executive options to purchase 1,050,000 shares of the Company’s common stock at an exercise price of $3.00. Options expire eight years from the grant date with vesting of 210,000 on September 1, 2011 and on each January 1^st of the succeeding four years, beginning January 1, 2012. The Company expects to incur annual stock compensation expense of $0.3

F-36

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

million related to this issuance in the years 2012-2014. The Company calculated fair value of the options using the Black-Scholes model and inputs described below; however, in consideration of the Commitment to Enter into a Business Combination transaction described in Note 13, the Company utilized stock price and exercise price inputs based on the Company’s estimated proportionate valuation as a component of that transaction. This resulted in a higher stock option fair value than would have occurred utilizing the Company’s current estimated common share fair value and exercise price per the stock grant.

The fair value of stock-based awards on the date of grant is computed using the Black-Scholes option pricing model. The risk-free interest rate is based on the implied yield of U.S. Treasury zero-coupon securities that correspond to the expected life of the option. As a recently formed, nonpublic entity with limited equity transaction history, it was not practicable for the Company to estimate the volatility of its share price, therefore, volatility was estimated based on the historical and implied volatilities of a group of companies considered peers. Management concluded that the peers’ businesses were more characteristic of the Company’s business than industry indexes. An average of the peers’ volatility was utilized as an estimate of the Company’s share price volatility. The expected life of awards granted represents the period of time that the awards are expected to be outstanding based on the “simplified” method, which is allowed for companies that cannot reasonably estimate expected life of options based on its historical share option exercise experience. The Company does not expect to pay dividends on its common stock. Due to the nature of the issuances, the company estimated zero option forfeitures. Stock-based compensation expense is recorded only for those awards that are expected to vest. Assumptions used in the Black-Scholes model for stock options granted were as follows:


	Years Ended December 31,
	2011			2010
Risk-free interest rate		1.20	%		1.38	%
Expected volatility of common stock		54.97	%		78.70	%
Expected life of options		6.0 years			2.5 years
Dividend yield		0.00	%		0.00	%

The Black-Scholes option pricing model was developed for estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Because option valuation models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. The Company’s options do not have the characteristics of exchange traded options. A summary of stock option activity for the year ended December 31, 2011 is as follows:


Options	Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding as of January 1, 2010		238,116	$	2.00
Granted		469,384	$	3.00
Exercised		—		—
Forfeited and expired		—		—

Outstanding as of December 31, 2010		707,500	$	2.66		3.66	$	188,112
Granted		1,050,000		3.00
Exercised		—		—
Forfeited and expired		—		—

Outstanding as of December 31, 2011		1,757,500	$	2.86		5.85	$	207,161

Vested at December 31, 2011		1,127,500	$	2.79		5.03	$	207,161
Exercisable as of December 31, 2010		707,500	$	2.66		3.66	$	188,112
Exercisable as of December 31, 2011		1,127,500	$	2.79		4.53	$	207,161

F-37

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2011 and 2010 was $7.05 and $1.28, respectively. The weighted-average grant-date fair value of the 420,000 stock options that vested during 2011 and the 630,000 unvested stock options at the December 31, 2011 was $7.05. To date, there have been no exercises of stock options under the Plan. The fair value of stock options vested and stock-based compensation expense recognized for the years ended December 31, 2011 and 2010, respectively, was $579,000 and $601,000, and is included in salaries, wages and employee benefits on the consolidated statements of operations. There were no unvested options at December 31, 2010. As of December 31, 2011, there was $0.9 million of unrecognized compensation cost related to unvested share-based compensation awards. This cost is expected to be recognized over a weighted-average period of 36 months.

Note 12 – Earnings per Share

Basic earnings per share is based on the weighted-average number of common shares outstanding and diluted earnings per share is based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. The following table presents a reconciliation of the numerators and denominators of basic and diluted earnings per share and the computation of basic and diluted earnings per share attributable to USMD (in thousands, except per share data):


	Years Ended December 31,
	2011		2010
Numerator:
Net earnings attributable to USMD Inc.	$	2,658	$	7,425

Denominator:
Weighted-average common shares outstanding		29,708		29,708
Effect of potentially dilutive securities:
Stock options		69		68

Weighted-average common shares outstanding assuming dilution		29,777		29,776

Earnings per share attributable to USMD Inc.
Basic	$	0.09	$	0.25
Diluted	$	0.09	$	0.25

At December 31, 2011 and 2010, the computation of dilutive shares excludes 1,519,384 and 469,384 stock options, respectively, with a weighted-average exercise price of $3.00 per share, because the exercise price of these outstanding options was greater than the estimated fair value of USMD’s common shares and, therefore, was anti-dilutive to the computation.

Note 13 – Commitments and Contingencies

Litigation

The Company is, from time to time, subject to claims and litigation arising in the ordinary course of business. In certain of these actions, plaintiffs request payment for damages, including punitive damages that may not be covered by insurance. The Company is currently not a party to any pending or threatened proceeding, which, in management’s opinion, would have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

F-38

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

Financial Guarantees

As of December 31, 2011, the Company had issued guarantees to third parties of the indebtedness and other obligations of certain of its nonconsolidated investees. Should the investees fail to pay the obligations due, the Company could potentially be required to make maximum aggregate payments totaling $4.5 million. The remaining terms of these guarantees range from seven to 38 months. The Company records a liability for performance under financial guarantees, when, upon review of available financial information of the nonconsolidated affiliate and in consideration of pertinent factors, management determines that it is probable it will have to perform under the guarantee and the liability is reasonably estimable. The Company has not recorded a liability for these guarantees, as the Company believes the likelihood it will have to perform under these agreements is remote.

Commitment to Enter into a Businesses Combination

In April 2010, the USMD Board of Directors approved in principle a transaction (the “Original Contribution Agreement”) pursuant to which the Company will combine its business with UANT Ventures, LLP (“Ventures”) and Urology Associates of North Texas, LLP (“UANT”) (the “Contribution”). The Company’s Board of Directors includes three UANT and Ventures shareholders. Of these three, the Company’s CEO and Board chairman is the managing partner of UANT and Ventures. Pursuant to this transaction, the shareholders of the Company will contribute all of their equity interests in the Company to a newly formed Delaware corporation named USMD Holdings, Inc. (“Holdings”) in return for shares of common stock of Holdings. Contemporaneous with this contribution, UANT and Ventures will contribute their businesses to Holdings in return for shares of common stock of Holdings. The parties executed a definitive agreement regarding this transaction in August 2010 and the shareholders of USMD and the partners of Ventures approved it on August 23, 2011.

On December 1, 2011 and December 15, 2011, Ventures and Holdings entered into definitive agreements (the “Merger Agreements”) with The Medical Clinic of North Texas, P.A. (“MCNT”) and Impel Management Services, L.L.C. (“Impel”), respectively. The Merger Agreements provide that subsidiaries of Ventures will merge with and into MCNT and Impel (the “Mergers”) as part of the Contribution, resulting in MCNT and Impel becoming wholly-owned subsidiaries of Ventures. In exchange for their equity interests in MCNT and Impel, the owners of MCNT and Impel will receive as merger consideration partnership interests in Ventures.

MCNT is a multi-specialty physician group that provides professional medical and related health care services throughout the Dallas Fort Worth service area. MCNT provides professional services in medical specialties that include Family Medicine, Internal Medicine, Obstetrics and Gynecology, Pediatrics, Psychotherapy, Sports Medicine, Rheumatology, Endocrinology, Infectious Disease, Geriatrics, Neurology Podiatric Medicine, General Surgery, Allergy and Immunology, Travel Medicine and Diabetes Education.

Impel is a related entity of MCNT that provides management, operational, and administrative services primarily to MCNT.

F-39

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

Operating Lease Commitments

USMD leases certain office space and office equipment under noncancellable operating lease agreements. Operating leases generally have three to seven year terms and include renewal options with terms to be negotiated at the time of renewal. One facility lease includes standard rent escalation terms. These leases generally require the lessee to pay all executory costs such as maintenance and insurance. Future minimum lease payments under operating leases at December 31, 2011 are as follows (in thousands):


Years Ending December 31,
2012	$	333
2013		330
2014		306
2015		313
2016		320
Thereafter		163

Total	$	1,765

Total rent expense under operating leases was approximately $0.4 million and $0.9 million for the years ended December 31, 2011 and 2010, respectively.

Note 14 – Related Party Transactions

USMD currently pays for Holdings’ expenses, which consist of expenses associated with the preparation and filing of Holding’ periodic reports and the post-effective amendment to Form S-4 with the SEC. If the Contribution fails to occur, it is unlikely Holdings will have the ability to repay USMD for these expenses. At December 31, 2011, $81,000 is due from Holdings and recorded in affiliate accounts receivable on USMD’s balance sheet.

USMD provides management, clinical and support services to seven nonconsolidated affiliates in which it has limited partnership or ownership interests. Management services revenue from these entities totaled $15.2 million, and $12.3 million for the years ended December 31, 2011, and 2010, respectively. In addition, USMD recognized lithotripsy revenues of $2.0 million and $1.7 million from USMD Arlington and USMD Fort Worth for the years ended December 31, 2011 and 2010.

Effective, September 1, 2007, a member of the USMD Board of Directors loaned the Company $51,000 at a 9.0% annual interest rate. USMD paid the loan in full on June 11, 2010.

Note 15 – Employee Benefit Plans

A 401(k) defined contribution plan is provided for all eligible employees. USMD matches amounts contributed by employees, of 50%, 75%, and 100% for years of service of 0—4 years, 4—10 years, and over 10 years, respectively, not to exceed 6.0% of the employee’s base compensation. Retirement benefits equal the amounts accumulated to the employee’s individual account at the date of retirement. The Company’s contributions to the plan totaled $379,000 and $350,000 in 2011 and 2010, respectively.

F-40

USMD INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

December 31, 2011

Note 16 – Subsequent Events

Commitment to Enter into a Businesses Combination

As a result of the Merger Agreements discussed in Note 13, on February 9, 2012, USMD, UANT and Ventures entered into an Amendment to the Original Contribution Agreement to reflect, among other changes, that Ventures will contribute to Holdings the MCNT and Impel businesses as part of the Contribution.

Guarantee of Investee Debt

On March 22, 2012, USMD issued a guaranty to a third party lender for the indebtedness of Anchorage Cancer Treatment Center, LLC, an equity method investee, for a construction loan to build out and equip a cancer treatment center and leasehold. The loan is a 7 year, $6.2 million loan at 5.5% interest per annum. USMD holds a 20% equity interest in this investee and its guaranty on this debt is a pro rata 20% or $1.2 million of the original principal of the loan.

F-41

INDEX TO UROLOGY ASSOCIATES OF NORTH TEXAS, L.L.P.’s FINANCIAL STATEMENTS

UROLOGY ASSOCIATES OF NORTH TEXAS, L.L.P. COMBINED FINANCIAL STATEMENTS



Report of Independent Certified Public Accountants			F-43

Combined Balance Sheets as of December 31, 2011 and 2010			F-44

Combined Statements of Income for the years ended December 31, 2011 and 2010			F-45

Combined Statements of Partners’ Capital for the years ended December 31, 2011 and 2010			F-46

Combined Statements of Cash Flows for the years ended December 31, 2011 and 2010			F-47

Notes to the Combined Financial Statements			F-48

F-42

Report of Independent Certified Public Accountants

To the Partners

Urology Associates of North Texas, L.L.P.

We have audited the accompanying combined balance sheets of Urology Associates of North Texas, L.L.P. and subsidiaries (the Partnership) as of December 31, 2011 and 2010, and the related combined statements of income, partners’ capital and cash flows for the years then ended. These combined financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America established by the American Institute of Certified Public Accountants. 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 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 Partnership’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, 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 combined financial statements referred to above present fairly, in all material respects, the financial position of Urology Associates of North Texas, L.L.P. and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Grant Thornton LLP

Dallas, Texas

April 13, 2012

F-43

Urology Associates of North Texas, L.L.P.

COMBINED BALANCE SHEETS

December 31,


	2011		2010
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	1,953,587	$	3,367,215
Accounts receivable – net of allowances of $2,436,227 in 2011 and $2,141,632 in 2010		3,540,286		2,989,075
Due from related parties		370,708		157,863
Prepaid expenses and other accounts receivable		1,313,395		831,567


Total current assets		7,177,976		7,345,720

PROPERTY AND EQUIPMENT, net		14,865,002		13,416,698

OTHER ASSETS
Goodwill		4,987,660		4,987,660
Partnership interests in closely held businesses – at cost		40,934		607,324
Partnership interests in closely held businesses – at cost plus equity in undistributed earnings		7,941,451		7,283,265
Deposits		33,000		33,000


TOTAL ASSETS	$	35,046,023	$	33,673,667

LIABILITIES AND PARTNERS’ CAPITAL

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	2,728,202	$	1,488,691
Accrued salaries and wages		1,700,352		2,729,811
Due to related parties		242,908		—
Current maturities of long-term debt		5,819,235		5,096,304
Current portion of capital lease obligations		121,494		235,014


Total current liabilities		10,612,191		9,549,820

LONG-TERM LIABILITIES
Long-term debt		9,162,433		10,530,668
Capital lease obligations		27,209		148,667


Total liabilities		19,801,833		20,229,155

COMMITMENTS AND CONTINGENCIES

PARTNERS’ CAPITAL		15,244,190		13,444,512


TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	35,046,023	$	33,673,667

The accompanying notes are an integral part of these combined financial statements.

F-44

Urology Associates of North Texas, L.L.P.

COMBINED STATEMENTS OF INCOME

For the years ended December 31,


	2011			2010

Net patient services revenue	$	55,541,437		$	50,129,445

Expenses
Salaries and benefits		17,544,390			15,095,428
Rent		3,251,684			2,941,329
Incentive plan payments to partners		9,882,287			8,817,970
Medical supplies and services		3,885,622			3,170,567
Insurance		652,031			651,519
Bad debt expense		1,279,609			1,213,995
Depreciation and amortization		3,523,844			2,888,371
Computer and telecommunication expenses		1,114,650			1,010,356
Other		5,689,836			4,574,556


Total expenses		46,823,953			40,364,091


Operating income		8,717,484			9,765,354

Other income (expense)
Equity in earnings from investments in partnerships		5,720,651			4,568,672
Interest income		—			18
Interest expense		(602,004	)		(613,538	)
Gain on sale/disposal of assets		85,000			7,034,882
Other income		1,693,071			1,491,501


Net income attributable to the owners of the Partnership	$	15,614,202		$	22,246,889

The accompanying notes are an integral part of these combined financial statements.

F-45

Urology Associates of North Texas, L.L.P.

COMBINED STATEMENTS OF PARTNERS’ CAPITAL

For the years ended December 31, 2011 and 2010


Balance
December 31, 2009	$	11,092,836

Net income		22,246,889
Contributions		—
Distributions		(19,895,213	)


Balance
December 31, 2010		13,444,512

Net income		15,614,202
Contributions		—
Distributions		(13,814,524	)


Balance
December 31, 2011	$	15,244,190

The accompanying notes are an integral part of these combined financial statements.

F-46

Urology Associates of North Texas, L.L.P.

COMBINED STATEMENTS OF CASH FLOWS

For the years ended December 31,


	2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	15,614,202		$	22,246,889
Adjustments to reconcile net income to net cash provided by operating activities
Equity in earnings from investments in partnerships		(5,720,651	)		(4,568,674	)
Gain on sales of investment in partnerships		(85,000	)		(7,009,822	)
Gain on sale of assets		—			(25,060	)
Depreciation and amortization		3,523,844			2,888,371
Bad debt expense		1,279,609			1,213,995
Impairment		—			180,000
Change in operating assets and liabilities
Accounts receivable		(1,830,820	)		(1,400,508	)
Due from related parties, prepaid expenses and other assets		(694,673	)		(820,367	)
Accounts payable and accrued liabilities		423,367			479,866
Due to related parties, accrued salaries and wages		(786,551	)		544,603


Net cash provided by operating activities		11,723,327			13,729,293

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(4,156,004	)		(4,840,504	)
Capital contributions to partnerships		—			(523,777	)
Disposal of partnership interests		285,000			9,211,644
Equity distributions from equity-method investees		5,062,465			2,872,368


Net cash provided by investing activities		1,191,461			6,719,731

CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on long-term debt		4,511,000			5,147,573
Repayment of long-term debt		(5,391,282	)		(5,502,652	)
Distributions to partners		(13,448,134	)		(19,895,213	)


Net cash used in financing activities		(14,328,416	)		(20,250,292	)


Net increase (decrease) in cash		(1,413,628	)		198,732

Cash and cash equivalents, beginning of year		3,367,215			3,168,483


Cash and cash equivalents, end of year	$	1,953,587		$	3,367,215


SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid	$	569,162		$	599,045


Non-cash distributions	$	366,390		$	—


Accrued capital expenses	$	816,144		$	—

The accompanying notes are an integral part of these combined financial statements.

F-47

Urology Associates of North Texas, L.L.P.

NOTES TO COMBINED FINANCIAL STATEMENTS

December 31, 2011 and 2010

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations

Urology Associates of North Texas, L.L.P., a Texas Limited Liability Partnership (the “Partnership”, “UANT”), was formed pursuant to the laws of the State of Texas on August 1, 1997. The Partnership is a urology group, which specializes in various adult and pediatric bladder, prostate, and kidney care, including robotic, laparoscopic, and cryotherapy surgeries throughout the Dallas/Fort Worth metropolitan area. Furthermore, the Partnership holds investments in the form of limited partnership interests in other operating entities.

The Partnership is organized as a limited liability partnership (“L.L.P.”). The Partnership will dissolve on December 31, 2050, unless dissolved sooner. The liability of an individual member of the L.L.P. for the Partnership’s debt is limited to that member’s investment in the Partnership.

Basis of Presentation

The accompanying combined financial statements have been prepared in conformity with US generally accepted accounting principles (“US GAAP”), and include the accounts of the Partnership, as well as UANT Ventures, L.L.P. (“UANT Ventures”), and its subsidiary Neo Alliance, L.L.C. UANT Ventures held a 51.52% interest in Neo Alliance, L.L.C. until the subsidiary was dissolved in 2010. Due to UANT Ventures having an ownership group that mirrors the Partnership, it has been combined with the Partnership.

Investments in unconsolidated partnerships are accounted for using either the cost or equity method, depending on the Partnership’s ownership percentage and the amount of influence or control the Partnership has over the related entity. See Note 2.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, deposits with banks and all highly liquid investments with original maturities of three months or less.

The Partnership regularly maintains cash balances at financial institutions which exceed FDIC insured limits. The Partnership has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

Property and Equipment, net

Property and equipment are stated at cost less accumulated depreciation. Improvements that substantially increase the useful life of property are capitalized.

Expenditures for maintenance and repairs that do not substantially increase the useful life of property are expensed as incurred. Upon retirement or disposition, the cost and depreciation previously provided are removed from the accounts with the gains or losses on such retirements being included in operations for the period. Depreciation is calculated using the straight line method over the estimated useful lives of the property and equipment as follows:


Office equipment			5 - 7 years
Medical equipment			5 - 7 years
Furniture and fixtures			5 - 7 years
Leasehold improvements			3 -10 years

F-48

Urology Associates of North Texas, L.L.P.

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2011 and 2010

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Accounts Receivable, net

The Partnership recognizes revenue on the accrual basis of accounting so that revenues are recognized once services are performed. Revenues are recorded net of contractual allowances in connection with various government related programs and managed care and commercial payers, which totaled approximately $35,661,000 and $33,435,000 for the years ending December 31, 2011 and 2010, respectively. Accounts are charged to bad debt allowance as they are deemed uncollectible based upon a periodic review of the accounts. All receivables considered doubtful have been charged to bad debt allowance. Accounts receivable is stated net of an allowance for doubtful accounts of approximately $337,000 and $318,000 and net of contractual allowances of approximately $2,099,000 and $1,824,000 as of December 31, 2011 and 2010, respectively.

The Partnership had the following concentrations of credit risk as of December 31:


	2011			2010

Government-related programs		28	%		33	%
Managed care and commercial payers		62			54
Self-pay		10			13


Total		100	%		100	%

Goodwill

The Partnership recorded goodwill in connection with its purchase of its equity method investment in Metro I Stone Management, L.P. The Partnership evaluates the amount of goodwill recorded on an annual basis for impairment or more frequently when events occur that indicate a potential impairment. The annual test of goodwill was performed at December 31, 2011 and 2010 and indicated there was no impairment of goodwill.

Income Taxes

The Partnership is a limited liability partnership, whose taxable income or loss is reported directly in the tax returns of its partners. Accordingly, no provision for income taxes is made in these combined financial statements. Furthermore, the Partnership files as a tiered partnership for Texas margin tax purposes which passes the tax burden to the individual partners. Accordingly, no provision for margin tax is made in these financial statements.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates relate to contractual allowances, bad debts and the recoverability of goodwill.

Advertising

Advertising costs are expensed as incurred. Advertising expenses totaled approximately $943,000 and $927,000 for the twelve months ended December 31, 2011 and 2010, respectively.

F-49

Urology Associates of North Texas, L.L.P.

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2011 and 2010

NOTE 2 – PARTNERSHIP INTERESTS IN CLOSELY HELD BUSINESSES

The Partnership held the following interests in closely held businesses at December 31, 2011, which are being reported under the cost method:


	Ownership or Limited Partner Interest			Investment

Rocky Mountain Medical Center, L.P.		0.88	%	$	—
Surgery Center of Waxahachie, L.P.		4.51	%		40,934


				$	40,934

In May 2011, the Partnership sold its ownership interests in Trinity MC, L.L.C. for $285,000, resulting in a gain of $85,000. Also, in May 2011, the Partnership made a non-cash distribution to its partners of the investment it held in USMD, Inc.

The Partnership held the following interests in closely held businesses at December 31, 2010, which are being reported under the cost method:


	Ownership or Limited Partner Interest			Investment

Rocky Mountain Medical Center, L.P.		0.88	%	$	—
Trinity MC, L.L.C.		1.18	%		200,000
USMD, Inc.		8.23	%		366,390
Surgery Center of Waxahachie, L.P.		4.51	%		40,934


				$	607,324

At December 31, 2010, the partnership determined that there was an impairment of the value of The Rocky Mountain Medical Center, L.L.P investment. Therefore, the partnership recorded a charge in the amount of $180,000, which represents a reduction of the full amount of the original cost and the carrying amount of this investment.

The Partnership held the following interests in closely held businesses at December 31, 2011 which are being reported under the equity method:


	Limited Partner Interest			Investment		Equity in earnings

Dallas Stone Management, L.P.		6.92	%	$	475,030	$	125,302
North Texas Stone Management, L.P.		30.00	%		121,667		273,411
USMD Hospital at Arlington, L.P.		23.44	%		6,097,029		2,896,797
USMD Hospital at Fort Worth, L.P.		10.86	%		718,271		583,685
Metro I Stone Management, L.P.		88.50	%		529,454		1,841,456


				$	7,941,451	$	5,720,651

F-50

Urology Associates of North Texas, L.L.P.

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2011 and 2010

NOTE 2 – PARTNERSHIP INTERESTS IN CLOSELY HELD BUSINESSES – Continued

The Partnership held the following interests in closely held businesses at December 31, 2010 which are being reported under the equity method:


	Limited Partner Interest			Investment		Equity in earnings
Dallas Stone Management, L.P.		6.92	%	$	468,747	$	117,625
North Texas Stone Management, L.P.		30.00	%		113,010		251,170
USMD Hospital at Arlington, L.P.		23.44	%		5,880,503		2,163,389
USMD Hospital at Fort Worth, L.P.		10.86	%		221,438		178,901
Metro I Stone Management, L.P.		88.55	%		599,567		1,857,587


				$	7,283,265	$	4,568,672

The Partnership intends to continue to fund the capital needs of USMD Hospital at Fort Worth, L.P. (“USMD Fort Worth”). During 2010, the Partnership contributed additional capital of approximately $42,537 to maintain its 29.97% limited partner interest and then sold 19.11% and recognized a gain on this sale in the amount of $2,138,345. The Partnership continues to account for its investment in USMD Fort Worth under the equity method because it continues to have significant influence. During 2010, the Partnership sold 13.37% interest in USMD Hospital at Arlington, L.P. and recognized a gain on this sale in the amount of $4,871,477. The individual partners of UANT Ventures along with other partners of USMD Fort Worth have guaranteed certain building and land acquisition notes payable. The individual partners’ portion of that guarantee is approximately $707,000 and $690,000 as of December 31, 2011 and 2010, respectively. UANT Ventures along with other partners of USMD Fort Worth have also guaranteed approximately $5,011,000 and $6,204,000 of other debt as of December 31, 2011 and 2010, respectively, in proportion to their limited partner interest. In addition, UANT Ventures along with other partners of USMD Hospital at Arlington, L.P. have guaranteed building, land, and equipment acquisition notes payable of approximately $37,603,000 and $41,800,000 as of December 31, 2011 and 2010, respectively, in proportion to their limited partner interest.

The Partnership accounts for its 6.92% limited partner interest of Dallas Stone Management, L.P. under the equity method because in addition to its direct limited partner interest the Partnership also owns an indirect limited partner interest of approximately 30% through its 88.55% limited partner interest of Metro I Stone Management, L.P. The Partnership determined that due to certain general partner rights (of which it does not own), Metro I Stone Management, L.P. should not be consolidated. Therefore, the Partnership’s investment is accounted for under the equity method.

F-51

Urology Associates of North Texas, L.L.P.

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2011 and 2010

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment consists of the following as of December 31:


	2011			2010

Office equipment	$	1,227,448		$	1,109,314
Medical equipment and systems		16,596,194			15,013,823
Furniture and fixtures		1,113,494			785,123
Leasehold improvements		9,557,084			6,897,947


		28,494,220			23,806,207
Less accumulated depreciation		(13,629,218	)		(10,389,509	)


Property and equipment, net	$	14,865,002		$	13,416,698

NOTE 4 – CAPITAL LEASE OBLIGATIONS

The Partnership enters into lease agreements for the lease of medical equipment. For the years ended December 31, 2011 and 2010, assets acquired under capital leases total approximately $1,095,000 and $1,340,000, respectively, and the related accumulated depreciation recorded is approximately $973,000 and $1,050,000, respectively. Depreciation of the medical equipment under capital lease is included in depreciation expense. The remaining obligation associated with these leases as of December 31, 2011 is approximately $149,000.

The following is a schedule by year of future minimum lease payments under the capital lease obligation together with the present value of the net minimum lease payments as of December 31, 2011:


2012	$	130,334
2013		27,677


Total		158,011
Less: Interest (imputed)		(9,308	)


Present value/book value of net minimum lease payments	$	148,703

F-52

Urology Associates of North Texas, L.L.P.

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2011 and 2010

NOTE 5 – LONG-TERM DEBT

Long-term debt consistent of the following as of December 31:


	2011		2010

$3,476,000 note payable to bank in monthly installments of $57,933.33, plus interest at LIBOR rate plus 1.5% with a minimum floor of 4%, with 4% being charged at December 31, 2011 and 2010, balance due at maturity in November 2013, secured by substantially all assets of the Partnership.	$	1,308,077	$	2,003,276

$3,260,000 note payable to bank in monthly installments of $67,916.67 through March 2010 and $30,300.00 for the balance of the term, plus interest at LIBOR rate plus 1.5% with a minimum floor of 4%, with 4% being charged at December 31, 2011 and 2010, balance due at maturity in November 2012, secured by substantially all assets of the Partnership.		333,299		696,898

$2,600,000 note payable to bank in monthly installments of $54,166.67, plus interest at LIBOR rate plus 1.5% with a minimum floor of 4%, with 4% being charged at December 31, 2011 and 2010, balance due at maturity in November 2012, secured by substantially all assets of the Partnership.		561,399		1,211,399

$5,000,000 note payable to bank in monthly installments of $104,166.67, plus interest at LIBOR rate plus 1.68% with a minimum floor of 4%, with 4% being charged at December 31, 2011 and 2010, balance due at maturity in August 2013, secured by substantially all assets of the Partnership.		1,649,576		2,899,576

$5,000,000 note payable to bank in monthly installments of $83,333.33, plus interest at LIBOR rate plus 1.68% with a minimum floor of 4%, with 4% being charged at December 31, 2011 and 2010, balance due at maturity in August 2014, secured by substantially all assets of the Partnership.		2,152,085		3,152,085

$700,000 term promissory note to bank in monthly installments of $11,667.00, plus interest at LIBOR rate plus 1.5% with a minimum floor of 4%, with 4% being charged at December 31, 2011 and 2010, balance due at maturity in February 2015.		443,300		583,304

$4,400,000 note payable to bank in monthly installments of $73,333.33, plus interest at LIBOR rate plus 2.25% with a minimum floor of 4%, with 4% being charged at December 31, 2011 and 2010, balance due at maturity in January 2016, secured by substantially all assets of the Partnership.		3,379,600		4,186,267

$430,000 note payable to bank in monthly installments of $8,958.33, plus interest at LIBOR rate plus 2.25% with a minimum floor of 4%, with 4% being charged at December 31, 2011 and 2010, balance due at maturity in August 2014, secured by substantially all assets of the Partnership.		226,666		394,167

$500,000 term promissory note to bank in monthly installments of $8,333.33, plus interest at LIBOR rate plus 2.25% with a minimum floor of 4%, with 4% being charged at December 31, 2011 and 2010, balance due at maturity in January 2016, secured by substantially all assets of the Partnership.		416,666		500,000

F-53

Urology Associates of North Texas, L.L.P.

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2011 and 2010

NOTE 5 – LONG-TERM DEBT – Continued


	2011			2010

$4,511,000 advance promissory note to bank in monthly installments of $75,183.33 commencing March 2012, plus interest at LIBOR rate plus 2.25% with a minimum floor of 4%, with 4% being charged at December 31, 2011 and 2010, balance due at maturity in February 2016, secured by substantially all assets of the Partnership.	$	4,511,000		$	—


Total debt		14,981,668			15,626,972

Less current portion		(5,819,235	)		(5,096,304	)


Total long-term debt	$	9,162,433		$	10,530,668

Maturities of long-term debt at are as follows:


2012	$	5,819,235
2013		4,142,156
2014		2,185,955
2015		1,765,088
2016		918,867
Thereafter		150,367


	$	14,981,668

The Partnership is subject to covenants under its credit agreements, including fixed charge coverage ratios and the level of tangible net worth, based on US GAAP. As of December 31, 2011 and 2010, the Partnership was in compliance with these covenants.

