Adeel Zaidi, A. K. Chagla, Prestige Consulting, Inc., and Apex Katy Physicians – TMG, L.L.C. v. Pankaj K. Shah and Apex Katy Physicians, LLC

ACCEPTED
14-14-00855-cv
FOURTEENTH COURT OF APPEALS
HOUSTON, TEXAS
3/18/2015 12:34:30 PM
CHRISTOPHER PRINE
CLERK
No. 14-14-00855-CV

FILED IN
IN THE COURT OF APPEALS FOR THE 14th COURT OF APPEALS
FOURTEENTH SUPREME JUDICIAL DISTRICT HOUSTON, TEXAS
AT HOUSTON, TEXAS 3/18/2015 12:34:30 PM
CHRISTOPHER A. PRINE
Clerk

ADEEL ZAIDI, A. K. CHAGLA, PRESTIGE CONSULTING, INC.,
and APEX KATY PHYSICIANS – TMG, L.L.C., Appellants,

v.

PANKAJ K. SHAH and APEX KATY PHYSICIANS, LLC, Appellees.

On Appeal from the 61st District Court, Harris County, Texas
Trial Court Cause No. 2009-02578

BRIEF OF APPELLANTS ADEEL ZAIDI, A. K. CHAGLA, PRESTIGE
CONSULTING, INC., and APEX KATY PHYSICIANS – TMG, LLC
! ORAL ARGUMENT REQUESTED !

Douglas R. Little
State Bar No. 12416600
440 Louisiana Street, Suite 900
Houston, Texas 77002
713.275.2069

Robin L. Harrison
State Bar No. 09120700
Campbell, Harrison & Dagley L.L.P.
909 Fannin Street, 40th Floor
Houston, Texas 77010
(713) 752-2332
(713) 752-2330 Facsimile

March 17, 2015 ATTORNEYS FOR APPELLEES
 TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

INDEX OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi

RECORD AND PARTY REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x

STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii

STATEMENT REGARDING ORAL ARGUMENT . . . . . . . . . . . . . . . . . . . . . . xv

ISSUES PRESENTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvi

STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SUMMARY OF THE ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

ARGUMENT AND AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

1. The Court should reverse and remand this case for a new trial, because
the trial court’s conclusion of law that Zaidi committed perjury is flawed
in its over-breadth and not based upon legally sufficient evidence, and
its consequent findings as to the relative credibility of the parties is
against the great weight and preponderance of the evidence and
constitutes an abuse of discretion . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

A. The trial court erred in failing to specify the statement(s) it found to be
perjury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

B. The elements of perjury have not been met here where there has been no
fabrication of evidence or intent to deceive the court. . . . . . . . . . . . 17

C. Shah’s inconsistent testimony, contradicted by independent witnesses
and documents, belies the trial court’s finding as to his credibility. 19

2. Appellants are prevented from adequately making their appeal to this
Court because the trial court’s gross award of damages is neither tied to
specific causes of action nor broken down into specific items of damage

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 awarded, and there is no evidence, or alternatively insufficient evidence,
to support one or more of the causes of action or items of damage
pleaded. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

3. The gross award of damages is reversible because it likely includes
damages for with there is insufficient evidence . . . . . . . . . . . . . . . . 35

A. An award in any amount for recovery of lost accounts receivable. . 35

B. An award based upon a contingent asserted liability . . . . . . . . . . . . 44

C. An award of $2.8 million for Medistar’s units in the Landlord . . . . 45

D. An award of $638,000 on the letter of credit . . . . . . . . . . . . . . . . . . 46

E. An award of $1,350,000 in alleged commissions . . . . . . . . . . . . . . 48

F. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

4. Damages apparently awarded by the trial court for fraud,
misrepresentation, and fraudulent inducement were not proximately
caused by representations made by the “Defendants” upon which
Plaintiffs admittedly did not rely . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

5. Damages apparently awarded by the trial court for breach of contract,
fraud, misrepresentation, and fraudulent inducement cannot be
recovered because Plaintiffs ratified the actions upon which such
damages were based . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

6. The trial court’s award of damages for monies paid in settlement by
Shah to former members of the Landlord constitutes an impermissible
double recovery where Shah received the members’ interests in the
Landlord and will profit again from the Landlord’s recovery . . . . . 56

7. The exemplary damages awarded by the trial court are excessive in light
of the flawed findings of compensatory damages . . . . . . . . . . . . . . 57

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8. The evidence is insufficient to show the level of egregious conduct on
the part of either Zaidi or Chagla required to support the award of
exemplary damages against them . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

9. The elements of the various causes of action pleaded have not been met
with sufficient evidence here, where the non-interested witnesses gave
testimony contradicting Plaintiffs’ theory of the case, Shah’s own
testimony and pleadings show he had requisite knowledge and intention
to enter into the Landlord mortgage regardless of any representations
made by Zaidi, and documentary evidence shows Shah and the Landlord
ratified certain material actions of the “Defendants.” . . . . . . . . . . . 59

A. Fraud, including common law and statutory fraud, fraudulent
inducement, fraudulent transfer, and fraud by non-disclosure.59

B. Negligent misrepresentation and gross negligence. . . . . . . . . 59

C. Breach of contract and tortious interference with contract . . 59

D. Breach of fiduciary duties, including as to Chagla,
notwithstanding that the evidence showed that he did nothing
material. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

10. Defendants cannot be held liable for fraudulent inducement when they
did not enter into any contracts with the Plaintiffs as counterparties.67

11. Defendants cannot be held jointly and severally liable for civil
conspiracy when there was no evidence, or alternatively insufficient
evidence, of an agreement by Defendants to accomplish an unlawful
purpose, and no evidence, or alternatively insufficient evidence, of an
intent to harm Plaintiffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

12. Defendants cannot be held jointly and severally liable on a theory of
alter ego when there was no evidence, or alternatively insufficient
evidence, that the only corporation they owned was used to commit an
actual fraud on Plaintiffs for Defendants’ direct personal benefit . . 70

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 13. Chagla, who affirmatively pleaded the statute of limitations, cannot be
held liable for tort claims arising from actions that occurred more than
two years prior to his having been added as a defendant in this lawsuit
in December 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

14. The trial court committed harmful error when it improperly found all
inferences against Chagla simply because he did not appear for trial
when the court had previously granted Chagla’s motion to quash a
subpoena to appear due to his ill health, which prevented him from
traveling from his home in Pakistan, and plaintiffs never requested
Chagla’s deposition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

15. A default judgment cannot be rendered against Apex TMG on the basis
that it had forfeited its corporate charter prior to trial when it is clear that
Apex TMG appeared and answered and participated in trial only to
defend itself and not seek affirmative relief . . . . . . . . . . . . . . . . . . . 73

CONCLUSION AND PRAYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

CERTIFICATE OF COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Separately submitted

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 IDENTITY OF PARTIES AND COUNSEL

Appellants: Counsel:

Adeel Zaidi,, A. K. Chagla, Douglas R. Little
Prestige Consulting, Inc., and State Bar No. 12416600
Apex Katy Physicians – TMG, LLC 440 Louisiana Street, Suite 900
Houston, Texas 77002
713.275.2069
doug@douglasrlittle.com

Robin L. Harrison
State Bar No. 09120700
Campbell, Harrison & Dagley L.L.P.
909 Fannin Street, 40th Floor
Houston, Texas 77010
(713) 752-2332
(713) 752-2330 Facsimile

Appellees: Counsel:

Pankaj K. Shah and Jeremy Gaston
Apex Katy Physicians, LLC State Bar No. 24012685
Andrew K. Meade
State Bar No. 24032854
Hawash Meade Gaston Neese
& Cicack, LLP
2118 Smith Street
Houston, Texas 77002
713-658-9001
713-658-9011 (Facsimile)

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 INDEX OF AUTHORITIES
Cases

Aim-Ex Industry, Inc. v. Slover, 2010 WL 2136599 (Tex. App.
–Amarillo, 2010, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34, 57

Allen v. Devon Energy Holdings, LLC, 367 S.W.3d 355 (Tex. App.
–Houston [1st Dist. 2012], pet. granted, dism’d by agmt) . . . . . . . . . . . 61, 64

Brazosport Bank of Texas v. Oak Park Townhouses, 889 S.W.2d 676
(Tex. App–Houston [14th Dist.] 1994, writ denied) . . . . . . . . . . . . . . . 63, 64

Crown Life Insurance Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000) . . . . . . . . . . . 31

Cruse v. O’Quinn, 273 S.W.3d 766 (Tex. App.–Houston
[14th Dist. 2008, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Dallas Ry. & Terminal Co. v. Gossett, 156 Tex. 252,
294 S.W.2d 377 (1956) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Daniel v. Kelly Oil Corp., 981 S.W.2d 230 (Tex. App.–Houston [1st Dist.]
1998, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671 (Tex. 2000) . . . . . . . . . . 50, 54

Ghidoni v. Stone Oak, Inc., 966 S.W.2d 573 (Tex. App.
—San Antonio 1998, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Goodyear Tire & Rubber Co. v. Rios, 143 S.W.3d 107
(Tex. App.–San Antonio 2004, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . 41

Haase v. Glazner, 62 S.W.3d 795 (Tex. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Harris County v. Smith, 96 S.W.3d 230 (Tex. 2002) . . . . . . . . . . . . . . . . . . . . . 31

Hoggett v. Brown, 971 S.W.2d 472 (Tex. App.–Houston
[14th Dist. 1997, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

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In re Texas American Exp., Inc., 190 S.W.3d 720 (Tex. App.
– Dallas 2005, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Kyle v. Zepeda, 2013 WL 2246030 (Tex. App.–Houston
[1st Dist.] 2013, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Lundy v. Masson, 260 S.W.3d 482 (Tex. App. – Houston
[14th Dist.] 2008, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Marauder Corp. v. Beall, 301 S.W.3d 817 (Tex. App.–Dallas 2009, no pet.) . . . 44

Martinez v. Molinar, 953 S.W.2d 399 (Tex. App.—El Paso, no writ) . . . . . . . . . 32

Massey v. Armco Steel Co., 652 S.W.2d 932 (Tex. 1983) . . . . . . . . . . . . . . . . . . 68

Priddy v. Rawson, 282 S.W.3d 588 (Tex. App. – Houston
[14th Dist.] 2009, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156
(Tex. 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Schakosky v. Client Services, Inc., 634 F. Supp. 2d 732 (E.D. Tex 2007) . . . . . . 54

Schlumberger Well Surveying Corp. v. Nortex Oil & Gas Corp.,
435 S.W.2d 854 (Tex. 1968) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Schronk v. Laerdal Medical Corp., — S.W.3d —, 2013 WL 6570907
(Tex. App.–Waco 2013, pet. denied 2014) . . . . . . . . . . . . . . . . . . . . . . . . . 41

S.E.C. v. Resource Development Intern., LLC, 487 F.3d 295 (5th Cir. 2007) . . . 71

Shook v. Walden, 368 S.W.3d 604 (Tex. App.–Austin 2012,
pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Somers v. Crane, 295 S.W.3d 5 (Tex. App.–Houston
[1st Dist. 2009, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Southern Elec. Serv., Inc. v. City of Houston, 355 S.W.3d 319
(Tex. App.–Houston [1st Dist. 2011], pet. denied) . . . . . . . . . . . . . . . . . . . 44

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Spiritas v. Robinowitz, 544 S.W.2d 710 (Tex. Civ. App.–Dallas
1976, writ ref’d, n.r.e.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

SSP Partners v. Gladstrong Investments (USA) Corp., 275 S.W.3d 444
(Tex. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

St. Joseph Hosp. v. Wolff, 94 S.W.3d 513 (Tex. 2002) . . . . . . . . . . . . . . . . . . . . . 55

State v. Eversole, 889 S.W.2d 418 (Tex. App.–Houston [14th Dist.]
1994, pet. disc. pet. den.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1 (Tex.1991) . . . . . . . . . . . . . . 56

Strebel v. Wimberly, 371 S.W.3d 267 (Tex. App.–Houston
[1st Dist.] 2012, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64, 65

Suntech Processing Systems, LLC v. Sun Communications, Inc.,
2000 WL 1780236 (Tex. App.–Dallas 2000, pet. denied) . . . . . . . . . . . . . . 62

Tagle v. Galvan, 155 S.W.3d 510 (Tex. App.—San Antonio 2004,
no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31, 32

Tana Oil & Gas Corp. v. McCall, 104 S.W.3d 80 (Tex. 2003) . . . . . . . . . . . . . . 44

Tex. Indus., Inc. v. Vaughn, 919 S.W.2d 798 (Tex. App.—Houston
[14th Dist.] 1996, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Thomas v. Oldham, 895 S.W.2d 352 (Tex. 1995) . . . . . . . . . . . . . . . . . . . . . . . . 33

Triplex Communications Inc. v. Riley, 900 S.W.2d 716 (Tex. 1995) . . . . . . . . . . 68

U.S. Renal Care v. Jaafar, 345 S.W.3d 600 (Tex. App.–San Antonio
2011, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40, 41

Vanscot Concrete Co. v. Bailey, 853 S.W.2d 525 (Tex. 1993) . . . . . . . . . . . . . . 73

Vickery v. Commission for Lawyer Discipline, 5 S.W.3d 241
(Tex. App.—Houston [14th Dist.] 1999, pet. denied) . . . . . . . . . . . . . . . . . 32

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Whitaker v. Rose, 218 S.W.3d 216, 224 (Tex. App.—Houston
[14th Dist.] 2007, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Willis v. Donnelly, 199 S.W.3d 262 (Tex. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . 54

Statutes and Rules

Tex. Bus. & Comm. Code Ann. § 9.607 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Tex. Bus. Org. Code § 101.114 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70, 71

Tex. Penal Code Ann. § 37.02(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Tex. Tax Code § 171.252 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Tex. R. App. P. 61.1(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30, 31

Tex. R. Civ. P. 299, 299a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

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 RECORD AND PARTY REFERENCES

1. “CR” refers to the original Clerk’s Record filed in one digital volume on

December 5, 2014.

2. “Supp CR” refers to the first Supplemental Clerk’s Record requested by

Appellants. If not filed by the time this Brief is submitted, then the references made

to the Perryman Deposition made the subject of the first Supplemental Record request

will be to page and line of that deposition. “Supp CR 2” refers to the second

Supplemental Clerk’s Record requested by Appellants. If not filed by the time this

Brief is submitted, then the Response to be included in the second Supplement will

be included in the Appendix. “Supp CR 3” refers to the third Supplemental Clerk’s

Record requested by Appellants. If not filed by the time this Brief is submitted, then

the pleadings to be included in the third Supplement will be included in the

Appendix. “Supp CR 4” refers to the fourth Supplemental Clerk’s Record requested

by Appellants. If not filed by the time this Brief is submitted, then the pleadings to

be included in the fourth Supplement will be included in the Appendix.“RR” refers

to the Reporter’s Record filed in nine digital volumes on December 17, 2014.

References to individual volumes will be designated “1RR,” “2RR,” etc. Volumes

1 – 5 contain the testimony adduced on March 17 – 20, 2014. Volumes 6 – 9 contain

the parties’ Exhibits.

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 3. Individual parties will be identified by their last names. Appellant

Prestige Consulting, Inc., which did business as Turn-Around Management Group,

will be identified as “TMG.” Appellant Apex Katy Physicians – TMG, LLC, the

general partner of the Hospital, will be identified as “Apex TMG.” The Hospital,

Apex Long Term Acute Care – Katy, L.P., which having gone through a completed

bankruptcy case was not in fact a party at the time of trial (see 9RR D. Exs. 62, 65),

will be identified as the “Hospital.” Appellee Apex Katy Physicians, LLC, will be

identified as the “Landlord.”