NOTE 6 – DUE FROM AND DUE TO RELATED PARTIES

The Partnership has transactions in the ordinary course of business with entities that are related through common ownership or management or in which it holds investment interests.

During 2011 and 2010, the Partnership was billed management fees and contract labor of approximately $1,213,000 and $892,000, respectively, from USMD Cancer Treatment Centers, LLC, a wholly owned subsidiary of USMD, Inc., which the Partnership has an 8.2% limited partnership interest. As of December 31, 2011 and 2010, $97,000 and $91,000, respectively, is due to this related party.

In addition, during 2011 and 2010, the Partnership was billed monthly rental and common area maintenance fees totaling $695,000 and $640,000, respectively, from USMD Hospital at Arlington, L.P., which the Partnership has a 23.44% limited partnership interest. As of December 31, 2011 and 2010, no amounts were due to this related party for these fees.

In addition, during 2011, the Partnership was billed tenant improvement construction costs totaling $1,604,000, from USMD Hospital at Arlington, L.P., which the Partnership has a 23.44% limited partnership interest. As of December 31, 2011, $145,900 is due to this related party.

F-54

Urology Associates of North Texas, L.L.P.

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2011 and 2010

NOTE 6 – DUE FROM AND DUE TO RELATED PARTIES – Continued

In addition, during 2011, the Partnership billed tenant improvement allowances totaling $319,000, to USMD Hospital at Arlington, L.P., which the Partnership has a 23.44% limited partnership interest. As of December 31, 2011, $196,000 is due from this related party.

In addition, during 2011 and 2010, the Partnership was billed for services rendered in connection with research studies conducted of approximately $92,000 and $104,000, respectively, from USMD Hospital at Arlington, L.P., which the Partnership has a 23.44% limited partnership interest. As of December 31, 2011 and 2010, no amounts were due to this related party for these services.

In addition, during 2011 and 2010, the Partnership billed for radiation therapy services of approximately $193,000 and $142,000, respectively, provided to USMD Hospital at Arlington, L.P., which the Partnership has a 23.44% limited partnership interest. As of December 31, 2011 and 2010, $93,000 and $33,060, respectively, is due from this related party.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Leases

The Partnership leases certain medical office space and medical equipment under non-cancelable operating leases expiring between the years 2012 and 2021. Total expenditures related to these leases were approximately $3,252,000 and $2,941,000 for the years ended December 31, 2011 and 2010, respectively. This amount is included in rent expense on the combined statement of income.

Future minimum lease payments under non-cancelable operating lease agreements at December 31, 2011 are as follows:


2012	$	2,525,660
2013		2,315,873
2014		1,900,084
2015		1,801,674
2016		1,679,400
Thereafter		5,248,982

Litigation

From time to time, the Partnership is involved in certain legal actions and claims arising in the ordinary course of its business. It is the opinion of management, based on the advice of legal counsel, that there is no such litigation or claims that when resolved will have a material effect on the Partnership’s financial position or results of operations.

NOTE 8 – EMPLOYEE BENEFIT PLAN

The Partnership offers a defined contribution retirement plan which covers substantially all full-time employees and is qualified under Section 401(k) of the Internal Revenue Code. Under the plan, employees may voluntarily contribute a percentage of their compensation to the plan and the Partnership makes an additional contribution of 3% of the employee’s gross earnings. The Partnership may also make discretionary contributions to the plan. Retirement plan expense was approximately $359,000 and $461,000 for the years ended December 31, 2011 and 2010, respectively.

F-55

Urology Associates of North Texas, L.L.P.

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2011 and 2010

NOTE 9 – SUBSEQUENT EVENTS

In April 2010 and later amended in August 2011, the partners of UANT approved in principle, a transaction pursuant to which UANT and UANT Ventures will combine their respective businesses with USMD, Inc. (“USMD”). UANT and UANT Ventures will contribute their businesses to a newly formed Delaware corporation named USMD Holdings, Inc. (“Holdings”) in return for shares of common stock of Holdings. Contemporaneously with this contribution, the shareholders of USMD will contribute all of their equity interests in USMD to Holdings in return for shares of common stock of Holdings. A definitive agreement regarding this transaction is expected to be executed in 2012, subject to the satisfaction of customary closing conditions, including the approval of the definitive agreement by the partners of UANT and UANT Ventures. The agreement is further expected to provide that if the transaction does not occur due to the failure of the UANT/UANT Ventures partners to approve the transaction, then UANT and UANT Ventures will be liable for the out of pocket fees and expenses of USMD incurred after April 28, 2010 towards the pursuit of the transaction, up to a maximum reimbursement of $500,000.

Subsequent to December 31, 2011, the Partnership received additional advances on the advance loan in the amount of $351,000, bringing the total balance on the advance loan to $4,862,000. The advance loan is to be repaid over 5 years at an interest rate of LIBOR plus 2.25% with a minimum rate of 4% per annum beginning on March 1, 2012. See Note 5.

On March 16, 2012, the Partnership executed a guaranty on equipment debt entered into by Metro I Stone Management, Ltd. in the amount of approximately $453,000.

UANT evaluated its financial statements for subsequent events through April 13, 2012, the date the financial statements were available to be issued. UANT is not aware of any subsequent events which would require recognition or disclosure in the financial statements.

F-56

INDEX TO IMPEL MANAGEMENT SERVICES, L.L.C.’s AND THE MEDICAL CLINIC OF NORTH TEXAS, P.A.’s FINANCIAL STATEMENTS


IMPEL MANAGEMENT SERVICES, L.L.C. AND THE MEDICAL CLINIC OF NORTH TEXAS, P.A. COMBINED FINANCIAL STATEMENTS

Independent Accountant’s Report			F-58

Combined Balance Sheets as of December 31, 2011 and 2010			F-59

Combined Statements of Income for the years ended December 31, 2011 and 2010			F-61

Combined Statements of Members’ and Stockholders’ Equity (Deficit) for the years ended December 31, 2011 and 2010			F-62

Combined Statements of Cash Flows for the years ended December 31, 2011 and 2010			F-63

Notes to the Combined Financial Statements			F-65

F-57

Independent Accountants’ Report

Board of Directors

Impel Management Services, L.L.C.

and The Medical Clinic of North Texas, P.A.

North Richland Hills, Texas

We have audited the accompanying combined balance sheets of Impel Management Services, L.L.C. and The Medical Clinic of North Texas, P.A. (collectively, the Company) as of December 31, 2011 and 2010, and the related combined statements of income, members’ and stockholders’ equity (deficit) and cash flows for the years then ended. These combined 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 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. 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 combined financial statements referred to above present fairly, in all material respects, the financial position of Impel Management Services, L.L.C. and The Medical Clinic of North Texas, P.A. as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ BKD, LLP

April 10, 2012

F-58

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Combined Balance Sheets

December 31, 2011 and 2010


	2011		2010
Assets
Current Assets
Cash and cash equivalents	$	3,737,008	$	3,443,235
Certificates of deposit – restricted		3,064,602		3,056,411
Accounts receivable
Patient services (net of allowance for doubtful accounts of $94,471 and $676,633, respectively)		8,225,668		6,615,044
Management services		533,673		165,043
Other		847,335		267,042
Deferred tax asset		399,125		287,577
Supply inventory		595,023		568,731
Prepaid expenses		614,420		597,558


Total current assets		18,016,854		15,000,641

Property and Equipment, Net		7,022,310		7,189,662
Deposits		119,993		104,569
Deferred Tax Asset		2,633,746		2,236,666
Cash Surrender Value of Life Insurance Policies		2,764,121		2,424,217
Other		—		3,115


Total assets	$	30,557,024	$	26,958,870

See Notes to Combined Financial Statements

F-59

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Combined Balance Sheets (Continued)

December 31, 2011 and 2010


	2011			2010
Liabilities and Members’ and Stockholders’ Equity (Deficit)
Current Liabilities
Line of credit	$	1,417,397		$	1,292,917
Notes payable, current portion		410,159			398,859
Accounts payable		1,799,815			1,644,593
Accrued liabilities
Accrued compensation and payroll taxes		7,747,581			6,000,751
Accrued 401(k) contribution payable		16,549			11,345
Other		2,347,559			1,010,342
Income taxes payable		833,740			418,285
Deferred revenue		80,701			53,580
Capital lease obligations, current portion		296,036			526,079
Deferred rent, current portion		694,238			718,729


Total current liabilities		15,643,775			12,075,480

Notes Payable, Less Current Portion		2,839,182			3,231,288
Capital Lease Obligations, Less Current Portion		270,403			414,454
Deferred Compensation – Nonqualified Retirement Plan		3,229,675			3,024,688
Deferred Compensation – Nonqualified Savings Plan		4,665,528			4,245,760
Deferred Rent, Less Current Portion		4,533,528			3,576,221
Other		111,692			108,968


Total long-term liabilities		15,650,008			14,601,379


Total liabilities		31,293,783			26,676,859

Members’ and Stockholders’ Equity (Deficit)
Impel Management Services, L.L.C. members’ and stockholders’ equity		3,133,759			3,529,837
The Medical Clinic of North Texas, P.A. common stock, $0.01 par value; 200 shares authorized; 105 and 97 shares issued and outstanding, at December 31, 2011 and 2010, respectively		1			1
Additional paid-in capital		6,555			6,111
Accumulated deficit		(3,877,074	)		(3,253,938	)


Total members’ and stockholders’ equity (deficit)		(736,759	)		282,011


Total liabilities and members’ and stockholders’ equity (deficit)	$	30,557,024		$	26,958,870

See Notes to Combined Financial Statements

F-60

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Combined Statements of Income

Years Ended December 31, 2011 and 2010


	2011			2010
Revenue
Net patient service revenue	$	100,674,129		$	94,745,314
Management fee revenue and other revenue		8,346,731			7,408,504


Total net revenue		109,020,860			102,153,818

Operating Expenses
Salaries, taxes and benefits		72,870,167			67,145,593
Supplies		11,642,968			10,451,594
Professional and contract services		4,453,434			3,380,092
Rent expense		7,883,597			7,204,402
Depreciation and amortization		2,246,605			2,140,342
Bad debt expense		906,089			1,685,206
Malpractice insurance		978,091			1,061,375
Other general and administrative		7,071,377			6,868,566


Total operating expenses		108,052,328			99,937,170


Income from Operations		968,532			2,216,648


Other Income (Expense)
Interest income		19,145			27,732
Interest expense		(365,144	)		(348,930	)
Other income (expense), net		—			(199,396	)


Total other expense, net		(345,999	)		(520,594	)


Income Before Provision for Income Taxes		622,533			1,696,054

Provision for Income Taxes		324,573			407,309


Net Income	$	297,960		$	1,288,745

See Notes to Combined Financial Statements

F-61

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Combined Statements of Members’ and Stockholders’ Equity (Deficit)

Years Ended December 31, 2011 and 2010


	Impel Management Services, L.L.C.			The Medical Clinic of North Texas, P.A.
	Members’ Equity			Common Stock					Additional Paid-in Capital			Accumulated Deficit			Total
	Members’ Equity			Shares			Par Value		Additional Paid-in Capital			Accumulated Deficit			Total
Balance, January 1, 2010	$	3,159,251			94		$	1	$	5,945		$	(3,622,104	)	$	(456,907	)

Retirement of membership interests and common stock		(256,234	)		(2	)		—		(111	)		—			(256,345	)

Issuance of common stock to new shareholders		—			5			—		277			—			277

Distributions to members		(293,759	)		—			—		—			—			(293,759	)

Net income		920,579			—			—		—			368,166			1,288,745


Balance, December 31, 2010		3,529,837			97			1		6,111			(3,253,938	)		282,011

Retirement of membership interests and common stock		(26,280	)		(4	)		—		(112	)		—			(26,392	)

Issuance of common stock to new shareholders					12					556			—			556

Distributions to members		(1,290,894	)		—			—		—			—			(1,290,894	)

Net income		921,096			—			—		—			(623,136	)		297,960


Balance, December 31, 2011	$	3,133,759			105		$	1	$	6,555		$	(3,877,074	)	$	(736,759	)

See Notes to Combined Financial Statements

F-62

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Combined Statements of Cash Flows

Years Ended December 31, 2011 and 2010


	2011			2010
Operating Activities
Net income	$	297,960		$	1,288,745
Items not requiring (providing) cash
Depreciation and amortization		2,249,720			2,140,342
Deferred income taxes		(508,628	)		1,587
Loss on disposition of assets		139,026			—
Provision for doubtful accounts		906,089			1,685,206
Loss (gain) on cash surrender value of life insurance policies		50,404			(204,656	)
Changes in
Accounts receivable		(3,465,636	)		(2,618,430	)
Supply inventory		(26,292	)		(76,220	)
Prepaid expenses		(16,862	)		669,111
Deposits		(15,424	)		(805	)
Accounts payable		155,222			(80,423	)
Accrued liabilities – other		1,337,217			328,111
Accrued compensation and payroll taxes		1,746,830			1,141,393
Accrued 401(k) contribution payable		5,204			(1,258,174	)
Income taxes payable/receivable		415,455			(158,865	)
Deferred compensation		624,755			1,217,420
Deferred revenue		27,121			17,550
Deferred rent		(38,019	)		(16,799	)


Net cash provided by operating activities		3,884,142			4,075,093


Investing Activities
Purchase of property and equipment		(1,090,356	)		(1,008,182	)
Investments in certificates of deposit		(8,191	)		(12,425	)
Investments in life insurance policies		(390,308	)		(379,783	)


Net cash used in investing activities		(1,488,855	)		(1,400,390	)

See Notes to Combined Financial Statements

F-63

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Combined Statements of Cash Flows (Continued)

Years Ended December 31, 2011 and 2010


	2011			2010
Financing Activities
Payments on capital leases	$	(531,182	)	$	(693,732	)
Net proceeds from line of credit		124,480			770,852
Proceeds from long-term debt		2,724			—
Principal payments on long-term debt		(401,831	)		(382,257	)
Distributions to members		(1,290,894	)		(293,759	)
Redemption of common stock and membership interests		(5,367	)		(98,139	)
Issuance of common stock		556			277


Net cash used in financing activities		(2,101,514	)		(696,758	)


Increase in Cash and Cash Equivalents		293,773			1,977,945

Cash and Cash Equivalents, Beginning of Year		3,443,235			1,465,290


Cash and Cash Equivalents, End of Year	$	3,737,008		$	3,443,235


Supplemental Cash Flow Information
Cash paid for interest	$	301,590		$	306,534
Cash paid for income taxes	$	398,478		$	541,984

Supplemental Noncash Investing and Financing Activities
Assets acquired through capital leases	$	157,088		$	169,180
Assets acquired through lease incentives	$	970,835		$	2,799,800
Notes payable issued for redemption of membership interests	$	21,025		$	158,206

See Notes to Combined Financial Statements

F-64

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Notes to Combined Financial Statements

December 31, 2011 and 2010

Note 1: Description of Business and Basis of Presentation

Impel Management Services, L.L.C. (IMS) a Texas limited liability company, was formed on December 27, 1994, and commenced operations on January 1, 1995. IMS was formed for the purpose of providing comprehensive management services, equipment, supplies, facilities and support personnel to medical practices. IMS provides such support services to The Medical Clinic of North Texas, P.A. (MCNT) and other medical facilities.

IMS’ income and losses are allocated to the respective members based on percentage ownership subject to certain provisions as defined in the Regulations of IMS (Regulations). The term of IMS is 50 years, unless terminated earlier in accordance with the terms of its Regulations. The Regulations contain provisions, which limit the sale, assignment or transfer of a membership’s interest in IMS. The formation of IMS was designed to limit the members from IMS’ liabilities and to qualify IMS as a partnership for federal income tax purposes. The outstanding membership interests of IMS are owned primarily by physicians who are also shareholders of MCNT.

MCNT, a Texas professional association, was formed on November 8, 1994, and commenced operations on January 1, 1995. MCNT was formed for the purpose of engaging in the practice of medicine and is owned by the practicing physicians of its clinics. MCNT operates clinics throughout Dallas and Fort Worth, Texas, which specialize in internal medicine, family practice, pediatrics and obstetrics and gynecology, among other things.

On January 1, 1995, IMS and MCNT entered into a management services agreement which was amended and restated effective January 1, 2004 (the Service Agreement). The Service Agreement requires MCNT to pay IMS a management fee in exchange for management and administrative services and for supplying MCNT with equipment, supplies, facilities and support personnel in connection with clinic operations. The term of the Service Agreement is 30 years, renewable for successive five-year periods unless terminated earlier in accordance with the terms thereof.

In August 1997, the Texas State Board of Medical Examiners approved IMS’ application for a 501(a) organization. This organization, Unity Health (UH), currently includes IMS as the sole member; therefore, IMS consolidates UH for financial reporting purposes. This legal structure allowed UH to enter into professional and global capitated contracts with managed health insurers. Operations of UH commenced on May 1, 1998. During 2000, IMS terminated all outstanding professional and global capitated contracts within UH. IMS has elected to maintain UH as a dormant corporation in anticipation of potential future opportunities.

The accompanying combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of MCNT and of IMS and its consolidated subsidiary, UH (collectively, the combined entities are herein referred to as the Company). All significant intercompany accounts and transactions have been eliminated. The financial statements of MCNT and IMS are presented on a combined basis due to common ownership and control and interrelated business activities.

Note 2: Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported

F-65

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Notes to Combined Financial Statements

December 31, 2011 and 2010

amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2011 and 2010, cash equivalents consisted primarily of money market accounts.

The financial institution holding the Company’s cash accounts is participating in the FDIC’s Transaction Account Guarantee Program. Under that program, through December 31, 2010, all noninterest-bearing transaction accounts were fully guaranteed by the FDIC for the entire amount in the account. Pursuant to legislation enacted in 2010, the FDIC will fully insure all noninterest-bearing transaction accounts beginning December 31, 2010 through December 31, 2012, at all FDIC-insured institutions.

Effective July 21, 2010, the FDIC’s insurance limits were permanently increased to $250,000. At December 31, 2011, the Company’s interest-bearing cash accounts exceeded federally insured limits by approximately $3,240,000.

Certificates of Deposit

Certificates of deposits with original maturities when purchased, from three months to one-year are carried at amortized cost. At December 31, 2011, certificates of deposit on hand were restricted in use and held by the bank as collateral for a revolving line of credit (see Note 4).

Patient Accounts Receivable

The Company reports patient accounts receivable for services rendered at net realizable amounts from third-party payers, patients and others. The Company provides an allowance for doubtful accounts based upon a review of outstanding receivables, historical collection information and existing economic conditions. As a service to the patient, the Company bills third-party payers directly and bills the patient when the patient’s liability is determined. Patient accounts receivable are due in full when billed. Accounts are considered delinquent and subsequently written off as bad debts based on individual credit evaluation, payment history and other specific circumstances of the account.

Supply Inventory

Supply inventory primarily consists of drugs and vaccines and is stated at the lower of cost, determined using the first-in, first-out method or market.

Property and Equipment

Property and equipment acquisitions are recorded at cost and are depreciated using the straight-line method over the estimated useful life of each asset.

Assets under capital lease obligations and leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or their respective estimated useful lives.

F-66

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Notes to Combined Financial Statements

December 31, 2011 and 2010

The estimated useful lives for each major classification of property and equipment are as follows:


Computer equipment and software		3 years
Medical equipment		5 – 15 years
Office equipment		3 – 10 years
Electronic medical record equipment and software		5 – 15 years
Leasehold improvements		3 – 15 years

Expenditures for repairs and maintenance are charged to operations as incurred, while betterments that extend the useful lives of assets are capitalized.

Long-lived Asset Impairment

The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimate future cash flows expected to result from the use and eventual disposition of the asset is less than the carrying amount of the asset, the asset cost is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value. No asset impairment was recognized during the years ended December 31, 2011 and 2010.

Net Patient Service Revenue

The Company has agreements with third-party payers (federal and state agencies under the Medicare and Medicaid programs, managed health care plans and commercial insurance companies) that provide for payments to the Company at amounts different from its established rates. Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payers and others for services rendered and include estimated contractual revenue adjustments.

Approximately 18% and 21% of net patient service revenue is from participation in the Medicare and state-sponsored Medicaid programs for the years ended December 31, 2011 and 2010.

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation and change. As a result, it is reasonably possible that recorded estimates will change materially in the near term.

Management Fee Revenue

Management fee revenue consists of fees charged for services provided to health care providers and is recognized as services are provided.

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance Accounting Standards Codification (ASC) 740, Income Taxes. The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable

F-67

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Notes to Combined Financial Statements

December 31, 2011 and 2010

income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income taxes result from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Uncertain tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50%; the term upon examination also includes resolution of the related appeals or litigation processes, if any. A tax position that meets the more likely than not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more likely than not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

MCNT files stand alone income tax returns and is subject to federal and state income taxes.

IMS’ members have elected to have IMS’ income taxed as a partnership under provisions of the Internal Revenue Code (IRC). Therefore, taxable income or loss is reported to the individual members for inclusion in their respective tax returns and no provision for federal income taxes is included in these statements. The provision for income taxes related to IMS reflected in these statements is for state income taxes only.

With a few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2007.

Advertising

Advertising costs are expensed as incurred.

Deferred Rent

The Company has entered into operating lease agreements which contain provisions for future increases in rent payments, tenant improvement allowances and periods in which monthly rent payments are reduced to zero. In accordance with accounting principles generally accepted in the United States of America, the Company records monthly rent expense equal to the total of the payments due over the lease term, less any improvement allowances, divided by the number of months of the lease term. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent.

F-68

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Notes to Combined Financial Statements

December 31, 2011 and 2010

Note 3: Property and Equipment

Property and equipment consists of the following at December 31, 2011 and 2010:


	2011			2010

Furniture and fixtures	$	1,823,627		$	1,746,382
Computer equipment and software		1,717,269			1,607,626
Medical equipment		4,491,735			4,204,415
Office equipment		4,080,328			3,928,257
Electronic medical record equipment and software		3,698,499			3,319,721
Leasehold improvements		8,230,270			7,273,592

		24,041,728			22,079,993
Less: Accumulated depreciation and amortization		(17,019,418	)		(14,890,331	)


	$	7,022,310		$	7,189,662

Medical equipment includes $2,822,751 and $2,665,663 of assets under capital leases at December 31, 2011 and 2010, respectively. Office equipment includes $197,384 and $197,384 of assets under capital leases at December 31, 2011 and 2010, respectively. Accumulated amortization of all assets under capital leases totaled $2,248,842 and $1,744,872 at December 31, 2011 and 2010, respectively.

Depreciation and amortization expense was $2,249,720 and $2,140,342 for the years ended December 31, 2011 and 2010, respectively.

Note 4: Line of Credit

The Company has a $3,000,000 revolving line of credit with a commercial bank. The line of credit bears interest at LIBOR plus 1.50% (2.58% at December 31, 2011), which is payable monthly. Outstanding advances on the line are collateralized by the Company’s certificates of deposit with balance totaling approximately $3,050,000. At December 31, 2011 and 2010, there were $1,417,397 and $1,292,917, respectively, of outstanding borrowings against this line. At December 31, 2011, there was $1,707,083 of available borrowings on the line of credit. The line matures on December 20, 2012.

F-69

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Notes to Combined Financial Statements

December 31, 2011 and 2010

Note 5: Notes Payable

Notes payable consist of the following at December 31, 2011 and 2010:


	2011		2010

Note payable to Texas Health Resources (THR) in the original amount of $3,342,725; no payments were due through February 5, 2006, during which time $1,279,663 of interest accrued into the principal balance of the note at a rate of 6.5% per annum; monthly payments of $14,630 plus interest at LIBOR plus 0.7% were required through August 31,2009. Effective September 1, 2009, the loan agreement was amended to (a) extend the maturity date to August 31, 2019, (b) change the interest rate to a fixed rate of 4.43%, (c) require a monthly principal and interest payment of $36,057 and (d) include certain financial and reporting covenants. The note is collateralized by substantially all of the assets of MCNT other than certificates of deposit totaling approximately $3,050,000.	$	2,808,268	$	3,109,274

Note payable to landlord, THR, for leasehold improvements; 8% per annum interest; monthly payments of $6,445; maturing August 2015; secured by related improvements.		245,103		300,412
Notes payable to former members at an interest rate of 5% per annum matured 2011; secured by pledge of membership interest in IMS.		—		9,512

Note payable to former member; 4.25% per annum interest; payable in five annual payments of $3,855; maturing January 2014; secured by pledge of membership interest in IMS.		10,896		15,419

Note payable to former member; 4.25% per annum interest; payable in seven annual payments of $6,155; maturing January 2016; secured by pledge of membership interest in IMS.		29,567		37,324

Note payable to former member; 4.25% per annum interest; payable in seven annual payment of $2,217; maturing January 2017; secured by pledge of membership interest in IMS.		13,303		15,520

Note payable to former member 4.25% per annum interest; payable in seven annual payments of $20,384; maturing January 2017; secured by pledge of membership interest in IMS.		124,003		142,686

Note payable to former member 4.25% per annum interest; payable in seven annual payments of $3,003; maturing January 2018; secured by pledge of membership interest in IMS.		18,201		—

		3,249,341		3,630,147
Less current maturities		410,159		398,859


	$	2,839,182	$	3,231,288

F-70

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Notes to Combined Financial Statements

December 31, 2011 and 2010

Aggregate annual maturities of notes payable at December 31, 2011, are as follows:


2012	$	410,159
2013		429,323
2014		449,574
2015		441,080
2016		407,245
Thereafter		1,111,960


	$	3,249,341

Note 6: Capital Lease Obligations

The Company has acquired certain medical and office equipment under capital leases. The minimum lease payments required under these leases at December 31, 2011, are as follows:


2012	$	330,297
2013		125,450
2014		82,228
2015		66,365
2016		29,016


Total future minimum payments on capital leases		633,356
Less amount representing interest		(66,070	)


Present value of future minimum lease payments		567,286
Less current portion of capital lease obligations		(296,883	)


Long-term portion of capital lease obligations	$	270,403

Note 7: Members’ and Stockholders’ Equity

Each outstanding membership interest in IMS represents one vote. IMS profits, losses, deductions and credits are allocated to the members pro rata in accordance with their respective interests in IMS.

Shareholders of MCNT are entitled to one vote per share. Shareholders are also entitled to receive dividends when and if declared by the Company’s Board of Directors. Shareholders are prohibited from transferring their shares in MCNT to any party other than MCNT shareholders.

Note 8: Deferred Compensation – Nonqualified Retirement Plan

On June 1, 2004, the Company adopted a nonqualified deferred compensation plan (the Plan). The Plan was amended and restated December 31, 2008.

For ERISA purposes, the Plan is intended to be a nonqualified “top-hat” plan; that is, an unfunded plan of deferred compensation maintained for a select group of management or highly compensated employees. For income tax purposes, the Plan is intended to be a nonqualified, unfunded, unsecured promise-to-pay deferred compensation plan under the IRC, which operates as an account balance plan in compliance with Section 409A of the IRC.

F-71

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Notes to Combined Financial Statements

December 31, 2011 and 2010

Each participant may defer either (a) 1% – 50% or (b) $5,000 – $50,000 of their salary compensation or (b) 1% – 90% of their bonus compensation. Participants elect to have their deferrals allocated to hypothetical crediting rate options offered by the Plan. A participant’s account is credited with unrealized gains and losses, interest income and expenses. Participants are always 100% vested in their salary deferrals and earnings thereon. However, all funds are part of the general assets and funds of the Company and are subject to the claims of the Company’s general creditors in bankruptcy. A participant or beneficiary may receive a distribution of their account balance in the event of death, disability, retirement, termination of employment or a change in control, as defined by the Plan Document.

Deferred compensation and accumulated earnings thereon, totaled $3,229,675 and $3,024,688 at December 31, 2011 and 2010, respectively, and is reflected as a long-term liability in the accompanying combined balance sheets. The Company partially funds its deferred compensation liabilities by purchasing corporate owned life insurance policies on the participants. The aggregate cash surrender value of these policies was $2,764,121 and $2,424,217 at December 31, 2011 and 2010, respectively, and is reflected as a noncurrent asset in the accompanying combined balance sheets.

Note 9: Deferred Compensation – Nonqualified Savings Plan

Effective January 1, 2008, the Company revised the deferred compensation plan, previously referred to as the Physician Savings Plan (Savings Plan), to comply with Section 409A of the IRC. The revised Savings Plan is a nonqualified deferred compensation plan that is unfunded and benefits a select group of physicians.

Participants are required to contribute 2% of their monthly net revenue each month until their total contributions equal $50,000. In the year that a participant’s account reaches $50,000, interest will begin being credited to the participant’s account. When a participant terminates employment for any reason, they are entitled to begin receiving their accrued benefit. Distributions will be made in five equal annual installments, with the first installment payment to be made on the first anniversary of the participant’s termination.

Contributions to the Savings Plan will not be held in a trust for the exclusive benefit of the participants and, therefore, will remain subject to the claims of the Company’s creditors in bankruptcy. Amounts contributed to the Savings Plan may be used to guarantee the Company’s line of credit, or as otherwise deemed necessary at the sole discretion of the Company’s Board of Directors.

At December 31, 2011 and 2010, the Company’s deferred compensation obligation under the Savings Plan totaled $4,665,528 and $4,245,760, respectively, and is classified as a long-term liability in the accompanying combined balance sheets.

Note 10: Defined Contribution Plan

The Company sponsors a defined contribution plan (the 401(k) Plan) in which full-time employees who have completed one-year of service are eligible to participate. Employees can contribute up to 100% of their pre-tax salary to the 401(k) Plan, subject to certain limitations.