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 No. 14-14-00855-CV

IN THE COURT OF APPEALS
FOR THE FOURTEENTH JUDICIAL DISTRICT
AT HOUSTON, TEXAS

ADEEL ZAIDI, A. K. CHAGLA, PRESTIGE CONSULTING, INC.,
and APEX KATY PHYSICIANS – TMG, L.L.C., Appellants,

v.

PANKAJ K. SHAH and APEX KATY PHYSICIANS, LLC, Appellees.

On Appeal from the 61st District Court, Harris County, Texas
Trial Court Cause No. 2009-02578

BRIEF OF APPELLANTS

TO THE HONORABLE COURT OF APPEALS FOR
THE FOURTEENTH SUPREME JUDICIAL DISTRICT:

Appellants Zaidi, Chagla, TMG, and Apex TMG appeal from a bench trial

Judgment awarding in excess of $50 million in purported fraud and related damages,

and exemplary damages, in what was really a breach of contract case involving a

business deal that simply went awry. Appellants challenge all of the trial court’s

findings and conclusions as unsupported and insupportable either by legally or

factually sufficient evidence. Appellants also challenge the trial court’s award of

damages as not having been supported by the court’s findings of fact and conclusions

of law. Appellants seek a reversal of the Judgment and a remand for a new trial.
 STATEMENT OF THE CASE

Shah and the Landlord filed this case in the 61st District Court on January

15, 2009 (CR 8 – 89) following a dispute with numerous member owners of the

Landlord. Allegations of breach of contract and fraud were made. These members

who had opposed Shah’s action with respect to the Landlord then filed suit against

him in the 11th District Court on January 18, 2009 (Supp CR 3; Appendix), alleging

breach of the Landlord company agreement. The cases were consolidated by the

Order of the 61st District Court on April 9, 2009 (3 Supp Cr; Appendix).

Partial summary judgment was rendered against Shah on the contract claims

of many of the Landlord members in August 2009 (CR 379, 381, 383, and 385), and

Shah thereafter settled with these parties (4RR 101 – 103:14), effectively terminating

that case and their involvement. The case was abated by the bankruptcy of the

Landlord for a period of a year that was finally settled and dismissed in February

2013 (9RR, D. Ex. 68). This case was tried to the Court beginning on March 17,

2014 (1 RR).

The trial court concluded at the end of the testimony that, although he was

not convinced that fraud at the time of the transactions involved had been proved, he

nevertheless believed that someone (Zaidi it turned out) had lied to the court (5RR

140:21 – 142:20). He signed his Judgment (Appendix 1) against the Defendants who

are Appellants (judgment was not granted against all Defendants) on July 24, 2014,

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awarding damages, including actual damages and exemplary damages, interest, and

attorneys’ fees, in excess of $50,000.000.00.

Before the Judgment was signed, Plaintiffs, on April 28, 2014, submitted

their proposed findings of fact and conclusions of law (CR 1049) and filed a brief in

support of their claim for enhanced exemplary damages. Defendants filed an

extensive response to Plaintiffs’ brief on May 7, 2014 (2 Supp CR; Appendix 4), and

submitted their objections (CR 1087) to Plaintiff’s proposals and their own proposed

findings and conclusions (CR 1134) on May 12, 2014.

After the Judgment was signed, there followed Defendants’ request for

findings of fact and conclusions of law on August 12 (CR 1169), Defendants’ notice

of past-due findings and conclusions on September 10 (CR 1171), Plaintiffs’

amended proposed findings and conclusions on September 30 (CR 1173),

Defendants’ objections to the amended proposals on October 3 (CR 1195), the trial

court’s actual findings of fact and conclusions of law, also on October 3 (CR 1199,

Appendix 2), and Defendants’ request for additional findings and conclusions on

October 10 (CR 1207). The court did not enter any of the requested additional

findings and conclusions. Appellants’ notice of appeal was timely filed on October

21, 2014 (CR 1252).

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 STATEMENT REGARDING ORAL ARGUMENT

This case involved a business deal involving numerous people who were

trying to open and operate a long-term acute care hospital in Katy, Texas –the

Hospital. The operative agreements the parties entered into occurred in late 2006 and

early 2007 for the most part. These parties had agreements and disagreements over

a period from January 2008 until January 2009, as all people who do business

together do, and which no one characterized as fraudulent or malicious at the time,

or even until 2010, when Shah and the Landlord filed their third amended petition.

Suddenly the business dispute was a colossal fraud, and Appellants, who were all

repeatedly tarred along with many others with the same illusory brush at trial, even

though they are separate entities in every legal and factual respect, were made to be

the instigators.

The trial judge bought into the narrative for reasons that will never be

known, and as a result awarded damages, in a case in which the largest item of

dispute was a $9.0 million secured loan, of $50,617,101.50, plus attorneys’ fees of

another $350,000.00. The exemplary damages alone amount to $33,521,260.00, and

$6,704,252.00 of that was assessed against Chagla, who was not present at the trial

because he was too ill to travel to Houston from Pakistan, a fact known at all times

to the trial court, which had refused to order him to appear for that very reason (see

4 Supp CR, Appendix).
- xv -
 Under these circumstances, and for these reasons, Appellants believe that the

Court would benefit from argument on the merits of the trial court’s actions, and

Appellants further believe that such argument will be further the interests of justice

between these parties.

ISSUES PRESENTED

1. Can the trial court’s conclusion that Zaidi committed perjury be upheld

where the court did not specify any statements it found to be perjury and the evidence

is legally insufficient to show fabrication of evidence and malicious intent to deceive

the court (CL 2), and did the trial court abuse its discretion in making its consequent

findings with respect to the relative credibility of Shah and Zaidi (Preliminary

Findings)?

2. Have Appellants been prevented from adequately making their appeal

to this Court because the trial court’s gross award of damages is neither tied to

specific causes of action nor broken down into specific items of damage awarded,

when there is no evidence, or alternatively insufficient evidence, to support one or

more of the causes of action or items of damage pleaded?

3. Is there sufficient evidence to support the nonspecific damages awarded,

including:

A. An award in any amount for recovery of loss of accounts

receivable pursuant to an asserted lien interest of the Landlord against

- xvi -
 the Hospital?

B. An award based upon a contingent asserted liability in the amount

of $5,445,291.87, the full amount of which is disputed by Shah?

C. An award of $2.8 million for units in the Landlord owned by

Medistar that Plaintiffs knew were carried for it?

D. An award of $638,000 for the Landlord’s purported inability to

draw against a Hospital letter of credit?

E. An award of $1,350,000 in alleged commissions?

4. Can damages apparently awarded by the trial court for fraud,

misrepresentation, and fraudulent inducement have been proximately caused by

representations made by the “Defendants” upon which Plaintiffs admittedly did not

rely? (FF 19)

5. Can damages apparently awarded by the trial court for breach of

contract, fraud, misrepresentation, and fraudulent inducement be recovered when

such damages are alleged to have been caused by actions of the “Defendants” that

were ratified by Plaintiffs?

6. Does the trial court’s award of damages for monies paid in settlement by

Shah to former members of the Landlord constitute an impermissible double recovery

where Shah received the members’ interests in the Landlord and will profit again

from the Landlord’s recovery? (FF 16)

- xvii -
 7. Are the exemplary damages awarded by the trial court excessive, in light

of the flawed findings of compensatory damages?

8. Is there sufficient evidence of the level of egregious conduct on the part

of either Zaidi or Chagla required to support the award of exemplary damages against

them?

9. Where the non-interested witnesses gave testimony contradicting

Plaintiffs’ theory of the case, Shah’s own testimony and pleadings show he had

requisite knowledge and intention to enter into the Landlord mortgage regardless of

any representations made by Zaidi, and documentary evidence shows Shah and the

Landlord ratified certain material actions of the “Defendants,” have all of the

elements of the various causes of action pleaded, including whether those actions

were relied on by Plaintiffs and whether the actions proximately caused damages to

Plaintiffs, been met (FF 19), including whether there is sufficient evidence to support

the findings and conclusions of:

A. Fraud, including common law and statutory fraud, fraudulent

inducement, fraudulent transfer, and fraud by non-disclosure? (FF 4, 5,

8, 9, 10, 11, 14, 15, 16, 18, and CL 4, 5, 6, 7, 8)

B. Breach of fiduciary duties, including as to Chagla,

notwithstanding that the evidence showed that he did nothing material?

(FF 3, 6, 7, 13, 14, 15, 18, and CL 10, 11)

- xviii -
 C. Negligent misrepresentation and gross negligence? (FF 5, 8, 9,

and CL 12, 13)

D. Breach of contract and tortious interference with contract? (FF

11, 12, 14, 15, and CL 14, 15)

10. Can Defendants be held liable for fraudulent inducement when they did

not enter into any contracts with the Plaintiffs as counterparties, including whether

Defendants can be found to have fraudulently induced contracts Plaintiffs made with

third parties? (CL 6)

11. Can Defendants be held jointly and severally liable for civil conspiracy

when there was no evidence, or alternatively insufficient evidence, of an agreement

by Defendants to accomplish an unlawful purpose, and no evidence, or alternatively

insufficient evidence, of an intent to harm Plaintiffs? (FF 2, 3, 4, 5, 6, 7, 10, 11, 12,

13, 14, 15, 16, 17, and CL 9)

12. Can Defendants be held jointly and severally liable on a theory of alter

ego when there was no evidence that the only corporation they owned was used to

commit an actual fraud on Plaintiffs for Defendants’ direct personal benefit? (FF 2,

3, 4, 5, 6, 7, 10, 11, 12, 13, 14, 15, 16, 17, and CL 9)

13. Can Chagla, who affirmatively pleaded the statute of limitations, be held

liable for tort claims arising from actions that occurred more than two years prior to

his having been added as a defendant in this lawsuit in December 2010? (CL 4, 5, 6,

- xix -
7, 8, 12, 13, 15)

14. Can the trial court properly find all inferences against Chagla simply

because he did not appear for trial when the court had previously granted Chagla’s

motion to quash a subpoena to appear due to his ill health, which prevented him from

traveling from his home in Pakistan, and plaintiffs never requested Chagla’s

deposition? (CL 3)

15. Can a default judgment be rendered against Apex TMG on the basis that

it had forfeited its corporate charter prior to trial when it is clear that Apex TMG

appeared and answered and participated in trial only to defend itself, and not seek

affirmative relief? (CL 1)

STATEMENT OF FACTS

The Parties Involved:

TMG: Prestige did business under the name Turn-Around Management

Group (hereafter “TMG”; 2RR 62:17–64:17). Chagla originally formed TMG, but

ceased to be as active when he retired. Zaidi took over the business and operated it

as President. Zaidi owned 71% and Chagla owned 29%. TMG had done and did

consulting work for Medistar Corp. (5RR105:16–108:12; 9RR D. Ex. 25), an

established hospital developer and operator in Houston, from which the Landlord

ultimately purchased the property occupied by the Hospital (6RR P. Ex. 13). TMG

managed the Hospital under a written management agreement dated October 9, 2006
(9RR D. Ex. 7), signed by TMG, the Hospital, and Apex TMG as the general partner

of the Hospital.

Zaidi: Adeel Zaidi dreamed of developing and operating a long-term acute

care hospital (in the industry, an “LTACH”) in 2006. The Katy LTACH that became

the Hospital was to have been the fulfillment of that dream. Zaidi was not a

physician, but a “successful business person” (2RR 64:8–9). Zaidi owned a small

limited partner interest in the Hospital along with numerous physicians (6RR P. Ex.

7). He and numerous physicians also owned small interests in Apex TMG (6RR P.

Ex. 5). Neither he nor TMG ever owned any interest in the Landlord (6RR P. Ex. 10;

2RR 83:20–23; 5RR 102:16–103:10).

Chagla: A. K. Chagla came out of retirement to assist in the handling of

paperwork for TMG. “Mr. Chagla’s role was to review contracts” (2RR 64:18–21).

Shah testified as follows: “A. K. Chagla. . . . I believe you testified that he didn’t

have any involvement with this [Apex business]. Who formed Indus Associates for

you? A. Mr. Chagla.” That was the extent of it (4RR 319:5–13). After this

litigation began in 2009, Chagla became ill and started working from home (2RR

67:12–20). Thereafter, he returned to Pakistan and was hospitalized. He has

remained hospitalized there and was medically unable to travel to Houston as late as

February 24, 2014 (Supp CR4, Appendix 6) when his motion to quash the trial

subpoena served on his counsel was heard and granted.

-2-
 Shah: P. K. Shah is a physician and had been an investor in health care

entities long before the Hospital and the Landlord (4RR 56:20–57:6). He owned an

interest in each and every entity involved in this case except TMG (4RR

128:24–132:8; 6RR P. Exs. 5, 7, 10), although he received a 25% interest in the

income to be paid to TMG under the Hospital management agreement pursuant to a

joint venture agreement that he demanded to be made part of (compare the joint

venture agreements of 2006 and 2007, 9RR D. Ex. 6; see 4RR 146:21–150:18). He

owned over half of the Landlord (4RR 154:10–155:25; 9RR P. Ex. 10).

Apex TMG: Apex TMG was created in August 2006 (6RR P. Ex. 4) as a

limited liability company, although its company agreement was not executed until

October 2006 (6RR P. Ex. 5). It was the general partner of the Hospital (6RR P. Ex.

7). Its managers were Zaidi, representing TMG, which owned 50%, and Shah, Steven

Koch, and Waseem Peracha, “on a rotational basis,” representing the Hospital.

The Hospital: The Hospital was created as Apex Long Term Acute Care

Hospital–Katy, LP, a limited partnership, in September 2006 (6RR P. Ex. 7).

Numerous doctors owned limited partnership interests. Apex TMG was the general

partner and owned a 1% interest. The Hospital signed leases with both Medistar and

the Landlord for the Katy hospital property. Both – they were identical – were dated

January 4, 2007 (6RR P. Exs. 14, 14b). The Hospital also had a line of credit and a

letter of credit thereunder for operating needs (9RR D. Ex. 16; 8RR P. Ex. 42). The

-3-
original plan was for the Hospital to rent from Medistar, which would own at least

50% of the real estate (see Shah Binding Letter of Intent, 9RR D. Ex. 4). That

changed after a meeting with Monzer Hourani, the principal of Medistar, on

December 22, 2006 (see 9RR D. Ex. 10; 4RR 154:18–156:24). After that meeting,

the deal changed and the Landlord was formed to buy 100% of the hospital property

from Medistar and lease it to the Hospital.

The Landlord: The Landlord was formed as Apex Katy Physicians, LLC, by

the signing of a company agreement on February 9, 2007 (6RR P. Ex. 10), although

it conducted business “informally” beginning by at least January 4, when it signed the

purchase and sale agreement with Medistar (6RR P. Ex. 13) and executed a lease with

the Hospital (6RR P. Ex. 14b). Shah and Zaidi were initially named co-managers,

The reasons for this were hotly contested (compare 4RR 65:10–66:19 with 5RR

75:21–76:22). Despite Zaidi’s titular status as co-manager, after at least February

2007 Shah exerted complete control over the Landlord (5RR 76; 82:17–23).

The Business Deal involving the Landlord and the Hospital:

The first memorandum of understanding between Medistar, which had the

rights to the Katy real estate, as landlord, and TMG, representing the interests of an

as yet unformed hospital, was signed on July 28, 2006 (6RR P. Ex. 1).

The Hospital was created on August 24 (6RR P. Ex. 6), and its limited

partnership agreement (6RR P. Ex. 7) was signed up as of September 12, 2006. The

-4-
investment structure was simple and expressly disclosed: Each limited partner put in

a small amount of cash and guaranteed a portion of the Hospital’s debt to Bank of

America (4RR 165:1–17; 9RR D. Ex. 16), by which the Hospital acquired its

necessary working capital (5RR 72:10–24).