Excluding owners, officers and certain members of management, the Company makes matching contributions up to a maximum of 100% of the first 3% of participants’ salary deferrals and 50% of the next 6% of participants salary deferrals. All employees, including owners, officers and management, are eligible for discretionary profit-sharing contributions at the option of the Company’s Board of Directors.

F-72

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Notes to Combined Financial Statements

December 31, 2011 and 2010

The Company contributed $1,386,978 and $1,534,299 to the 401(k) Plan for the years ended December 31, 2011 and 2010, respectively. At December 31, 2011 and 2010, current liabilities include accrued 401(k) contributions payable of $16,549 and $11,345, respectively.

Note 11: Income Taxes

Income tax expense for the years ended December 31, 2011 and 2010, consists of the following:


	2011			2010
Current income tax expense
Federal	$	550,258		$	177,117
State		282,943			228,605

		833,201			405,722
Deferred income tax expense (benefit)
Federal		(508,628	)		1,587


Income tax expense	$	324,573		$	407,309

Deferred income taxes arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

The tax effect of temporary differences that give rise to the Company’s deferred tax assets and deferred tax liabilities at December 31, 2011 and 2010, are presented below:


	2011			2010
Deferred tax assets
Deferred compensation	$	2,735,960		$	2,515,690
Allowance for doubtful accounts		33,050			236,803
Accrued expenses		418,720			104,242
Deferred rent		368,537			523,303
Intangibles		37,849			41,801
Contributions carryover		—			23,707
Unrealized loss on cash surrender value of life insurance policies		71,501			42,062


Total deferred tax assets		3,665,617			3,487,608

Deferred tax liabilities
Property and equipment		(580,101	)		(886,189	)
Prepaid expenses		(52,645	)		(73,676	)
Other		—			(3,500	)


Total deferred tax liabilities		(632,746	)		(963,365	)


Net deferred tax asset	$	3,032,871		$	2,524,243

F-73

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Notes to Combined Financial Statements

December 31, 2011 and 2010

Deferred tax assets and liabilities at December 31, 2011 and 2010, are as follows:


Current deferred tax assets	$	451,770		$	381,057
Current deferred tax liabilities		(52,645	)		(93,480	)


Net current deferred tax asset	$	399,125		$	287,577


Noncurrent deferred tax assets	$	3,213,847		$	3,122,855
Noncurrent deferred tax liabilities		(580,101	)		(886,189	)


Net noncurrent deferred tax asset	$	2,633,746		$	2,236,666

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all deferred tax asset will not 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.

A reconciliation of income tax expense for the years ended December 31, 2011 and 2010, at the statutory rate to the Company’s actual income tax expense is shown below:


	2011			2010
Income tax expense computed at the statutory rate (34%)	$	211,661		$	576,658
Income not subject to federal income taxes		(330,806	)		(312,997	)
Nondeductible expenses		294,421			22,504
State income taxes, net of federal benefit		194,924			159,146
Other		(45,627	)		(38,002	)


Actual income tax expense	$	324,573		$	407,309

Note 12: Operating Lease Commitments

The Company leases certain land, buildings and equipment under noncancelable operating leases expiring at various dates through 2018. Operating leases generally have three to ten year terms, with one or more renewal options and require the Company to pay all executor costs (property taxes, maintenance and insurance).

F-74

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Notes to Combined Financial Statements

December 31, 2011 and 2010

Future minimum payments under noncancelable operating lease agreements at December 31, 2011, are as follows:


	Unrelated Parties							Related Parties Facilities		Net Future Payments
Years Ending December 31,	Equipment		Facilities		Sublease Income			Related Parties Facilities		Net Future Payments

2012	$	624,388	$	4,822,434	$	(114,725	)	$	530,478	$	5,862,575
2013		56,503		4,429,397		(108,425	)		301,008		4,678,483
2014		19,819		4,123,389		(108,425	)		134,811		4,169,594
2015		18,957		3,654,469		(108,425	)		45,059		3,610,060
2016		15,797		2,937,783		(108,425	)		—		2,845,155
Thereafter		—		14,151,455		(975,830	)		—		13,175,625


	$	735,464	$	34,118,927	$	(1,524,255	)	$	1,011,356	$	34,341,492

Total rent expense for the years ended December 31, 2011 and 2010, was $7,883,597 and $7,204,402, respectively, of which approximately $600,000 each year was to related parties.

Note 13: Litigation

The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. Based upon the advice of counsel, management records an estimate of the amount of ultimate expected loss, if any, for each of these matters.

Events could occur that would cause the estimate of ultimate loss to differ materially in the near term.

Note 14: Concentration of Credit Risk

The Company grants credit without collateral to its patients, most of whom are area residents and are insured under third-party payer agreements. The mix of net receivables from patients and third-party payers at December 31, 2011 and 2010, is as follows:


	2011			2010

Medicare		20	%		21	%
Medicaid		3			3
Other third-party payers		75			74
Patients		2			2


		100	%		100	%

Note 15: Related Party Transactions

The Company leases certain facilities from physicians who are also stockholders (see Note 12, Operating Lease Commitments).

F-75

Impel Management Services, L.L.C.

and

The Medical Clinic of North Texas, P.A.

Notes to Combined Financial Statements

December 31, 2011 and 2010

Note 16: Medical Malpractice Claims

MCNT purchases medical malpractice insurance under a claims-made policy on a fixed premium basis. Accounting principles generally accepted in the United States of America require a health care provider to accrue the expense of its share of malpractice claim costs, if any, for any reported and unreported incidents of potential improper professional service occurring during the year by estimating the probable ultimate costs of the incidents. Based upon MCNT’s claim experience, no such accrual has been made at December 31, 2011 and 2010. It is reasonably possible that this estimate could change materially in the near term.

Note 17: Current Economic Conditions

The current protracted economic decline continues to present health care entities with difficult circumstances and challenges, which in some cases have resulted in declines in the fair value of assets, constraints on liquidity and difficulty obtaining financing. The financial statements have been prepared using values and information currently available to the Company.

Current economic conditions, including the rising unemployment rate, may make it difficult for certain of our patients to pay for services rendered. As employers make adjustments to health insurance plans or more patients become unemployed, services provided to self-pay and other payers may impact net patient service revenue, which could have an adverse impact on the Company’s future operating results.

Further, the effect of economic conditions on the state may have an adverse effect on cash flows related to the Medicaid program.

Note 18: Subsequent Events

Subsequent events have been evaluated through April 10, 2012, which is the date the combined financial statements were available to be issued.

F-76

Annex A

Execution Copy

CONTRIBUTION AND PURCHASE AGREEMENT

This CONTRIBUTION AND PURCHASE AGREEMENT (this “Agreement”), dated effective as of August 19, 2010, is by and among USMD Holdings, Inc., a Delaware corporation (“Holdings”), Urology Associates of North Texas, L.L.P., a Texas limited liability partnership (“UANT”), UANT Ventures, L.L.P., a Texas limited liability partnership (“Ventures”), and USMD Inc., a Texas corporation (“USMD”). Each of the parties to this Agreement is individually referred to herein as a “Party” and collectively, as the “Parties.” Capitalized terms used herein that are not otherwise defined herein shall have the meanings ascribed to them in Article IX herein.

WHEREAS, as of the Closing Date, Ventures will own (either directly or indirectly through its ownership of UANT) the Ventures’ Interests, of which the Ventures’ Contributed Interests will be contributed to Holdings, and the Ventures’ Purchased Interests will be sold to Holdings, each as more particularly described herein; and

WHEREAS, the persons listed on Schedule I hereto (the “USMD Holders”) own all of the outstanding common stock of USMD (the “USMD Holders’ Contribution” and together with the Ventures’ Contributed Interests, the “Contribution”); and

WHEREAS, Ventures and USMD desire that their ownership be combined as described in this Agreement.

NOW, THEREFORE, the Parties hereby agree as follows:

ARTICLE I

Contribution and Purchase

1.1 Contribution by Ventures. Upon the terms and subject to the conditions of this Agreement, Ventures agrees to contribute, assign, transfer, convey and deliver, or cause to be contributed, assigned, transferred, conveyed and delivered, the Ventures’ Contributed Interests to Holdings in exchange for the consideration described in Section 1.4.

1.2 Contribution by USMD Holders. Upon the terms and subject to the conditions of this Agreement, USMD agrees to cause the USMD Holders to contribute, assign, transfer, convey and deliver, or cause to be contributed, assigned, transferred, conveyed and delivered, the USMD Holders’ Contribution to Holdings in exchange for the consideration described in Section 1.4. Certain of the USMD Holders, as designated with a “Yes” under the column heading “Contributing USMD Holder” on Schedule I (the “Contributing USMD Holders”) desire that their portion of the USMD Holders’ Contribution be deemed as though it were first contributed to Ventures in exchange for partnership interests in Ventures, and then contributed by Ventures to Holdings in exchange for the consideration described in Section 1.4 (such contributions, the “Deemed Contributions”); provided, however, that each Contributing USMD Holder who does not beneficially own a partnership interest in Ventures may choose to contribute up to 57,985 shares of its USMD common stock directly to Holdings in exchange for that portion of the consideration described in Section 1.4 attributable to such shares so contributed to Holdings. Accordingly, (a) USMD agrees to cause the Contributing USMD Holders to direct that the shares of Holdings common stock issued in consideration for their Deemed Contribution shall be issued to Ventures, and Holdings agrees to issue the shares of its common stock as so directed; and (b) Ventures agrees to issue, in exchange for the Deemed Contributions, partnership interests to the Contributing USMD Holders.

1.3 Sale and Purchase. Upon the terms and subject to the conditions of this Agreement, Ventures agrees to sell, assign, transfer, convey and deliver to Holdings, and Holdings agrees to purchase from Ventures, the Ventures’ Purchased Interests in exchange for the consideration described in Section 1.4.

1.4 Consideration.

(a) The consideration for the Contribution shall be equal to 10,000,000 shares of common stock of Holdings (the “Holdings Shares”). The allocation of the Holdings Shares between Ventures and the USMD Holders shall be based upon the relative value of the contributions to Holdings made by Ventures and the USMD Holders and shall be as set forth in Cells I57 and K57 of Schedule III hereto, after Schedule III has been adjusted pursuant to Section 1.4(b). For illustration only, Schedule III indicates that, as of December 31, 2010, 5,810,931 of the Holdings Shares would be issued to the USMD Holders (including Ventures to the extent of its ownership of USMD common stock) and 4,189,069 of the Holdings Shares would be issued to Ventures.

(b) Schedule III sets forth the allocation of the Holdings Shares as of December 31, 2010 and shall be adjusted (the “Schedule III Adjustments”) as of the Closing Date:

(i) to reflect any changes since December 31, 2010 in “Total Subsidiary Level Debt,” “USMD Corporate Level Debt” and “Ventures/UANT Corporate Level Debt” as set forth in Columns D, F and G, respectively, of Schedule III (and as such terms are defined in Article IX);

(ii) to reflect any changes since December 31, 2010 in ownership percentages of the assets or investments held by either Ventures or USMD, as reflected in Columns H and J, respectively, of Schedule III;

(iii) to reflect the amount of any “Deferred Payment Obligations” of USMD and Ventures as set forth in Cells I48 and K48, respectively, of Schedule III. Such amounts shall be calculated in accordance with the Schedule III Deferred Payment Obligations as defined in Article IX;

(iv) to reflect the amount of any “Net Working Capital Adjustments” of USMD and Ventures as set forth in Cells I49 and K49, respectively, of Schedule III. Such amounts shall reflect the working capital adjustment numbers set forth in Cell D75 of Schedule IV-A and Cell D68 of Schedule IV-B, respectively, such numbers determined as of the Closing Date; and

(v) to reflect the amount of any capital expenditures since December 31, 2010 relating to fixed assets of USMD and Ventures, as set forth in Cells I50 and K50, including without limitation capital expenditures for equipment, building or tenant improvements, but only to the extent the Committee has agreed to the inclusion of each such capital expenditure as an adjustment to Schedule III.

(c) The consideration for the Ventures’ Purchased Interests shall be a note issued by Holdings in the original principal amount of $30,000,000 (the “Holdings Note”). The Holdings Note issued to Ventures pursuant to this Section 1.4(c) shall be issued to Ventures and held for the benefit of the Class A Limited Partners.

(d) The relative consideration set forth in Schedule III has been derived from the fair market values of the respective business lines of USMD and Ventures as determined by the valuation conducted by Value Management Group, LLC.

(e) For the purposes of computing the adjustments, if any, pursuant to subsection (b) above, the following provisions shall be applicable:

(i) At least 30 days prior to the Closing Date, each of USMD and Ventures shall deliver to the other an estimated calculation of the Schedule III Adjustments, based upon (1) its most recently available consolidated financial statements and (2) such pro forma adjustments as are necessary to reflect the material changes between the date of such financial statements and the Closing Date. Each of Ventures and USMD shall give to the other any information and back-up materials reasonably requested by the requesting Party with respect to its Schedule III Adjustments.

(ii) USMD and Ventures shall jointly determine the extent of any Schedule III Adjustments as promptly as practicable.

(iii) In the event that USMD and Ventures are unable to agree upon the any of the Schedule III Adjustments, the Parties shall submit such matter to the Dallas, Texas office of Grant Thornton LLP (or if such firm is unwilling or unable to serve, another nationally recognizable accounting firm mutually agreed upon by the Parties), who shall make the final determination with respect to the correctness of the proposed Schedule III Adjustments in light of the terms and provisions of this Agreement.

1.5 Closing. The closing (the “Closing”) of the transactions contemplated hereby (the “Transactions”) shall take place at the offices of USMD in Irving, Texas, commencing 9:00 a.m., local time, on the fifth business day after the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the Transactions, or such other date and time as the Parties may mutually determine (the “Closing Date”). At the Closing, each of Ventures and the USMD Holders shall deliver to Holdings such bills of sale, instruments of assignment, transfer and conveyance and similar documents as are necessary to transfer the Ventures’ Interests and the USMD Holders’ Contribution. Against such delivery, Holdings shall issue and deliver the Holdings Note and the Holdings Shares as set forth in Section 1.4. Each Party shall cause to be prepared, executed and delivered all other documents required to be delivered by such Party pursuant to this Agreement and all other appropriate and customary documents as another Party or its counsel may reasonably request for the purpose of consummating the Transactions. All actions taken at the Closing shall be deemed to have been taken simultaneously at the time the last of any such actions is taken or completed.

1.6 Tax Treatment. The parties to this Agreement agree that, for United States federal income tax purposes:

(a) the Contribution is intended to be, and shall be characterized as, an exchange qualifying under Section 351 of the Internal Revenue Code of 1986, as amended (the “Code”);

(b) the Deemed Contributions by the Contributing USMD Holders to Ventures is intended to be, and shall be characterized as, a contribution pursuant to Section 721 of the Code; and

(c) the Deemed Contribution by Ventures to Holdings is intended to be, and shall be characterized as, an exchange qualifying under Section 351 of the Code.

1.7 Options Exchange; Option Grant; Employee Stock Grant

(a) As of June 30, 2010, USMD had granted options to purchase an aggregate of 657,500 shares of USMD common stock (238,116 shares of USMD common stock at an exercise price of $2.00 per share, and 419,384 shares of USMD common stock at an exercise price of $3.00 per share, such shares collectively, the “USMD Granted Shares”), pursuant to the USMD 2007 Plan. In addition, USMD has issued under the USMD 2007 Plan 50,000 options to purchase USMD common stock at an exercise price of $3.00 per share to its recently appointed Chief Accounting Officer as part of his compensation to accept this position, and between June 30, 2010 and the Closing Date, USMD anticipates granting (in addition to and separate from the above mentioned options) options to purchase shares of USMD common stock under the USMD 2007 Plan (at an exercise price of $3.00 per share of USMD common stock) to new hires made in anticipation of the integration of the businesses of USMD, UANT and Ventures and of Holdings’ thereafter operating as a publicly-held corporation, but only after consultation with the Committee as to the individuals to receive options and as to the number of options to be granted. Pursuant to the Holdings Equity Plan, all outstanding stock options granted under the USMD 2007 Plan will be assumed under the Holdings Equity Plan and deemed to constitute stock options granted under the Holdings Equity Plan. Pursuant to Section 8 of the USMD 2007 Plan and Section 2(b) of the Holdings Equity Plan, the number of shares of Holdings common stock issuable upon exercise of each assumed option shall be equal to the product (rounded to the nearest whole number) of (i) the number of shares of USMD common stock issuable upon exercise, times (ii) the Conversion Ratio. The exercise price of each assumed option shall be equal to the quotient (rounded to nearest cent) of (x) the exercise price of the USMD option immediately prior to the Closing Date, divided by (y) the Conversion Ratio, and each assumed option shall expire five years from the date of issuance under the Holdings Equity Plan.

(b) On the Closing Date, Holdings shall grant to Ventures options to purchase 221,322 shares of Holdings common stock, which is equal to the number of shares of Holdings common stock that the holders of the USMD Granted Shares are to receive pursuant to subsection (a), at an exercise price equal to the quotient of (i) $3.00 divided by (ii) the Conversion Ratio. Such options shall expire five years from the date of issuance under the Holdings Equity Plan and shall be held by Ventures for the benefit of the Class B Limited Partners.

(c) A true, complete and correct list of the option awards made under the Holdings Equity Plan as of the Closing Date, after giving effect to the exchanges and grants set forth in subsections (a) and (b), is set forth on Schedule II hereto.

(d) On or before the Closing Date and pursuant to the Holdings Equity Plan, the Parties agree that Holdings may issue up to 50,000 shares of Holdings common stock as restricted stock grants of 100 shares each to up to 500 employees of USMD and Ventures.

ARTICLE II

Representations and Warranties of UANT and Ventures

UANT and Ventures hereby jointly and severally make the representations and warranties to USMD and Holdings set forth in this Article II, as of the date hereof and as of the Closing Date. For purposes of such representations and warranties, unless the context otherwise requires, references to “UANT” and “Ventures” include their respective consolidated subsidiaries.

2.1 Organization, Standing and Power. Each of UANT and Ventures is duly organized, validly existing and in good standing under the laws of the State of Texas and has the power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which would not reasonably be expected to have a Material Adverse Effect. Each of UANT and Ventures is duly qualified to do business in each jurisdiction where the nature of its business or the ownership or leasing of its properties make such qualification necessary except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect. Ventures and UANT have delivered to USMD and Holdings true and complete copies of the Ventures Constituent Instruments and UANT Constituent Instruments.

2.2 Authority; Execution and Delivery; Enforceability. Each of UANT and Ventures has all requisite power and authority to execute and deliver this Agreement and to consummate the Transactions. The execution and delivery by each of UANT and Ventures of this Agreement and the consummation of the Transactions have been duly authorized and approved, or will have been duly authorized and approved prior to Closing, by the partners of Ventures and the partners of UANT and no other partnership proceedings on the part of UANT or Ventures, except for the special meeting of Ventures partners to be held prior to Closing, are necessary to authorize this Agreement and the consummation of the Transactions. This Agreement has been duly executed and delivered by each of UANT and Ventures and is enforceable against each of them in accordance with its terms.

2.3 No Conflicts; Consents. The execution and delivery by each of UANT and Ventures of this Agreement does not, and the consummation of the Transactions and compliance with the terms hereof will not, except as set forth on Schedule 2.3 hereto, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the Ventures’ Interests under, any provision of (a) the Ventures Constituent Instruments or UANT Constituent Instruments, (b) any Contract to which Ventures or UANT or any of their respective properties or assets is subject, or (c) any material judgment, order or decree or material Law applicable to Ventures or UANT or their respective properties or assets.

2.4 Litigation. There is no Action pending or threatened against or affecting Ventures or UANT which (a) adversely affects or challenges the legality, validity or enforceability of this Agreement or (b) could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect for either Ventures or UANT.

2.5 Good Title. Ventures (a) is the beneficial owner of, and has good title to, the Ventures’ Interests, and (b) except as set forth on Schedule 2.5, has the right and authority to contribute or sell, as the case may be, and deliver the Ventures’ Interests as described herein, free and clear of liens, claims and encumbrances other than Permitted Liens.

2.6 UANT Financial Statements. UANT has delivered true and complete copies of (a) combined, audited financial statements of UANT and Ventures, including balance sheet, statement of income and statement of cash flows, for the fiscal years ended December 31, 2010 and 2009, accompanied by the audit report of Grant Thornton LLP, and (b) combined, unaudited financial statements of UANT and Ventures, including balance sheet and statement of income for the three month period ended March 31, 2011 (collectively the “UANT Financial Statements”) to USMD and to Holdings. The UANT Financial Statements present fairly the financial condition and results of operations of UANT as of the dates thereof or for the periods covered thereby and have been prepared in accordance with GAAP.

2.7 Undisclosed Liabilities. There are no material liabilities of UANT or of Ventures, other than (a) liabilities as disclosed, reflected or reserved against in the UANT Financial Statements, (b) liabilities incurred in the ordinary course of business, consistent with past practice since the most recent date of the UANT Financial Statements, or (c) liabilities arising in the ordinary course of business out of Contract or Law and not required under GAAP to be reflected on the UANT Financial Statements. Since the date of the UANT Financial Statements, UANT and Ventures have each operated its business only in the ordinary course and there have been no changes or developments in or affecting the business or operations of Ventures or UANT that has had or would reasonably be expected to have a Material Adverse Effect.

2.8 Material Contracts. Schedule 2.8 hereto lists all Contracts to which Ventures or UANT is bound or affected. UANT and Ventures have delivered, or has made available, true, correct and complete copies of all such Contracts to USMD and Holdings. Neither Ventures nor UANT is in breach of or in default under any Contract so listed on Schedule 2.8. Such Contracts are legal, valid and binding obligations of Ventures or UANT, as the case may be, enforceable in accordance with their terms and have not been amended.

2.9 Compliance with Laws. To its knowledge, each of Ventures and UANT has complied with and is in compliance with all Laws, regulations, licensing requirements, rules, ordinances, and orders of Governmental Entities, and neither Ventures nor UANT has received any notices of non-compliance with any Laws from any Government Entities. Additionally:

(a) Neither Ventures nor UANT has submitted any claim for payment to any payor source, either governmental or nongovernmental, in violation of any false claim or fraud law, including, without limitation, the False Claims Act, 31 U.S.C. §3729, or any other applicable federal or state false claim or fraud law.

(b) Neither Ventures nor UANT nor, to UANT’s and Ventures’ knowledge, any person or entity providing professional or other services to Ventures or UANT is presently, or has, engaged in any activities which are prohibited, or are cause for criminal or civil penalties and/or mandatory or permissive exclusion from any Health Care Program, including without limitation:

(i) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment;

(ii) knowingly and willfully making or causing to be made a false statement or representation of a material fact for use in determining rights to any benefit or payment;

(iii) presenting or causing to be presented a claim for reimbursement under any Health Care Program that is: (1) for an item or service the claimant knows or should know was not provided as claimed; (2) for an item or service the claimant knows or should know is false or fraudulent; or (3) for an item or service the claimant knows or should know is not medically necessary;

(iv) failing to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on claimant’s behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment;

(v) knowingly or willfully soliciting or receiving any bribe, rebate, payoff, influence payment, kickback or other payment of any nature in violation of any legal requirement with respect to any Health Care Program; or

(vi) knowingly and willfully making or causing to be made or inducing or seeking to induce the making of any false statement or representation (or omitting to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading) or a material fact under any Health Care Program.

(c) Neither Ventures nor UANT nor, to UANT’s and Ventures’ knowledge, any other employee or contracted agent of Ventures or UANT has, directly or indirectly:

(i) offered, paid, solicited or received any remuneration, in cash or in kind, to, or made any financial arrangements with, any past or present customers, past or present suppliers, contractors or third party payors, in order to obtain business or payments from such persons in violation of any legal requirement;

(ii) solicited, received, given or agreed to give, or is aware that there has been made or that there is any agreement to make, any gift or gratuitous Payment (as hereinafter defined) of any kind, nature or description to any customer or potential customer, supplier or potential supplier, contractor, third party payor or any other person in violation of any legal requirement;

(iii) made or agreed to make, or is aware that there has been made or that there is any agreement to make, any contribution, payment, gift or other distribution, whether in money, property or services (a “Payment”) to, or for the private use of, any governmental official, employee or agent where the Payment was in violation of any legal requirement;

(iv) established or maintained any unrecorded fund or asset for any purpose or made any false or artificial entries on any of its books or records for any reason; or

(v) made, or agreed to make, or is aware that there has been made or that there is any agreement to make, any Payment to any person or entity with the intention or understanding that any part of such Payment would be used for any purpose other than that described in the documents supporting such Payment.

(d) Neither Ventures nor UANT, nor, to UANT’s and Ventures’ knowledge, any other employee or contracted agent of Ventures or UANT, has been convicted of, charged with, or investigated (other than as part of routine surveys) for:

(i) a criminal offense related to the delivery of an item or service under Medicare, Medicaid, or any other federal or state health care program, including without limitation any program funded under Title V or Title XX of the Social Security Act (the Maternal and Child Health Services Program or the Block Grants to States for Social Services Program, respectively);

(ii) a criminal offense relating to neglect or abuse of patients in connection with the delivery of a health care item or service;

(iii) fraud, theft, embezzlement, or other financial misconduct in connection with the delivery of a health care item or service or with respect to any act or omission in a health care program operated by or financed in whole or in part by any federal or state government agency;

(iv) unlawful manufacture, distribution, prescription, or dispensing of a controlled substance; or

(v) obstructing an investigation of any crime referred to in (i) through (iv) above.

(e) Neither Ventures nor UANT nor any of their respective employees has been excluded or suspended from participation in any Health Care Program or been subject to any order or consent decree of, or criminal or civil fine or penalty imposed by, any court or governmental agency with respect to such program.

2.10 Affiliated Transactions. Except as set forth on Schedule 2.10, no partner of either UANT or Ventures (a) is a party to any Contract with either UANT or Ventures other than the Transaction Documents and the employment agreements contemplated in Sections 6.6 and 7.6, or (b) owns any asset used in, or necessary to, the conduct of the business of either UANT or Ventures.

2.11 Taxes. Ventures and UANT have each timely filed all returns, reports, declarations or statements relating to taxes (“Tax Returns”) required to be filed by each of them in accordance with all applicable Law. All Tax Returns are true, correct and complete in all material respects. All taxes which are due and payable by Ventures or UANT have been timely paid in full. There is no Action pending or threatened against or affecting Ventures or UANT with regard to any taxes or Tax Returns. Ventures and UANT have each provided or made available to USMD and to Holdings true, correct and complete copies of all Tax Returns for 2007, 2008 and 2009. Any UANT unpaid taxes are reflected as a reserve for taxes on the UANT Financial Statements.

ARTICLE III

Representations and Warranties of USMD

USMD hereby makes the representations and warranties to Ventures, UANT and Holdings set forth in this Article III, as of the date hereof and as of the Closing Date. For purposes of such representations and warranties, unless the context otherwise requires, references to “USMD” include the consolidated subsidiaries of USMD.

3.1 Organization, Standing and Power. USMD is duly organized, validly existing and in good standing under the laws of the State of Texas and has full corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, would not reasonably be expected to have a Material Adverse Effect. USMD is duly qualified to do business in each jurisdiction where the nature of its business or the ownership or leasing of its properties make such qualification necessary except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect. USMD has delivered to UANT, Ventures and Holdings true and complete copies of the USMD Constituent Instruments.

3.2 Authority; Execution and Delivery; Enforceability. USMD has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the Transactions. The execution and delivery by USMD of this Agreement and the consummation of the Transactions has been duly authorized and approved, or will have been duly authorized and approved prior to Closing, by the board of directors of USMD and no other corporate proceedings on the part of USMD, except for the special meeting of the shareholders of USMD to be held prior to Closing, are necessary to authorize this Agreement and the consummation of the Transactions. This Agreement has been duly executed and delivered by USMD and is enforceable against USMD in accordance with its terms.

3.3 No Conflicts; Consents. The execution and delivery by USMD of this Agreement does not, and the consummation of the Transactions and compliance with the terms hereof will not, except as set forth on Schedule 3.3 hereto, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the USMD Holders’ Contribution under, any

provision of (a) the USMD Constituent Instruments, (b) any Contract to which USMD or any of its properties or assets is subject or (c) any material judgment, order or decree or material Law applicable to USMD or its properties or assets.

3.4 Litigation. Except as set forth on Schedule 3.4, there is no Action pending or threatened against or affecting USMD which (a) adversely affects or challenges the legality, validity or enforceability of this Agreement or (b) could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.

3.5 USMD Shares. The USMD Holders are the record owners of the USMD Holders’ Contribution. The shares of USMD common stock owned by the USMD Holders have been duly and validly issued and are fully paid and nonassessable.

3.6 USMD Financial Statements. USMD has delivered true and complete copies of (a) its consolidated, audited financial statements, including balance sheet, statement of income and statement of cash flows, for the fiscal years ended December 31, 2010 and 2009, accompanied by the audit report of Grant Thornton LLP, and (b) its consolidated, unaudited financial statements, including balance sheet and statement of income for the three month period ended March 31, 2011 (collectively the “USMD Financial Statements”) to UANT, Ventures and Holdings. The USMD Financial Statements present fairly the financial condition and results of operations of USMD as of the dates thereof or for the periods covered thereby and have been prepared in accordance with GAAP.

3.7 Undisclosed Liabilities. There are no material liabilities of USMD, other than (a) liabilities as disclosed, reflected or reserved against in the USMD Financial Statements, (b) liabilities incurred in the ordinary course of business, consistent with past practice since the most recent date of the USMD Financial Statements, or (c) liabilities arising in the ordinary course of business out of Contract or Law and not required under GAAP to be reflected on the USMD Financial Statements. Since the date of the USMD Financial Statements, USMD has operated its business only in the ordinary course and there has not been any change or development in or affecting the business or operations of USMD’s business that has had or would reasonably be expected to have a Material Adverse Effect.

3.8 Material Contracts. Schedule 3.8 hereto lists all Contracts to which USMD is bound or affected. USMD has delivered, or has made available, true, correct and complete copies of all such Contracts to UANT, Ventures and Holdings. USMD is not is in breach of or in default under any Contract so listed on Schedule 3.8. Such Contracts are legal, valid and binding obligations of USMD, enforceable in accordance with their terms and have not been amended.

3.9 Compliance with Laws. To its knowledge, USMD has complied with and is in compliance with all Laws, regulations, licensing requirements, rules, ordinances, and orders of Governmental Entities, and USMD has not received any notices of non-compliance with any Laws from any Government Entities. Additionally:

(a) USMD has not submitted any claim for payment to any payor source, either governmental or nongovernmental, in violation of any false claim or fraud law, including, without limitation, the False Claims Act, 31 U.S.C. §3729, or any other applicable federal or state false claim or fraud law.

(b) Neither USMD nor, to USMD’s knowledge, any person or entity providing professional or other services to USMD is presently, or has, engaged in any activities which are prohibited, or are cause for criminal or civil penalties and/or mandatory or permissive exclusion from any Health Care Program, including without limitation:

(i) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment;

(ii) knowingly and willfully making or causing to be made a false statement or representation of a material fact for use in determining rights to any benefit or payment;

(ii) solicited, received, given or agreed to give, or is aware that there has been made or that there is any agreement to make, any gift or gratuitous Payment of any kind, nature or description to any customer or potential customer, supplier or potential supplier, contractor, third party payor or any other person in violation of any legal requirement;

(iii) made or agreed to make, or is aware that there has been made or that there is any agreement to make, any Payment to, or for the private use of, any governmental official, employee or agent where the Payment was in violation of any legal requirement;

(iv) established or maintained any unrecorded fund or asset for any purpose or made any false or artificial entries on any of its books or records for any reason; or

(d) Neither USMD nor, to USMD’s knowledge, any other employee or contracted agent of USMD, has been convicted of, charged with, or investigated (other than as part of routine surveys) for:

(ii) a criminal offense relating to neglect or abuse of patients in connection with the delivery of a health care item or service;

(iv) unlawful manufacture, distribution, prescription, or dispensing of a controlled substance; or

(v) obstructing an investigation of any crime referred to in (i) through (iv) above.

(e) Neither USMD nor its employees has been excluded or suspended from participation in any Health Care Program or been subject to any order or consent decree of, or criminal or civil fine or penalty imposed by, any court or governmental agency with respect to such program.

3.10 No Other Securities. Except for the equity interests of USMD shown on Schedule I and the options shown on Schedule II, there are no other shares of capital stock or other securities, options, warrants, calls, rights, commitments, agreements, arrangements, or undertakings of any kind to which USMD is bound, obligating USMD to issue, deliver or sell any shares of capital stock or other securities of USMD.

3.11 Affiliated Transactions. Except as set forth on Schedule 3.11, no officer or director of USMD, and no USMD Holder, (a) is a party to any Contract with USMD other than the Transaction Documents, or (b) owns any asset used in, or necessary to, the conduct of the business of USMD.

3.12 Taxes. USMD has timely filed all Tax Returns required to be filed by it in accordance with all applicable Law. All Tax Returns are true, correct and complete in all material respects. All taxes which are due and payable by USMD have been timely paid in full. There is no Action pending or threatened against or affecting USMD with regard to any taxes or Tax Returns. USMD has provided or made available to UANT, Ventures and Holdings true, correct and complete copies of all Tax Returns for 2007, 2008 and 2009. Any unpaid taxes are reflected as a reserve for taxes on the USMD Financial Statements.

ARTICLE IV

Representations and Warranties of Holdings

Holdings hereby makes the representations and warranties to USMD, UANT and Ventures set forth in this Article IV, as of the date hereof and as of the Closing Date.

4.1 Organization, Standing and Power. Holdings is duly organized, validly existing and in good standing under the laws of State of Delaware and has full corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which would not reasonably be expected to have a Material Adverse Effect. Holdings is duly qualified to do business in each jurisdiction where the nature of its business or the ownership or leasing of its properties make such qualification necessary except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect. Holdings has delivered to USMD, UANT and Ventures true and complete copies of the Holdings Constituent Instruments. Holdings has been formed for the purpose of completing the Transactions and has not conducted any operations other than the implementation of the Transactions.

4.2 Authority; Execution and Delivery; Enforceability. Holdings has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the Transactions. The execution and delivery by Holdings of this Agreement has been duly authorized and approved by the board of directors of Holdings and no other corporate proceedings on of Holdings are necessary to authorize this Agreement. This Agreement has been duly executed and delivered by Holdings and is enforceable against Holdings in accordance with its terms. Upon issuance thereof at the Closing, the Holdings Note shall been duly executed and delivered by Holdings and is enforceable against Holdings in accordance with its terms.

4.3 No Conflicts; Consents. The execution and delivery by Holdings of this Agreement does not, and the consummation of the Transactions and compliance with the terms hereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the Holdings Shares under, any provision of (a) the Holdings Constituent Instruments, (b) any Contract to which Holdings or any of its properties or assets is subject, or (c) any material judgment, order or decree or material Law applicable to Holdings or its properties or assets.

4.4 Capital Structure. The authorized capital stock of Holdings consists of 1,000,000 shares of preferred stock, $0.01 par value, of which no shares are issued and outstanding and 49,000,000 shares of common stock, $.01 par value, of which 100 shares are issued and outstanding. As of the date hereof, the Holdings Shares are reserved for issuance in connection with the Transactions, and up to 2,000,000 shares of Holdings common stock are reserved for issuance (i) upon the exercise of the stock options issued pursuant to Sections 1.7 (a) and (b), (ii) in connection with the restricted stock grant to employees pursuant to Section 1.7 (d), or (iii) under the Holdings Equity Plan. Except as set forth above, no shares of capital stock or other voting securities of Holdings are issued, reserved for issuance or outstanding. All outstanding shares of Holdings common stock are, and the Holdings Shares will be when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the Delaware General Corporation Law, the Holdings Constituent Instruments or any Contract to which Holdings is a party or is otherwise bound. The Holdings Shares shall be issued in compliance with the Securities Act.

ARTICLE V

Covenants

5.1 Consents and Approvals. Each of the Parties shall use its reasonable efforts in good faith to obtain at the earliest practicable date any approvals, authorizations and consents necessary, and shall take such actions as the other Parties may reasonably request, to consummate the Transactions and diligently attempt to satisfy, to the extent within its control, all conditions precedent to its obligations to close the Transactions. Nothing in this Section 5.1 shall require a Party to expend any monies to obtain any approval or consent required hereunder, except for customary attorneys’ fees and filing fees incident to the Transactions or as otherwise specifically required under this Agreement.

5.2 Operation in Ordinary Course. Each Party covenants that between the date hereof and the Closing, except as contemplated hereby or with the prior consent of the other Parties, it shall refrain from: (a) entering into any transaction with respect to its business other than in the ordinary course, including without limitation entering into a transaction to acquire all or substantially all of the equity interests or assets, by merger, acquisition or otherwise, of another entity; (b) permitting any encumbrance, mortgage, pledge or lease of or on any material asset; (c) disposing of any material asset; or (d) incurring any material liabilities, other than indebtedness incurred in the ordinary course of business under already established credit facilities. Notwithstanding the foregoing, the Parties agree that: (x) UANT shall convert to a Texas professional limited liability company and merge with a newly-formed, wholly-owned subsidiary of Ventures; (y) Ventures shall convert to a Texas limited partnership; and (z) UANT and Ventures shall distribute cash to their equity holders.

5.3 Public Announcements. None of the Parties shall issue any press release or make any such public statement regarding the Transactions without the prior written consent of the other Parties, except as may be required by applicable Law after consultation with the other Parties.

5.4 Access. Each of the Parties shall permit representatives of the other Parties to have full access to all premises, properties, personnel, books, records, contracts and documents of or pertaining to such Party.

5.5 Registration Statement; Proxy Statement. Holdings shall, as promptly as practicable, prepare and file with the SEC a registration statement on Form S-4 (the “S-4 Registration Statement”), containing a proxy statement/prospectus, in connection with the registration under the Securities Act of the issuance of the Holdings Shares in connection with the Contribution. Holdings shall, as promptly as practicable, prepare and file with the SEC a proxy statement that will be the same proxy statement/prospectus contained in the S-4 Registration Statement and a form of proxy, to be used in connection with the vote of by the USMD Holders and the partners of Ventures to approve the Contribution (such proxy statement/prospectus, the “Joint Proxy Statement”). Holdings shall use its reasonable best efforts to cause the S-4 Registration Statement declared effective as

promptly as practicable. USMD and Ventures shall use their respective reasonable best efforts to cause the Joint Proxy Statement to be disseminated to their respective equity holders at the earliest practicable date after the S-4 Registration Statement has been declared effective.

5.6 Listing Application. In order to satisfy the requirements of 42 C.F.R. Ch IV (10-1-09 Edition)—§411.356, Holdings shall, as soon as practicable, prepare and submit to the AMEX and/or NASDAQ a listing application with respect to the Holdings Shares issuable pursuant to the Contribution. Holdings shall use its reasonable best efforts to obtain, prior to the Closing, approval for the listing of the Holdings Shares on such exchange, subject to official notice of issuance.

5.7 Notice of Developments. From the date hereof until the Closing, each Party shall give the other Parties prompt written notice upon becoming aware of any event or circumstance that could reasonably be expected to result in a breach of, or inaccuracy in, any of the representations and warranties made by such Party under this Agreement.

5.8 Release of Personal Guarantees. The Parties shall, in connection with the Closing, use reasonable best efforts to obtain the release of any personal guarantees delivered by the USMD Holders to any third parties in connection with any indebtedness of any of the Parties or their subsidiaries. Holdings shall, in connection with the Closing, obtain the releases of any personal guarantees delivered by the partners of UANT or of Ventures to any third parties in connection with the Ventures/UANT Corporate Level Debt or any Total Subsidiary Level Debt guaranteed by the partners of Ventures or of UANT.

5.9 Subsequent Transfers of UANT Business Units.

(a) The Parties understand and acknowledge that, on or after the Closing Date, Holdings shall make subsequent transfers or contributions of certain business units of UANT or of its ownership interests in UANT to affiliates or subsidiaries of Holdings. Each of the Parties understands and acknowledges that: (i) Holdings shall separate UANT’s radiation therapy business unit from UANT and shall operate that business unit independently from UANT; (ii) Holdings shall separate UANT’s anatomical and clinical laboratory business unit from UANT and shall operate that business unit independently from UANT; (iii) Holdings shall separate UANT’s diagnostic imaging business unit from UANT and shall operate that business unit independently from UANT; and (iv) Holdings shall contribute UANT without the business units mentioned directly above to CNHO and UANT, as a wholly owned subsidiary of CNHO, shall provide professional medical clinical and surgical services and other limited ancillary services, including but not limited to Video Urodynamics, through its Physicians. The Parties acknowledge that the relative value of the contributions to Holdings made by the USMD Holders and by Ventures is based upon the assumption that the assets, liabilities and cash flow from the operations of such business unit will be so transferred and contributed.

(b) In the event that Holdings is unable to operate any portion of UANT’s diagnostic imaging business unit due to delays in the licensing, permitting, inspection or payor enrollment processes (such portion, the “Retained Portion”), UANT shall continue to operate the Retained Portion in a manner consistent with current business practices until such time as Holdings is able to operate the Retained Portion as contemplated in Section 5.9(a)(iii). In addition, Holdings shall be entitled to deduct from each monthly payment due to Ventures under the Holdings Note the amount of Adjusted Net Income (as defined below) generated during such month by the Retained Portion. Any such offset shall (i) commence with the first monthly payment due under the Holdings Note and shall continue until such date as Holdings is able to operate the Retained Portion as contemplated in Section 5.9(a)(iii), and (ii) be applied first to the interest portion of the monthly payment and then to the principal portion of such monthly payment. In the event the Adjusted Net Income exceeds the monthly payment (including principal and interest) due under the Holdings Note, such excess shall accrue and be applied to offset future monthly payments. UANT shall provide to Holdings, at least two (2) days before the date on which the monthly Holdings Note payment is due, an estimate of the Adjusted Net Income for that month (which Holdings shall then use to calculate the remaining note payment to be paid for such month). UANT shall reconcile such monthly estimates on a

quarterly basis and any adjustments made to the Adjusted Net Income for any month shall be accounted for in the offsets made to future note payments. Each month, the Adjusted Net Income for that month, as adjusted for payroll taxes, shall be paid to the Physicians who are Class A Limited Partners as additional employment compensation, in accordance with the relative sharing percentages represented by the partnership interests each holds as a Class A Limited Partner. “Adjusted Net Income” shall mean, for any month, ninety-seven point three percent (97.3%) of the net income of the Retained Portion for such month, calculated in a manner consistent with UANT’s historical methodologies.

ARTICLE VI

Conditions Precedent to Obligations of USMD

The obligations of USMD to consummate the Transactions shall be subject to the satisfaction on or before the Closing Date of each of the following conditions:

6.1 Compliance. Each of Ventures, UANT and Holdings shall have, or shall have caused to be, satisfied or complied with and performed in all material respects, all terms, covenants and conditions of this Agreement to be complied with or performed by it on or before the Closing Date.

6.2 Representations and Warranties. All of the representations and warranties made by Ventures, UANT and Holdings in this Agreement and in all certificates and other documents delivered by Ventures, UANT or Holdings to USMD pursuant hereto, shall have been true and correct in all material respects as of the date hereof, and shall be true and correct in all material respects at the Closing Date, with the same force and effect as if such representations and warranties had been made at and as of the Closing Date, except for changes permitted or contemplated by this Agreement, or changes approved in writing by USMD and Holdings.

6.3 Consents, Licenses and Approvals. USMD shall have received all required permits, licenses, contracts and third party consents in form satisfactory to USMD.

6.4 Equity Holder Approval. This Agreement shall have been approved by the USMD Holders and by the partners of Ventures.

6.5 Transaction Documents. The Committee shall have approved each of the Transaction Documents to be executed by the Parties and their subsidiaries.

6.6 Fairness Opinion. USMD shall have received from Value Management Group, LLC an opinion, in form and substance acceptable to the Committee, that the consideration for the Transactions is fair, from a financial point of view, to the USMD shareholders and to Ventures and its partners.

6.7 Employment of Physicians. All or substantially all of the Physicians shall have entered into employment agreements with CNHO or a subsidiary of CNHO, in form and substance satisfactory to the Committee.

6.8 Regulatory Approval. The S-4 Registration Statement shall have been declared effective by the SEC and the Holdings Shares shall have been approved to be listed for quotation on the AMEX and/or NASDAQ.

6.9 Compliance. USMD shall have determined in its reasonable judgment that: (i) the ownership of any of the securities issued by Holdings pursuant to this Agreement would not constitute a financial relationship as that term is defined for purposes of 42 U.S.C. 1395nn, the federal physician self-referral statute and regulations; and (ii) the operation of the businesses of the parties in the manner contemplated after the Closing will not violate any state or federal healthcare law, rule or regulation.

ARTICLE VII

Conditions Precedent to Obligations of Ventures and UANT

The obligations of Ventures and UANT to consummate the Transactions shall be subject to the satisfaction on or before the Closing Date of each of the following conditions:

7.1 Compliance. Each of USMD and Holdings shall have, or shall have caused to be, satisfied or complied with and performed in all material respects, all terms, covenants and conditions of this Agreement to be complied with or performed by it on or before the Closing Date.

7.2 Representations and Warranties. All of the representations and warranties made by USMD and Holdings in this Agreement and in all certificates and other documents delivered by USMD or Holdings to Ventures or UANT pursuant hereto, shall have been true and correct in all material respects as of the date hereof, and shall be true and correct in all material respects at the Closing Date, with the same force and effect as if such representations and warranties had been made at and as of the Closing Date, except for changes permitted or contemplated by this Agreement, or changes approved in writing by Ventures.

7.3 Consents, Licenses and Approvals. Ventures shall have received all required permits, licenses, contracts and third party consents in form satisfactory to Ventures.

7.4 Equity Holder Approval. This Agreement shall have been approved by the USMD Holders and by the partners of Ventures.

7.5 Transaction Documents. The Committee shall have approved each of the Transaction Documents to be executed by the Parties and their subsidiaries.

7.6 Fairness Opinion. Ventures shall have received from Value Management Group, LLC an opinion, in form and substance acceptable to the Committee, that the consideration for the Transactions is fair, from a financial point of view, to the USMD shareholders and to Ventures and its partners.

7.7 Employment of Physicians. All or substantially all of the Physicians shall have entered into employment agreements with CNHO or a subsidiary of CNHO, in form and substance satisfactory to the Committee.

7.8 Regulatory Approval. The S-4 Registration Statement shall have been declared effective by the SEC and the Holdings Shares shall have been approved to be listed for quotation on the AMEX and/or NASDAQ.

7.9 Compliance. UANT and Ventures shall have determined in their reasonable judgment that: (i) the ownership of any of the securities issued by Holdings pursuant to this Agreement would not constitute a financial relationship as that term is defined for purposes of 42 U.S.C. 1395nn, the federal physician self-referral statute and regulations; and (ii) the operation of the businesses of the parties in the manner contemplated after the Closing will not violate any state or federal healthcare law, rule or regulation.

ARTICLE VIII

Miscellaneous

8.1 Termination. This Agreement and the Transactions may be terminated at any time on or before the Closing Date:

(a) by mutual consent of Ventures and USMD;

(b) by USMD if any of the conditions in Article VI have not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of USMD to comply with its obligations under this Agreement) and USMD has not waived such condition on or before the Outside Closing Date;

(c) by Ventures if any of the conditions in Article VII have not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Ventures or UANT to comply with their obligations under this Agreement) and Ventures has not waived such condition on or before the Outside Closing Date; or

(d) by USMD or by Ventures, if such party is not in breach hereunder and the Transactions have not been consummated by Outside Closing Date.

If this Agreement is terminated pursuant to the foregoing provisions, then all provisions of this Agreement (except this Article VIII) shall thereupon become void without any liability on the part of any Party hereto to any other Party hereto, subject to the following provisions. If this Agreement is terminated by either Party under subsections (b) or (c) above, solely as a result of the failure of the Committee to approve of the form of the Transaction Documents, then USMD and Ventures shall each be responsible for payment of one-half of the documented reasonable out-of-pocket fees and expenses incurred by each of the Parties from and after April 28, 2010 in connection with the Transactions. If this Agreement is terminated solely as a result of the failure of USMD or Ventures to obtain the approval of their respective equity holders to consummate the Transactions, then the Party who fails to obtain approval shall be obligated to reimburse the other Parties for all of their documented and reasonable out of pocket fees and expenses incurred from and after April 28, 2010 in connection with the Transactions (but subject to a maximum of $500,000). In the case of USMD, approval by its equity holders shall mean the contribution by the USMD Holders of all common stock of USMD in accordance with the provisions of Section 1.2. The remedies set forth in this section shall be the exclusive remedies of the Parties with regard to a termination of this Agreement.

8.2 Expenses. Except as provided in Section 8.1, each Party shall pay its own expenses incurred in connection with this Agreement and the Transactions, whether or not the Agreement or the Transactions are consummated.

8.3 Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):

If to Holdings or USMD, to:

6333 North State Highway 161, Suite 200

Irving, Texas 75038

If to Ventures or UANT, to:

612 East Lamar Blvd., Suite 700

Arlington, Texas 76011

8.4 Amendments. No provision of this Agreement may be waived or amended except in a written instrument signed by the Parties. Any amendment that provides for a material change in the terms and conditions of this Agreement must be approved by the USMD Holders and the partners of Ventures in accordance with Sections 6.4 and 7.4.

8.5 Waivers; No Additional Consideration. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right.

8.6 Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.

8.7 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the Transactions are fulfilled to the extent possible.

8.8 Counterparts; Facsimile Execution. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties. Facsimile execution and delivery of this Agreement is legal, valid and binding for all purposes.

8.9 Entire Agreement; Third Party Beneficiaries. This Agreement (a) constitutes the entire agreement and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the Transactions and (b) is not intended to confer any rights or remedies upon any person other than the Parties.

8.10 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

8.11 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the Parties without the prior written consent of each of the other Parties. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns.

8.12 Survival of Representations, Warranties and Covenants. Regardless of any investigation of any time made on behalf of any Party hereto or any information any Party may have in respect thereof each representation and warranty made in this Agreement or any of the Transaction Documents shall survive the Closing for a period of one (1) year following the Closing Date, except that representations and warranties set forth in Sections 2.1, 2.2, 2.5, 3.1, 3.2, 3.5, 3.10, 4.1 and 4.2 shall survive indefinitely and the representations and warranties set forth Sections 2.9, 2.11, 3.9 and 3.12 shall survive until the expiration of the applicable statute of limitations. Each of the covenants and agreements contained in this Agreement and each of the Transaction Documents, shall survive the Closing indefinitely.

ARTICLE IX

Certain Definitions

As used herein, the following terms shall have the following meanings:

“Action” means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or threatened in writing before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign), stock market, stock exchange or trading facility.

“AMEX” means the NYSE Amex Equities, formerly known as The American Stock Exchange.

“Class A Limited Partners” means those persons who are admitted as Class A Limited Partners under the Limited Partnership Agreement of UANT Ventures, L.P. resulting from the conversion of Ventures as referenced in Section 5.2(y).

“Class B Limited Partners” means those persons who are admitted as Class B Limited Partners under the Limited Partnership Agreement of UANT Ventures, L.P. resulting from the conversion of Ventures as referenced in Section 5.2(y).

“Closing Date Net Working Capital” means the amount by which the consolidated current assets of USMD or Ventures, as the case may be, and its consolidated subsidiaries exceed the consolidated current liabilities of such entity and its consolidated subsidiaries, calculated at the close of business on the last business day prior to the Closing Date, all as computed in accordance with GAAP.

“Committee” means the committee appointed by UANT and USMD in connection with the Transactions and consisting of Dr. John House, Dr. Charles Cook, Dr. Paul Thompson, Dr. Jim Saalfield, Dr. Patrick Collini, Dr. Mark McCurdy, Dr. Richard Scriven, Dr. Keith Waguespack, Dr. Ira Hollander and Dr. Alex Gordon.

“Contract” means, with respect to any Party, any contract, lease, license, indenture, note, bond, agreement, permit, concession, franchise or other instrument which involves more than $100,000 in payments by or to such Party during any 12 month period but excluding any contract that may be terminated by such Party at any time after the Closing without material liability, penalty or premium upon notice of 90 days or less.

“Conversion Ratio” means the quotient of (a) 10 million, divided by (b) the number of shares of USMD common stock outstanding immediately prior to the Closing.

“CNHO” means USMD Affiliated Services, a Texas non-profit corporation and wholly owned subsidiary of USMD.

“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, which are applicable to the circumstances as of the date of determination.

“Governmental Entity” means any federal, state, local or foreign government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign.

“Health Care Program” means any Federal Health Care Program (as defined at 42 U.S.C. §1320a-7b(f)) or any health care program operated by or financed in whole or in part by any state or other government jurisdiction.

“Holdings Constituent Instruments” means the certificate of incorporation and bylaws of Holdings, each as amended to the date of this Agreement.

“Holdings Equity Plan” means the USMD Holdings, Inc. 2010 Equity Compensation Plan.

“Law” means any statute, law, ordinance, rule, regulation, order, writ, injunction, judgment, or decree.

“Lien” means any lien, security interest, pledge, equity and claim of any kind, voting trust, stockholder agreement and other encumbrance.

“Material Adverse Effect” means, with respect to any Party, the existence of any fact or the occurrence of any change which, individually or in the aggregate, has had and would reasonably be expected to have a material adverse effect on (a) the ability of the Party to perform its obligations under this Agreement, (b) the ability of the Party to consummate the Transactions, or (c) the business, assets, operations, prospects or financial condition of such Party.

“NASDAQ” means the NASDAQ Stock Market.

“Outside Closing Date” means December 31, 2011.

“Permitted Liens” means (a) any statutory liens for current year taxes or other charges not yet due and payable, (b) any mechanics, materialmen’s or similar statutory liens incurred in the ordinary course of business, not yet due and payable, and (c) any liens associated with any Total Subsidiary Level Debt and USMD Corporate Level Debt or Ventures/UANT Corporate Level Debt, as the case may be.

“Physicians” means persons who are (a) members of the partners of Ventures and (b) medical doctors engaged in medical practice.

“Schedule III Deferred Payment Obligations” means, in the case of UANT and Ventures, those certain deferred payments payable to Dr. David Ellis and Dr. H.P. Hezmall.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Total Subsidiary Level Debt” means the aggregate indebtedness, obligations or liabilities of the direct and indirect subsidiaries of USMD or of Ventures and UANT, as the case may be, as of the Closing Date in respect of borrowed money or representing the balance deferred and unpaid of the purchase money of any property (including capital lease obligations), all as computed in accordance with GAAP.

“Transaction Documents” means the documents to be entered into or adopted in connection with the Transactions, including but not limited to the (a) Holding’s Constituent Instruments; (b) the practice management agreement (by and among, USMD, CNHO and UANT whereby USMD will provide UANT/CNHO with the premises, equipment, staff, supplies, administration, financial services and other goods and services necessary to permit UANT/CNHO to provide through the Physicians comprehensive professional clinical urological services and to bill and collect for these services from all payors); (c) the Holdings Note; (d) the subordination agreements with the lender(s) of the Parties; (e) the Ventures limited partnership agreement (governing Ventures after its conversion to a limited partnership); (f) the limited liability company agreement for the general partner of Ventures; (g) the restated bylaws for the CNHO; (h) the UANT Company Agreement (governing UANT after its conversion to a professional limited liability company) and any amendments or restatement thereto; (i) the contribution agreements between each of the USMD Holders who are not Contributing USMD Holders and Holdings, or between each of the Contributing USMD Holders and Ventures, as the case may be (which agreements shall confirm that each of the USMD Holders has good title to his or her portion of the USMD Holders’ Contribution, with the right and authority to contribute and deliver such portion as described herein, free and clear of liens, claims and encumbrances); and (j) such other and additional documents determined by the Parties to be required to consummate and Close the Transactions.

“UANT Constituent Instruments” means the certificate of formation and limited liability partnership agreement of UANT, as amended, and drafts of the certificate of conversion and limited liability company agreement of UANT, to be entered into prior to the Closing.

“USMD Constituent Instruments” means the certificate of incorporation, bylaws and shareholders’ agreement of USMD, as amended.

“USMD Corporate Level Debt” means the indebtedness, obligations or liabilities of USMD as of the Closing Date in respect of borrowed money or representing the balance deferred and unpaid of the purchase money of any property (including capital lease obligations), as computed in accordance with GAAP.

“USMD 2007 Plan” means the USMD Inc. 2007 Long Term Incentive Plan.

“Ventures Constituent Instruments” means the certificate of formation and limited liability partnership agreement of Ventures, as amended, and drafts of the certificate of conversion and limited partnership agreement, to be entered into prior to Closing.

“Ventures Contributed Interests” mean the percentage of Ventures Interests as calculated by dividing (a) the amount listed in Cell K54 of Schedule III, by (b) the difference of (i) the amount listed in Cell K51 of Schedule III less (ii) the amount listed in Cell K52 of Schedule III. The percentage shall be used to determine the proportion, by value, of the Ventures Interests to be contributed. The actual assets (or portions thereof) that will comprise the Ventures Contributed Interests and make up such value shall be determined by Ventures in consultation with the Committee.

“Ventures Interests” means all of the assets of Ventures including without limitation its equity interest in UANT and in the other entities as set forth in Rows 19 through 38 on Schedule III.

“Ventures’ Purchased Interests” mean the percentage of Ventures Interests as calculated by dividing (a) the amount of the Holdings Note, by (b) the difference of (i) the amount listed in Cell K51 of Schedule III, less (ii) the amount listed in Cell K52 in Schedule III. The percentage shall be used to determine the proportion, by value, of the Ventures Interests to be purchased. The actual assets (or portions thereof) that will comprise the Ventures Purchased Interests and make up such value shall be determined by Ventures in consultation with the Committee.

“Ventures/UANT Corporate Level Debt” means the indebtedness, obligations or liabilities of Ventures and of UANT as of the Closing Date in respect of borrowed money or representing the balance deferred and unpaid of the purchase money of any property (including capital lease obligations), as computed in accordance with GAAP.

“Video Urodynamics” means the assets, including their associated revenue, used in connection with the video urodynamics business unit of UANT.

(Signature Pages Follow.)

IN WITNESS WHEREOF, the parties hereto have caused this Contribution and Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.