Medistar hosted a meeting some time in September with the group of doctors

who had expressed interest in the hospital project. Shah was among the doctors who

attended (4RR 137:19–23). On September 6, 2006, Medistar put the project’s terms

in a letter that would, upon acceptance, become a binding letter of intent (e.g., Shah’s

LOI, 9RR D. Ex. 4).

-5-
 After describing the physical project, the LOI summarized the terms as

follows:

1 Unit = $40,000 Investment
150 Units = $6,000,000 Investment, 33.33% Ownership
225 Units = $9,000,000 Investment, 50.00% Ownership

There were no payment terms, there were no provisions for partial payment, and there

were no provisions for any purchase other than for cash. The LOI was accompanied

by Medistar’s projections for the five-year net dollar return (2RR 80:5–81:10).

Medistar’s projections were accepted because, according to Shah, it was the “expert

in this business” (4RR 142:11–143:4). Although his signature on the September 6

letter is undated, Shah executed the LOI indicating that he would purchase 125 units

which, at $40,000 per unit, would cost $5,000,000. Numerous other physicians,

whose names are listed in the Landlord company agreement, also signed LOI’s and

paid $40,000 in cash for each unit they purchased.

A second MOU between Medistar and TMG, still on behalf of the unnamed

hospital entity, was signed on September 19, 2006 (6RR P. Ex. 2). This MOU

reflected the delivery of the LOI’s by the doctors and proposed that they would own

between 33% and 50% of the “Katy project,” although it also provided in a hand-

written addition that they would own “around 225 units,” which pursuant to the LOI’s

summary would be 50%. A down payment of $500,000.00 would be required, and

closing was scheduled for December 9, 2006. As a very large prospective owner in

-6-
the Katy project, per his LOI, Shah was aware of these negotiations. He had already

made his investment in the Hospital in August 2006 (4RR 126:12–127:3), and he had

also invested in Apex TMG (4RR 128:24–129:13). Shah always wanted to be

involved in owning the real estate and touted his real estate expertise as a reason for

obtaining the 25% interest in TMG’s management fee in January 2007. (5RR

66:8–18; 9RR D. Ex. 5, 1/24/07 agreement).

Apex TMG, the only entity with a bank account (4RR 170:13–22), issued a

check identified as for “Apex Katy Physicians” to Medistar on November 7, 2006, for

the $500,000 down payment (9RR D. Ex. 8). By December 21, no other funds had

been paid. Unhappy with the hospital group’s progress in raising the necessary

money – Shah had not paid any of his investment yet – Mr. Hourani of Medistar

issued an ultimatum (6RR P. Ex. 15), demanding that the group perform one of three

options set out in the letter, and threatening to cancel the transaction if no agreement

was reached.

Zaidi informed Shah of this development. Shah instructed Zaidi to contact

Hourani to set up a meeting to “get this straightened out” (4RR 160:12–18). The

meeting occurred in the evening of December 22, 2006, after which everything –

except the LOI documents memorializing the doctors’ investments – changed.

During the meeting, which included Hourani, Shah, Mrs. Shah, Zaidi, and

a TMG employee, Abeer Saqer, Shah told Zaidi that he wanted to own the majority

-7-
share of the real estate (Zaidi, 5RR 75:4–76:22; Shah, 4RR 154:6–155:25). Shah

handled the negotiations with Medistar for his own account, which resulted in a “final

deal” with Shah owning 55% of the real estate (4RR 155:2–156:24). This was a

totally different package than had previously been on the table (Supp CR 1; Perryman

37:3–38:13, Appendix 3). Shah was completely involved and set this structure up

(Supp CR 1, Perryman 248:6–249:12, Appendix 3). In fact, Shah brought himself

into this deal (Supp CR 1, Perryman 272:25–273:14, Appendix 3).

This new deal was reflected by several handwritten and typed documents

marked as Defendants’ Exhibit 10 (9RR). These contain scenarios A and B, and it

is plain that scenario A was the “final deal.” The first handwritten page of D. Ex. 10

(confirmed by two typed versions as pages 2 and 3) was signed by everyone and

provided that if “you,” which was Shah, would pay $13.5 million for the property

now, the “total price” would be $17.5 million. A four-payment schedule for the

“remainder” was set out, and Shah was listed as a personal guarantor. Although Shah

claims that he did not know what the “extra” $4.0 million was all about, he was

forced to admit that Medistar sued him to collect that $4.0 million (4RR 153:16–20).

Medistar always contended that Shah owed the $4.0 million (Shah, 4RR

167:15–169:22; Supp CR 1, Perryman 154:8–155:12, Appendix 3). That lawsuit was

settled (4RR 316:23–317:6).

From the moment the December 22 meeting ended, Shah and his wife were

-8-
in complete control of the real estate investment (5RR 75:21–76:9). There were no

new LOI’s or other disclosures about the new terms of the investment that all the

other doctors had already signed up and paid for, however (4RR 240:20–241:21).

Shah finally paid $1.5 million as a “30% down payment” for his units in 2007 (9RR

D. Ex. 11), but, after being refunded $240,000 by Apex TMG for six units sold to

others (2RR 135:3–21; 9RR D. Ex. 19), he ended up paying only $1,260,000 for his

244 units. And this was expressly his intent at all times (4RR 248:22–249:8).

On January 4, 2007, numerous actions in furtherance of the Landlord’s real

estate purchase occurred. First, Shah finally delivered his $1.5 million check for what

he called his 30% down payment for his units (it was actually 30% of the $5.0 million

price that he had agreed to pay Medistar for the 125 units he agreed to buy under the

September 2006 LOI). Second, Medistar, Alamo Title, and “Apex Katy Physicians,

Ltd.,” which the Landlord was being called at the time, executed an escrow agreement

providing for the deposit of an additional $2.2 million “pending the closing” (9RR

D. Ex. 12). Apex TMG, on “Apex Katy Physicians, Ltd.’s” behalf, issued a check for

that amount that day (9RR D. Ex. 14). It was comprised of funds from all the

doctor/investors, including Shah (5RR 100:16–22).

The purchase and sale agreement between “Apex Katy Physicians, Ltd.,” and

Medistar (9RR D. Ex. 13), and the two leases, one between Medistar and the Hospital

(9RR D. Ex. 15), designed to protect Medistar until the property sale closed, and the

-9-
other between “Apex Katy Physicians, Ltd.,” and the Hospital (9RR D. Ex. 15A) were

also executed on January 4, 2007.

On January 12, 2007, the Hospital and its limited partners attended a closing

of the Hospital/Bank of America credit facility (Shah, 4RR 209:13; Note, 9RR D. Ex.

16). This was crucial to the Hospital because the revolving note provided it with

working capital to use until it could open and secure its LTACH license (which

ultimately took until June 20, 2008 [8RR P. Ex. 50], during which time no LTACH

patients could be admitted as such) and the letter of credit that was required to secure

the leases. Shah testified that he was at the closing, he saw his name on the list of

investor/guarantors, and he recognized the long list of documents that all the parties

had signed, one of which was a landlord lien waiver. By the waiver, Medistar and the

Landlord subordinated their lien on certain described assets of the Hospital,

specifically cash, to Bank of America’s lien, that was required for Bank of America

to issue the letter of credit. Shah especially wanted the letter of credit, and he

understood that the landlord lien waiver was a prerequisite (4RR 210:9–216:11).

On February 1, 2007, MetroBank issued a commitment letter proposal (9RR

D. Ex. 18) to Shah, his friend Vora, and his cousin Suneja for a $9.0 million loan to

the Landlord to be secured by a mortgage on the real estate and their personal

guaranties of a portion of the debt. Zaidi was not copied with the commitment letter

and denied having seen it or having discussed its details with the MetroBank officer,

- 10 -
Mr. Tariq (5RR 77:11–25). Shah, Vora, and Suneja accepted the commitment on

February 8, 2007, agreeing to the terms of the loan.

As of the next day, all the Landlord investors signed the Landlord company

agreement (9RR D. Ex. 20). The company agreement named both Shah and Zaidi as

co-managers. Shah said that it was Zaidi’s idea, even though Zaidi owned no interest

in the Landlord, to have Shah named as a manager (4RR 65–66). Conversely, Zaidi

said that Shah asked him to be a co-manager, which was acceptable to Zaidi because

of his trust in Shah (5RR 75–76).

On March 9, 2007, Medistar was issued a certificate for 70 units in the

Landlord, for which it said it had provided services and not cash (Supp CR 1,

Perryman 110:12–11:20, 113:9–13, Appendix 3). Despite his testimony at trial on

direct (4RR 77:18–23), Shah admitted on cross that he knew that Medistar had these

units for which it had not paid any cash (Shah, 4RR 166:22–25: “They [Medistar]

were a partner in the sense that they had 70 units that they didn’t pay anything for?

A. That’s true, sir.”).

The closing of the MetroBank loan occurred on March 22, 2007 (closing

documents, 7RR P. Ex. 30), and again there is strong disagreement about who knew

what. Shah’s bank officer, Mr. Tariq, said that Zaidi knew all the details (3RR

92:1–93:11), while Zaidi said only that he knew there was a loan, but not any details

about a lien (2RR 109:23–112:6). Zaidi also said that he was at the closing

- 11 -
representing the interests only of the Hospital side, that he asked Shah if it was alright

for him to sign the closing documents as such, and that he was told that it was (5RR

78:23–79:5). Zaidi also insisted that Shah had originally told him that he, Vora, and

Suneja intended to seek loans to purchase their units, as the LOI’s required (2RR

111:5-9), and that he was reassured before the closing that they still intended to do

so and take care of the mortgage (5RR 101:4–102:15). In fact, the loan documents

contained a provision that allowed for a penalty-free payoff within four months (4RR

252:14–253:15). At least Vora expressed that he desired that they pay off the loan

during the four-month period, as indicated in an email that Shah read aloud in court

(4RR 256:19–258:17). Zaidi was happy about this (5RR 101:18–102:15).

The timing of the closing was driven by a Medistar ultimatum, of which both

Zaidi (5RR 100:4–22) and Shah (4RR 231:22–233:19) were aware. If the closing did

not go forward on March 22, Medistar threatened to cancel the transaction and retain

the doctors’ earnest money of $2.7 million. It was all at risk.

After March 22, Zaidi had virtually no further personal involvement in the

management of the Landlord. Apex TMG collected funds and issued unit certificates

at the instance of Shah or Mrs. Shah. Despite the fact that no document anywhere

indicated that Shah (through his investment company, Indus Industries) should

receive 244 units instead of the 125 Shah had committed for (5RR 108:12–109:8),

Shah believed that he was entitled to 244 (his 55%) (4RR 156:1–24), and he

- 12 -
requested and received them. Indus was issued certificates for 214 units on July 24,

2007 (9RR D. Ex. 27), and for 30 units on December 10, 2007 (9RR D. Ex. 36).

On about March 23, Medistar issued checks for $500,000+ to TMG for

consulting services that it had performed for Medistar over a long period of time on

projects that were later memorialized in the memorandum of understanding of May

2007 (9RR D. Ex. 25). None of the money paid to TMG was for any service rendered

or commission in connection with the Katy real estate (Supp CR 1, Perryman,

43:12–45:7; 284:6–19, Appendix 3; Saqer, 5RR83:3–84:5).

The Hospital opened its doors in January 2007, and then admitted its first

patient in March (2RR 233:4–7). Because the Hospital did not have its LTACH

license, however, and would not obtain it until June 2008, its cash flow was very

limited, and it fell further and further behind in its rent obligations to the Landlord.

In fact, throughout 2007 and 2008, the Hospital was paying approximately 50% of

the rent on a monthly basis, by agreement with Shah (Shah, 4RR 90:2–17; Odhav,

4RR 186:19–23).

On August 21, 2007, the Steering Committee of the Hospital, comprised of

many of the doctors investing and practicing there, including Shah, authorized Zaidi

to approach Shah and request a loan of $700,000 for the Hospital’s operational needs

(5RR 109:18–110:3). Shah wrote a check on the Landlord account for the $700,000,

but erroneously made it payable to itself. The check was picked up by an Apex TMG

- 13 -
employee and deposited into the Apex TMG account that contained the Hospital

funds. All of the $700,000 was used for the Hospital’s operating expenses

(5RR121:13–123:24). Shah was thanked for the loan by the Steering Committee on

several occasions, and he acknowledged making the loan (Odhav, 4RR

185:18–186:12; 191:1–8; Saqer 5RR 84:19–85:8).

In January 2008, Shah unilaterally wrote a memo for the Landlord to Zaidi

claiming that “he” owed the Landlord a large sum of money (8RR P. Ex. 40),

notwithstanding that Zaidi personally had not borrowed or received any money for

anything, with the exception of expense reimbursements from TMG or Apex TMG.

On behalf of the Hospital, Zaidi and Dr. Koch answered the memo by a letter on

January 17, 2008 (9RR D. Ex. 40), responding line by line and agreeing with Shah’s

positions on most points. Full disclosure was made. Shah admitted that all of the

amounts listed in his memo and in the response constituted loans the Landlord had

made to the Hospital (4RR 282:13–283:7).

In April 2008, Bank of America contacted Zaidi, at Apex TMG, representing

the Hospital, its borrower, and told him that a routine audit revealed that the landlord

lien waiver from the original closing in January 2007 could not be found in the bank’s

files and had to be replaced. Zaidi attempted to discuss the matter with Shah but was

unable to do so, so he furnished the required replacement, identical to the original,

dated as of the original date (5RR 111:18–112:23).

- 14 -
 Further disputes erupted in late 2008, and threats of default and eviction

were made, but then dropped. Things came to a head again in January 2009, and

eviction proceedings were again initiated but dropped. This suit was filed on January

15, 2009, and Zaidi was “unelected” manager of the Landlord on January 19, 2009

(4RR 269:15–20). TMG’s management agreement was terminated on May 11, 2009

(9RR D. Ex. 60), by a document that recited that agreed and unpaid management fees

at that time amounted to $480,000. The Hospital filed a no-asset bankruptcy petition

in September 2009. The Landlord filed a claim in the Hospital’s bankruptcy case on

November 17, 2009, and amended it on about January 25, 2010 (9RR D. Ex. 62). The

Landlord asserted the claims against the Hospital that it asserts against Defendants

here.

SUMMARY OF THE ARGUMENT

The trial court’s judgment for actual and exemplary damages in excess of

$50,000,000 is fatally flawed and must be reversed and sent back for a new trial. The

damages awards are stated in gross amounts, and there are no damage findings to

show how the amounts were arrived at, even though these findings were requested.

As a result, Appellants are left to guess as to how to contest these damages on appeal.

Many of the elements of damage claimed by Plaintiffs, and the causes of action upon

which they were based, were not supported by legally or factually sufficient evidence.

Particularly, the damages awarded may well have contained amounts for (i) accounts

- 15 -
receivable, when there was no actual evidence of receivables in the record, (ii) a

contingent and disputed claim, and (iii) loans made to an entity whose debts have

been adjudicated in bankruptcy.

The trial court’s findings hold all of the Defendants liable “individually and

collectively” on the various causes of action. These findings likewise are flawed and

constitute harmful error because the record quite simply does not contain evidence

to support an alter ego finding or civil conspiracy. Rather, the record shows that one

Appellant, Chagla, who was also assessed over $6 million in exemplary damages,

served an almost entirely ministerial function in the underlying events.

Appellants believe and contend that many of the harmful and erroneous

results in this case flow directly from the trial court’s mistaken conclusion that

Appellant Zaidi committed perjury.