HOLDINGS

USMD Holdings, Inc., a Delaware corporation

By:		/s/ John House, M.D.
Name:		John House, M.D.
Title:		President

USMD

USMD Inc., a Texas corporation

By:		/s/ John House, M.D.
Name:		John House, M.D.
Title:		Chairman and Chief Executive Officer

UANT

Urology Associates of North Texas, L.L.P., a Texas limited liability partnership

By:		/s/ Dr. Mark McCurdy
Name:		Dr. Mark McCurdy
Title:		Authorized Partner

By:		/s/ Dr. Richard Scriven
Name:		Dr. Richard Scriven
Title:		Authorized Partner

By:		/s/ Dr. Keith Waguespack
Name:		Dr. Keith Waguespack
Title:		Authorized Partner

By:		/s/ Dr. Ira Hollander
Name:		Dr. Ira Hollander
Title:		Authorized Partner

Signature Page

Contribution and Purchase Agreement


VENTURES

UANT Ventures, L.L.P., a Texas limited liability partnership

By:		/s/ Dr. Mark McCurdy
Name:		Dr. Mark McCurdy
Title:		Authorized Partner

By:		/s/ Dr. Richard Scriven
Name:		Dr. Richard Scriven
Title:		Authorized Partner

By:		/s/ Dr. Keith Waguespack
Name:		Dr. Keith Waguespack
Title:		Authorized Partner

By:		/s/ Dr. Ira Hollander
Name:		Dr. Ira Hollander
Title:		Authorized Partner

Signature Page

Contribution and Purchase Agreement

Schedule I

List of USMD Shareholders and USMD Shares Held


Name of Holder	Number of Shares of USMD Common Stock Held		“Contributing USMD Holders”
John House		5,664,196		Yes
H.P. Hezmall		3,664,196		Yes
David Ellis		3,661,196		Yes
Paul Thompson		3,655,196		Yes
Steve House		1,832,528		Yes
Charles Bradford		1,714,195		Yes
Jacob Rosenstein		1,252,584		No
Charles Cook		931,005		Yes
Christopher Dunleavy		721,900		Yes
Neil House		540,864		Yes
Wade Lowry		446,686		Yes
Tom Hall		330,000		Yes
Glen Wyant		284,640		No
Jeffrey W. Heitkamp		281,276		No
Todd Profit Sharing Plan		255,164		No
Kenneth Licker		192,150		Yes
Jim Saalfield		191,645		Yes
Gary Price		178,131		Yes
Michael Biavati		154,168		No
Pat Collini		150,547		Yes
Russell Dickey		87,292		No
Marian Zinnante		77,593		No
Jim Edwardson		65,000		No
Lawrence J. Alter		63,393		Yes
Scott Allen		59,407		No
Harrison Mitchell Abrahams, M.D., P.A.		57,985		No
Lawrence J. Alter M.D., P.A.		57,985		No
Aaron M. Amos, M.D., P.A.		57,985		No
Jeffrey C. Applewhite, M.D., P.A.		57,985		No
Gordon S. Brody, M.D., P.A.		57,985		No
Paul Chi-An Chan, M.D., P.A.		57,985		No
Weber Chuang M.D., P.A.		57,985		No
M. Patrick Collini M.D., P.A.		57,985		No
Kevin D Diamond MD PA		57,985		No
Robert A. Dowling, M.D., P.A.		57,985		No
Patrick R. Frey, M.D., F.A.C.S., P.A.		57,985		No
Michael B. Gruber, M.D., P.A.		57,985		No
Ira N. Hollander, M.D., P.A.		57,985		No
John M. House, M.D., P.A.		57,985		No
John W. Jaderlund, MD, PA		57,985		No
J. Daniel Johnson, M.D., P.A.		57,985		No
E. Paul Kaplan, M.D., P.A.		57,985		No
Justin T. Lee MD PA		57,985		No
Wade L. Lowry, M.D., P.A.		57,985		No
Cleburne Urology Associates, P.A. (Barney Maddox)		57,985		No
Mark Alan McCurdy, M.D., P.A.		57,985		No
F.H. Moore III, M.D., P.A.		57,985		No
Mark A. Norris, M.D., P.A.		57,985		No
Christopher Pace, M.D., P.A.		57,985		No
Kirk Pinto, M.D., P.A.		57,985		No
V. Gary Price, M.D., P.A.		57,985		No
Jeff L. Pugach, M.D., P.A.		57,985		No
Delbert C. Rudy, P.A.		57,985		No

Schedule I


Name of Holder	Number of Shares of USMD Common Stock Held		“Contributing USMD Holders”
James G. Saalfield, M.D., P.A.		57,985		No
Andrew C Sambell M.D.P.A.		57,985		No
Richard R. Scriven, M.D., P.A.		57,985		No
David L. Shepherd, M.D., P.A.		57,985		No
Ali R. Shirvani, M.D., P.A.		57,985		No
Marie-Blanche Tchetgen, M.D., P.A.		57,985		No
Scott A Thurman M.D., P.A.		57,985		No
Thomas C. Truelson, M.D., P.A.		57,985		No
James C. Vestal, MD., PA		57,985		No
Keith A. Waguespack M.D., P.A		57,985		No
Diane C. West, M.D., P.A.		57,985		No
Michael McCullough		50,678		No
Tracy Cannon-Smith M.D., P.A.		50,251		No
S. Alexis Gordon, MD PA		50,251		No
All Shirvani		50,000		Yes
Robert L. True		48,495		No
James W. Ward		48,495		No
A.E. Thurman. M.D.		43,487		No
Gordon Brody		42,363		Yes
Kirk Pinto		40,467		Yes
Mary Finke		38,797		No
G. Byron Kallam		35,644		No
Tracy Rukab		35,644		No
Randy Hess		35,000		No
Kurt Kaufman		35,000		No
Richard H. Bevan-Thomas, M.D., P.A.		34,789		No
Ashton Flp		30,000		No
Ellen Parrill		29,098		No
Kenneth Licker, M.D.		28,990		No
Terri Crawford		25,000		No
Chris Lichty		25,000		No
John W. Johnson, III		23,763		No
John R. Jeffers		19,399		No
Ralph T. Wiegman		19,399		No
Keryn M. Dias		19,398		No
Cliff Vestal		12,000		Yes
John Pumphry		11,881		No
Richard Lieman		10,000		No
Scott Ashton		10,000		No
Leea Bristow		10,000		No
David Cavallaro		10,000		No
Monty Trimble		7,072		No
Robert Bell		5,365		No
Mike Mycoskie		5,000		No
Jan Turley		5,000		No
JJ Fedderson		5,000		No
Mark Freis		5,000		No
Larry Haun		5,000		No
Ty Miller		5,000		No
Luis Nolasco		5,000		No
Jennifer Passamano		5,000		No
Terry White		5,000		No
Gabe Zablatnik		4,000		No
Tahir Ali		3,564		No
Steve Miller		3,255		No

Total		29,707,912

Schedule I – p. 2

Schedule II

List of Holdings Option Holders


Name of USMD Holder	Number of USMD Options		Number of Holdings Options to be Granted⁽¹⁾
Pete LaNasa		150,000		50,492
Christopher Dunleavy		100,000		33,661
Klaus Buzzi		100,000		33,661
Karen Fiducia		85,616		28,819
Scott Allen		35,000		11,781
David Ransom		28,000		9,425
Gordon Davis		20,000		6,732
Marcia Crim		13,000		4,376
Keri Davis		10,000		3,366
Stephanie Atkins-Guidry		10,000		3,366
James Rick		9,000		3,029
Deonna Koerner		7,500		2,525
Alex Stefanowicz		7,000		2,356
Robin Boone		6,000		2,020
Lola Ham		5,500		1,851
Howard Screwes		5,000		1,683
Jesse Nieto		5,000		1,683
Jordan Yelman		5,000		1,683
Angela Marple		4,517		1,520
Bruce Hilton		4,500		1,515
Donna Cabaniss		4,500		1,515
Erin Greig		4,500		1,515
Lori Gray		4,500		1,515
Tamra Truit		4,500		1,515
Bernardo Valle		4,417		1,487
Bren Clevenger-Ori		3,514		1,183
Donald Laury		3,000		1,010
Genae Sweet		3,000		1,010
Tonya Smith		2,666		897
Billy Fielding		2,000		673
Tom Spencer		1,000		337
Carol Martin		500		168
Christopher Bergeron		500		168
Gregory Harvey		500		168
James Gagliardi		500		168
Linda Webb		500		168
Lisa Snead		500		168
Cheryl Jones		250		84
Patricia Woznicki		250		84
Roni Gonzalez		250		84
Alma Meza		100		34
Anita Edinbyrd		100		34
Ann Cason		100		34
Bobbye Stephens		100		34
Bonita McMahan		100		34
Carla Smith		100		34
Catherine Fetalsana		100		34
Cecelia Huston		100		34
Charmaine Fetalsana		100		34
Charnard Wamber		100		34
Chrystal Oney		100		34
Cynthia Branch		100		34
Dameon Law		100		34

Schedule II


Name of USMD Holder	Number of USMD Options		Number of Holdings Options to be Granted⁽¹⁾
Darlene Brewer		100		34
Deborah Richardson		100		34
Diana Howell		100		34
Estella Abalos		100		34
Esther Teague		100		34
Glenda Norris		100		34
Heather Stults		100		34
Ian Untrecht		100		34
Ingrid Outland		100		34
Jaimie Borden		100		34
Jennifer Cerutti		100		34
Kathleen Lawrence		100		34
Keitha Newton		100		34
Kevin Brumfield		100		34
Kim Baptist		100		34
Kreshunda Shine		100		34
Latreesha Leonard		100		34
Laurel Bell		100		34
LeeAnn Taylor		100		34
Leila Rances		100		34
Linda Bramblett		100		34
Lori Clinton		100		34
Lorie Brown		100		34
Marcia Wade-Shepherd		100		34
Marilyn Nelson		100		34
Pamela Bichsel		100		34
Pamela Carboni		100		34
Penelope Jones		100		34
Racheal Baskin		100		34
Rangaswamy Raghavan		100		34
Rashya Jackson		100		34
Reneka Taylor		100		34
Rossana Gonzalez		100		34
Sharon Stigarll		100		34
Sherry Robinson		100		34
Stacie Williams		100		34
Suzanne Sheahan		100		34
Theresa Jones		100		34
Todd Litzelfelner		100		34
Tonya Beal		100		34
Victoria Kamp		100		34
Shelbre Petrie		60		20
Rhonda Sutherland		40		13
Adrain Fisher		20		7

Total for USMD Holders		657,500		221,322

Total for Ventures				221,322

TOTAL HOLDINGS OPTIONS				442,644

(1)

Based on a Conversion Ratio equal to the number of USMD Options times the ratio of the number of Holdings shares outstanding divided by the number of USMD shares outstanding, where the number of Holdings shares outstanding is 10,000,000 and the number of USMD shares outstanding (pursuant to Schedule I) is 29,707,912.

Schedule II – p. 2

Schedule III

Attribution of Value

(See attached.)

Schedule III

Schedule III


A	B	C		D			E		F			G			H			I			J			K
	Entity	Total Enterprise Value		Total Subsidiary Level Debt			Total Enterpise Value Less		USMD Corporate Level Debt			Ventures/ UANT Corporate Level			USMD Enterprise Value						Ventures Enterpise Value
	Entity	Total Enterprise Value		Total Subsidiary Level Debt			Total Enterpise Value Less		USMD Corporate Level Debt			Ventures/ UANT Corporate Level			% Own			$ Value			% Own			$ Value
5
6	USMD
7	USMD Arlington		169,550,000		(46,320,000	)		123,230,000								5.00	%		6,161,500			22.63	%		27,886,949
8	USMD FW Hospital		46,060,000		(19,660,000	)		26,400,000								20.00	%		5,280,000			10.88	%		2,872,320
9
10	USMD Hospital Division		31,880,000					31,880,000								100.00	%		31,880,000
11	USMD Cancer Division		27,450,000					27,450,000								100.00	%		27,450,000
12	Willowbrook Cancer		10,870,000		(4,880,000	)		5,990,000								30.00	%		1,797,000
13
14	USMD Litho Division
15	Management		5,550,000					5,550,000								100.00	%		5,550,000
16	Minority Partnership Interests		9,920,000		(130,000	)		9,790,000		(7,690,000	)					*Varies			9,790,000
17
18	USMD Inc Holding Company Debt									(730,000	)
19
20	Ventures
21	UANT
22	Cancer		46,290,000					46,290,000					(9,460,000	)								100	%		46,290,000
23	Imaging		4,730,000					4,730,000					(380,000	)								100	%		4,730,000
24	Lab		7,890,000					7,890,000														100	%		7,890,000
25	Research		880,000					880,000														100	%		880,000
26	Practice		5,370,000					5,370,000					(3,860,000	)								100	%		5,370,000
27
28	UANT Owned:
29	MetroStone Management		9,160,000					9,160,000														88.55	%		8,111,180
30	Dallas Stone Management		9,030,000					9,030,000														34.05	%		3,074,715
31	North Texas Stone Management		5,580,000		(200,000	)		5,380,000														30.00	%		1,614,000
32	Waxahachie Surgery Center																					4.51	%		41,000
33	US Urology																					10.00	%		0
34	Linked Urology Research Network																					20.00	%		0
35
36	UANT Ventures
37	Baylor Carrolton																					1.14	%		200,000
38	North Texas Hospital																					0.88	%		180,000
39	Neo - Alliance																					51.52	%		0
40
41	UANT Ventures (Corporate Debt)												(1,090,000	)
42	UANT Lithotripsy (Corporate Debt)												(1,210,000	)
43
44	Total		390,210,000		(71,190,000	)		319,020,000		(8,420,000	)		(16,000,000	)					87,908,500						109,140,164

45
46	*Total Gross Enterprise Value*																		87,908,500						109,140,164
47	Adjustments:
48	Deferred Payout Obligations (as defined in Section 1.4(b) of the Agreement)																		0						(186,000	)
49	Working Capital Adjustment (as defined in Section 1.4(b) of the Agreement)																		3,270,000						(3,294,000	)
50	Approved Capital Expenditures (as defined in Section 1.4(b) of the Agreement)																		0						0

51	*Adjusted Net Enterprise Value (Purchase Price)*																		91,178,500						105,660,164
52	Less: Indebtedness (columns G and H)																		(8,420,000	)					(16,000,000	)
53	Holdings Note (as defined in Section 1.4(c) of the Agreement)																								(30,000,000	)

54	*Value of Contribution to Holdings*																		82,758,500						59,660,164
55
56	Relative Value of Contribution to Holdings																		58.109308	%					41.890692	%
57	Number of Shares of Holdings Stock																		5,810,931						4,189,069

Schedule IV-A

USMD Net Working Capital Adjustments


	A	B	C			D		E
3	Accounts	Comments	USMD Inc Consolidated Management Company			USMD Inc Consolidated Management Company
4			Dec 31, 2010			Acquisition Date
5	Cash			5,452,356
6	Management Fee AR (Hospital & Litho & CTC)			1,357,355
7	Allowance for Doubtful Accounts			(4,711	)
8	Management Fee AR (CTC)
9	Federal Income Tax Refund			167,136
10	Refundable Varian Deposit (Christus Muguerza)			—
11	AR Other			—
12	Prepaids and Other Current Assets			122,027

13	Total Current Assets	Ties to G/L		7,094,163			—

14
15	Accounts Payable			563,177
16
17	Due From Arlington LP			(320,866	)
18	Due From Fort Worth LP			(9,767	)
19	Due from Litho LP			(343,567	)

20	Total Intercompany Receivable from LP			(674,200	)

21
22	Intercompany Payable/(Receivable):
23	Due to Matrx
24	Due From USL
25	Due From Admin Svcs	Portion is attributable to Arl/FW/Litho LP
26	Due from CTC
27	Due to USMD Inc
28	Due to Admin

29	Total Intercompany	Subject to Reconciliation of LP related Exps		—

30
31	Accrued Interest Payable	TBD whether included or excluded		—
32	Accrued Expenses	Subject to review for completeness		1,200,432
33	Accrued Payroll	Subject to review for completeness/Achievability		1,353,901
34	Accrued Franchise Tax
35	Federal Taxes Payable
36	State Taxes Payable

37	Total Accrued Liabilities			2,554,333

38
39	Accrued Payroll Liabilities:
40	Accrued Payroll
41	Accrued PTO
42	Payroll Related Liabilities
43	Total Accrued Payroll			—			—
44
45	Current Portion of Debt	Excluded from Calculation
46	Total Current Liabilities	Ties to G/L		2,443,310			—
47

48	Net Working Capital			4,650,853			—		A

49
50		USMD Inc Net Working Capital Settlement Target
51
52			USMD Inc
53			YTD			Annualized
54	Accounting Fee Revenue			15,600			31,200
55	Management Fee Revenue			4,442,090			8,884,180
56	Arlington Staff Pass Through Revenue			2,574,644			5,149,288
57	Fort Worth Staff Pass Through Revenue			1,012,748			2,025,496
58	CTC Staff Pass Through Revenue			1,323,633			2,647,266
59	Physicists Revenue			1,313,000			2,626,000
60	Salary Processing Fee Revenue			16,615			33,230

61	Total Net Revenue (not incl. interest)			10,698,330			21,396,660

62
63	Less:
64	Acct Fee Revenue			15,600			31,200
65	Arlington Staff Pass Through Revenue	Reimbursement of Cost (Contra Expense)		2,574,644			5,149,288
66	Fort Worth Staff Pass Through Revenue	Reimbursement of Cost (Contra Expense)		1,012,748			2,025,496
67	CTC Staff Pass Through Revenue	Reimbursement of Cost (Contra Expense)		1,323,633			2,647,266
68	Salary Processing Fee Revenue	Reimbursement of Cost (Contra Expense)		16,615			33,230

69	Total Cost Reimbursement (I.E Contra Expense)			4,943,240			9,886,480

70
71	Adjusted Net Revenue			5,755,090			11,510,180

72
73	Net Working Capital Target = Net Revenue @ 12%			690,611			1,381,222		B
74
75	Actual Net Working Capital Adjustment to Purchase Price as of Acquisition Date						3,269,631		A-B

Schedule IV-A

Schedule IV-B

UANT/Ventures Net Working Capital Adjustments


		A	B	C		D			E	F		G			H
4		Accounts	Comments	UANT & UANT Ventures Excluding Clinic		UANT & UANT Ventures Excluding Clinic				UANT Clinic & Video		UANT Clinic & Video
4		Accounts	Comments	UANT & UANT Ventures Excluding Clinic		UANT & UANT Ventures Excluding Clinic				UANT Clinic & Video		UANT Clinic & Video
5				Dec 31, 2010		Acquisition Date				Dec 31, 2010		Acquisition Date
	6	Cash			—
	7	Net Patient AR	Subject to GAAP Collectibility Assessment		2,989,075
	8	Allowance for Doubtful Accounts
	9	Deposits			28,000
	10
	11
	12	AR Other			494,994
	13	Prepaids and Other Current Assets			405,201

	14	Total Current Assets	Ties to G/L		3,917,270		—				—		—

	15
	16	Accounts Payable			1,173,340
	17
	18	Accrued Interest Payable	Not included in the calculation
	19	Accrued Expenses	Subject to review for completeness
	20	Accrued Bonus	Subject to review for completeness/Achievablity
	21	Accrued Franchise Tax
	22	Federal Taxes Payable
	23	State Taxes Payable

	24	Total Accrued Liabilities			—		—				—		—

	25
	26	Accrued Payroll Liabilities:
	27	Accrued Payroll			1,075,368
	28	Accrued PTO
	29	Payroll Related Liabilities			157,561

	30	Total Accrued Payroll			1,232,929		—				—		—

	31
	32	Current Portion of Debt	Excluded from Calculation

	33	Total Current Liabilities	Ties to G/L		2,406,269		—				—		—

	34
	35	Net Working Capital			1,511,001		—		A		—		—		X

	36
	37	UANT/Ventures Net Working Capital Settlement Target
	38
39				UANT & UANT Ventures
40						YTD
	41	UANT CTC Revenue					12,754,839
	42	UANT Imaging Revenue					2,378,107
	43	UANT Lab Revenue					2,920,338
	44	UANT Research Revenue					545,395
	47

	48	Total Net Revenue (not incl. interest)			—		18,598,679

	49
	50	Less:

	55	Total Adjustments			—		—

	56
	57	Adjusted Net Revenue			—		18,598,679

	58
	59	Net Working Capital Target = (Net Rev @ 12% for Ancillaries)			—		2,231,841		B
	60
	61	UANT Clinic AR from VMG Report											2,849,700
	62	UANT Inventory from VMG Report											152,000
	63	UANT Accrued Expenses from VMG Report											(239,000	)
	64	Adjustment for Video NWC TBD by VMG											(3,540	)

	65	Net Working Capital Target = (Predetermined Target Established by VMG)											2,759,160		Y

	66		Working Capital Adjustment of Columns D and G				(720,840	)	A-B				(2,759,160	)	X-Y
	67
	68	Actual Net Working Capital Adjustment to Purchase Price as of Acquisition Date					(3,480,000	)	(Cell D66 + G66)

Schedule IV-B

Schedule 2.3

Ventures/UANT Consents

1.	The Property & General Liability Policy with CNA American Casualty Co. of Reading, PA requires written consent to transfer rights and duties under the Policy.

2.	The Crime Policy with Travelers Casualty and Surety Company of America requires written notice within 90 days of a change of control.

3.	The Texas Non-Subscriber Policy with Republic-Vanguard Insurance Company requires written consent to assign rights or duties under the Policy.

4.	The following real estate leases require landlord’s consent to assign the leases:


Location		Property Management Company
South Arlington		SCM Real Estate Services
USMD Cancer Center		SCM Real Estate Services
DeSoto		Options Real Estate
Huguley		NAI Huff Partners
FW Pediatrics-Pennsylvania		Texas Health Resources
FW Downtown-Terrell Ave		Texas Health Resources
HEB		Texas Health Resources
Harris SW		Texas Health Resources
North Arlington		Texas Health Resources
Saginaw		Texas Health Resources
Administrative Office		Texas Health Resources
Carrollton		Metrocrest Hospital Authority
Cleburne		Dr. Barney Maddox
Denton		Delphis Operations dba Cirrus Health
Grand Prairie		HealthTexas Provider Network
Grapevine		Healthcare Realty Services
Plano		Healthcare Realty Services
Las Colinas		Lincoln Harris
Mansfield		Regency Commons LTD
Medical City Dallas		Medial City Dallas
NRH		Med Cap Properties
Waxahachie		William C. Major, MD
Weatherford		Barbara and Perry Mader

5.	UANT and Ventures own the following equity investments which cannot be transferred to another owner without the approval of the general partner or the Board of Directors.

22.7% ownership USMD Hospital at Arlington, LP.

10.9% ownership in USMD Hospital at Ft. Worth, LP.

1.143% ownership in Trinity MC, LLC (dba Baylor-Carrolton Hospital).

0.931% ownership in Rocky Mountain Medical Center, L.P. (dba North Texas Hospital in Denton)

88.5% ownership Metro I Stone Management, LP

7.5% ownership in Dallas Stone Management, LP

30% ownership in North Texas Stone Management, LP

Schedule 2.3

The Loan Agreement with Compass Bank dated November 7, 2008 executed by UANT and Ventures requires consent for a change in ownership affecting more than 20% of the current ownership structure and further requires consent to transfer collateral having an aggregate value of more than $150,000 or to transfer all or substantially all of the assets.

7.	The following Promissory Notes and the Commercial Security Agreement with Compass Bank, dated November 7, 2008, list as an event of default, the occurrence of any event of default specified in the Loan Agreement (referred to in item 6 above):

Revolving Promissory Note in the original principal amount of $1,000,000, executed by UANT

Term Promissory Note (First Term Note) in the original principal amount of $3,476,000, executed by UANT

Term Promissory Note (Second Term Note) in the original principal amount of $2,600,000, executed by UANT

Advance Promissory Note (First Advance Note) in the original principal amount of $5,000,000, executed by UANT

Advance Promissory Note (Second Advance Note) in the original principal amount of $5,000,000, executed by UANT

Term Promissory Note (Third Term Note) in the original principal amount of $3,260,000, executed by UANT

Commercial Security Agreement executed by UANT, covering all assets

Master Lease Agreement dated as of February 14, 2008 between UANT as Lessee and GE Healthcare Financial Services as Lessor states that an assignment of either the Agreement or the assignment of the equipment without Lessor’s prior consent, or a material change in ownership of Lessee are events of default.

9.	Service Agreements between UANT and GE Healthcare Financial Services, dated June 16, 2006, December 19, 2006 and February 11, 2008, respectively, require prior written consent to assign the Agreements.

10.	Employment Agreement dated January 1, 2005, between UANT and Thomas W. Hall, requires prior written consent to assign the Agreement.

11.	Physician Services Agreement dated December, 2008 between UANT and Pete LaNasa, M.D., requires prior written consent to assign the Agreement.

12.	The following third party payor contracts require prior written consent to assign the contracts:

Physician Group Participation Agreement with Health Value Management, Inc., dba ChoiceCare Network

PPO Physician Group Participation Agreement with Affiliated Healthcare Inc.

Participating Provider Group Agreement with Beech Street Corp.

Letter of Agreement with Elder Health Texas, Inc. dba Bravo Health Texas, Inc.

Group Managed Care Agreement with Blue Cross and Blue Shield of Texas

Physician Group Services Agreement with Cook Children’s Health Plan

Provider Agreement with Healthcare Advantage Association, Inc.

Provider Agreement with North Texas Healthcare Network

PHCS Participating Professional Group Agreement with Private Healthcare Systems, Inc.

Participating Medical Group Agreement with ppoNEXT, Inc.

Schedule 2.3 – p. 2

Participating Group Practitioner Agreement with Texas True Choice, Inc.

Medical Practice Agreement with UNICARE Life & Health Insurance Company

Health Care Service Provider Agreement with USA Managed Care Organization, Inc.

13.	The Physician Group Agreement with Aetna Health, Inc. provides for termination upon a change of control to an entity that is not acceptable to Aetna, and that no assignment of the Agreement may occur without prior written consent.

14.	Provider Group Services Agreement with CIGNA HealthCare of Texas, Inc. provides for termination as a result of a merger of UANT or the acquisition of UANT by another entity.

15.	Participating Provider Group Agreement with The First Health Network and the CCN Network, requires notice of any significant change in ownership within a reasonable period of time prior to effective date of change.

16.	Medical Group Participation Agreement with United HealthCare of Texas, Inc. requires prior written consent to assign the Agreement.

17.	Management Agreement with USMD Cancer Treatment Centers, dated June 21, 2006, provides for termination of the Agreement in the event of a change in control and requires prior written consent to assign the Agreement.

18.	End User License Agreement dated June 29, 2007, with General Electric Company (through its GE Healthcare Division) prohibits assignment.

19.	Management Agreement with Claripath Laboratories requires prior written consent to assign the Agreement.

20.	Touchworks System Agreement with Allscripts, LLC requires prior written consent to assign the Agreement.

Schedule 2.3 – p. 3

Schedule 2.5

Ventures/UANT Good Title

1.	Master Lease Agreement with GE Healthcare Financial Services, dated February 14, 2008, requires prior written consent to assign the equipment under such Lease.

2.	Loan Agreement with Compass Bank dated November 7, 2008 requires consent to transfer assets.

3.	Compass Bank holds a lien on all of the assets of Ventures pursuant to the Commercial Security Agreement dated November 7, 2008.

4.	See the equity investments listed in Schedule 2.3 requiring the approval of the general partner or the Board of Directors prior to the transfer of any such interests.

Schedule 2.5

Schedule 2.8

Ventures/UANT Material Contracts

1.	The following insurance contracts:


TYPE	CARRIER	POLICY NO.
Property & General Liability	CNA - American Casualty Co. of Reading, PA	B2090501908
Auto	CNA - Valley Forge Insurance Co.	B2090501939
Inland Marine	CNA - Continental Casualty Co.	B2095229224
Umbrella	CNA - Continental Casualty Co.	B2090501987
Crime	Travelers	104965559
Texas Non-Subscriber	Republic Vanguard	RVC100197
Directors & Officers	Darwin National Ins. Co.	0303-5856
Professional Liability	American Physicians Insurance Company	TX11437106

2.	The following employment/payroll contracts:

Employment Agreement with Richard Bevan-Thomas, MD

Employment Agreement with Keith R. Xavier

Employment Agreement with Jonathan David Kaye, MD

Employment Agreement with Rashel M. Haverkorn, MD

Employment Agreement with Jason M. Greenfield, MD

Employment Agreement with Carl Frisina, MD

Employment Agreement with Addison E. Thurman, MD

Physician Services Agreement with William Murphy, MD

Physician Services Agreement with Pete LaNasa, MD

Employment Agreement with Thomas W. Hall

Change in Control Severance Agreement with Cordell Harriman

Change in Control Severance Agreement with Chris Sherlock

3.	Bank loans: See Paragraphs 6 and 7 of Schedule 2.3 with respect to the bank loans with Compass Bank.

4.	The following service contracts:

Management Agreement with USMD Cancer Treatment Centers.

Management Agreement with Claripath Laboratories, Inc.

Agreement with USMD Hospital at Arlington, LP to provide pathology services for prostate biopsies.

5.	The following software contracts:

Touchworks System Agreement with Allscripts, LLC

End User License Agreement with GE Healthcare Financial Services

6.	Real estate leases: See Schedule 2.3 with respect to the real estate leases

7.	Equipment lease: Master Lease Agreement dated as of February 14, 2008, with GE Healthcare Financial Services

Schedule 2.8

Schedule 2.10

Ventures/UANT Affiliated Transactions

1.	Each UANT partner owns his/her own office furniture and computers. While these assets are physically located in UANT’s offices, they are not listed on UANT’s fixed asset listings or financial statements.

2.	Dr. Barney Maddox is partial owner the building leased by UANT for the Cleburne office location. There is a Lease which expires September 30, 2011.

3.	Dr. Pat Collini is partial owner of the building leased by UANT for the Mansfield office location. There is an Office Facilities Lease which expires December 31, 2011.

Schedule 2.10

Schedule 3.3

USMD Consents

1.	Loan Agreement between USMD and Bank of Texas, N.A. dated as of April 30, 2010 requires the consent of the bank to the transaction.

Schedule 3.3

Schedule 3.4

USMD Litigation

1.	Civil Action No. 3:09-cv-1081-D; Erdman Company f/k/a Marshall Erdman & Associates, Inc., and Marshall Erdman Development, LLC v. USMD of Arlington GP, LLC and USMD Hospital at Arlington, L.P.; In the United States District Court, Northern District of Texas, Dallas Division.

Schedule 3.4

Schedule 3.8

USMD Material Contracts

Office Lease Agreement between Wells REIT-Las Colinas Corporate Center I, L.P. and USMD Inc. dated as of July 12, 2006 as amended by the First amendment dated as of November 1, 2006, and as further amended by the Second Amendment dated as of December 1, 2009 for lease of principal business premises located at 6333 North State Highway 161, Suite 200, Irving, TX 775038.

2.	Severance Agreement among USMD, certain USMD Affiliates and Mr. Greg Weiss.

3.	Loan Agreement between USMD Inc. and Bank of Texas, N.A. dated as of April 30, 2010.

4.	Management Agreement between Mat-Rx Development, L.L.C. and USMD Hospital at Arlington, L.P. dated as of March 1, 2010.

5.	Management Agreement between Mat-Rx Development, L.L.C. and USMD Hospital at Fort Worth, L.P. dated as of March, 1, 2010.

6.	Governing Documents for the following entities, pursuant to which U.S. Lithotripsy, L.P. or Litho GP, LLC, a wholly owned subsidiary of U.S. Lithotripsy, L.P., is entitled to the payment of a management fee for managing the business and operations of the entities:

Big Country II Lithotripsy, L.P.

Dallas Stone Management, L.P.

Gateway II Lithotripsy, LLC

Ironwood Stone Management, L.P.

Lithotripsy of East Texas, L.P.

Metro I Stone Management, L.P.

Midland Stone Management, L.P.

Mississippi Valley I Stone Management

Rio Grande Lithotripsy, L.P.

SE Colorado Lithotripsy II, L.P.

South Texas Lithotripsy, L.P.

White River Lithotripsy, LLC

Western Plains II Lithotripsy, L.P.

NC Missouri Lithotripsy II, L.P.

North Texas Stone, L.P.

Verrazano lithotripsy, L.P.

East Texas II Athens, L.P.

East Texas II Longview, L.P.

Houston Lithotripsy II, L.P.

Metro Houston Lithotripsy II, L.P.

St. Louis Urological Surgeons, Inc.

Millenium Lithotripsy, L.P.

Schedule 3.8

Partnership Interest Purchase Agreements between U.S. Lithotripsy and each of (i) John House, M.D., (ii) David Ellis, M.D., (iii) H. Patrick Hezmall, M.D., and (iv) Paul Thompson, M.D. pursuant to which U.S. Lithotripsy acquired from each seller for a series of installment payments such seller’s ownership interest in U.S. Lithotripsy, L.P.

8.	Management Agreement between USMD Cancer Treatment Centers, LLC and Dallas Oncology Consultants, PA dated February 8, 2007 (as amended on March 10, 2008).

9.	Management Agreement between USMD Cancer Treatment Centers, LLC and North Dallas Urology Consultants, PA dated December 12, 2007 (as amended on February 29, 2008).

10.	Management Agreement between USMD, Inc. d/b/a USMD Cancer Treatment Centers and Urology Associates of North Texas, LLP dated June 21, 2006.

11.	Management Agreement between USMD Cancer Treatment Centers, LLC and Specialists in Urology dated on March 20, 2008 (as amended on March 25, 2009 and June 1, 2010).

12.	Management Agreement between USMD Cancer Treatment Centers, LLC and Associated Urologists, PA dated August 22, 2008.

13.	Management Agreement between USMD Cancer Treatment Centers, LLC and Arizona Institute of Urology dated November 1, 2007.

14.	Management Agreement between USMD Cancer Treatment Centers, LLC and Willowbrook Cancer Center, LLC dated April 16, 2008.

15.	Management Agreement between USMD Cancer Treatment Centers, LLC and USMD Hospital at Arlington, L.P. dated December 21, 2009.

Schedule 3.8 – p. 2

Schedule 3.11

USMD Affiliated Transactions

1.	Each USMD Holder has executed a Shareholder Agreement with USMD dated as of January 1, 2007.

2.	Each USMD Holder has executed a Registration Rights Agreement with USMD dated as of January 1, 2007.

3.	Each USMD Holder that is an employee of USMD has signed an Employee Non-Solicitation and Confidentiality Agreement with USMD.

4.	John House, M.D. and Paul Thompson, M.D. have each entered into a Partnership Interest Purchase Agreement with U.S. Lithotripsy, L.P. as more fully described in Item 7 to Schedule 3.8.

Schedule 3.11

AMENDMENT TO

CONTRIBUTION AND PURCHASE AGREEMENT

This AMENDMENT TO CONTRIBUTION AND PURCHASE AGREEMENT (this “Amendment”), executed on this 9th day of February, 2012, to be effective as of December 15, 2011, is by and among USMD Holdings, Inc., a Delaware corporation (“Holdings”), Urology Associates of North Texas, L.L.P., a Texas limited liability partnership (“UANT”), UANT Ventures, L.L.P., a Texas limited liability partnership (“Ventures”), and USMD Inc., a Texas corporation (“USMD”), and is joined in for limited purposes by John M. House, M.D. and Richard C. Johnston, M.D. Each of the parties to this Agreement is individually referred to herein as a “Party” and collectively, as the “Parties.” Capitalized terms used herein that are not otherwise defined herein shall have the meanings ascribed to them in Article IX of the Agreement (as defined below).

WHEREAS, the parties previously entered into that certain Contribution and Purchase Agreement dated August 19, 2010 (the “Agreement”); and

WHEREAS, before the Closing Date, UANT will merge with a wholly-owned subsidiary of Ventures, with UANT surviving and being a wholly-owned subsidiary of Ventures (the “UANT Merger”); and

WHEREAS, Ventures, Holdings, and MCNT are parties to an agreement (the “MCNT Agreement”), under which MCNT will merge with a wholly-owned subsidiary of Ventures before the Closing Date with MCNT surviving and being a wholly-owned subsidiary of Ventures (the “MCNT Merger”); and

WHEREAS, Ventures, Holdings, and Impel are parties to an agreement (the “Impel Agreement”), under which Impel will merge with a wholly-owned subsidiary of Ventures before the Closing Date with Impel surviving and being a wholly-owned subsidiary of Ventures (the “Impel Merger”); and

WHEREAS, the Contributing USMD Holders desire to, before the Closing Date, contribute at least a portion of their USMD shares directly to Ventures in exchange for partnership interests in Ventures, rather than first contributing them to Holdings; and

WHEREAS, the parties have decided that, at the Closing Date, Ventures shall contribute all of its assets, including its ownership interests in USMD, UANT, MCNT, and Impel, in exchange for shares of common stock in Holdings, thereby eliminating the promissory note described in the Agreement as a portion of the consideration to be received by Ventures; and

WHEREAS, the Parties desire to amend the Agreement in certain other respects;

NOW, THEREFORE, the Parties hereby agree as follows:

1. Contribution by Ventures. In lieu of the contribution described in Section 1.1 of the Agreement, Ventures agrees to contribute, assign, transfer, convey and deliver, or cause to be contributed, assigned, transferred, conveyed and delivered, all of its assets, including all of the equity interests in USMD, UANT, MCNT, and Impel to Holdings in exchange for the consideration described in paragraph 3 of this Amendment.

2. Contribution by USMD Holders. In lieu of the provisions in Section 1.2 of the Agreement, USMD agrees to cause the USMD Holders to contribute their USMD shares as follows:

(a) Those USMD Holders listed on Schedule I as “Contributing USMD Holders” shall, before the Closing Date, contribute their USMD shares (excluding the USMD shares referred to in subparagraph (b) of this paragraph 2) to Ventures in exchange for Class B Partnership Interests in Ventures (the “USMD-Ventures Contribution”);

(b) Each of those USMD Holders listed on Schedule I as “Contributing USMD Holders” shall contribute 57,985 USMD shares to Holdings in exchange for the consideration described in paragraph 3 of this Amendment; and

(c) Those USMD Holders listed on Schedule I as not being “Contributing USMD Holders” (the “Non-Contributing USMD Holders”) shall contribute all of their USMD shares to Holdings in exchange for the consideration described in paragraph 3 of this Amendment.

The contributions to Holdings by Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and the Non-Contributing USMD Holders are referred to herein as the “Contribution”.

3. Consideration. In lieu of the provisions in Section 1.4 of the Agreement, the Parties agree that the consideration for the Contribution shall be as follows:

(a) The aggregate consideration payable by Holdings for the Contribution shall be equal to 10,000,000 shares of common stock of Holdings (the “Holdings Shares”), of which (i) an aggregate of Nine Million (9,000,000) shares shall be issued to Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and the Non-Contributing USMD Holders at Closing in the amounts and to the persons set forth in Schedule I, which, for avoidance of doubt, shall be issued in proportion to the pro rata percentages set forth next to the name of each person set forth in Schedule I (the “Pro Rata Percentages”), and (ii) an aggregate of One Million (1,000,000) shares (the “Adjustment Shares”) shall be issued to John M. House, M.D. and Richard C. Johnston, M.D., as Nominees for Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and the Non-Contributing USMD Holders. The share certificate representing the Adjustment Shares shall be issued on the Closing Date but held by Holdings pending the adjustments described in subparagraph (b), below and shall be transferable only in accordance with subparagraph (e) below. The Adjustment Shares shall be shown as issued and outstanding on the balance sheet of Holdings on the date such shares are issued to John M. House, M.D. and Richard C. Johnston, M.D., as Nominees for Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and the Non-Contributing USMD Holders, and shall be legally outstanding under applicable state law.

(b) The allocation of the Adjustment Shares between Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and the Non-Contributing USMD Holders shall be determined following the Closing based upon changes in the relative value of the contributions to Holdings made by (i) Ventures (after accounting for the MCNT Merger, the Impel Merger, the UANT Merger and the USMD-Ventures Contribution), (ii) the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and (iii) the Non-Contributing USMD Holders (it being agreed that the value of the contribution to Holdings made by the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment and the Non-Contributing USMD Holders shall be based only on the value of USMD represented by the shares of common stock of USMD contributed to Holdings by the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment the Non-Contributing USMD Holders pursuant to this Agreement and not that portion of the value of USMD contributed to Ventures by the Contributing USMD Holders pursuant to the USMD-Ventures Contribution), in each case between December 31, 2010 and 11:59 p.m. local time in Dallas, Texas on the Closing Date (the “Schedule 1.4 Adjustments”). For illustration only, Schedule I and Schedule 1.41 indicate that, on the Closing Date, 68,663 of the Adjustment Shares would be issued to the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment and the Non-Contributing USMD Holders and 931,337 of the Adjustment Shares would be issued to Ventures. The relative consideration set forth in Schedule 1.41 has been derived in part from the fair market values of the respective business lines of USMD, Ventures, MCNT, and Impel as determined by valuations conducted by an independent third party valuation company.

The Schedule 1.4 Adjustments shall be calculated as follows:

(i) to reflect any changes since December 31, 2011 in “Total Subsidiary Level Debt,” “USMD Corporate Level Debt,” “Ventures/UANT Corporate Level Debt,” “Impel Level Debt,” and “MCNT Corporate Level Debt,” as set forth in Columns D, F, G, H, and I, respectively, of Schedule 1.41;

(ii) to reflect any changes since September 30, 2011 in ownership percentages of the assets or investments held by either USMD, Ventures/UANT, Impel, and MCNT, as reflected in Columns J, L, N, and P, respectively, of Schedule 1.41;

-2-

(iii) to reflect on Schedule 1.41 the amount of any “Deferred Payment Obligations” of USMD, Ventures/UANT, Impel, and MCNT as set forth in Cells K62, M62, O62, and Q62, respectively. Such amounts shall be calculated in accordance with the Schedule 1.4 Deferred Payment Obligations as defined in Article IX;

(iv) to reflect the amount of any “Net Working Capital Adjustments” of USMD, Ventures/UANT, Impel, and MCNT in Cells D75 of Schedule 1.42, D68 of Schedule 1.43, D75 of Schedule 1.44, and D75 of Schedule 1.45, respectively; and

(v) to reflect on Schedule 1.41 the amount of any mutually approved capital expenditures (A) since December 31, 2010 relating to fixed assets of the UANT clinical practice and (B) since September 30, 2011 relating to fixed assets or mutually approved capital contributions of USMD, Ventures/UANT, Impel, and MCNT as set forth in Cells K65, M65, O65, and Q65, including without limitation approved capital expenditures for equipment, building or tenant improvements.

(c) For the purposes of computing the adjustments, if any, pursuant to subsection (b) above, no adjustments to the Adjusted Equity Values reflected on Row 69 of Schedule 1.41 shall be made to the extent of any amounts already included in the calculations set forth in Rows 62-65 and Row 67 of Schedule 1.41, and the following provisions shall be applicable:

(i) No later than the later of (i) ninety (90) days following the Closing Date, or (ii) five (5) business days following the final determination of any adjustments to consideration under each of the MCNT Agreement and Impel Agreement, Ventures shall prepare and deliver to Holdings and the USMD Holder Representative a calculation of the Schedule 1.4 Adjustments, based upon its, and MCNT’s and Impel’s financial statements at and as of the Closing Date. Ventures shall provide the USMD Holder Representative, and Holdings shall provide to Ventures, any information and back-up materials reasonably requested by the requesting Party with respect to the Schedule 1.4 Adjustments.

(ii) The USMD Holder Representative shall have thirty (30) days following receipt of Ventures’s calculations of Schedule 1.4 Adjustments to notify Ventures of any dispute of any item contained therein, which notice shall set forth in reasonable detail the basis for such dispute. At any time within such thirty (30)-day period, the USMD Holder Representative shall be entitled to agree with any or all of the items set forth in Ventures’s calculation of the Schedule 1.4 Adjustments.

(iii) If the USMD Holder Representative does not notify Ventures of any such dispute within such thirty (30)-day period, or notifies Ventures of its agreement with Ventures’s calculations, Ventures’s calculations of the Schedule 1.4 Adjustments shall be final and binding on the Parties.

(iv) If the USMD Holder Representative notifies Ventures of any such dispute within such thirty (30)-day period, the Schedule 1.4 Adjustments shall be resolved as follows:

(A) The USMD Holder Representative and Ventures shall jointly determine the extent of any Schedule 1.4 Adjustments as promptly as practicable.

(B) In the event that the USMD Holder Representative and Ventures are unable to agree upon any of the Schedule 1.4 Adjustments, the Parties shall submit such matter to the Dallas, Texas office of Grant Thornton LLP (or if such firm is unwilling or unable to serve, another nationally recognizable accounting firm mutually agreed upon by the Parties), who shall make the final determination with respect to the correctness of the proposed Schedule 1.4 Adjustments in light of the terms and provisions of this Agreement, with such determination being final and binding on the Parties.

Notwithstanding anything herein to the contrary, the Schedule 1.4 Adjustments as set forth in subparagraphs (i) through (v) of paragraph 3(b) as they relate to MCNT and Impel shall be determined pursuant to each of the MCNT Agreement and Impel Agreement and shall be final and binding on the Parties hereto for purposes of any adjustments to the consideration made pursuant hereto.

(d) The allocation of the Adjustment Shares in accordance with this Section 1.4 shall be the Parties’ sole and exclusive basis for allocating Holdings Shares as a result of the relative values of the contributions to Holdings made by (i) Ventures (after accounting for the MCNT Merger, the Impel Merger, the UANT

-3-

Merger and the USMD-Ventures Contribution), (ii) the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and (iii) the Non-Contributing USMD Holders. Any allocation of the Adjustment Shares in favor, or to detriment, of Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, or the Non-Contributing USMD Holders shall be made in accordance with such Person’s Pro Rata Percentage.

(e) Once the allocation of the Adjustment Shares in accordance with this Section 1.4 has been finally determined, John M. House, M.D. and Richard C. Johnston, M.D. shall endorse the certificate representing the Adjustment Shares (or execute a separate stock power transferring such shares) to Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and the Non-Contributing USMD Holders in accordance with such determination, and Holdings shall deliver the certificate to its transfer agent with instructions to reissue the Adjustment Shares to Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and the Non-Contributing USMD Holders. In no event shall the reissuance of the Adjustment Shares to Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and the Non-Contributing USMD Holders occur later than five years following the Closing. Neither Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, the Non-Contributing USMD Holders, Holdings, John M. House, M.D. nor Richard C. Johnston shall transfer, pledge, hypothecate or encumber any Adjustment Shares or rights to receive Adjustment Shares except that once the allocation of the Adjustment Shares in accordance with this Section 1.4 has been finally determined, they may transfer and allocate the Adjustment Shares in accordance with and pursuant to this Section 1.4.

(f) During the entire period the Adjustment Shares are held by John M. House, M.D. and Richard C. Johnston, M.D., as Nominees for Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and the Non-Contributing USMD Holders: (i) all dividends paid on any Adjustment Share will be distributed when received by John M. House, M.D. and Richard C. Johnston, M.D. to Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and the Non-Contributing USMD Holders in proportion to the Pro Rata Percentages and (ii) all voting rights of the Adjustment Shares shall be exercisable by John M. House, M.D. and Richard C. Johnston, M.D. at the direction of and on behalf of Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and the applicable Non-Contributing USMD Holders in proportion to the Pro Rata Percentages in the same manner as such shares would be entitled to such voting rights upon the reissuance of the Adjustment Shares to Ventures, the Contributing USMD Holders making contributions described in paragraph 2(b) of this Amendment, and the Non-Contributing USMD Holders under Section 1.4(e).

(g) This Section 3 of this Amendment and Section 1.4 of the Agreement are intended to comply with the requirements set forth in Section 2.02 of Revenue Procedure 84-42, 1984-1 C.B. 521.

4. Options. Section 1.7(b) of the Agreement is amended to read in its entirety as follows:

On the Closing Date, Holdings shall grant to Ventures options to purchase a number of shares of Holdings common stock equal to the number of shares of Holdings common stock that the holders of the USMD Granted Shares are entitled to receive pursuant to Section 1.7(a) above, at an exercise price equal to the quotient of (i) $3.00 divided by (ii) the Conversion Ratio. Such options shall expire five years from the date of issuance under the Holdings Equity Plan and shall be held by Ventures for the benefit of the Class A limited partners.

5. Tax Treatment. Section 11.6 of the Agreement is amended to read as follows:

The parties to this Amendment agree that, for United States federal income tax purposes the Contribution is intended to be, and shall be characterized as, an exchange qualifying under Section 351 of the Internal Revenue Code of 1986, as amended (the “Code”).

6. Issuance of Class B Partnership Interests. The Class B Partnership Interests in Ventures to be issued to the Contributing USMD Holders shall be based upon the relative values of the USMD shares contributed by them to Ventures as compared with the values of Ventures, UANT, MCNT, and Impel, as finally determined pursuant to this Amendment, the MCNT Agreement, and the Impel Agreement.

-4-

7. Additional Definition. “USMD Holder Representative” means John House, M. D.

8. Listing Application. Section 5.6 of the Agreement is amended to read as follows:

Holdings shall, as soon as practicable, prepare and submit to NASDAQ a listing application with respect to the listing on the Nasdaq Capital Market of the Holdings Shares issuable pursuant to the Contribution, and shall use its best efforts to obtain, prior to the Closing, approval for the listing of the Holdings Shares on the Nasdaq Capital Market, or another stock exchange agreed to in writing by the Parties, subject in either case to official notice of issuance.

9. Conditions Precedent to Obligations of USMD.

(a) Section 6.2 of the Agreement is amended to read as follows:

All of the representations and warranties made by Ventures, UANT and Holdings in this Agreement and in all certificates and other documents delivered by Ventures, UANT or Holdings to USMD pursuant hereto, shall have been true and correct in all material respects as of the date hereof, and shall be true and correct in all material respects at the Closing Date, with the same force and effect as if such representations and warranties had been made at and as of the Closing Date, except for changes permitted or contemplated by this Agreement, changes approved in writing by USMD and Holdings or any failure of any such representations and warranties to be true and correct in all material respects at the Closing Date solely as result of the consummation of the Impel Merger and/or the MCNT Merger on the Closing Date.

(b) Section 6.7 of the Agreement is amended to read as follows:

The S-4 Registration Statement shall have been declared effective by the SEC and NASDAQ shall have approved the listing on the Nasdaq Capital Market of the Holdings Shares issuable pursuant to the Contribution or such shares shall have been approved for listing on another stock exchange agreed to in writing by the Parties.

10. Conditions Precedent to Obligations of Ventures and UANT. Section 7.7 of the Agreement is amended to read as follows:

11. Subsequent Transfers of UANT Business Units. Section 8.9(b) of the Agreement is hereby deleted.

12. Survival of Representations, Warranties and Covenants. The first sentence of Section 8.12 of the Agreement is hereby deleted.

13. D&O Coverage. Holdings (or a third party at the direction of Holdings), at Holding’s sole expense, will pay at the Closing an amount sufficient to enable UANT to purchase “tail” coverage for a period of six (6) years following the Closing Date under the directors and officers liability insurance policy of UANT, as in effect on the Closing Date, up to an aggregate amount not to exceed $55,000.

14. New Definitions. The following definitions are added to Article IX of the Agreement:

“Impel” means Impel Management Services, L.L.C., a Texas limited liability Company.

“MCNT” means The Medical Clinic of North Texas, P.A., a Texas Professional Association.

“Schedule 1.4 Deferred Payment Obligations” means, in the case of UANT and Ventures, those certain deferred payments payable to Ken Licker, M.D.P.A., Robert Dowling, M.D.P.A., Gordon Brodie, M.D.P.A., and Mark Norris, M.D.P.A.

15. Revised Definitions. At Article X, the defined term, “Schedule III Deferred Payment Obligations” shall be deleted. In addition, the definitions of the defined terms below shall be revised so that such terms shall be defined as follows:

-5-

“Conversion Ratio” means the quotient of (a) the number set forth in Cell K72 of Schedule 1.41after the completion of the Schedule 1.41 Adjustments, divided by (b) the number of shares of USMD common stock outstanding immediately prior to the Closing.

“Outside Closing Date” means August 31, 2012. 16. Expenses. Section 8.2 of the Agreement is amended to read as follows:

8.2. Expenses. Except as provided in Section 8.1 and in the second paragraph of this Section 8.2, each Party shall pay its own expenses incurred in connection with this Agreement and the Transactions, whether or not the Agreement or the Transactions are consummated.

Holdings shall pay all filing fees in connection with all pre-transaction notifications required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the rules and regulations promulgated thereunder, in connection with the Transactions (including, without limitation, the UANT Merger, the MCNT Merger, and the Impel Merger).

[the rest of this page is blank]

-6-

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to Contribution and Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.


HOLDINGS

USMD Holdings, Inc., a Delaware corporation

By:		/s/ John House, M.D.
Name: John House, M.D.
Title: President

USMD

USMD Inc., a Texas corporation

By:		/s/ John House, M.D.
Name: John House, M.D.
Title: Chairman and Chief Executive Officer

UANT

Urology Associates of North Texas, L.L.P., a Texas limited liability partnership

By:		/s/ Dr. Mark McCurdy
Name: Dr. Mark McCurdy
Title: Authorized Partner


By:		/s/ Dr. Richard Scriven
Name: Dr. Richard Scriven
Title: Authorized Partner


By:		/s/ Dr. Keith Waguespack
Name: Dr. Keith Waguespack
Title: Authorized Partner


By:		/s/ Dr. Ira Hollander
Name: Dr. Ira Hollander
Title: Authorized Partner

-7-


VENTURES

UANT Ventures, L.L.P., a Texas limited liability partnership

By:		/s/ Dr. Mark McCurdy
Name: Dr. Mark McCurdy
Title: Authorized Partner

By:		/s/ Dr. Richard Scriven
Name: Dr. Richard Scriven
Title: Authorized Partner

By:		/s/ Dr. Keith Waguespack
Name: Dr. Keith Waguespack
Title: Authorized Partner


By:		/s/ Dr. Ira Hollander
Name: Dr. Ira Hollander
Title: Authorized Partner

JOINED SOLELY FOR THE PURPOSES OF SECTION 3:

/s/ John M. House, M.D.
John M. House, M.D.


/s/ Richard C. Johnston, M.D.
Richard C. Johnston, M.D.

-8-

Schedule I to Amendment to Contribution and Purchase Agreement


	USMD Common Stock Held		“Contributing USMD Holder”	USMD Shares Contributed to Ventures		USMD Shares Contributed to Holdings		Pro Rata Percentage
John House		5,664,196	Yes		5,664,196				0.0000
H.P. Hezmall		3,664,196	Yes		3,606,211		57,985		0.0684
David Ellis		3,661,196	Yes		3,603,211		57,985		0.0684
Paul Thompson		3,655,196	Yes		3,597,211		57,985		0.0684
Steve House		1,832,528	Yes		1,774,543		57,985		0.0684
Charles Bradford		1,714,195	Yes		1,656,210		57,985		0.0684
Jacob Rosenstein		1,252,584	No		—		1,252,584		1.4769
Charles Cook		931,005	Yes		873,020		57,985		0.0684
Christopher Dunleavy		721,900	Yes		663,915		57,985		0.0684
Neil House		540,864	Yes		482,879		57,985		0.0684
Wade Lowry		446,686	Yes		446,686				0.0000
Tom Hall		330,000	Yes		272,015		57,985		0.0684
Glen Wyant		284,640	No		—		284,640		0.3356
Jeffrey W. Heitkamp		281,276	No		—		281,276		0.3316
Todd Profit Sharing Plan		255,164	No		—		255,164		0.3009
Kenneth Licker		192,150	Yes		192,150				0.0000
Jim Saalfield		191,645	Yes		191,645				0.0000
Gary Price		178,131	Yes		178,131				0.0000
Michael Biavati		154,168	No		—		154,168		0.1818
Pat Collini		150,547	Yes		150,547				0.0000
Russell Dickey		87,292	No		—		87,292		0.1029
Marian Zinnante		77,593	No		—		77,593		0.0915
Jim Edwardson		65,000	No		—		65,000		0.0766
Lawrence J. Alter		63,393	Yes		63,393				0.0000
Scott Allen		59,407	No		—		59,407		0.0700
Michael McCullough		50,678	No		—		50,678		0.0598
Ali Shirvani		50,000	Yes		50,000				0.0000
Robert L. True		48,495	No		—		48,495		0.0572
James W. Ward		48,495	No		—		48,495		0.0572
A.E. Thurman, M.D.		43,487	No		—		43,487		0.0513
Gordon Brody		42,363	Yes		42,363				0.0000
Kirk Pinto		40,467	Yes		40,467				0.0000
Mary Finke		38,797	No		—		38,797		0.0457
G. Byron Kallam		35,644	No		—		35,644		0.0420
Tracy Rukab		35,644	No		—		35,644		0.0420
Randy Hess		35,000	No		—		35,000		0.0413
Kurt Kaufman		35,000	No		—		35,000		0.0413
Ashton Flp		30,000	No		—		30,000		0.0354
Ellen Parrill		29,098	No		—		29,098		0.0343
Kenneth Likker, M.D.		28,990	No		—		28,990		0.0342
Terri Crawford		25,000	No		—		25,000		0.0295
Chris Lichty		25,000	No		—		25,000		0.0295
John W. Johnson, III		23,763	No		—		23,763		0.0280
John R. Jeffers		19,399	No		—		19,399		0.0229
Ralph T. Wiegman		19,399	No		—		19,399		0.0229
Keryn M. Dias		19,398	No		—		19,398		0.0229
Cliff Vestal		12,000	Yes		12,000				0.0000


John Pumphry	11,881	No	—	11,881	0.0140
Richard Lieman	10,000	No	—	10,000	0.0118
Scott Ashton	10,000	No	—	10,000	0.0118
Leea Bristow	10,000	No	—	10,000	0.0118
David Cavallaro	10,000	No	—	10,000	0.0118
Monty Trimble	7,072	No	—	7,072	0.0083
Robert Bell	5,365	No	—	5,365	0.0063
Mike Mycoskie	5,000	No	—	5,000	0.0059
Jan Turley	5,000	No	—	5,000	0.0059
JJ Fedderson	5,000	No	—	5,000	0.0059
Mark Freis	5,000	No	—	5,000	0.0059
Larry Haun	5,000	No	—	5,000	0.0059
Ty Miller	5,000	No	—	5,000	0.0059
Luis Nolasco	5,000	No	—	5,000	0.0059
Jennifer Passamano	5,000	No	—	5,000	0.0059
Terry White	5,000	No	—	5,000	0.0059
Gabe Zablatnik	4,000	No	—	4,000	0.0047
Tahir Ali	3,564	No	—	3,564	0.0042
Steve Miller	3,255	No	—	3,255	0.0038
Harrison Mitchell Abrahams, M.D., P.A.	57,985	No	—	57,985	0.0684
Lawrence J. Alter, M.D., P.A.	57,985	No		57,985	0.0684
Aaron M. Amos, M.D., P.A.	57,985	No	—	57,985	0.0684
Jeffrey C. Applewhite, M.D., P.A.	57,985	No	—	57,985	0.0684
Richard H. Bevan-Thomas, M.D., P.A.	34,789	No	—	34,789	0.0410
Gordon S. Brody, M.D., P.A.	57,985	No		57,985	0.0684
Tracy Cannon-Smith M.D.P.A.	50,251	No	—	50,251	0.0592
Paul Chi-An Chan, M.D., P.A.	57,985	No	—	57,985	0.0684
Weber Chuang M.D., P.A.	57,985	No	—	57,985	0.0684
M. Patrick Collini, M.D., P.A.	57,985	No		57,985	0.0684
Kevin D Diamond MD PA	57,985	No	—	57,985	0.0684
Robert A. Dowling, M.D., P.A.	57,985	No	—	57,985	0.0684
Patrick R. Frey, M.D., F.A.C.S., P.A.	57,985	No	—	57,985	0.0684
S. Alexis Gordon, MD PA	50,251	No	—	50,251	0.0592
Michael B. Gruber, M.D., P.A.	57,985	No	—	57,985	0.0684
Ira N. Hollander, M.D., P.A.	57,985	No	—	57,985	0.0684
John M. House, M.D., P.A.	57,985	No		57,985	0.0684
John W. Jaderlund, MD, PA	57,985	No	—	57,985	0.0684
J. Daniel Johnson, M.D., P.A.	57,985	No	—	57,985	0.0684
E. Paul Kaplan, M.D., P.A.	57,985	No	—	57,985	0.0684
Wade L. Lowry, M.D., P.A.	57,985	No		57,985	0.0684
Justin T. Lee MD PA	57,985	No	—	57,985	0.0684
Cleburne Urology Associates, P.A. (Barney Maddox)	57,985	No	—	57,985	0.0684
Mark Alan McCurdy, M.D., P.A.	57,985	No	—	57,985	0.0684
F.H. Moore III, M.D., P.A.	57,985	No	—	57,985	0.0684