ARGUMENT AND AUTHORITIES

As a preliminary matter, Appellants must observe that the trial court did

some extraordinary things in both the trial and post-trial phases of this case after

apparently deciding the first day of trial that Zaidi had committed perjury. While the

evidence does not support a finding of perjury, the court’s conclusion appears to have

colored the entire case. First, the court ignored the great weight and preponderance

of the actual evidence, as opposed to the speculation, innuendo, and insinuation that

Plaintiffs built their case on, in determining the relative credibility of the testimony

- 16 -
of Shah and Zaidi. The trial court’s fact findings on credibility should be disregarded

or at the very least discounted. (See Supp CR 2, Response, Appendix 4.)

Second, the court ignored all settled Texas law to award Plaintiffs a default

judgment against Apex TMG, for having forfeited its charter, even though it was clear

that Apex TMG sought no affirmative relief and did nothing other than appear and

defend itself.

Third, the court found all inferences against Mr. Chagla for his failure to

attend trial, and then awarded not only actual damages but exemplary damages of

$6,704,252 against him, even though the court knew he was too ill to travel from his

hospital bed in Pakistan and had quashed Plaintiffs’ trial subpoena for that very

reason. Even Shah admitted that Chagla “didn’t have any involvement with” the Apex

matters (4RR 319:5–13), except that he formed Shah’s investment company. No

evidence was offered to support Chagla’s liability for anything, only insinuation and

baseless accusation.

Finally, without identifying how or why, or the supposed evidence upon

which the conclusion was based – because there was none – the trial court simply

issued as if by fiat the conclusion of law that all Appellants operated the business

entities involved in this case together as one business enterprise and therefore were

liable for all damages together as co-conspirators and under the theory of alter ego.

The court grossly overstepped its legitimate bounds as a fact finder and awarded the

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judgment under appeal based upon punitive notions rather than evidence. It must be

reversed in the interests of justice.

1. The Court should reverse and remand this case for a new trial, because
the trial court’s conclusion of law that Zaidi committed perjury is flawed
in its over-breadth and not based upon legally sufficient evidence, and
its consequent findings as to the relative credibility of the parties is
against the great weight and preponderance of the evidence and
constitutes an abuse of discretion

A. The trial court erred in failing to specify the statement(s) it found to be
perjury.

B. The elements of perjury have not been met here where there has been no
fabrication of evidence or intent to deceive the court.

The trial court found that Zaidi made false statements under oath and

committed perjury “on more than one occasion.” The court did not identify one false

statement, however, made by Zaidi to deceive the court. Because of this failure,

Appellants are left to guess at what constitutes the supposed perjury and cannot

meaningfully address this issue on appeal. All we have is the court’s statement at the

close of the evidence that he had heard testimony that was not credible from

“witnesses,” plural. (5RR 140:21–141:14).

THE COURT: To award exemplary damages, there is an intent element
associated with that. And I'm not saying this is the case; but what if the
intent necessary for the cause of action that is pled has not been proven
to my satisfaction but I have determined that there was intent in
testimony presented to me that was intended to either deceive the Court
or to directly and intentionally testify contrary to the facts as I have
found them based upon the documents. Two separate things.
So, there's intent of – for instance B and I'm – this is part of the question,

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 not part of me reciting what I believe to be a finding of fact or
conclusion of law. That’s different from saying that someone, at the time
that this transaction was going through, intended a fraud or intended to
deceive someone at that time; but now that this case has been tried,
sworn testimony has been presented to me, and I find that testimony
wholly incredible based upon what the documents say and/or that there
was intent to deceive this Court into believing that the document that I'm
looking at did not represent the facts as I’ve determined them to be.

(5RR 141:20–142:17; emphasis added.)

Appellants acknowledge, as they must, that Zaidi had a great deal of

difficulty explaining what and when he knew about the MetroBank mortgage and

loan. He admitted he knew about the loan, but he said he was not sure what the

mortgage was all about. His explanation was that Shah had told him several times

that he and his colleagues would be borrowing money to buy their units, not as a

company debt, and that he trusted Shah (5RR 77–78). The trial court may not have

found that explanation particularly credible, but it was not “fabricated evidence” that

Zaidi made up to deceive the Court. In fact, that is exactly the same thing he told the

Landlord investors at the Hospital steering committee meeting on January 19, 2009.

A that meeting, the non-Shah affiliated owners were told that the mortgage had been

discovered (8RR P. Ex. 67), which caused them to sue Shah, but not Zaidi, even after

they learned that Zaidi had indeed signed all the same papers for the loan as Shah had

(see Koch deposition excerpts, admitted but omitted from the CR).

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 Importantly, Zaidi admitted that he knew now, at the time of trial, that both

a loan and a mortgage had been made (2RR 110:12–111:9). He did not deny this.

Perjury is the fabrication of evidence. See Daniel v. Kelly Oil Corp., 981

S.W.2d 230 (Tex. App.–Houston [1st Dist.] 1998, pet. denied). Perjury is committed

if, “with intent to deceive and with knowledge of the statement’s meaning,” a person

makes a false statement under oath or unsworn declaration.” Tex. Penal Code Ann.

§ 37.02(a). That did not happen in this case. For better or worse, Zaidi continued to

tell a story that may be hard for others to believe but that he has said for many years

that he believes. If this was the perjury, then why did the trial court not say so?

“Facts constituting the offense of perjury must be averred directly and with certainty.”

State v. Eversole, 889 S.W.2d 418, 422 (Tex. App.–Houston [14th Dist.] 1994, pet.

disc. pet. den.). The trial court’s conclusion of law that Zaidi committed perjury is

fatally over-broad and not supported by legally sufficient evidence.

C. Shah’s inconsistent testimony, contradicted by independent witnesses
and documents, belies the trial court’s finding as to his credibility.

The court apparently decided that, if one side has committed perjury, then

the other side must be credible. The weight of the evidence, even disregarding

Zaidi’s testimony, presents a more clear picture of whose testimony was credible and

whose was not and also goes to disproving the asserted fraud. Appellants recognize

that the burden to show abuse of discretion here is very high, but this Court should

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know how the trial court really reached its conclusions. The court’s had to have

disregarded not only Zaidi’s testimony but also all the other contrary evidence,

including documents and the testimony of independent witnesses, to arrive at the

findings about Shah’s and Zaidi’s credibility. These findings are so against the great

weight and preponderance of the evidence as to constitute an abuse of discretion in

this case.

The disputes between the Landlord, Shah’s real estate company, and make

no mistake, it was Shah’s company (see, e.g., 4RR 62: “my company”), and the

Hospital, as the tenant, arose in earnest in November 2008, with default notices, and

then seemingly reached a boiling point with eviction notices and court proceedings

in January and February 2009 (See, e.g., 8RR P. Exs. 55 and 56, 4RR 97). But then,

nothing until the Hospital declared its no-asset Chapter 7 bankruptcy in September

2009. No fighting, no allegations of fraud or wrongdoing, no anything.

To be sure, there had been controversy in January of 2008, when Shah and

the Hospital’s steering committee exchanged the stern but not hostile letters

concerning the financial dealings between them since March 2007. (8RR P. Ex. 40,

9RR D. Ex. 40.) Shah recounted his positions on what he said he was owed, and the

Hospital replied, extensively agreeing with Shah’s positions and promising to try to

pay him back. (4RR 273:22–279:24.) Far from concealing anything from Shah,

Zaidi and the steering committee freely disclosed all pertinent financial information

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that existed at the time. Shah agreed on cross that he had no evidence to suggest that

the Hospital was not in fact trying over the next year to repay the amounts it conceded

were due (4RR 282:13–283:7).

More importantly, the memo that Shah had sent to Zaidi, for the Hospital ,

setting out in detail all of the loans he had made to the Hospital (Shah, 4RR

282:13–283:7) and all of the funds he contended that the general partner of the

Hospital had not yet accounted for, proves, as both Dr. Odhav and Ms. Saqer testified,

that everyone, including Shah, had complete information about the Hospital’s

finances and financial condition at all times; no one kept or tried to keep Shah in the

dark about anything. (Odhav, 4RR 183:6–185:2; Saqer, 5RR 84:6–18)

The very next day after the Hospital sent its reply to Shah’s memo, Shah

claims, without any corroboration from any source, that he (the Landlord) tried to

draw $638,000, the exact amount allowed under an amended letter of credit securing

his rent (8RR P. Ex. 44), but was unable to do so, and lost the $638,000, because

“Zaidi” had the document and refused to give it to him (4RR 73–74). But Shah

produced no evidence of any actual draw attempt at any time and no evidence that he

complained to the Hospital of his inability to draw down the funds. The evidence is

that he did nothing until the default letters were sent to the Hospital in November

2008. No fighting, no allegations of fraud or wrongdoing, no anything.

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 Shah’s testimony on this subject was both uncorroborated and internally

inconsistent. He also claimed that when he tried to draw upon the letter of credit in

January 2008, he couldn’t because Zaidi had effectively destroyed it by amending it

in 2007. In fact, the amendment (8RR P. Ex. 44) was a ministerial non-event that

only revised the letter of credit to reflect draws that had already happened, and Shah’s

January 18 “draw” letter (8RR P. Ex. 43), which the evidence shows was not in fact

sent, purported to draw the exact amount allowable under the very amended letter of

credit that Shah pretended not to know about (4RR 73:22–25). Plaintiffs’ Exhibit 94

(8RR) shows, however, that over a month later, on February 25, 2008, his then

lawyer Jeffrey Kaiser sent Shah an email telling him that he needed to get the

document so a draw could be made before February 27. Shah said he asked for it, but

where’s the proof? Shah offered no proof of any actual draw attempt at any time, no

correspondence from Bank of America about any such draw attempt, no

correspondence refusing to honor any draw, no correspondence or anything with

Zaidi about the “missing” letter of credit, no allegations of fraud or wrongdoing, no

anything. Shah’s story is not credible.

Shah also said at trial that “Zaidi” had stolen the $700,000 that the Hospital

used for operating expenses in 2007. Shah claimed the Landlord had “borrowed” the

money from and to itself to give to Apex TMG (there was no evidence that the check

was given to or ever possessed by Zaidi himself) to open a new landlord account, for

- 23 -
reasons unknown, for unknown signatories (4RR 265:18–270:13). Yet in his January

2008 memo he called this money “borrowed” by the Hospital and to be repaid.

Indeed, in perhaps a weak moment when he had strayed from his script on cross, Shah

agreed that all the sums he listed as due in his January 2008 memo were loans he had

made to the Hospital (4RR 282:13–283:7). Shah also admitted that, with the single

exception of the mention of the $700,000 loan in the January 2008 letter, he never

asked anyone about the “missing” money or the supposed “new” account for over

three and a half years. This was true even though Shah knew the money had been

debited from the Landlord’s MetroBank account in September 2007 because Shah

received monthly bank statements the entire time (4RR 265:18–273:21).

Others with knowledge did mention the $700,000 during this time, and they

completely corroborated Zaidi’s description of the check as a loan for Hospital

operations at a time when it badly needed the funds (Zaidi, 5RR 109:9–110:1). Dr.

Odhav, an independent witness (4RR 198:18–20), knew about this loan and others

from many discussions at the steering committee meetings (4RR 185:18–186:12).

Abeer Saqer likewise attended those meetings and heard discussion about the loans

to the Hospital, and she also heard the steering committee thank Shah both for having

made them and for allowing reduced rent to be paid (5RR 84:19–85:12). Shah’s story

is not credible.

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 Shah’s behavior in 2007 and 2008 ( and even up to December 30, 2010,

when the second amended petition was filed [CR 824]), is completely inconsistent

with the claims of malice, intentional fraud, and deliberate breaches of fiduciary duty

that were made in the amended petition and at trial. Why? Because they are not true.

Shah started the process of getting the Hospital out of the Landlord’s real

estate by declaring defaults in November and December 2008, and then appeared to

continue that process in earnest in January and February 2009 (8RR P. Exs. 55, 55a,

and 56), when formal eviction proceedings were commenced. But then all such

proceedings were dropped and never reasserted before the Hospital declared

bankruptcy in September 2009. Is this the behavior of someone who has been

defrauded or cheated by his adversary, or does this sound like a business deal that

everyone was trying to save until they simply couldn’t? (Saqer, 5RR 90:16–17:

“Everyone was an honest people trying to do the best on this project, as far as I

know.”)

During the contentious months of November 2008 through February 2009,

when lawyers for Shah and the Landlord wrote to and met with Defendants’ lawyers

repeatedly, no mention was ever made in any letter, memo, email, or meeting, about

anyone stealing $700,000, or anyone destroying a letter of credit, or anyone receiving

illegal real estate commissions or kick-backs. Shah admitted this (4RR

266:15–273:21).

- 25 -
 Even when Shah saw fit to file this suit, on January 15, 2009 (CR 1), long

after he would have known about the $700,000 theft (4RR 86), the allegedly

surreptitious landlord waiver (9RR D. Ex. 17; see 8RR P. Ex. 45), and the January

2008 letter of credit issue, Shah and the Landlord filed a garden variety case alleging

breach of contract and, among other things, fraud in that Medistar and Zaidi had

misrepresented the potential of the real estate and the Hospital in the Medistar 2006

projections that had accompanied the LOI’s (2RR 80:5–7). No mention was made of

any of the malefactions which were the main attraction at the trial: No theft, no

waiver, no letter of credit, no free Medistar units, and no illegal real estate

commissions.

Shah and Medistar settled the 2008 case that Medistar had filed against Shah

for the $4,000,000 in purchase money that Shah had not paid with a dismissal in

2010. From that point on, Medistar was no longer a villain in his story.

Next, the lawsuit filed by the Landlord investors who had sued Shah, but not

Zaidi, for breach of the Landlord company agreement, was settled. Shah admitted

that he had not obtained the unanimous consent of the members, and Zaidi, as co-

manager, likewise did not. The difference is that Shah testified in August 2009 in the

Medistar case that he had had the authority to sign the loan and mortgage documents

without the members’ unanimous consent, because he was a manager (4RR

249:16–252:7). He also defended the investors’ motions for summary judgment by

- 26 -
strenuously arguing that since the investors had access to all the books and records

– just as he did – and had signed the company agreement after the loan commitment

had been made (Supp CR 3, Shah response to motions for summary judgment and

sur-reply to plaintiffs’ response, Appendix 5), they were charged with knowledge of

his actions as a matter of law and had no claim. The trial court granted summary

judgment against Shah (4RR 102–03). Shah settled those claims with the then-

existing investor/members of the Landlord for the payment of $552,500.00, over time,

effective December 1, 2010 (4RR 101–02). The investor plaintiffs, and the troubling

issues they presented to Shah, were also now dealt with.

Twenty-nine days later, on December 30, the second amended petition was

filed, and a day after that, a third amended petition was filed (omitted from the CR;

no. 47631147 in the district clerk’s website for this case). For the first time, Shah’s

story morphed into what he testified to at trial: That Shah was an innocent passive

investor – a “whale” in counsel’s terms – who had been fleeced by the “promoters”

of the real estate deal, most centrally Zaidi and Chagla. For the first time, allegations

appear that the $700,000 had been stolen, the landlord lien waiver had been secretly

(fraudulently) provided to Bank of America, the letter of credit had been fraudulently

destroyed by Zaidi, and the consulting payments Medistar had made from its profit

from the real estate sale had really been illegal real estate commissions.

Appellants contend that these allegations were conveniently contrived. They

- 27 -
are false, and the only “evidence” offered to support them was Shah’s testimony,

uncorroborated by the documents or other testimony one would have expected to see

were the allegations true.

The inconsistencies in Shah’s story, and that story’s inherent lack of

credibility, came out in his testimony. Some examples:

! Shah twice said that he was merely a passive investor (e.g., 4RR 56) who

had little if any involvement in the development of the real estate project. He also

said that he was made co-manager by Zaidi, who promised to “run everything” (4RR

64–65). An independent witness, however, Gary Perryman, Medistar’s President,

testified that the hospital deal “changed” in December 2006 (Supp CR 1, Perryman

37:3–38:13, Appendix 3) because Shah “brought himself into the deal.” (Supp Cr 1,

Perryman 248:6-249:12, 256:6-24, 272:25-273:14, Appendix 3).

! Shah originally insisted that he did not know about the real estate deal

until near the end of the process in late 2006 (4RR 112–13), but then admitted on

cross that he had attended the Medistar presentation in September, after which he

made his subscription for 125 units (4RR 137–38). Shah originally said that the

Medistar meeting on December 22, 2006, had been set up by Zaidi (4RR 60). He

admitted on cross, however, that he instructed Zaidi to set up the meeting so that he

and Hourani could straighten the problem out (4RR 160).

! Shah also admitted that he told Zaidi at the meeting that he wanted to

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own the majority of the real estate, 55% (4RR 154:10–155:5). When the deal

changed, and Shah was in charge, he would have his 55% with only a nominal cash

investment (4RR 155–56, 248:22). He was forced to admit that there were never any

other documents signed by the investors that disclosed this arrangement that was so

different than the cash offer they had all signed up for (4RR 146), and that he had

never told any of them that his deal, and the deal he made for his two colleagues, was

different from everyone else’s deal (4RR 164:1–167:7, 240:20–241:21). He admitted

the result of what he had done very directly:

Q. So, we have two classes of people. We have Medistar and the
three of you that are in this class; and all the other poor schmucks that
are in this class, they are paying cash, right?

A. Yes, sir.

(4RR 166:7–167:7; Emphasis added). Shah intentionally structured the deal to

benefit himself and his friends at the expense of his fellow investors, and he intended

it (4RR 248).

! Plaintiffs repeatedly stressed that if the Hospital did well, Zaidi (actually

TMG, which had the management contract, but Plaintiffs always reduced it to Zaidi,

personally, without evidence) would do well. Plaintiffs ignored the fact that, under

the 2007 joint venture agreement with TMG, Saqer, and Peracha, Shah would also do

just as well, since he had obtained a 25% interest in the management fees for free.

When Shah was confronted with the joint venture agreement (9RR D. Ex. 5, pp. 3 and

- 29 -
4) that he had demanded from Zaidi when he learned that Saqer and his friend

Peracha were involved in it, he looked at it and calmly declared, totally contrary to

its plain and clear terms, that it was for “future” projects (4RR 146).

! Shah pretended that he had no idea what the $4,000,000 in “additional”

purchase money for the real estate was (see 9RR D. Ex. 10) on direct examination

(4RR 61–65). On cross he was forced to admit that he had signed a note and guaranty

for that very $4,000,000, and that Medistar had sued him, and only him (4RR 153),

to enforce that guaranty (4RR 161:2–163:25, 167:15–169:22).

! Shah, on direct, pretended that the investment structure of the Landlord

was “set up by Mr. Zaidi” – who had nothing to do with that structure – and was the

same as that for the Hospital investment (4RR 58–59). The evidence shows this to

be completely false, and Shah knew it was false. Each of the Hospital investors paid

a small amount down, which was all fully disclosed, and each signed a bank guaranty

for a larger sum, also fully disclosed. On the contrary, the Landlord deal that

everyone signed up for, before it was changed, required cash subscriptions, and the

documents disclosed to everyone in what became the Landlord deal say just this, as

Shah was forced to admit (4RR 143–45, 156:1–24, 164:1–167:7). Only Shah and his

special class had the “Hospital” option.

! Shah testified intently that he would not have invested in the Landlord

had he known that the landlord’s lien had been waived, yet the facts are that the letter

- 30 -
of credit was important to him and he “understood” that Bank of America had to have

collateral for the letter of credit it issued for his benefit. He also acknowledged that

the landlord lien waiver was in fact listed as part of the original credit deal he signed

in January 2007, before he invested and before he signed the MetroBank loan closing

papers in March (4RR 208:1–210:3, 211:8–215:19). Even his banker friend, Mr.

Tariq, who handled the Landlord loan for MetroBank, agreed on cross that Shah had

to know about the landlord lien waiver (3RR 122:8–16).

The documents, independent witness testimony, and Shah’s own words and

actions lead to the inescapable conclusion that Shah is not credible.

2. Appellants are prevented from adequately making their appeal to this
Court because the trial court’s gross award of damages is neither tied to
specific causes of action nor broken down into specific items of damage
awarded, and there is no evidence, or alternatively insufficient evidence,
to support one or more of the causes of action or items of damage
pleaded.

The trial court’s findings of fact and conclusions of law (CR 1199, Appendix

2) contain no findings of any damages amounts, and the Judgment recites only

damages awarded without making any findings as to how any actual damages were

arrived at. This happened even though the court, at the close of the evidence, asked

for proposed findings and conclusions and said: “I do need the findings of fact which

support the numbers, if any, that you suggest should go in a judgment” (5RR

145:13–20). This also happened even though, after the court issued its findings and

- 31 -
conclusions on October 3, 2014, Appellants requested additional findings and

conclusions that would have quantified the damages, by claim, awarded to Plaintiffs

(CR 1207).

Appellants are prevented from being able properly to present their appeal

from this Judgment, In 2002, the Texas Supreme Court in Harris County v. Smith,

96 S.W.3d 230 (Tex. 2002), considered whether a trial court had committed harmful

error by submitting a broad-form question on damages. Id. at 231. The Court

concluded that the error was harmful because the trial court’s charge error “probably

prevented the petitioner from properly presenting its case to the appellate courts.” Id.,

citing Tex. R. App. P. 61.1(b). The Court single damages question was harmful

because it prevented the appellate court from determining “whether the jury based its

verdict on an improperly submitted,” invalid element of damage. Id. at 234. In

Crown Life Insurance Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000), the Supreme Court

had found that where a single broad-form liability question commingles valid and

invalid grounds, and the appellant’s objection is timely and specific, the error is

harmful. The Court remanded for a new trial because the appellate court could not

determine whether the verdict was based upon an invalid theory.

In 2004, the Harris County decision was applied to cases involving findings

of fact and conclusions of law in Tagle v. Galvan, 155 S.W.3d 510 (Tex. App.—San

Antonio 2004, no pet.). The appellant urged the court to find that the trial court had

- 32 -
committed error in making a broad-form finding of $2,000,000 in actual damages,

and in failing to make additional findings of fact which would have separated each

element of the damages. Id. at 515. The Court found that the Harris County/Casteel

rules would apply in the context of a bench trial and findings and conclusions. “We

agree that a properly prepared request for findings or additional findings specifically

drawing a trial court’s attention to the Harris County/Casteel problem will likely be

sufficient to preserve error.” Id. at 516. The “problem” is the harm that results when

an appellant must guess at the basis of the court’s assessment of damages against it.

Martinez v. Molinar, 953 S.W.2d 399 (Tex. App.—El Paso, no writ) (“The test for

determining whether the complainant has suffered harm is whether the circumstances

of the case would require an appellant to guess the reason or reasons the judge has

ruled against it.”).

Findings of fact and conclusions of law should not contain a cumulative

damages amount. Rather, the findings of fact should track the suggestions of the

Texas Pattern Jury Charge and the requirements of Harris County, to provide an

appellant with sufficient information to enable it properly to present its case to the

appellate court. A request for additional findings of fact acts in much the same way

as an objection to a charge. Vickery v. Commission for Lawyer Discipline, 5 S.W.3d

241, 255-56 (Tex. App.—Houston [14th Dist.] 1999, pet. denied).

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 This is the situation in this case exactly. Appellants requested the proper

additional findings and conclusions, but the Court refused to enter them, even though

it knew of the Harris County/Casteel issue before it. Because Appellants did in fact

request additional findings and conclusions that would have “detail[ed] the

apportionment of damages among the court’s findings” on liability, Appellants have

preserved their right to have the damages assigned and quantified by claim, so that

they are not forced “to guess” at what amounts were awarded for which claims or

whether the damages awarded are attributable to invalid claims. The trial court’s

“broad-form” cumulative award of damages without specific allocation to any

liability findings greatly impairs Appellants’ ability to prosecute their appeal, which

is harmful error. Appellants cannot determine what the damages awarded by the trial

court are based on. This is precisely the situation condemned in Casteel. Appellants

can and do contest the gross amounts under Thomas v. Oldham, 895 S.W.2d 352

(Tex. 1995). The only proper remedy is a reversal of this case and a remand for new

trial.

The trial court’s failure also to itemize the amounts found by it to be

attributable to the several types of damages claimed by the two separate Plaintiffs on

their separate causes of action further impairs Appellants’ ability to present this

appeal. The trial court’s findings of fact make no damages finding with respect to

any of the damage elements alleged by either of the Plaintiffs. The judgment simply

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states total amounts of actual and punitive damages to be recovered by each Plaintiff.

The judgment also simply doubles the amount of actual damages awarded to each

Plaintiff to award punitive damages against Zaidi to each Plaintiff and takes one-half

of the same actual damages amounts to award punitive damages against Chagla.

Because there are no findings of fact to support the judgment’s damages

awards, the judgment must be reversed. Tex. R. Civ. P. 299, 299a. Additionally, the

judgment must also be reversed because the trial court’s award of aggregate damages

amounts includes invalid elements, as is shown below. Because the court did not

address the separate damages elements claimed, and some have no support in the

evidence, the error is harmful and the only proper remedy is a reversal of this case

and a remand for new trial. Harris County, at 236. See also Tex. Indus., Inc. v.

Vaughn, 919 S.W.2d 798, 804 (Tex. App.—Houston [14th Dist.] 1996, no pet.);

Whitaker v. Rose, 218 S.W.3d 216, 224 (Tex. App.—Houston [14th Dist.] 2007, no

pet.) (holding that when a default judgment specifies a single damages award based

on more than one damages element and there is no evidence to support the award as

to one of the elements, then the entire award must be reversed and remanded even

though one of the other elements might be sufficient to support the award). Aim-Ex

Industry, Inc. v. Slover, 2010 WL 2136599 (Tex. App.—Amarillo 2010, no pet.)

(“Because of . . . the lack of any attempt to itemize or segregate what sums of money,

if any, were allotted to the myriad types of damages sought, we cannot but reverse

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and remand the actual damages awarded.”).

Plaintiffs submitted two different post-trial proposals for findings and

conclusions, and the amounts Plaintiffs claimed as damages differed. In the first

(CR1049), Plaintiffs claimed total actual damages for the Landlord of

$17,476,465.84, and for Shah of $8,744,712.66. In the second (CR 1173), Plaintiffs

claimed total actual damages for the Landlord of $18,111,624.90, and for Shah of

$9,214,712.66. The trial court awarded actual damages to the Landlord of

$4,071,584.00, and to Shah of $9,336,920.00. Appellants specifically pointed out in

their objections to Plaintiffs’ proposals (CR 1087) that several of the elements of

damages claimed by Plaintiffs were not supported by the evidence, legally or

factually. Not only could the Plaintiffs not agree on the amounts, the trial court could

not agree with either suggestion, but it declined to provide any basis for its damage

awards. Appellants have no idea what the court included and did not include in the

Judgment. Appellants must “guess.”

3. The gross award of damages is reversible because it likely includes
damages for with there is insufficient evidence.

If the Judgment amount includes any amount attributable to the following

elements, then there is harmful and reversible error.

A. An award in any amount for recovery of lost accounts receivable.

Plaintiffs claimed damages in the amount of $11,218,465,84 for the loss of

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the Hospital’s alleged accounts receivable in 2009, caused by the alleged fraudulent

waiver of the landlord’s lien in 2008. This claim was fictitious and supported by no

legally or factually sufficient evidence.

The only proffered “evidence” of these alleged accounts receivable came in

the brief testimony of Parag Parikh, Shah’s nephew and a self-styled “forensic

financial consultant” who has never testified in court before or had any of his

“opinions” accepted by any Court (3RR 177:20–23). There is no scientific discipline

involved in the work of a “forensic financial consultant,” although Parikh said that

he “knew something about accounting” (3RR 178:18–20).

Parikh testified that the Landlord lost the ability to seize $11.1 million in

accounts receivable because the landlord’s lien had been waived. Had it not been

waived – and Parikh merely assumed that the waiver was not in place in 2007, which

is contrary to the evidence (3RR 181:6–182:9) – Parikh said: “Essentially, you know,

my understanding is that the landlord lien, if it had not been waived, would have been

available for foreclosure by the landlord on the tenant to recover funds that the tenant

owed the landlord” (3RR 160:24–161:3).

Parikh’s methodology, if you will, was simple: Add numbers to create the

biggest total possible. The source data that he claimed to rely upon was from

Plaintiff’s Exhibit 83c (8RR), which was a collection of bank statements and other

financial records (beginning in May of 2008, 3RR 161:8) of the Hospital. These

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records had been created by the Hospital’s accountant, Shebay & Co. (Shebay, 5RR

14:1–15:16).

Parikh simply added together a series of numbers he found in Exhibit 83c for

the period between May 2008 and an unknown date and called that number the

Hospital’s accounts receivable. As he put it: “It [his number] was calculated by

taking all of the revenue from May of 2008, to the end of these records for – from

Medicare, Medicaid, United Healthcare, Blue Cross Blue Shield, for the tenant,

hospital tenant” (3RR 165:6–10, emphasis added). He looked at revenue, not

accounts, for an indeterminate period, to the “end of the records,” whenever that was.

There are many very serious factual problems with what Parikh did, but the

foremost is that, as a matter of fact, Exhibit 83c cannot factually support Parikh’s

opinion. As Michael Shebay, the CPA who created the records as business records

during the time the Hospital was operating, said:

Q. Based upon your preparation of these materials, all of these
materials, can those serve as the basis of an opinion that the hospital
ever owned $11.1 million in accounts receivable?

A. No.

(Shebay, 5RR 15:24–16:2). Shebay’s factual explanation was equally simple:

Q. (BY MR. LITTLE) All right. As a matter of the facts reflected in
the documents contained in Exhibit [8]3, do they reflect $11.1 million
of accounts receivable at any time?

A. No, sir.

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 Q. Do they reflect any accounts receivable information for the year
2009 at all?

A. No, sir.

(Shebay, 5RR 16:11–18).

Although Parikh may have known “something about accounting,” his

testimony makes clear that he didn’t understand the document on which he based his

testimony. As Shebay explained, Exhibit 83c, which he prepared, is a collection of

bank statements and accounting records showing Hospital transactions on a cash

received basis:

Q. What’s the significant of – significance of that with respect to
accounts receivable?

A. They wouldn't show up in a cash basis because on the cash basis
we only account for moneys coming in, moneys going out. On – on
an accrual basis, you would include the receivables.

Q. But there is no accrual basis accounting in Exhibit 83, is there?

A. No, sir.

Q. So, there's no accounts receivable information in Exhibit 83, is
there?

A. There's no accounts balances in this exhibit.

Q. And there's nothing from 2009?

A. No, sir.

(Shebay, 5RR 15:2–16).

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 Parikh unwittingly explained how he flouted the principles of accounting.

To create his number, he took all the revenue numbers from May 2008 to whatever

date the records ended and just added them up, as though they would in reality remain

static and in place for 18 months. He did that because he had to have something to

call accounts receivable. He made it up. But on cross, he took pains to explain the

difference between revenue and accounts receivable: revenue is what you have after

the accounts receivable have been paid and are no longer accounts receivable (3RR

179:22–180:1). They are, in other words, mutually exclusive.