Mark A. Norris, M.D., P.A.	57,985	No	—	57,985	0.0684
Christopher Pace, M.D., P.A.	57,985	No	—	57,985	0.0684
Kirk Pinto, M.D., P.A.	57,985	No		57,985	0.0684
V. Gary Price, M.D., P.A.	57,985	No		57,985	0.0684
Jeff L. Pugach, M.D., P.A.	57,985	No	—	57,985	0.0684
Delbert C. Rudy, P.A.	57,985	No	—	57,985	0.0684
James G. Saalfield, M.D., P.A.	57,985	No		57,985	0.0684
Andrew C Sambell M.D.P.A.	57,985	No	—	57,985	0.0684
Richard R. Scriven, M.D., P.A.	57,985	No	—	57,985	0.0684
David L. Shepherd, M.D., P.A.	57,985	No	—	57,985	0.0684
Ali Shirvani, M.D., P.A.	57,985	No	—	57,985	0.0684
Marie-Blanche Tchetgen, M.D., P.A.	57,985	No	—	57,985	0.0684
Scott A Thurman M.D., P.A.	57,985	No	—	57,985	0.0684
Thomas C. Truelson, M.D., P.A.	57,985	No	—	57,985	0.0684
James C. Vestal, M.D., P.A.	57,985	No		57,985	0.0684
Keith A. Waguespack M.D., P.A	57,985	No	—	57,985	0.0684
Diane C. West, M.D., P.A.	57,985	No	—	57,985	0.0684

	29,707,912		23,560,793	6,147,119	7.2478
Ventures					92.7522

Schedule 1.41


	A	B	C		D		E		F		G		H		I		J		K		L		M		N		O		P		Q
	Entity		Total Enterprise Value		Total Subsidiary Level Debt (+/- Net working capital excess (deficit)		Total Enterpise Value Less Subsidiary Level Debt		USMD Corporate Level Debt		Ventures/ UANT Corporate Level Debt		Impel Corporate Level Debt		MCNT Corporate Level Debt		USMD Enterprise Value				UANT Enterpise Value				Impel Enterprise Value				MCNT Enterpise Value
	Entity		Total Enterprise Value				Total Enterpise Value Less Subsidiary Level Debt		USMD Corporate Level Debt		Ventures/ UANT Corporate Level Debt		Impel Corporate Level Debt		MCNT Corporate Level Debt		% Own		$ Value		% Own		$ Value		% Own		$ Value		% Own		$ Value
5
6	USMD
7		USMD Arlington		165,280,000		(40,956,000)		124,324,000										5.00%		6,216,200		23.4368%		29,137,567
8		USMD FW Hospital		49,000,000		(17,529,000)		31,471,000										20.00%		6,294,200		10.8565%		3,416,649
9
10		USMD Hospital Division		31,880,000				31,880,000										100.00%		31,880,000
11		USMD Cancer Division		27,450,000				27,450,000										100.00%		27,450,000
12		Willowbrook Cancer		10,870,000		0		10,870,000										0.00%		0
13
14		USMD Litho Division
15		Management		5,550,000				5,550,000										100.00%		5,550,000
16		Minority Partnership Interests		9,920,000		(117,000)		9,803,000		(7,220,000)								*Varies		9,803,000
17
18		USMD Inc Holding Company Debt								(730,000)
19
20	Ventures
21		UANT
22		Cancer		46,290,000				46,290,000				(5,172,000)										100%		46,290,000
23		Imaging		4,730,000				4,730,000				(291,000)										100%		4,730,000
24		Lab		7,890,000				7,890,000				(60,000)										100%		7,890,000
25		Research		880,000				880,000														100%		880,000
26		Practice		5,370,000				5,370,000				(7,907,000)										100%		5,370,000
27
28		UANT Owned:
29		MetroStone Management		9,160,000				9,160,000														88.5472%		8,110,924
30		Dallas Stone Management		9,030,000				9,030,000														31.4453%		2,839,514
31		North Texas Stone Management		5,580,000		(90,000)		5,490,000														30.00%		1,647,000
32		Waxahachie Surgery Center																				4.51%		41,000
33		US Urology																				0.00%		0
34		Linked Urology Research Network																				0.00%		0
35
36		UANT Ventures
37		Baylor Carrolton																				0.00%		0
38		North Texas Hospital																				0.88%		180,000
39		Neo—Alliance																				0.00%		0
40
41		UANT Ventures (Corporate Debt)										(560,668)
42		UANT Lithotripsy (Corporate Debt)										(561,000)
43
44	Impel
45		Impel Management Services, L.L.C.		6,562,000				6,562,000																		100%		6,562,000
46		Impel Consulting Experts		3,653,000				3,653,000																		100%		3,653,000
47		Impel (Corporate Debt)												(313,163)
48
49	MCNT
50		Clinical Lab (TBD by VMG)						0																						100%		0
51		Imaging (TBD by VMG)						0																						100%		0
52		Other (TBD by VMG)						0																						100%		0
53		Other (TBD by VMG)						0																						100%		0
54		Other (TBD by VMG)						0																						100%		0
55		Total MCNT (Per HCI)		57,300,000				57,300,000																						100%		57,300,000
56		MCNT (Corp Debt & Deferred Comp Plans)														(13,472,086)
57
58		Total		456,395,000		(58,692,000)		397,703,000		(7,950,000)		(14,551,668)		(313,163)		(13,472,086)				87,193,400				110,532,654				10,215,000				57,300,000

59
60	*Total Gross Enterprise Value*																			87,193,400				110,532,654				10,215,000				57,300,000
61	Adjustments:
62		Deferred Payout Obligations (as defined in Section 1.4(c)(iii) of the Agreement)																		0												—
63		Net Working Capital Adjustment (as defined in Section 1.4(c)(iv) of the Agreement)																		6,142,131				727,993				1,861,966				(854,489)
64		Surplus Assets (subset of working capital adjustment)																		0				—				1,460,624				2,530,141
65		Approved Capital Expenditures (as defined in Section 1.4(c)(v) of the Agreement)																		0				2,941,982				0

66	*Adjusted Net Enterprise Value (Purchase Price)*																			93,335,531				114,202,629				13,537,590				58,975,662
67		Less: Indebtedness (columns F,G, H, I)																		(7,950,000)				(14,551,668)				(313,163)				(13,472,086)
68

69	*Value of Contribution to Holdings*																			85,385,531				99,650,961				13,224,427				45,503,566
70
71	Relative Value of Contribution to Holdings																			35.027880%				40.880016%				5.425083%				18.667020%
72	Number of Shares of Holdings Stock																			3,502,788				4,088,002				542,508				1,866,702

Schedule 1.41

Schedule 1.42

USMD Net Working Capital Adjustments


	A	B	C			D		E
3	Accounts	Comments	USMD Inc Consolidated Management Company			USMD Inc Consolidated Management Company
4			Sept 30 2011			Acquisition Date
5	Cash			8,983,693
6	Management Fee AR (Hospital & Litho & CTC)			1,744,118
7	Allowance for Doubtful Accounts
8	Management Fee AR (CTC)
9	Federal Income Tax Refund
10	Deferred Tax Asset			177,245
11	AR Other Net of Allowance			23,575
12	Prepaids and Other Current Assets			340,979

13	Total Current Assets	Ties to G/L		11,269,610			—

14
15	Accounts Payable			120,871
16	Related Party Payable			5,940
17
18
19

20	Total Intercompany Receivable from LP			126,811

21
22	Intercompany Payable/(Receivable):			(294,493	)
23	Due to Matrx
24	Due From USL
25	Due From Admin Svcs	Portion is attributable to Arl/FW/Litho LP
26	Due from CTC
27	Due to USMD Inc
28	Due to Admin

29	Total Intercompany	Subject to Reconciliation of LP related Exps		(294,493	)

30

31	Accrued Interest Payable	TBD whether included or excluded		—
32	Accrued Expenses	Subject to review for completeness		3,287,177
33
34	Accrued Franchise Tax
35	Federal Taxes Payable
36	State Taxes Payable

37	Total Accrued Liabilities			3,287,177

38
	Accrued Payroll Liabilities:
40	Accrued Payroll			1,187,392
41	Accrued PTO
42	Payroll Related Liabilities

43	Total Accrued Payroll			1,187,392			—

44
45	Current Portion of Debt	Excluded from Calculation

46	Total Current Liabilities	Ties to G/L		4,306,887			—

47

48	Net Working Capital			6,962,723			—		A

49
50	USMD Inc Net Working Capital Settlement Target
51
52			USMD Inc
53			9/30/11 YTD			Annualized
54
55	Management Fee Revenue			13,473,381			17,964,508
56	Arlington Staff Pass Through Revenue			4,143,438			5,524,584
57	Fort Worth Staff Pass Through Revenue			1,707,193			2,276,257
58	CTC Staff Pass Through Revenue			2,057,133			2,742,844
59	Physicists Revenue			2,307,241			3,076,321
60	Salary Processing Fee Revenue			29,420			39,227

61	Total Net Revenue (not incl. interest)			23,717,806			31,623,741

62
63	Less:
64
65	Arlington Staff Pass Through Revenue	Reimbursement of Cost (Contra Expense)		4,143,438			5,524,584
66	Fort Worth Staff Pass Through Revenue	Reimbursement of Cost (Contra Expense)		1,707,193			2,276,257
67	CTC Staff Pass Through Revenue	Reimbursement of Cost (Contra Expense)		2,057,133			2,742,844
68	Salary Processing Fee Revenue	Reimbursement of Cost (Contra Expense)		29,420			39,227

69	Total Cost Reimbursement (I.E Contra Expense)			7,937,184			10,582,912

70
71	Adjusted Net Revenue			15,780,622			21,040,829

72
73	Net Working Capital Target = Net Revenue @ 3.9%			615,444			820,592		B
74
75	Actual Net Working Capital Adjustment to Purchase Price as of Acquisition Date						6,142,131		A-B

Schedule 1.42

Schedule 1.43

UANT Net Working Capital Adjustments


	A	B	C			D	E	F		G			H
1 2 3	Accounts	Comments	UANT & UANT Ventures Excluding Clinic			UANT & UANT Ventures Excluding Clinic		UANT Clinic & Video		UANT Clinic & Video
4			Sept 30 2011			Acquisition Date		Sept 30 2011		Acquisition Date
5	Cash			2,935,213
6	Net Patient AR	Subject to GAAP Collectibility Assessment		3,634,477
7	Allowance for Doubtful Accounts
8	Deposits
9
10
11	AR Other			537,178
12	Prepaids and Other Current Assets			629,789

13	Total Current Assets	Ties to G/L		7,736,657		—			—		—

14
15	Accounts Payable			(10,271	)
16
17	Accrued Interest Payable	Not included in the calculation
18	Accrued Expenses	Subject to review for completeness		1,425,409
19	Accrued Bonus	Subject to review for completeness/Achievablity
20	Accrued Franchise Tax
21	Partner Withdraw Payable			113,898
22	State Taxes Payable

23	Total Accrued Liabilities			1,539,307		—			—		—

24
25	Accrued Payroll Liabilities:
26	Accrued Payroll			1,865,283
27	Accrued PTO
28	Payroll Related Liabilities

29	Total Accrued Payroll			1,865,283		—			—		—

30
31	Current Portion of Debt	Excluded from Calculation

32	Total Current Liabilities	Ties to G/L		3,394,319		—			—		—

33
34	Net Working Capital			4,342,338		—	A		—		—			X

35

36	UANT L.P.& UANT Ventures L.L.C. Inc Net Working Capital Settlement Target
37
38			UANT & UANT Ventures
39						9/30/11 YTD
40	UANT CTC Revenue					12,174,806
41	UANT Imaging Revenue					1,151,459
42	UANT Lab Revenue					2,643,607
43	UANT Research Revenue					475,982
46

47	Total Net Revenue (not incl. interest)			—		16,445,854

48
49	Less:
54
55	Total Adjustments			—		—
56
57	Adjusted Net Revenue Annualized			—		21,927,805

58
59	Net Working Capital Target = (Net Rev @ 3.9% )			—		855,184	B
60
61	UANT Clinic AR from VMG Report										2,849,700
62	UANT Inventory from VMG Report										152,000
63	UANT Accrued Expenses from VMG Report										(239,000	)
64	Adjustment for Video NWC TBD by VMG (This number will be provided at later date, s/be immaterial)										(3,540	)

65	Net Working Capital Target = (Predetermined Target Established by VMG)										2,759,160			Y
66		Working Capital Adjustment of Columns D and G				3,487,153	A-B				(2,759,160	)		X-Y

67
68	Actual Net Working Capital Adjustment to Purchase Price as of Acquisition Date					727,993	(Cell D66 + G66)

Schedule 1.43

Schedule 1.44

Impel Net Working Capital Adjustment


	A	B	C		D		E
3	Accounts	Comments	Impel
4			Sept 30 2011		Acquisition Date
5	Cash			2,081,358		TBD
6						TBD
7						TBD
8						TBD
9						TBD

10	Total Cash			2,081,358

11
12						TBD
13	Mgmt Fee AR			442,102		TBD
14	AR			10,891		TBD
15	AR Other			9,982		TBD
16	Prepaid			86,806		TBD
17	Intercompany AR			230,956		TBD
18	Note Receivable from MCNT	Applied to surplus asset schedules to be consistent with HCI				TBD
19	Deposits			66,450
20	Cash Surrender Value of Insurance	Applied to surplus asset schedules to be consistent with HCI
21	Other current assets

22	Total Current Assets			2,928,545		—

23
24	Accounts Payable			2,642		TBD
25
26	Accrued current liabilities			173,709
27	Accrued Interest Payable					TBD
28	Franchise tax (margin tax)			16,225		TBD
29	Accrued Payroll (A comp)	PTO liability is not adjusted monthly		600,076		TBD
30	Accrued 401k			1,092		TBD
31	Federal Taxes Payable	Not adjusted monthly				TBD
32	Deferred Revenue			26,610		TBD

33	Total Accrued Liabilities			817,712

34
35
36
37
38
39
40
41
42
43
44						TBD
45						TBD

46	Total Current Liabilities			820,354

47

48	Net Working Capital			2,108,191		—	A

49		Impel Net Working Capital Settlement Target
50
51			Impel & Ice
52			YTD		Annualized
53	Impel revenue			4,735,100		6,313,466
54	ICE revenue					—

55	Total Net Revenue (not incl. interest)			4,735,100		6,313,466

56
57
58
59
60
61
62
63
64
65
66
67	Less:
68

69				—		—

70
71	Adjusted Net Revenue			4,735,100		6,313,466

72
73	Net Working Capital Target = Net Revenue @ 3.9% per HCI analysis			184,669		246,225	B
74
75	Net Working Capital Adjustment to Purchase Price					1,861,966	A-B

Schedule 1.44

Schedule 1.45

MCNT Net Working Capital Adjustments


	A	B	C			D			E
3	Accounts	Comments	MCNT
4			Sep 30 2011			Acquisition Date

5	Cash			864,755			TBD
6							TBD
7	Cash Restricted for LOC collateral			3,000,000			TBD
8							TBD

9	Total Cash			3,864,755

10
11
12	Other AR			(173,909	)		TBD
13	Net Patient AR			8,440,748			TBD
14	Inventory	Mostly pharmacy at 45+ clinics		528,407			TBD
15	Prepaids			359,892			TBD
16	Intercompany Receivable from Impel						TBD
17	Deposits			68,198			TBD
18	Deferred Tax Asset	MCNT requested that DTA be excluded (USMD agreed if uant/usmd is consistent)

19	Total Current Assets			13,088,091			—

20
21	Accounts Payable			1,928,223			TBD
22	Intercompany payable to Impel			200,938
23	Accrued Interest Payable						TBD
24	Accrued Expenses			1,479,801			TBD
25	Accrued Payroll	PTO liability is not adjusted monthly		5,942,535			TBD
26	FIT Payable			34,087
27	401k payable			87,102
28	Accrued Franchise Tax			108,967			TBD
29	Federal Taxes Payable			—			TBD
30
31
32
33
34
35
36
37
38
39
40
41	Deferred Rent	Excluded from calc ok if consistent with UANT/USMD					TBD
42	Total Accrued Liabilities			7,652,492

43
44	Loans to shareholders			—			TBD
45	LOC						TBD

46	Total Current Liabilities			9,781,653

47

48	Net Working Capital			3,306,438			—			A

49
50		Net Working Capital Settlement Target
51
52			Sep 30 2011
53			YTD			Annualized
54	Professional Fee Revenue						—
55	Ancillary Revenue						—

56	Total Net Revenue (not incl. interest)			80,017,821			106,690,428

57
58	Less:
59
60
61
62
63
64
65
66


67	Total Cost Reimbursement (I.E Contra Expense)			—			—

68
69	Adjusted Net Revenue			80,017,821			106,690,428

70
71	Net Working Capital Target = Net Revenue @ 3.9%			3,120,695			4,160,927
72

73	Net Working Capital Target Subject to update from actual LOC balance						4,160,927			B

74
75	Net Working Capital Adjustment to Purchase Price						(854,489	)		A-B

Annex B

LOGO

PERSONAL AND CONFIDENTIAL

February 9, 2012

Board of Directors

USMD Inc.

6333 North State Highway 161

Suite 200

Irving, Texas 75038

Board of Directors

Urology Associates of North Texas, L.L.P.

612 East Lamar Blvd., Suite 700

Arlington, Texas 76011

Executive Committee

UANT Ventures, L.L.P.

612 East Lamar Blvd., Suite 700

Arlington, Texas 76011

Dear Directors and Executive Committee Members:

VMG Health, LLC has been retained by (1) the Board of Directors (the “USMD Board”) of USMD Inc. (“USMD”), and (2) the Board of Directors (the “UANT Board”) of Urology Associates of North Texas, L.L.P. (“UANT”), and the Executive Committee (the “Executive Committee”) of UANT Ventures, L.L.P. (“Ventures”) (the USMD Board, the UANT Board and the Executive Committee are collectively referred to as the “Parties”, and USMD, UANT and Ventures are collectively referred to as the “Companies”) to render a written opinion to the Parties on the fairness, from a financial point of view, of the relative allocation to existing holders of common stock of USMD and to Ventures, of the consideration to be paid pursuant to the Contribution and Purchase Agreement dated as of August 19, 2010, as amended by the Amendment to Contribution and Purchase Agreement dated effective as of December 15, 2011 by and among USMD Holdings, Inc., a Delaware corporation (“Holdings”), UANT, Ventures, and USMD (hereinafter referred to, as amended, as the “Contribution Agreement”).

Under the terms of the Contribution Agreement, the shareholders of USMD will contribute all of their equity interests in USMD, and Ventures will contribute all of its assets, to Holdings. The contribution by the USMD shareholders and the contribution by Ventures is collectively referred to as the “Contribution.” Immediately prior to the Contribution, UANT will merge into a subsidiary of Ventures and will become a wholly-owned subsidiary of Ventures.


USMD Board of Directors		Page 2
UANT Board of Directors
Ventures Executive Committee
CONFIDENTIAL		February 9, 2012

By virtue of the Contribution, the USMD shareholders will receive shares of Holdings common stock, and Ventures will receive shares of Holdings common stock. Holdings will issue a total of 10 million shares of its common stock in exchange for the Contribution. The allocation of the 10 million shares of Holdings common stock between the USMD shareholders and Ventures is based upon the relative value of their contributions, as further adjusted based on levels of consolidated net working capital and funded debt of each of USMD and Ventures, all as more particularly described in the Contribution Agreement, subject to certain procedures and limitations contained in the Contribution Agreement, as to which adjustments, procedures and limitations we express no opinion. Many of the USMD shareholders will contribute their shares of USMD to Ventures in exchange for partnership interests in Ventures prior to Ventures’ contribution of its assets to Holdings. As a result, certain of the USMD shareholders will receive partnership interests in Ventures in exchange for their indirect contribution of USMD shares to Holdings.

In arriving at our opinion, we have considered the nature of the subject businesses and history of the Companies, the economic outlook in the United States, Texas and Mexico, the outlook for acute care hospitals and other ancillary services in the health care industry, the Companies’ historical financial results, the outlook for future earnings, the book value of the Companies, the financial condition of the Companies, their cash flow capacity, past transactions related to the Companies, and prices at which other comparable public companies and comparable transactions which have occurred relative to the Companies, in each case through December 31, 2011.

In arriving at our opinion, we reviewed and analyzed certain information furnished by the Companies and reviewed other publicly available information including, but not limited to, the following: the Contribution Agreement; audited and un-audited financial data; management financial and operational reports and other analyses and data for the years ending December 31, 2007, December 31, 2008, December 31, 2009, and December 31, 2010 and for the eight month period ended August 31, 2011; current economic and healthcare services industry conditions in the Texas market; certain publicly available information with respect to certain publicly traded companies that we deemed comparable to the Companies; certain publicly available data relating to merger and acquisition transactions and valuations involving companies and assets we deemed comparable to those of the Companies; and such other matters as we deemed appropriate or necessary, including an assessment of general economic, market, and monetary conditions, in each case through December 31, 2011.

In addition we have had discussions with management of the Companies concerning their respective businesses, operations, assets, present conditions and future prospects and undertook such other studies, analyses and investigation as we deemed appropriate, in each case through December 31, 2011. We have not conducted a physical inspection of the inventory, fixed assets, or other assets, nor have we made or obtained any independent evaluation or appraisal of any such assets or any other assets of the Companies. In addition, we undertook such other studies, analyses, and investigations as we deemed appropriate, in each case through December 31, 2011.

In arriving at our opinion, we relied on the accuracy and completeness of all information supplied or otherwise made available to us by the Companies. We assumed that any projections for the Companies used in rendering our opinion had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Companies, and we express no opinion with respect to such projections or the assumptions on which they are based. We were not engaged to and did not independently verify such information or assumptions, including any financial forecasts, or undertake an independent appraisal of the assets of the Companies, nor have we evaluated the solvency or fair value of the Companies under any state or federal laws relating to bankruptcy, insolvency or similar matters. The Companies also provided historical financial information and financial forecasts related to the Companies to us for our evaluation in connection with our


USMD Board of Directors		Page 3
UANT Board of Directors
Ventures Executive Committee
CONFIDENTIAL		February 9, 2012

fairness opinion, and provided us with independent financial data regarding The Medical Clinic of North Texas, P.A. (“MCNT”) and Impel Management Consultants, L.L.C. (“Impel”) for our review of certain financial assumptions and projections contained in such financial data. We did not, however, express any opinion on or perform any valuations with respect to the MCNT and Impel financial data. In rendering our opinion, we did not perform any procedures or analysis regarding the potential environmental liabilities of the Companies, nor did we consider the impact of changes in the regulatory environment in which the Companies operate. We did not undertake any independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which the Companies are or may be party or are subject. Furthermore, no opinion, counsel or interpretation is intended in matters that require legal, regulatory, accounting, insurance, tax, or other similar professional advice. We have relied on the assessment by the Companies and their respective advisers, as to all legal, regulatory, accounting, insurance, and tax matters with respect to the Companies and the Contribution Agreement.

Our opinion is based upon market, economic, financial, and other conditions as they exist and can be evaluated as of December 31, 2011 and, although subsequent events may affect our opinion, we do not have any obligation to update, revise, or reaffirm our opinion, and we note that we have not updated our analyses through the date of our opinion and that conditions may have changed materially. We have assumed, without independent verification, that there has been no material change in the Companies’ financial condition, results of operations, business, assets, liabilities, cash flows or prospects since the date of the most recent financial statements made available to us as referenced above, and that there is no information or any facts that would make any of the information reviewed by us incomplete or misleading. We have relied upon and assumed, without independent verification, that (a) the representations and warranties of all parties to the relevant agreements and all other related documents that are referred to therein are and will remain true and correct, (b) each party to all such agreements and such other related documents will fully and timely perform all of the covenants and agreements required to be performed by such party, (c) all conditions to the consummation of the transactions contemplated by the Contribution Agreement will be satisfied without waiver thereof, and (d) the transactions contemplated by the Contribution Agreement will be consummated in a timely manner on the terms set forth in the Contribution Agreement, without any amendments, waivers or modifications of any term or condition the effect of which would be in any way meaningful to our analyses. In addition, we are not expressing any opinion as to the impact of the transactions contemplated by the Contribution Agreement on the solvency or viability of the Companies or Holdings or the ability of the Companies or Holdings to pay their respective obligations when they come due, and our opinion does not address any legal, regulatory, tax or accounting matters. We have assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the transactions contemplated by the Contribution Agreement will be obtained without any adverse effect on the Companies or Holdings or on the expected benefits of the transactions contemplated by the Contribution Agreement in any way meaningful to our analysis. We have assumed that no changes in the underlying businesses of the Companies have occurred since August 31, 2011.


USMD Board of Directors		Page 4
UANT Board of Directors
Ventures Executive Committee
CONFIDENTIAL		February 9, 2012

The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant quantitative and qualitative methods of financial analyses and the application of those methods to the particular circumstances, and therefore, such an opinion is not readily susceptible to summary description or partial analysis. Furthermore, in arriving at our opinion, we did not attribute any particular weight to any analysis or factor considered by us, but rather made qualitative judgments as to the significance and relevance of each analysis or factor. Accordingly, we believe that our analysis must be considered as a whole and that considering any portion of such analysis and of the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying our opinion. In our analyses, we made numerous assumptions with respect to industry performance, general business and economic conditions, and other matters, many of which are beyond the control of the Companies. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth therein. We analyzed the value of the Companies’ assets based upon the Cost Approach, Market Approach, and Income Approach to value and relied on the approach or approaches as we deemed appropriate.

VMG neither compiled nor audited USMD’s, UANT’s, Venture’s or Holdings’ financial statements, nor have we independently verified the information reviewed. We have assumed and relied upon the accuracy and completeness of the financial and other information provided to us in arriving at our opinion without independent verification.

Our opinion was undertaken at the sole behest of and for the sole benefit of the Board of Directors of USMD, the Board of Directors of UANT, and the Executive Committee of Ventures, which we understand are empowered to consider and pass upon the Contribution Agreement. This opinion should not be construed as creating any fiduciary duty from us to any person or party. To the extent that votes of the Companies’ equity holders are required or sought, our opinion does not constitute a recommendation to any equity holder of any of the Companies as to how any such equity holder should vote on the Contribution Agreement. Our opinion is limited to the fairness, from a financial point of view, of the relative allocation to existing holders of common stock of USMD and to Ventures of the consideration to be received, pursuant to the Contribution Agreement and does not address the relative merits of the Contribution Agreement or any other transaction or business strategies discussed by the Parties or the Companies as alternatives to the Contribution Agreement or the underlying business decision of the Parties or the Companies to proceed with the Contribution Agreement, nor the fairness of any portion or aspect of the Contribution Agreement to the holders of any class of securities, creditors, or other constituencies of the Companies, or to any other party, except as set forth in this opinion.

In addition, the Parties have not authorized us to solicit, and we have not solicited, any indications of interest from any third party with respect to providing capital to or acquiring all or any part of the Companies. Our opinion is necessarily based upon market, economic and other conditions as they exist on the date of this letter, and can be evaluated as of the date of this letter.


USMD Board of Directors		Page 5
UANT Board of Directors
Ventures Executive Committee
CONFIDENTIAL		February 9, 2012

This opinion relates only to the relative allocations of the consideration set forth in the Contribution Agreement as of the date hereof. We were not engaged to assess the long term business plan and therefore express no opinion regarding the Companies’ future financial performance and condition. Our opinion does not constitute a recommendation to any board member as to how the board member should vote on the Contribution Agreement; nor have we expressed any opinion as to the prices at which the assets of the Companies might trade in the future.

As part of our financial advisory and valuation activities, we engage in the valuation of businesses and securities in connection with mergers and acquisitions, private placements, restructurings, and valuations for corporate and other purposes. We are experienced in these activities. We received a fee in connection with the delivery of our opinion. We have also provided in the past, are currently providing, and may in the future provide valuation and financial advisory services to the Companies, for which we have been paid or expect to be paid fees. In addition, the Companies reimbursed us for expenses incurred in connection with rendering our opinion and will reimburse us for additional expenses and indemnify us against potential liabilities arising out of our services provided pursuant to issuing the opinion. We may in the future provide financial advisory, investment banking, or other services to the Companies or their respective affiliates for which we would expect to receive compensation.

The Parties have consented in our engagement letters to our services rendered to each of the other Parties pursuant to similar engagement letters, and each of the Parties has waived any conflicts of interest and potential conflicts of interest that may arise as a result of or in connection with our services and the opinion. Each of the Parties has acknowledged that its interests may be adverse to those of the other Parties and that such interests involve economic rights that are important to it.

It is understood that our opinion, and any written materials provided by us, will be solely for the confidential use of the Board of Directors of USMD, the Board of Directors of UANT, and the Executive Committee of Ventures and will not be reproduced, summarized, described, relied upon or referred to or given to any other person for any purpose without our prior written consent, except as set forth in our engagement letters or with our prior written consent.


USMD Board of Directors		Page 6
UANT Board of Directors
Ventures Executive Committee
CONFIDENTIAL		February 9, 2012

Based upon and subject to the foregoing, it is our opinion that, as of the date of this letter, the relative allocation established by the Contribution Agreement of the consideration to be received by the holders of common stock of USMD and by Ventures, taken in the aggregate, is fair from a financial point of view to such holders of common stock of USMD and to Ventures.

Respectfully submitted,

Value Management Group, LLC

LOGO

C. Elliott Jeter, CFA, CPA/ABV

Partner

ANNEX C – SECTIONS 10.351 TO 10.368 OF TEXAS BUSINESS ORGANIZATIONS CODE

SUBCHAPTER H – RIGHTS OF DISSENTING OWNERS

Sec. 10.351. APPLICABILITY OF SUBCHAPTER. (a) This subchapter does not apply to a fundamental business transaction of a domestic entity if, immediately before the effective date of the fundamental business transaction, all of the ownership interests of the entity otherwise entitled to rights to dissent and appraisal under this code are held by one owner or only by the owners who approved the fundamental business transaction.