He also said that to determine accounts receivable, you would never subtract

the expenses to be paid (3RR 178:21–179:15), which would include accounting for

the mere 30%-40% reimbursement factor that was proved to exist for the Hospital’s

accounts (Shah, 4RR 296:9–12; Shebay, 5RR 18:16–20). Even if Parikh’s source

numbers represented accounts, his calculation would have overstated the alleged

damages based upon this one element by 60% to 790%, or $6.72 million to $7.84

million.

Parikh also stated as a fact that the Landlord “tried” to foreclose on its lien

on these “accounts” in 2009, but was told by Bank of America that it could not

because of the waiver. (3RR 161:14–22.) No other evidence of any attempt actually

to foreclose this lien was offered by Plaintiffs.

Finally, after opining that the Bank had the right to the accounts because of

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the lien waiver, Parikh admitted that the Bank in fact did not collect the accounts after

all:

Q. (BY MR. LITTLE) Did – do you know if Bank of America
collected accounts or was paid out of the furniture, fixture[s], and
equipment?

A. I believe neither.

(3RR 183:5–8).

Parikh’s opinion testimony that the Landlord lost $11.1 million in accounts

receivable because of the lien waiver is utterly unreliable and not credible, and must

be disregarded entirely.

This case presents a similar issue to that addressed in U.S. Renal Care v.

Jaafar, 345 S.W.3d 600 (Tex. App.–San Antonio 2011, pet. denied). Like here, at

issue was the proper valuation of the accounts receivable of a medical business.

Unlike here, the expert used actual accounts receivable to compute his valuation.

Like here, he simply added two lists of numbers to arrive at his value, and in the

process, also like Parikh, he refused to age or adjust the accounts receivable to

account for both inevitable non-collection and the discount from the totals that

Medicare and the other insurers would apply (as here). “[T]he evidence at trial was

uncontroverted that Sellers had no expectation of being paid the entire amount it

billed for all patients.” U.S. Renal Care v. Jaafar, 345 S.W.3d at 614. Because the

expert’s methodology was “flawed,” as it is here, the Court said that “a party may

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assert on appeal that unreliable scientific evidence or expert testimony is not only

inadmissible, but also that its unreliability makes it legally insufficient to support a

verdict.” . . .; see Goodyear Tire & Rubber Co. v. Rios, 143 S.W.3d 107, 113 (Tex.

App.–San Antonio 2004, pet. denied).” Id. at 606.

The Court rejected the expert’s opinions and the judgment based upon them,

holding as an initial matter that it is “the plaintiff’s burden to prove damages with a

reasonable degree of certainty.” Id. at 613. Holding expressly that this reasonable

certainty was absent, the Court held that the judgment amount was supported by “only

speculation and conjecture”:

“It is well settled that the naked and unsupported opinion or conclusion of
a witness does not constitute evidence of probative force and will not
support a jury finding even when admitted without objection.” Dallas Ry.
& Terminal Co. v. Gossett, 156 Tex. 252, 256, 294 S.W.2d 377, 380 (1956).
The jury’s award of “damages must be ascertainable in some manner other
than by mere speculation or conjecture, and by reference to some fairly
definite standard, established experience, or direct inference from known
facts.” A.B.F. Freight Sys., 798 S.W.2d at 615.

Id. at 614 (emphasis added.) See also Schronk v. Laerdal Medical Corp., — S.W.3d

—, 2013 WL 6570907 at *4 (Tex. App.–Waco 2013, pet. denied 2014) (Conclusory

and speculative opinion testimony is not relevant evidence and “therefore, constitutes

no evidence.” If an expert brings to court “little more than his credentials and a

subjective opinion, his testimony will not support a judgment.” Id. at *7.)

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 Parikh’s opinion testimony was both the result of the same flawed

methodology as was the expert’s in the U.S. Renal case – because it did not take into

account the reality of lowered payments by the insurance companies – and utterly

speculative and conclusory because it directly contradicted the “known facts” that

Plaintiffs’ Exhibit 83c contained no information about the Hospital’s accounts

receivable at all, and certainly not for 2009. Adding 18 months of revenue together

and calling it the Hospital’s accounts receivable even violated Parikh’s own principle

that revenue is what has been paid on the accounts receivable, which in the process

eliminates the account that was paid.

Parikh’s testimony was also flawed, speculative, and unreliable for three

additional reasons.

First, the opinions went beyond the numbers he created, and the alleged

expertise he claimed, when he stated as a fact that the waiver of the landlord lien

caused the loss to the Landlord, even though he did not know whether or not the lien

waiver was actually in effect as part of the original credit transaction in 2007.

Appellants have shown that it was, and that Shah knew and “had to know” this.

Second, even thought he stated that the Landlord was prevented from

collecting the accounts (in August 2009) because of the waiver, this did not cause any

loss, because the Bank did not collect them either. Why? There were none to collect

(Zaidi, 5RR 116:3–117:3).

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 Third, the only accounts receivable that the Landlord ever could have

collected, had it properly foreclosed and notified the account debtors to pay it directly

upon the Hospital’s default , see UCC, Tex. Bus. & Comm. Code Ann. § 9.607 – and

there is no evidence that it did this – were those accounts that actually existed in

August 2009, and not some fanciful accounts that were made up from revenue

numbers in May 2008. As a matter of fact, even had Parikh’s methodology been

acceptable to create an accounts receivable balance for a point in time in 2009,

Exhibit 83c had no information of any kind about the Hospital’s revenue or accounts

in 2009. There is no reliable accounts receivable value for any point in time in 2009.

Additionally, the delivery of the waiver in 2008 did not in fact harm the

Landlord. Mr. Meade cross-examined Zaidi about his explanation of the delivery of

the replacement waiver and made the point that Bank of America had, in an

amendment to the January 2007 credit agreement (9RR D. Ex. 16) in March 2007,

reserved a lien only on certain Hospital cash accounts (Zaidi, 5RR 124:8–127:11).

The replacement waiver delivered in April 2008 (9RR D. Ex. 17) did not

change the definition of the collateral that had been given to Bank of America in

2007. It merely recited that collateral in the form of personal property had been

given. If Bank of America only had an interest in cash, and not in accounts

receivable, as Plaintiffs stated (Zaidi, 5RR 126:6–23), then neither the original waiver

nor the resubmitted waiver granted Bank of America any additional lien on the

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Hospital’s accounts receivable. The resubmitted waiver, however it happened, could

not have caused the Landlord to lose anything it otherwise had.

If the Judgment awarded any amount to the Landlord for these accounts

receivable, then it contains harmful and reversible error.

B. An award based upon a contingent asserted liability.

Part of the amount claimed by Shah was $5,445,291.87, the gross amount

stated in an arbitration demand filed by MetroBank (8RR P. Ex. 72) for Shah’s

default on his guaranty of the MetroBank loan. The only evidence introduced

regarding this contingent claim was (1) the demand itself, and (2) Shah’s testimony,

under oath, that he had responded to the claim asserting both that he did not owe

MetroBank any money and that MetroBank owed him more money than it claimed

(4RR 308:15–24). This contingent claim is not a proper element of recoverable

damage.

The purpose of actual damages is compensation for an injury actually

suffered. Marauder Corp. v. Beall, 301 S.W.3d 817 (Tex. App.–Dallas 2009, no pet.)

There must be a real causal connection between the act complained of and the

damages actually suffered. Tana Oil & Gas Corp. v. McCall, 104 S.W.3d 80 (Tex.

2003). “[A] party may not recover damages for breach of contract if those damages

are remote, contingent, speculative, or conjectural.” Southern Elec. Serv., Inc. v. City

of Houston, 355 S.W.3d 319, 324 (Tex. App.–Houston [1st Dist. 2011], pet. denied).

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 Likewise, “[a] contingency which cannot be determined with reasonable

certainty cannot be made the basis for recovery of a definite amount of damages.”

Spiritas v. Robinowitz, 544 S.W.2d 710, 720 (Tex. Civ. App.–Dallas 1976, writ ref’d,

n.r.e.) Spiritas involved a tract of land that the plaintiff claimed was burdened by an

invalid lien which the plaintiff said would in the future destroy his equity. He wanted

a judgment now for the amount he claimed he might lose in the future. The Court

refused: “The fallacy of this argument is that it assumes that the second lien will not

be discharged by any method other than the sale of the Tucker Tract,” and the Court

listed several other possible scenarios. Because of the other scenarios it could

envision, the Court held that “we are not certain that Spiritas has suffered any

pecuniary damage at this time.” Spiritas v. Robinowitz, 544 S.W.2d at 719.

Shah has other scenarios, too. He testified under oath that he does not owe

the debt. He can prevail on his defenses. He can settle for a lesser sum. The

MetroBank claim is a classic example of a claim that is “remote, contingent,

speculative, [and] conjectural,” and it is not a proper element of damage. At the least,

liability on that claim is not a “reasonable certainty.”

If the Judgment awarded any amount to Shah for this contingent claim, then

it contains harmful and reversible error.

C. An award of $2.8 million for Medistar’s units in the Landlord.

Plaintiffs’ damages claims included $2.8 million in damages for the Landlord

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for the 70 units that Plaintiffs say “Defendants” apparently “gave” to Medistar,

depriving the Landlord of their value. This allegation is false.

First, there was not one iota of evidence offered that would tend to prove that

Apex TMG, Zaidi, or any Appellant gave these 70 units to Medistar.

Second, we have already shown that Shah agreed in the December 22, 2006

meeting with Medistar to give Medistar an additional $4.0 million in purchase money

for the Katy property over the stated $13.5 million amount. The only logical

inference from the evidence that does exist is that Shah gave these units to his friends

at Medistar. In any event, it is quite clear that he knew at all times that Medistar

owned these carried units:

Q. [Medistar was] a partner in the sense that they had 70 units that
they didn’t pay anything for?

A. That’s true, sir.

(4RR 166:7–167:7).

If the Judgment awarded any amount to the Landlord for the value of these

units, then it contains harmful and reversible error.

D. An award of $638,000 on the letter of credit.

Plaintiffs’ claim included $638,888 in damages for the Landlord that they

assert it lost when it was unable to draw against the letter of credit. No legally or

factually sufficient evidence was presented to support this claim for damages.

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 The Hospital letter of credit (8RR P. Ex. 42) was indeed amended (8RR P.

Ex. 44), but there is no evidence, nothing more than insinuation and speculation, that

Zaidi or Apex TMG caused the amendment or that Zaidi had or ever had the

amendment. All the November 2007 amendment did was reduce the total amount

available under the letter of credit to account for draws that been made earlier in 2007

and shorten the expiry period accordingly. It was “accepted” by Zaidi as “GP” on

behalf of the Hospital. Zaidi did not sign off on the amendment as a representative

of the Landlord. The amendment did not preclude a draw against the letter of credit

had the Landlord actually made one, and there is no evidence that it ever did. The

draft letter of January 2008 (8RR P. Ex. 43) was not sent. Plaintiffs’ Exhibit 94

(8RR) proves that over a month later, on February 25, 2008, Shah’s then lawyer

Jeffrey Kaiser sent him an email telling him that he needed to get the document so a

draw could be made before February 27. Shah said he asked for it, and Zaidi said

Shah didn’t ask, and that he didn’t have it. (Zaidi, 5RR 110:14–111:17.) That is all

the evidence there is. There is no proof of any actual draw attempt by the Landlord,

no correspondence to or from the Bank about any such draw attempt, no

correspondence or testimony from the Bank regarding any refusal to honor any draw,

and no correspondence or anything with Zaidi about the so-called “missing” letter of

credit. Shah never mentioned it again until 2010, when he filed his new pleadings

with his new story.

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 If the Judgment awarded any amount to the Landlord for the amount it claims

it lost on the letter of credit, then it contains harmful and reversible error.

E. An award of $1,350,000 in alleged commissions.

Plaintiffs’ claim included $1.35 million in damages for the Landlord that

they assert constituted improper commissions paid to Zaidi and Apex TMG, although

Plaintiffs did not explain, and offered no evidence to show, how payments from

Medistar to someone else, whether or not commissions, caused it any harm of any

kind. No legally or factually sufficient evidence exists to support this claim for

damages.

The evidence that was admitted showed that four payments were made from

Medistar out of its profits from the sale of the Katy property (8RR P. Ex. 32). These

payments came out of those profits, but were for consulting work done on projects

memorialized in the memorandum of understanding of May 2007 (9RR D. Ex. 25)

and other projects that had never been paid for. TMG received something over

$500,000, and two other people also received consulting payments. The only

evidence offered on the subject was from Zaidi, Saqer, who had worked for Medistar

before she worked for TMG (5RR 81:3–10), and Perryman, Medistar’s President. All

agreed without equivocation that none of the money Medistar paid was for any

service or commission rendered in connection with the Katy real estate purchase

(Zaidi, 5RR 105–108:11; Saqer, 5RR 82:24–83:5; Supp CR 1, Perryman, 43:12–45:7;

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284:6–19, Appendix 3). There was no contrary evidence, only insinuation.

If the Judgment awarded any amount to the Landlord for these alleged

commissions, then it contains harmful and reversible error.

F. Conclusion.

Appellants are forced to guess at how the trial court reached the damages

awarded to the Landlord and Shah, and on what theories, because the trial court

declined to make the requested findings that would have made these awards clear.

Appellants have shown that a total of $16,006,465.84, in categories A – E

above, are invalid as to the Landlord and Shah and cannot be sustained. Plaintiffs

claimed either $17,486,465.84 or $18,111,624.90 for the Landlord, and the court

awarded $4,071.584.00. If we select the largest amount Plaintiffs claimed, and

subtract the amount that cannot be sustained, then the maximum damages that could

even arguably be claimed is $2,105,159.06. That means that the court must have

awarded some part or parts of the impermissible damages to arrive at its damage

award. Since there is absolutely no way to know how much, in which impermissible

categories, was awarded, then the Judgment as a whole as to the Landlord is

unsupported by legally or factually sufficient evidence and must be reversed and a

new trial ordered.

With respect to Shah, the problem is slightly different. Appellants have

shown that $5,445,291.87 in claimed damages for Shah is impermissible. Deducting

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that from the court’s gross award to Shah leaves $3,891,628.13. But the court’s gross

award is greater than the amount Plaintiffs asked for in either their original or their

amended proposed findings. So, how much was added that has no legally or factually

sufficient evidence to support it? We cannot know because the Court declined to

make the additional requested findings and conclusions. Since there is absolutely no

way to know how much, in which impermissible categories, was awarded, then the

Judgment as a whole as to Shah is unsupported by legally or factually sufficient

evidence and must be reversed and a new trial ordered. See Fortune Prod. Co. v.

Conoco, Inc., 52 S.W.3d 671, 682 (Tex. 2000) (Remand for new trial is the

appropriate remedy where there is some evidence of damages but no evidence to

support the full amount of damages found.)

4. Damages apparently awarded by the trial court for fraud,
misrepresentation, and fraudulent inducement were not proximately
caused by representations made by the “Defendants” upon which
Plaintiffs admittedly did not rely.

Appellants refer to Defendants here as “Defendants” because throughout the

trial, Plaintiffs through counsel simply used that shorthand rendition to assess blame

for everything that happened, as though “Defendants” were one unitary being,

frequently without offering evidence as to which of the various Defendants might

actually have done or omitted to do one or another thing. It is a classic strategy. But

it will not support a Judgment.

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 To recover for fraud, a party must prove that: (1) a material representation

was made; (2) the representation was false; (3) when the speaker made the

representation, he knew it was false or made it recklessly without knowledge of the

truth and as a positive assertion; (4) the speaker made it with the intention that it

should be acted upon by the party; (5) the party acted in reliance upon it; and (6) the

party thereby suffered injury. Priddy v. Rawson, 282 S.W.3d 588, 598 (Tex. App. –

Houston [14th Dist.] 2009, pet. denied); Lundy v. Masson, 260 S.W.3d 482, 492 (Tex.

App. – Houston [14th Dist.] 2008, pet. denied). Reliance and causation are essential.

Plaintiffs went to great pains to prove that Zaidi knew about the mortgage

and that he lied to Shah by telling him that all of the members had approved the

mortgage, a requirement under Shah’s company agreement for the Landlord. All of

the witnesses Plaintiffs called, except Parickh on damages, were called to establish

one or the other of those two points.

Leaving aside the incongruity of believing that Shah would make such a

huge issue of insuring that full consent existed, and then cavalierly satisfy that most

significant of all his issues by merely asking Zaidi if he had it, and not doing one

single other thing, Shah did not rely, as a matter of fact or law, on any representation

of Zaidi no matter what Shah (or his lawyer; Shulte [3RR 131–154]) asked or what

he was told.

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 Zaidi’s admitted inconsistencies regarding the mortgage do not prove fraud.

Shah claims that he would not have signed the closing papers if he had known that

Zaidi did not have the authority of all the real estate members to do the deal (4RR

84:22-24). This is not true. When Shah testified in 2009 in the Medistar v. Shah

case, before the new story had come out, Shah said, as he sort of admitted at trial, that

on March 22 he considered that he had the full authority to sign the closing papers as

a manager. Period. (4RR 251:4–7: “ Q: Did you have the authority to go out and

borrow the $9 million without the prior written consent of the members because of

subparagraph 2 of 3.05 [of the company agreement], yes or no? A: Yes, sir.”) Shah

would have gone forward with the closing if Zaidi – who said he was there only with

authority from the Hospital partners (Schulte, 3RR 148–498; Zaidi, 5RR

78:23–79:18) – had not been there at all. Why? Because there was no other way to

get his deal done and obtain the real estate for the tiny cash price and guaranty he had

arranged with his bank.

What Zaidi knew or didn’t know, or said or didn’t say, about the mortgage

had no affect on Shah, although it might have had an affect on the other then-

Landlord members. Appellants in this regard would only remind the Court that these

members are no longer owners of the Landlord. Shah declared under penalty of

perjury in the Landlord’s bankruptcy schedules in 2012 that they are gone (9RR D.

Ex. 67, pp. 36 and 37; ownership of the Landlord is now Indus Associates [Shah],

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76.7%; Vora, 6.67%– 10%; and Suneja, 10%–13.3%).

There are two things about the closing that Shah and Zaidi agreed upon.

First, it had to happen when it did because Medistar had issued another

ultimatum, and all the doctors’ money (including Shah’s, as he acknowledged, 4RR

233:9–16), would have been lost to Medistar if the closing had not happened (Shah,

4RR 231:22–233:19; Zaidi, 5RR 100:8–102:15). It seems very likely that this intense

pressure involving other people’s money explains a lot about what happened on

March 22. Shah knew this was the situation when he arrived at the closing. Zaidi

says that he had not seen the documents before the closing, and there is no credible

evidence to suggest that he had. Confronted with the facts at closing, however, and

Medistar’s ultimatum, Zaidi had to believe that he was doing the best for the investors

that he could by going along and insuring that they did not lose their investments

before the deal even got off the ground.

Second, there was a four-month period in which the loan could have been

paid and the line cancelled, and at least Vora fully intended that this option should be

exercised (Shah, 4RR 256:19–258:17; Zaidi, 5RR 99–102). Shah admitted that if he

and his colleagues had paid even the cash amount due for Shah’s 125 shares and his

colleagues’ 90 shares, there would never have been a need for either a loan or a lien

(4RR 260:8–21, 261:20–262:23).

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 There is legally or factually insufficient evidence in this record to support the

finding that Shah (and the Landlord) relied upon any representations of Zaidi or any

other “Defendant” to his or its detriment.

5. Damages apparently awarded by the trial court for breach of contract,
fraud, misrepresentation, and fraudulent inducement cannot be
recovered because Plaintiffs ratified the actions upon which such
damages were based.

In Fortune Prod. Co. v. Conoco, Inc., 53 S.W.3d 671 (Tex. 2000), the

Supreme Court recognized that contracts, even fraudulently induced contracts, can

be ratified. Id. at 676. Ratification forecloses a claim for damages. Appellants

pleaded ratification (Supp CR 4, Amended Answer, Appendix 6).

Generally, ratification is a doctrine of agency law, and allows a principal to

be bound by an agent’s unauthorized contract in circumstances where the principal

becomes aware of the contract and retains benefits under it. Willis v. Donnelly, 199

S.W.3d 262, 273 (Tex. 2006). A party need not show ratification by an express act,

as ratification can occur when the principal retains the benefits of a transaction after

he acquires full knowledge of the agent’s unauthorized act; of critical importance is

the principal’s knowledge of the transaction and his actions in light of such

knowledge. Schakosky v. Client Services, Inc., 634 F.Supp.2d 732, 736 (E.D. Tex

2007). Even if a principal was unaware of its agent’s unauthorized action, it may

ratify that action and thus become liable for it if the principal retains the benefits of

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the action after acquiring full knowledge of the unauthorized conduct. St. Joseph

Hosp. v. Wolff, 94 S.W.3d 513, 536 (Tex. 2002).

Although not directly a principal/agent relationship in all things, the

relationship between the Landlord and the Hospital shared many features. Through

Apex TMG, its general partner, the Hospital did in fact borrow sums from the

Landlord, some with fore-knowledge, and candidly some without. The $700,000 loan

is but one example of such a loan that was entered into with the Landlord’s full fore-

knowledge. The accrual of rent created by the Landlord’s agreement to accept

payment of essentially half rent through 2007 and 2008 is another.

What is important is that the Landlord had full knowledge of all of the

transactions, or Shah simply could not have produced his January 2008 memo (8RR

P. Ex. 40) that outlined each such transaction in full detail. And the Hospital did not

withhold any information about each of the disclosed transactions in its response to

Shah (9RR D. Ex. 40). With this full knowledge on both sides, Shah and the

Landlord decided to retain the benefits of the Landlord/Hospital relationship for more

than a year, with no changes. The Landlord and Shah ratified all conduct that had

occurred by that time, including any “unauthorized conduct” on the part of the

“Defendants.”

Plaintiffs claims for these damages lie against the Hospital, and Plaintiffs

asserted those claims in its bankruptcy case.

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 6. The trial court’s award of damages for monies paid in settlement by
Shah to former members of the Landlord constitutes an impermissible
double recovery where Shah received the members’ interests in the
Landlord and will profit again from the Landlord’s recovery.

Plaintiffs’ proposed findings and conclusions contained $552,500 in

damages for Shah, this being 100% of the amount he paid to the members of the

Landlord LLC who sued him for breaching the company agreement. We cannot

know if the court awarded any of this claim in damages, as explained above. No

legally or factually sufficient evidence exists to support this claim for damages, and

if awarded, it constitutes a double recovery here.

Shah and Zaidi both said that they should be held to the same standard when

it comes to evaluating their conduct as co-managers (e.g., Zaidi, 2RR 64–65). Shah

nevertheless demands that Zaidi reimburse him 100% of the losses for the breach, and

not that they be treated equally.

Moreover, Shah, by acquiring the interests of the other members in the 2010

settlement now owns, along with Vora and Suneja, 100% of the Landlord (9RR D.

Ex. 67, p. 36 of 42), and he (and they) will therefore recover 100% of any damages

that are affirmed as awarded to the Landlord. To allow Shah to recover this and to

recover what he paid to acquire that right gives Shah a double recovery.

The single recovery, or one satisfaction rule, holds that an injured party is

entitled to only one satisfaction. Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1,

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7 (Tex.1991). Allowing Shah to recover 100% of what he paid to acquire the right

to obtain 100% of the Landlord’s recovery allows a double recovery in this case.

7. The exemplary damages awarded by the trial court are excessive in light
of the flawed findings of compensatory damages.

Appellants contend that they have shown that all of the actual damages

findings in this case are defective because, even though we are forced to guess at

actual amounts, these findings inherently contain damages that have been awarded

on impermissible theories of recovery. The award of exemplary damages must fall

along with the actual damages, particularly under our circumstances. See Aim-Ex

Industry, Inc. v. Slover, 2010 WL 2136599 (Tex. App.–Amarillo, 2010, pet. denied).

8. The evidence is insufficient to show the level of egregious conduct on
the part of either Zaidi or Chagla required to support the award of
exemplary damages against them.

The only conduct of Zaidi that could arguably be called egregious, for which

legally or factually sufficient evidence exists, is his inconsistent testimony about his

knowledge of the mortgage, and as we believe Appellants have shown, that did not

in fact cause any harm. Everything else he was accused of, either directly or merely

as a “Defendant,” was supported only by the uncorroborated self-serving testimony

of Shah. Also self-serving, to be sure, but Zaidi testified positively and without

equivocation that he never lied to Shah, that he never cheated Shah, and that he never

deliberately or carelessly induced Shah to do anything by giving him false

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information (5RR 117:4–13). He also testified without contradiction, specifically

involving the landlord lien waiver, that he approved it because the bank required it

and because the letter of credit it supported was important to Shah. He never meant

any harm to flow from it (5RR 111:18–112:23).

As to Chagla, the matter is even simpler: the record holds no evidence that he

ever did anything wrong that caused any damage to anyone. He formed Indus for

Shah, but there is no suggestion or evidence that this caused any harm (Shah, 4RR

319:5–13); he issued Landlord certificates when instructed by others to do so (2RR

88:15–21); he faxed a sample lease to Medistar in November 2006 for its use in

preparing the Hospital lease (2RR 102:4–15); he merely notarized a few of the

closing documents in March 2007 (2RR 162:19–163:6); he notarized Zaidi’s

signature on the landlord lien waiver in April 2008 (2RR 234:14–235:11); and he

merely endorsed a check Apex TMG collected upon sale of some Medistar Landlord

units (2RR 252:9–11). That is it.

Chagla did nothing to deserve an award against him of either actual or

exemplary damages. Those awards were made because the court punitively resolved

all doubts and indulged all inferences against him in favor of Plaintiffs because he did

not appear for trial. This is gross error, given that Plaintiffs never in the five years

this case was pending requested his deposition and that the court quashed his trial

subpoena only three weeks before trial because of his uncontroverted medical

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condition.

9. The elements of the various causes of action pleaded have not been met
with sufficient evidence here, where the non-interested witnesses gave
testimony contradicting Plaintiffs’ theory of the case, Shah’s own
testimony and pleadings show he had requisite knowledge and intention
to enter into the Landlord mortgage regardless of any representations
made by Zaidi, and documentary evidence shows Shah and the Landlord
ratified certain material actions of the “Defendants.”

A. Fraud, including common law and statutory fraud, fraudulent
inducement, fraudulent transfer, and fraud by non-disclosure.

B. Negligent misrepresentation and gross negligence.

C. Breach of contract and tortious interference with contract.

Appellants have already shown that Shah did not rely upon Zaidi’s alleged

misrepresentation about the unanimous consent of the Landlord members, assuming

he even made such a representation, which is both doubtful and denied. For reasons

already explained, Shah would have closed that mortgage alone because that was his

ticket to wealth, he thought, and his and the other members’ money was very much

at risk on March 22.

What is striking about this case is the evidence that is not found in the

record. No witness who testified on any subject other than Zaidi’s knowledge

corroborated Shah’s story about anything, and there were numerous witnesses one

would have expected to hear from, were Shah’s story true. There is no documentary

evidence of any draw on the letter of credit. There is no evidence that Zaidi or the

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“Defendants” gave Medistar its units and Medistar’s and Shah’s own testimony

contradicted this contention. There is no or insufficient evidence that the payment

TMG received from Medistar was an impermissible real estate commissions, and

Medistar, Zaidi, and Saqer all contradict this allegation. Likewise, there is no or

insufficient evidence that the other people who received consulting payments from

Medistar were any part of the “Defendants.” There is no or insufficient evidence that

any action by any “Defendant” prevented the Landlord from collecting actual

accounts receivable of the Hospital. The accountant who created the books and

records – for business, and not for trial purposes – proved beyond question that those

books and records showed no such accounts. There is no or insufficient evidence that

Shah believed the Landlord’s $700,000 check was anything other than a loan to the

Hospital when it happened, and Odhav’s and Saqer’s testimony provides ample

evidence that Shah was recognized and thanked for the loan at the time. Shah’s

testimony by itself, as internally inconsistent and externally disputed as it was, is not

more than a scintilla of evidence under these circumstances, and is certainly not

factually sufficient to support and award of $50,000,000.

D. Breach of fiduciary duties, including as to Chagla,
notwithstanding that the evidence showed that he did nothing
material.

The trial found that “Defendants, individually and collectively, owed

fiduciary duties to Plaintiffs, individually and collectively,” (FF 3) and that

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“Defendants, individually and collectively, had conflicting interests in the

transactions at issue in their capacity as fiduciaries to Landlord, Tenant, Apex TMG,

Dr. Shah and Prestige” (FF 6). Fiduciary duties are created by specific and special

relationships and do not occur “collectively.” Moreover, breaches of such duties

must occur with respect to specific transactions and actions, rather than unenumerated

and vague transactions generally. Appellants have no way to obtain adequate

appellate review of such broad and nonspecific findings or of any damages that might

have been awarded on the basis of the court’s fiduciary duty findings and

conclusions. (FF 3, 6, 7, 13, 14, 15, and 18, and CL 10 and 11.)

Under Texas law, Zaidi did not owe a fiduciary duty to Shah as a member of

the Landlord. “A director’s fiduciary duty runs only to the corporation, not to

individual shareholders or even to a majority of the shareholders.” Somers v. Crane,

295 S.W.3d 5, 11 (Tex. App.–Houston [1st Dist. 2009, pet. denied), quoting Hoggett

v. Brown, 971 S.W.2d 472, 488 (Tex. App.–Houston [14th Dist. 1997, pet. denied).

“Due to the ‘extraordinary nature’ of a fiduciary relationship, the law does not

recognize such a relationship lightly.” Somers v. Crane, 295 S.W.3d at 11.

With respect specifically to LLCs, the Houston First Court held that the

question would be determined by looking at cases involving closely held

corporations, since they operate much the same way under Texas law. Allen v. Devon

Energy Holdings, LLC, 367 S.W.3d 355, 386 (Tex. App.–Houston [1st Dist. 2012],

- 62 -
pet. granted, dism’d by agmt). After this review, the Court held: “We therefore

decline to recognize such a fiduciary duty between members of an LLC . . ..” Allen

v. Devon Energy Holdings, LLC, 367 S.W.3d at 391. Accord, Suntech Processing

Systems, LLC v. Sun Communications, Inc., 2000 WL 1780236 *6 (Tex. App.–Dallas

2000, pet. denied) (unpublished opinion): “The statue governing limited liability

companies does not mandate a fiduciary relationship between members.”

This is not the end of the analysis, however. The credible evidence shows

that Zaidi was not a manager of the Landlord in anything but name only at any

material time. The Landlord company agreement allowed full delegation of all duties

of the managers, and the evidence shows that Shah assumed control over all

management duties and powers of the Landlord from an early date, not later than

February 1, 2007. The evidence also shows that Shah delegated certain ministerial

duties of the Landlord to Apex TMG. Shah unilaterally made all decisions for the

Landlord concerning loans to the Hospital and other financial dealings between the

Landlord and the Hospital. He unilaterally prepared and sent the January 2008 memo

to the Hospital that set out the loans that he had made in 2007 and wanted repaid, or

at least discussed. He unilaterally accepted the Hospital’s January 17, 2008 response,

asking that he work with the Hospital to arrive at a plan for repayment. He

unilaterally ratified the circumstances detailed in the memo and response for almost

two years. He unilaterally made all decisions about the concessions and

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accommodations that were requested by the Hospital in 2007, 2008, and 2009. He

unilaterally made the decision to declare the Hospital in default and to institute

eviction proceedings.