(b) This subchapter applies only to a “domestic entity subject to dissenters’ rights,” as defined in Section 1.002. That term includes a domestic for-profit corporation, professional corporation, professional association, and real estate investment trust. Except as provided in Subsection (c), that term does not include a partnership or limited liability company.

(c) The governing documents of a partnership or a limited liability company may provide that its owners are entitled to the rights of dissent and appraisal provided by this subchapter, subject to any modification to those rights as provided by the entity’s governing documents.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 688, Sec. 56, eff. September 1, 2007.

Sec. 10.352. DEFINITIONS. In this subchapter:

(1) “Dissenting owner” means an owner of an ownership interest in a domestic entity subject to dissenters’ rights who:

(A) provides notice under Section 10.356; and

(B) complies with the requirements for perfecting that owner’s right to dissent under this subchapter.

(2) “Responsible organization” means:

(A) the organization responsible for:

(i) the provision of notices under this subchapter; and

(ii) the primary obligation of paying the fair value for an ownership interest held by a dissenting owner;

(B) with respect to a merger or conversion:

(i) for matters occurring before the merger or conversion, the organization that is merging or converting; and

(ii) for matters occurring after the merger or conversion, the surviving or new organization that is primarily obligated for the payment of the fair value of the dissenting owner’s ownership interest in the merger or conversion;

(C) with respect to an interest exchange, the organization the ownership interests of which are being acquired in the interest exchange; and

(D) with respect to the sale of all or substantially all of the assets of an organization, the organization the assets of which are to be transferred by sale or in another manner.

C-1

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 10.353. FORM AND VALIDITY OF NOTICE. (a) Notice required under this subchapter:

(1) must be in writing; and

(2) may be mailed, hand-delivered, or delivered by courier or electronic transmission.

(b) Failure to provide notice as required by this subchapter does not invalidate any action taken.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 10.354. RIGHTS OF DISSENT AND APPRAISAL. (a) Subject to Subsection (b), an owner of an ownership interest in a domestic entity subject to dissenters’ rights is entitled to:

(1) dissent from:

(A) a plan of merger to which the domestic entity is a party if owner approval is required by this code and the owner owns in the domestic entity an ownership interest that was entitled to vote on the plan of merger;

(B) a sale of all or substantially all of the assets of the domestic entity if owner approval is required by this code and the owner owns in the domestic entity an ownership interest that was entitled to vote on the sale;

(D) a plan of conversion in which the domestic entity is the converting entity if owner approval is required by this code and the owner owns in the domestic entity an ownership interest that was entitled to vote on the plan of conversion; or

(E) a merger effected under Section 10.006 in which:

(i) the owner is entitled to vote on the merger; or

(ii) the ownership interest of the owner is converted or exchanged; and

(2) subject to compliance with the procedures set forth in this subchapter, obtain the fair value of that ownership interest through an appraisal.

(b) Notwithstanding Subsection (a), subject to Subsection (c), an owner may not dissent from a plan of merger or conversion in which there is a single surviving or new domestic entity or non-code organization, or from a plan of exchange, if:

(1) the ownership interest, or a depository receipt in respect of the ownership interest, held by the owner is part of a class or series of ownership interests, or depository receipts in respect of ownership interests, that are, on the record date set for purposes of determining which owners are entitled to vote on the plan of merger, conversion, or exchange, as appropriate:

(A) listed on a national securities exchange or a similar system;

(B) listed on the Nasdaq Stock Market or a successor quotation system;

(C) designated as a national market security on an interdealer quotation system by the National Association of Securities Dealers, Inc., or a successor system; or

(D) held of record by at least 2,000 owners;

(2) the owner is not required by the terms of the plan of merger, conversion, or exchange, as appropriate, to accept for the owner’s ownership interest any consideration that is different from the

C-2

consideration to be provided to any other holder of an ownership interest of the same class or series as the ownership interest held by the owner, other than cash instead of fractional shares or interests the owner would otherwise be entitled to receive; and

(3) the owner is not required by the terms of the plan of merger, conversion, or exchange, as appropriate, to accept for the owner’s ownership interest any consideration other than:

(A) ownership interests, or depository receipts in respect of ownership interests, of a domestic entity or non-code organization of the same general organizational type that, immediately after the effective date of the merger, conversion, or exchange, as appropriate, will be part of a class or series of ownership interests, or depository receipts in respect of ownership interests, that are:

(i) listed on a national securities exchange or authorized for listing on the exchange on official notice of issuance;

(ii) approved for quotation as a national market security on an interdealer quotation system by the National Association of Securities Dealers, Inc., or a successor entity; or

(iii) held of record by at least 2,000 owners;

(B) cash instead of fractional ownership interests the owner would otherwise be entitled to receive; or

(c) Subsection (b) shall not apply to a domestic entity that is a subsidiary with respect to a merger under Section 10.006.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Amended by:

Acts 2005, 79th Leg., Ch. 64, Sec. 39, eff. January 1, 2006.

Sec. 10.355. NOTICE OF RIGHT OF DISSENT AND APPRAISAL. (a) A domestic entity subject to dissenters’ rights that takes or proposes to take an action regarding which an owner has a right to dissent and obtain an appraisal under Section 10.354 shall notify each affected owner of the owner’s rights under that section if:

(1) the action or proposed action is submitted to a vote of the owners at a meeting; or

(2) approval of the action or proposed action is obtained by written consent of the owners instead of being submitted to a vote of the owners.

(b) If a parent organization effects a merger under Section 10.006 and a subsidiary organization that is a party to the merger is a domestic entity subject to dissenters’ rights, the responsible organization shall notify the owners of that subsidiary organization who have a right to dissent to the merger under Section 10.354 of their rights under this subchapter not later than the 10th day after the effective date of the merger. The notice must also include a copy of the certificate of merger and a statement that the merger has become effective.

(1) be accompanied by a copy of this subchapter; and

(2) advise the owner of the location of the responsible organization’s principal executive offices to which a notice required under Section 10.356(b)(2) may be provided.

C-3

(d) In addition to the requirements prescribed by Subsection (c), a notice required to be provided under Subsection (a)(1) must accompany the notice of the meeting to consider the action, and a notice required under Subsection (a)(2) must be provided to:

(1) each owner who consents in writing to the action before the owner delivers the written consent; and

(2) each owner who is entitled to vote on the action and does not consent in writing to the action before the 11th day after the date the action takes effect.

(e) Not later than the 10th day after the date an action described by Subsection (a)(1) takes effect, the responsible organization shall give notice that the action has been effected to each owner who voted against the action and sent notice under Section 10.356(b)(2).

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 10.356. PROCEDURE FOR DISSENT BY OWNERS AS TO ACTIONS; PERFECTION OF RIGHT OF DISSENT AND APPRAISAL. (a) An owner of an ownership interest of a domestic entity subject to dissenters’ rights who has the right to dissent and appraisal from any of the actions referred to in Section 10.354 may exercise that right to dissent and appraisal only by complying with the procedures specified in this subchapter. An owner’s right of dissent and appraisal under Section 10.354 may be exercised by an owner only with respect to an ownership interest that is not voted in favor of the action.

(b) To perfect the owner’s rights of dissent and appraisal under Section 10.354, an owner:

(1) with respect to the ownership interest for which the rights of dissent and appraisal are sought:

(A) must vote against the action if the owner is entitled to vote on the action and the action is approved at a meeting of the owners; and

(B) may not consent to the action if the action is approved by written consent; and

(2) must give to the responsible organization a notice dissenting to the action that:

(A) is addressed to the president and secretary of the responsible organization;

(B) demands payment of the fair value of the ownership interests for which the rights of dissent and appraisal are sought;

(C) provides to the responsible organization an address to which a notice relating to the dissent and appraisal procedures under this subchapter may be sent;

(D) states the number and class of the ownership interests of the domestic entity owned by the owner and the fair value of the ownership interests as estimated by the owner; and

(E) is delivered to the responsible organization at its principal executive offices at the following time:

(i) before the action is considered for approval, if the action is to be submitted to a vote of the owners at a meeting;

(ii) not later than the 20th day after the date the responsible organization sends to the owner a notice that the action was approved by the requisite vote of the owners, if the action is to be undertaken on the written consent of the owners; or

(iii) not later than the 20th day after the date the responsible organization sends to the owner a notice that the merger was effected, if the action is a merger effected under Section 10.006.

C-4

(c) An owner who does not make a demand within the period required by Subsection (b)(2)(E) is bound by the action and is not entitled to exercise the rights of dissent and appraisal under Section 10.354.

(d) Not later than the 20th day after the date an owner makes a demand under this section, the owner must submit to the responsible organization any certificates representing the ownership interest to which the demand relates for purposes of making a notation on the certificates that a demand for the payment of the fair value of an ownership interest has been made under this section. An owner’s failure to submit the certificates within the required period has the effect of terminating, at the option of the responsible organization, the owner’s rights to dissent and appraisal under Section 10.354 unless a court, for good cause shown, directs otherwise.

(e) If a domestic entity and responsible organization satisfy the requirements of this subchapter relating to the rights of owners of ownership interests in the entity to dissent to an action and seek appraisal of those ownership interests, an owner of an ownership interest who fails to perfect that owner’s right of dissent in accordance with this subchapter may not bring suit to recover the value of the ownership interest or money damages relating to the action.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 10.357. WITHDRAWAL OF DEMAND FOR FAIR VALUE OF OWNERSHIP INTEREST. (a) An owner may withdraw a demand for the payment of the fair value of an ownership interest made under Section 10.356 before:

(1) payment for the ownership interest has been made under Sections 10.358 and 10.361; or

(2) a petition has been filed under Section 10.361.

(b) Unless the responsible organization consents to the withdrawal of the demand, an owner may not withdraw a demand for payment under Subsection (a) after either of the events specified in Subsections (a)(1) and (2).

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 10.358. RESPONSE BY ORGANIZATION TO NOTICE OF DISSENT AND DEMAND FOR FAIR VALUE BY DISSENTING OWNER. (a) Not later than the 20th day after the date a responsible organization receives a demand for payment made by a dissenting owner in accordance with Section 10.356, the responsible organization shall respond to the dissenting owner in writing by:

(1) accepting the amount claimed in the demand as the fair value of the ownership interests specified in the notice; or

(2) rejecting the demand and including in the response the requirements prescribed by Subsection (c).

(b) If the responsible organization accepts the amount claimed in the demand, the responsible organization shall pay the amount not later than the 90th day after the date the action that is the subject of the demand was effected if the owner delivers to the responsible organization:

(1) endorsed certificates representing the ownership interests if the ownership interests are certificated; or

(2) signed assignments of the ownership interests if the ownership interests are uncertificated.

(c) If the responsible organization rejects the amount claimed in the demand, the responsible organization shall provide to the owner:

(1) an estimate by the responsible organization of the fair value of the ownership interests; and

C-5

(2) an offer to pay the amount of the estimate provided under Subdivision (1).

(d) An offer made under Subsection (c)(2) must remain open for a period of at least 60 days from the date the offer is first delivered to the dissenting owner.

(e) If a dissenting owner accepts an offer made by a responsible organization under Subsection (c)(2) or if a dissenting owner and a responsible organization reach an agreement on the fair value of the ownership interests, the responsible organization shall pay the agreed amount not later than the 60th day after the date the offer is accepted or the agreement is reached, as appropriate, if the dissenting owner delivers to the responsible organization:

(1) endorsed certificates representing the ownership interests if the ownership interests are certificated; or

(2) signed assignments of the ownership interests if the ownership interests are uncertificated.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 10.359. RECORD OF DEMAND FOR FAIR VALUE OF OWNERSHIP INTEREST. (a) A responsible organization shall note in the organization’s ownership interest records maintained under Section 3.151 the receipt of a demand for payment from any dissenting owner made under Section 10.356.

(b) If an ownership interest that is the subject of a demand for payment made under Section 10.356 is transferred, a new certificate representing that ownership interest must contain:

(1) a reference to the demand; and

(2) the name of the original dissenting owner of the ownership interest.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 10.360. RIGHTS OF TRANSFEREE OF CERTAIN OWNERSHIP INTEREST. A transferee of an ownership interest that is the subject of a demand for payment made under Section 10.356 does not acquire additional rights with respect to the responsible organization following the transfer. The transferee has only the rights the original dissenting owner had with respect to the responsible organization after making the demand.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 10.361. PROCEEDING TO DETERMINE FAIR VALUE OF OWNERSHIP INTEREST AND OWNERS ENTITLED TO PAYMENT; APPOINTMENT OF APPRAISERS. (a) If a responsible organization rejects the amount demanded by a dissenting owner under Section 10.358 and the dissenting owner and responsible organization are unable to reach an agreement relating to the fair value of the ownership interests within the period prescribed by Section 10.358(d), the dissenting owner or responsible organization may file a petition requesting a finding and determination of the fair value of the owner’s ownership interests in a court in:

(1) the county in which the organization’s principal office is located in this state; or

(2) the county in which the organization’s registered office is located in this state, if the organization does not have a business office in this state.

(b) A petition described by Subsection (a) must be filed not later than the 60th day after the expiration of the period required by Section 10.358(d).

(c) On the filing of a petition by an owner under Subsection (a), service of a copy of the petition shall be made to the responsible organization. Not later than the 10th day after the date a responsible organization

C-6

receives service under this subsection, the responsible organization shall file with the clerk of the court in which the petition was filed a list containing the names and addresses of each owner of the organization who has demanded payment for ownership interests under Section 10.356 and with whom agreement as to the value of the ownership interests has not been reached with the responsible organization. If the responsible organization files a petition under Subsection (a), the petition must be accompanied by this list.

(d) The clerk of the court in which a petition is filed under this section shall provide by registered mail notice of the time and place set for the hearing to:

(1) the responsible organization; and

(2) each owner named on the list described by Subsection (c) at the address shown for the owner on the list.

(e) The court shall:

(1) determine which owners have:

(A) perfected their rights by complying with this subchapter; and

(B) become subsequently entitled to receive payment for the fair value of their ownership interests; and

(2) appoint one or more qualified appraisers to determine the fair value of the ownership interests of the owners described by Subdivision (1).

(f) The court shall approve the form of a notice required to be provided under this section. The judgment of the court is final and binding on the responsible organization, any other organization obligated to make payment under this subchapter for an ownership interest, and each owner who is notified as required by this section.

(g) The beneficial owner of an ownership interest subject to dissenters’ rights held in a voting trust or by a nominee on the beneficial owner’s behalf may file a petition described by Subsection (a) if no agreement between the dissenting owner of the ownership interest and the responsible organization has been reached within the period prescribed by Section 10.358(d). When the beneficial owner files a petition described by Subsection (a):

(1) the beneficial owner shall at that time be considered, for purposes of this subchapter, the owner, the dissenting owner, and the holder of the ownership interest subject to the petition; and

(2) the dissenting owner who demanded payment under Section 10.356 has no further rights regarding the ownership interest subject to the petition.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Amended by:

Acts 2009, 81st Leg., R.S., Ch. 84, Sec. 19, eff. September 1, 2009.

Sec. 10.362. COMPUTATION AND DETERMINATION OF FAIR VALUE OF OWNERSHIP INTEREST. (a) For purposes of this subchapter, the fair value of an ownership interest of a domestic entity subject to dissenters’ rights is the value of the ownership interest on the date preceding the date of the action that is the subject of the appraisal. Any appreciation or depreciation in the value of the ownership interest occurring in anticipation of the proposed action or as a result of the action must be specifically excluded from the computation of the fair value of the ownership interest.

C-7

(b) In computing the fair value of an ownership interest under this subchapter, consideration must be given to the value of the domestic entity as a going concern without including in the computation of value any control premium, any minority ownership discount, or any discount for lack of marketability. If the domestic entity has different classes or series of ownership interests, the relative rights and preferences of and limitations placed on the class or series of ownership interests, other than relative voting rights, held by the dissenting owner must be taken into account in the computation of value.

(c) The determination of the fair value of an ownership interest made for purposes of this subchapter may not be used for purposes of making a determination of the fair value of that ownership interest for another purpose or of the fair value of another ownership interest, including for purposes of determining any minority or liquidity discount that might apply to a sale of an ownership interest.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 688, Sec. 57, eff. September 1, 2007.

Sec. 10.363. POWERS AND DUTIES OF APPRAISER; APPRAISAL PROCEDURES. (a) An appraiser appointed under Section 10.361 has the power and authority that:

(1) is granted by the court in the order appointing the appraiser; and

(2) may be conferred by a court to a master in chancery as provided by Rule 171, Texas Rules of Civil Procedure.

(b) The appraiser shall:

(1) determine the fair value of an ownership interest of an owner adjudged by the court to be entitled to payment for the ownership interest; and

(2) file with the court a report of that determination.

(c) The appraiser is entitled to examine the books and records of a responsible organization and may conduct investigations as the appraiser considers appropriate. A dissenting owner or responsible organization may submit to an appraiser evidence or other information relevant to the determination of the fair value of the ownership interest required by Subsection (b)(1).

(d) The clerk of the court appointing the appraiser shall provide notice of the filing of the report under Subsection (b) to each dissenting owner named in the list filed under Section 10.361 and the responsible organization.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 10.364. OBJECTION TO APPRAISAL; HEARING. (a) A dissenting owner or responsible organization may object, based on the law or the facts, to all or part of an appraisal report containing the fair value of an ownership interest determined under Section 10.363(b).

(b) If an objection to a report is raised under Subsection (a), the court shall hold a hearing to determine the fair value of the ownership interest that is the subject of the report. After the hearing, the court shall require the responsible organization to pay to the holders of the ownership interest the amount of the determined value with interest, accruing from the 91st day after the date the applicable action for which the owner elected to dissent was effected until the date of the judgment.

C-8

(c) Interest under Subsection (b) accrues at the same rate as is provided for the accrual of prejudgment interest in civil cases.

(d) The responsible organization shall:

(1) immediately pay the amount of the judgment to a holder of an uncertificated ownership interest; and

(2) pay the amount of the judgment to a holder of a certificated ownership interest immediately after the certificate holder surrenders to the responsible organization an endorsed certificate representing the ownership interest.

(e) On payment of the judgment, the dissenting owner does not have an interest in the:

(1) ownership interest for which the payment is made; or

(2) responsible organization with respect to that ownership interest.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 10.365. COURT COSTS; COMPENSATION FOR APPRAISER. (a) An appraiser appointed under Section 10.361 is entitled to a reasonable fee payable from court costs.

(b) All court costs shall be allocated between the responsible organization and the dissenting owners in the manner that the court determines to be fair and equitable.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 10.366. STATUS OF OWNERSHIP INTEREST HELD OR FORMERLY HELD BY DISSENTING OWNER. (a) An ownership interest of an organization acquired by a responsible organization under this subchapter:

(1) in the case of a merger, conversion, or interest exchange, shall be held or disposed of as provided in the plan of merger, conversion, or interest exchange; and

(2) in any other case, may be held or disposed of by the responsible organization in the same manner as other ownership interests acquired by the organization or held in its treasury.

(b) An owner who has demanded payment for the owner’s ownership interest under Section 10.356 is not entitled to vote or exercise any other rights of an owner with respect to the ownership interest except the right to:

(1) receive payment for the ownership interest under this subchapter; and

(2) bring an appropriate action to obtain relief on the ground that the action to which the demand relates would be or was fraudulent.

(c) An ownership interest for which payment has been demanded under Section 10.356 may not be considered outstanding for purposes of any subsequent vote or action.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Amended by:

Acts 2009, 81st Leg., R.S., Ch. 84, Sec. 20, eff. September 1, 2009.

C-9

Sec. 10.367. RIGHTS OF OWNERS FOLLOWING TERMINATION OF RIGHT OF DISSENT. (a) The rights of a dissenting owner terminate if:

(1) the owner withdraws the demand under Section 10.356;

(2) the owner’s right of dissent is terminated under Section 10.356;

(3) a petition is not filed within the period required by Section 10.361; or

(4) after a hearing held under Section 10.361, the court adjudges that the owner is not entitled to elect to dissent from an action under this subchapter.

(b) On termination of the right of dissent under this section:

(1) the dissenting owner and all persons claiming a right under the owner are conclusively presumed to have approved and ratified the action to which the owner dissented and are bound by that action;

(2) the owner’s right to be paid the fair value of the owner’s ownership interests ceases;

(3) the owner’s status as an owner of those ownership interests is restored, as if the owner’s demand for payment of the fair value of the ownership interests had not been made under Section 10.356, if the owner’s ownership interests were not canceled, converted, or exchanged as a result of the action or a subsequent action;

(4) the dissenting owner is entitled to receive the same cash, property, rights, and other consideration received by owners of the same class and series of ownership interests held by the owner, as if the owner’s demand for payment of the fair value of the ownership interests had not been made under Section 10.356, if the owner’s ownership interests were canceled, converted, or exchanged as a result of the action or a subsequent action;

(5) any action of the domestic entity taken after the date of the demand for payment by the owner under Section 10.356 will not be considered ineffective or invalid because of the restoration of the owner’s ownership interests or the other rights or entitlements of the owner under this subsection; and

(6) the dissenting owner is entitled to receive dividends or other distributions made after the date of the owner’s payment demand under Section 10.356, to owners of the same class and series of ownership interests held by the owner as if the demand had not been made, subject to any change in or adjustment to the ownership interests because of an action taken by the domestic entity after the date of the demand.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 688, Sec. 58, eff. September 1, 2007.

Acts 2009, 81st Leg., R.S., Ch. 84, Sec. 21, eff. September 1, 2009.

Sec. 10.368. EXCLUSIVITY OF REMEDY OF DISSENT AND APPRAISAL. In the absence of fraud in the transaction, any right of an owner of an ownership interest to dissent from an action and obtain the fair value of the ownership interest under this subchapter is the exclusive remedy for recovery of:

(1) the value of the ownership interest; or

(2) money damages to the owner with respect to the action.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 688, Sec. 59, eff. September 1, 2007.

C-10

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20.

Indemnification of Directors and Officers.

Subsection (a) of Section 145 of the DGCL empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

Subsection (b) of Section 145 of the DGCL empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification may be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Section 145 of the DGCL further provides that to the extent a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in subsections (a) and (b) or in the defense of any claim, issue or matter therein, he will be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with his defense. This indemnification or advancement of expenses is not exclusive of any other rights to which the indemnified party may be entitled. Section 145 empowers the corporation to purchase and maintain insurance on behalf of a director, officer, employee or agent of the corporation against any liability asserted against him or incurred by him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liabilities under Section 145.

Section 102(b)(7) of the DGCL enables a corporation in its certificate of incorporation to eliminate or limit the personal liability of a director for monetary damages for violations of a director’s fiduciary duty, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL (providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemptions) or (iv) for any transaction from which the director derived an improper personal benefit.

Paragraph 9 of Holdings Certificate of Incorporation, provides that, any director, officer or trustee of Holdings who was or is a party in any action, suit or proceeding by reason of the fact that he is or was a

director or an officer of Holdings, shall be indemnified to the fullest extent permitted by the DGCL, against all expense, liability and loss reasonably incurred or suffered by such person in connection with any such action, suit or proceeding.

II – 1

Paragraph 9 of Holdings Certificate of Incorporation also provides that Holdings may pay expenses incurred in defending a proceeding in advance of its final disposition, provided that the indemnitee shall deliver an undertaking to repay all amounts so advanced if it shall ultimately be determined by a court, on final disposition, that the indemnitee is not entitled to be indemnified for such expenses. Holdings may grant rights to indemnification and advancement of expenses to any employee or agent of Holdings to the fullest extent permitted under the DGCL. The rights to indemnification and advancement of expenses are not exclusive of any other rights which a director, officer or employee or agent may have under any agreement, vote of shareholders or disinterested director, or otherwise. Holdings may purchase insurance against any such expense, liability or loss. Finally, no repeal or modification of Article 9 will adversely affect the rights to indemnification of directors that exist prior to such repeal or modification.

Paragraph 8 of Holdings Certificate of Incorporation provides that, to the fullest extent permitted by the DGCL, a director shall not be liable to Holdings or its shareholders for monetary damages for breach of his fiduciary duty to Holdings or its shareholders.

Article VII of the Holdings Bylaws provides that Holdings will indemnify any authorized representative (including officers, directors and employees) who has been made party to a third-party proceeding, against any expenses or judgments incurred by such person, if such person acted in good faith and in a manner he reasonably believed to be in the best interests of Holdings and reasonably believed his conduct was lawful or if he was successful in his defense of such proceeding. Holdings will also indemnify any authorized representative who has been made party to any corporate proceeding against any expenses actually incurred by such person, if such person acted in good faith and in a manner he reasonably believed to be in the best interests of Holdings or if he was successful in defense of such proceeding. However, Holdings will not be obligated to indemnify the authorized representative if he is found liable, unless the court determines that he is entitled to indemnification despite his liability. The authorized representative may have indemnification rights beyond those granted in the Holdings Bylaws. The authorized representative’s rights to indemnification arising under any statute, agreement, vote by shareholders or disinterested directors or otherwise will not be reduced or diminished by the indemnification provided under Holdings Bylaws.

Item 21.

Exhibits and Financial Statement Schedules.

(a) Exhibits

See the Exhibit Index, which is incorporated by reference in this item.

(b) Financial Statement Schedules

No financial statement schedules are required to be filed herewith.

(c) Reports, Opinions or Appraisals.

The opinion of Value Management Group, LLC (d/b/a VMG Health) is attached as Annex B to the Prospectus included as part of this registration statement.

Item 22.

Undertakings

The undersigned Holdings hereby undertakes:

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

II – 2

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.

That every prospectus (i) that is filed pursuant to paragraph (5) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act of 1933, and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

10)

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

II – 3

11)

To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

12)

To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

II – 4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Holdings has duly caused this post effective amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Irving, Texas on April 20, 2012.


USMD Holdings, Inc.

By:		/s/ John M. House
		John M. House
		Chief Executive Officer and President

Pursuant to the requirements of the Securities Act of 1933, this post effective to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.


	Signature	Title	Date

By:	/s/ John M. House John M. House	Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer)	April 20, 2012

By:	/s/ Breaux Castleman	Director	April 20, 2012
	Breaux Castleman

By:	/s/ Patrick Collini Patrick Collini	Director	April 20, 2012

By:	/s/ Charles E. Cook Charles E. Cook	Director	April 20, 2012

By:	/s/ Gary Rudin Gary Rudin	Director	April 20, 2012

By:	/s/ James G. Saalfield James G. Saalfield	Director	April 20, 2012

By:	/s/ Paul D. Thompson Paul D. Thompson	Director	April 20, 2012

By:	/s/ Christopher Dunleavy Christopher Dunleavy	Chief Financial Officer (Principal Financial Officer)	April 20, 2012

By:	/s/ Gordon Davis Gordon Davis	Chief Accounting Officer (Principal Accounting Officer)	April 20, 2012

II – 5

EXHIBIT INDEX


Exhibit No.		Description

2.1		Contribution and Purchase Agreement, dated as of August 19, 2010, by and among the Registrant, USMD Inc., Urology Associates of North Texas, L.L.P. and UANT Ventures, L.L.P. (included as Annex A to the Prospectus forming a part of this Registration Statement and incorporated herein by reference).

2.2		Amendment to the Contribution and Purchase Agreement, dated as of February 9, 2012, by and among the Registrant, USMD Inc., Urology Associates of North Texas, L.L.P. and UANT Ventures, L.L.P. (included as Annex A to the Prospectus forming a part of this Registration Statement and incorporated herein by reference).

3.1		Certificate of Incorporation of the Registrant

3.2		Bylaws of the Registrant

4.1		Investor Rights Agreement by and between Registrant and UANT Ventures, L.L.P.

5.1		Opinion of Hallett & Perrin regarding the legality of securities being registered

8.1		Opinion of Hallett & Perrin regarding tax matters

10.1		2010 Equity Compensation Plan of the Registrant

10.2		Partnership Interest Purchase Agreement dated as of January 1, 2007 by and between U.S. Lithotripsy. L.P. and Paul Thompson, M.D.

10.3		First Amendment to Partnership Interest Purchase Agreement dated as of September 16, 2009 by and between U.S. Lithotripsy L.P. and Paul Thompson, M.D.

10.4		Partnership Interest Purchase Agreement dated as of January 1, 2007 by and between U.S. Lithotripsy. L.P. and John House, M.D.

10.5		First Amendment to Partnership Interest Purchase Agreement dated as of September 16, 2009 by and between U.S. Lithotripsy L.P. and John House, M.D.

10.6		Executive Change-In-Control Agreement dated as of March 1, 2011 by and between Impel Management Services L.L.C. and Karen Kennedy

10.7		Severance Agreement dated as of September 1, 2011 by and between USMD Inc. and Gregory A. Cardenas

10.8		Agreement and Plan of Merger dated as of December 1, 2011 by and among Registrant, UANT Ventures, L.L.P., UANT Acquisition Company Inc. and The Medical Clinic of North Texas, P.A. (incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed on December 7, 2011)

10.9		Agreement and Plan of Merger dated as of December 15, 2011 by and among Registrant, UANT Ventures, L.L.P., UANT Acquisition Company No. 2, L.L.C. and Impel Management Services, L,L.C. (incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed on December 19, 2011)

21.1		Subsidiaries of the Registrant

23.1 *		Consent of Grant Thornton LLP, independent registered public accounting firm.

23.2 *		Consent of Grant Thornton LLP, independent registered public accounting firm.

23.3		Consent of Hallett & Perrin, P.C. (included as part of its opinions filed as Exhibit 5.1 and Exhibit 8.1 and incorporated herein by reference).

II – 6



23.4		Consent of Value Management Group, LLC, d/b/a VMG Health

23.5*		Consent of BKD, LLP, independent registered public accounting firm

23.6		Consent of director nominee

23.7		Consent of director nominee

23.8		Consent of director nominee

23.9*		Consent of Grant Thornton, LLP, independent registered public accounting firm

24.1		Power of Attorney (included on the signature page of the initial filing of this Registration Statement on Form S-4 and incorporated herein by reference).

99.1		Form of proxy of USMD Inc.

99.2		Form of proxy of UANT Ventures, L.L.P.

*	Filed herewith.

II – 7