Shah was the only actual manager of the Landlord during 2007, 2008, and

2009, and Zaidi at those same times was the only actual representative of the general

partner of the Hospital in dealings with the Landlord. The division of labor and

responsibility, legal and actual, between Shah and Zaidi/Apex TMG was open and

obvious and was fully understood by them and by the two entities. Zaidi did not

purport to represent or act for the Landlord in any negotiations or transactions

between the Hospital and the Landlord, and Shah did not purport to represent or act

for the Hospital in any of these negotiations or transactions.

Apex TMG was certainly a fiduciary with respect to the Hospital and its

limited partners. Brazosport Bank of Texas v. Oak Park Townhouses, 889 S.W.2d

676, 683 (Tex. App–Houston [14th Dist.] 1994, writ denied). Zaidi acted for the

general partner as its representative, but he was not the fiduciary. Zaidi was

designated co-manager of the Landlord with and by Shah, purely as a matter of

convenience to Shah. After his usefulness to Shah at the closing was behind them,

he neither had nor exercised any power or authority as a manager of the Landlord.

As Zaidi testified, and Ms. Saqer and Perryman confirmed, Shah took over complete

control of the management of the Landlord, and Zaidi took charge of managing the

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Hospital, for the general partner and for TMG.

Only if form is elevated over substance could Zaidi be said to have had the

type and extent of control that can give rise to a fiduciary duty. Allen v. Devon

Energy Holdings, LLC, 367 S.W.3d at 395-96 (“We conclude that there is a formal

fiduciary duty [in an LLC] when (1) the alleged fiduciary has a legal right of control

and exercises that control by virtue of his status as the majority owner and sole

member-manager of a closely-held LLC and (2) either purchases a minority

shareholder’s interest or causes the LLC to do so though a redemption when the result

of the redemption is an increased ownership interest for the majority owner and sole

manager.”) Under this analysis, Zaidi is not a fiduciary.

Even when groups actually having overlapping fiduciaries engage in

transactions with each other, it is not the law that these transactions are automatically

illegal or invalid, even if they are subject to scrutiny and can be presumed fraudulent.

No fiduciary relationship arises between the two entities who are doing business.

Brazosport Bank of Texas v. Oak Park Townhouses, 889 S.W.2d at 684. It is only

when the challenged transaction was entered into by two entities who were

represented by the same fiduciary that the presumption arises. That is not our case.

In Strebel v. Wimberly, 371 S.W.3d 267 (Tex. App.–Houston [1st Dist.]

2012, pet. denied), Strebel and Wimberly were involved in both an LLC and a limited

partnership, and Wimberly sued claiming that Strebel had caused him damage by

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reducing his interests and distributions from the enterprise as a whole. The LLC was

governed by Delaware law, which expressly provides that fiduciary duties exist in

favor of the members. (As shown above, this is not the case in Texas.) The limited

partnership agreement, on the other hand, contained a provision expressly waving any

fiduciary duties of the general partner, which Strebel controlled. Strebel contended

that Wimberly’s claims had to fail because it was actions taken at the general partner

level that had caused the injuries of which Wimberly complained, and no fiduciary

duties existed at that level.

The First Court agreed that it had to “determine in which capacity Strebel

was functioning when performing the specific actions that Wimberly claims gave rise

to damages for breach of fiduciary duty.” Strebel v. Wimberly, 371 S.W.3d at 283.

Because the Court concluded that these actions had taken place at the general

partnership level, where no fiduciary duties existed, they reversed the judgment for

Wimberly.

Non-liability in this case is even more clear, because there were not any

transactions between the Hospital the Landlord that involved overlapping fiduciaries

or even fiduciaries involved in different capacities. The Hospital engaged in the loan

and other transactions with the Landlord, and the general partner, who was

represented by Zaidi, as Shah and everyone else knew would be the case from the

beginning, was not a fiduciary vis-s-vis the Landlord. Zaidi, who might be called a

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fiduciary of the Landlord if form is elevated over substance, did not function in that

capacity in any single instance involving the operating loans and other transactions

between the Landlord and the Hospital. The actions complained of by Plaintiffs as

having given rise to damages for breach of fiduciary duty were not in fact taken by

a person with fiduciary duties in the actual, specific transactions involved. There is

no liability of Zaidi for breach of fiduciary duty.

Chagla’s case is easier. There is no evidence in the record of any specific or

special relationship with either Plaintiff out of which a fiduciary duty could have

arisen. He cannot be liable for the breach of a fiduciary duty that he did not have.

Causation is an essential element of each cause of action Plaintiffs asserted.

Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 160-61 (Tex.

1995). Plaintiffs had the burden of establishing that Defendants’s acts or omission

were the cause-in-fact of its damages. Jefferson Assocs., Ltd., 896 S.W.2d at 161

(“[t]he element common to both proximate cause and producing cause is actual

causation in fact”) (citations omitted). After the ratification of January 2008, all of

the damages claimed by Shah and the Landlord that allegedly occurred after 2009, up

to 2012, including loans, interest payments, and the like, are simply too remote to

have been proximately caused by Defendants.

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 10. Defendants cannot be held liable for fraudulent inducement when they
did not enter into any contracts with the Plaintiffs as counterparties.

Plaintiffs assert that “Defendants” are liable for fraudulent inducement of

unspecified “contracts,” but there were no contracts between any Defendant and

either Plaintiff in which a Plaintiff and a Defendant were counterparties, that is,

principals. There is no liability for fraudulent inducement in this case.

Fraudulent inducement can only exist as a cause of action with respect to a

contract between a Plaintiff and a Defendant. “Fraudulent inducement ‘is a particular

species of fraud’ that requires proof of the common law elements of fraud and a

contract between the parties.” Haase v. Glazner, 62 S.W.3d 795, 798–99 (Tex.

2001, emphasis added). The lease in this case was a contract between the Landlord

and a party, and that party was the Hospital, which is no longer a party to this case.

There are no contracts in this case in which a Defendant and a Plaintiff are

counterparties. Zaidi and Shah were both parties, as members, of the Landlord and

Apex TMG, but they were not principals who contracted with each other. After his

demand for participation, Shah and TMG were both parties to the 2007 joint venture

involving the Hospital management contract, but no harm has been asserted arising

from that contract. There are no others. Fraudulent inducement is impossible in this

case.

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 11. Defendants cannot be held jointly and severally liable for civil
conspiracy when there was no evidence, or alternatively insufficient
evidence, of an agreement by Defendants to accomplish an unlawful
purpose, and no evidence, or alternatively insufficient evidence, of an
intent to harm Plaintiffs.

The trial court found and concluded that Defendants engaged in a civil

conspiracy (FF 17 and CL 9) , at Plaintiffs’ urging, yet the record is devoid of

evidence meeting all the required elements.

The elements of civil conspiracy are as follows:

1. The defendant was a member of a combination of two or more persons.

2. The object of the combination was to accomplish an unlawful purpose,

or a lawful purpose by unlawful means.

3. The members had a meeting of the minds on the object or course of

action.

4. One of the members committed an unlawful, overt act to further the

object or course of action.

5. The plaintiff suffered injury as a proximate result of the wrongful act.

Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex. 1983).

Civil conspiracy requires specific intent to agree to accomplish an unlawful

purpose (or a lawful purpose by unlawful means) and the parties must be aware of the

harm or wrongful conduct at the inception of the agreement. Triplex Communications

Inc. v. Riley, 900 S.W.2d 716, 719 (Tex. 1995). Merely proving a joint intent to

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engage in the conduct that results in an injury is not sufficient to establish a claim for

civil conspiracy. Ghidoni v. Stone Oak, Inc., 966 S.W.2d 573, 585 (Tex. App.—San

Antonio 1998, pet. denied). Plaintiffs must show that the conspirators not only

intended to engage in common conduct, but that they intended the resulting harm. Id.

Schlumberger Well Surveying Corp. v. Nortex Oil & Gas Corp., 435 S.W.2d

854 (Tex. 1968), is insightful. Nortex sued Schlumberger for damages allegedly

resulting from fraud perpetrated by sellers of oil and gas leasehold estates.

Schlumberger did not sell the leasehold estates, but Nortex claimed that it was a

participant in a “conspiracy” that made the fraud possible. Id. at 885. Nortex had

purchased certain interests in mineral leasehold estates that were serviced by

Schlumberger. Id. at 855-856. It was later discovered that the leases were illegally

deviated and illegally producing oil. Id. at 855. To protect its customers that might

have been subject to investigation for illegally deviated wells and production,

Schlumberger developed alternate billing procedures, destroyed a library of logs, and

advised employees to have poor memories when the investigations began. Id. at 856.

Nortex argued that these facts supported Schlumberger’s liability for civil

conspiracy, but the Supreme Court disagreed. Instead, the Court found that “only by

suspicion and speculation can Schlumberger be linked to the conspiracy in two vital

respects, e.g., knowledge of the object of the conspiracy and intention to injure

others.” Id. The Court reasoned that a party without knowledge of the object and

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purpose of the conspiracy cannot be a co-conspirator, because he cannot agree, either

expressly or tacitly, to the commission of the wrong about which he knows nothing.

Id. at 857.

The Court found that though Schlumberger had good reason to believe that

a conspiracy to defraud Nortex existed, there was no evidence to support a reasonable

inference that Schlumberger had actual knowledge that the wells were being drilled

illegally, or that Schlumberger intended to participate in such a wrong. Id.

There is no evidence in this case of the essential elements of civil conspiracy

Just as in Schlumberger, there is nothing other than “suspicion and speculation” to

link any Defendant to any alleged conspiracy of joint conduct.

12. Defendants cannot be held jointly and severally liable on a theory of
alter ego when there was no evidence, or alternatively insufficient
evidence, that the only corporation they owned was used to commit an
actual fraud on Plaintiffs for Defendants’ direct personal benefit.

Likewise, the record evidence simply does not support the trial court’s

conclusion that “the corporate separateness of Prestige, Tenant, US TMG [which was

not even a Defendant against which the Judgment was rendered] , and Apex TMG (on

the one hand) from Mr. Zaidi and Mr. Chagla (on the other hand) are disregarded.”

(CL 9) The court made no findings and the record reveals no evidence that suggest

that these corporate Defendants engaged in fraud sufficient to invoke alter ego

liability.

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 The corporate veil is pierced: (1) when a corporation is the alter ego of its

owners or shareholders; (2) when a corporation is used for an illegal purpose, and (3)

when a corporation is used as a sham to perpetrate a fraud. S.E.C. v. Resource

Development Intern., LLC, 487 F.3d 295, 302 (5th Cir. 2007). Examples of when the

corporate form has been used as part of a fraudulent device to achieve an inequitable

result, so as to warrant disregard of the corporate form to impose liability on its

owners, arise when the corporate structure has been abused to perpetrate a fraud,

evade an existing obligation, achieve or perpetrate a monopoly, circumvent a statute,

protect a crime, or justify a wrong. SSP Partners v. Gladstrong Investments (USA)

Corp., 275 S.W.3d 444, 451 (Tex. 2008). Doctrines that support piercing the

corporate veil do not create substantive causes of action; piercing the corporate veil

merely expands the scope of potential sources of relief by extending to individual

shareholders or other business entities what is otherwise only a corporate liability.

In re Texas American Exp., Inc., 190 S.W.3d 720, 726 (Tex. App. – Dallas 2005, no

pet.).

The Texas limited liability company act, section 101.114 of the Texas

Business Organizations Code, provides that “Except as and to the extent the company

agreement specifically provides otherwise, a member or manager is not liable for a

debt, obligation, or liability of a limited liability company . . .” Case law has created

an equitable exception where it is shown that the LLC was used to perpetrate an

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actual fraud for the member’s direct personal benefit. The burden of showing “direct

personal benefit” is on the Plaintiff and is heavy. General benefit to the LLC and

thereby the member’s interest is not sufficient. The member has to receive money

directly. The statutory protections afforded to members and managers of an LLC give

way only when a plaintiff can show that the LLC was used for the purpose of

perpetrating, and did perpetrate, an actual fraud for the member or manager’s “direct

personal benefit.” Shook v. Walden, 368 S.W.3d 604, 621 (Tex. App.–Austin 2012,

pet. denied) (policies governing piercing veil of corporation also apply to limited

liability companies).

Again, there is no direct evidence that either Prestige, a corporation, or Apex

TMG, an LLC, committed the kinds of overt frauds required to pierce their corporate

veils and impose liability for their acts upon either Zaidi or Chagla. There is only

insinuation and a dose of guilt by association. Specifically with respect to Apex

TMG, there is absolutely no evidence that Zaidi received a direct personal benefit

from its actions, wrong or right, sufficient to allow the piercing of its veil under the

LLC statute.

13. Chagla, who affirmatively pleaded the statute of limitations, cannot be
held liable for tort claims arising from actions that occurred more than
two years prior to his having been added as a defendant in this lawsuit
in December 2010.

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 To avoid burdening this Brief, it is elementary that any cause of action that

has a statute of limitations of two years bars any recovery against Chagla for any

actions that occurred before December 30, 2008.

14. The trial court committed harmful error when it improperly found all
inferences against Chagla simply because he did not appear for trial
when the court had previously granted Chagla’s motion to quash a
subpoena to appear due to his ill health, which prevented him from
traveling from his home in Pakistan, and plaintiffs never requested
Chagla’s deposition.

Again to avoid further burdening this Brief, Appellants believe that this Issue

has been dealt with in Appellants’ argument on Issue 8 herein.

15. A default judgment cannot be rendered against Apex TMG on the basis
that it had forfeited its corporate charter prior to trial when it is clear that
Apex TMG appeared and answered and participated in trial only to
defend itself and not seek affirmative relief.

The trial court’s apparent punitive bent toward Defendants was illustrated

well in its conclusion of law on this issue. The law could not be clearer, and it was

discussed on the day the trial started, before the evidence began (2RR 29:11–32:14).

Despite the language of section 171.252 of the Texas Tax Code, which by

its terms denies a corporate entity the right to “sue or defend in a court of this state”

if its charter has been forfeited, it has been the settled law in Texas for years that a

corporate entity that has forfeited its charter may indeed nevertheless defend itself.

In Vanscot Concrete Co. v. Bailey, 853 S.W.2d 525, 526-27 (Tex. 1993), the Texas

Supreme Court held that it had been error for the Court of Appeals to dismiss

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Vanscot’s appeal. A corporate Defendant that has forfeited its charter has the right

to defend itself, even to the point of prosecuting an appeal. Accord, Cruse v.

O’Quinn, 273 S.W.3d 766, 770-71 (Tex. App.–Houston [14th Dist. 2008, pet.

denied). The rights to defend itself and to appeal an adverse judgment would be

hollow indeed if all the entity could appeal was a default judgment granted because

its charter had lapsed. If it can defend itself by appealing, it can defend itself by

participating in trial and asserting defenses. See Kyle v. Zepeda, 2013 WL 2246030

at *3 (Tex. App.–Houston [1st Dist.] 2013, no pet.) (“the statute has historically been

limited to prohibit defendants from bringing cross actions, not from merely defending

lawsuits.”)

This conclusion is so obviously wrong that it begs the question why the trial

court even contemplated it unless it simply decided that “Defendants” were wrong

about everything, regardless of what any contrary evidence might show.

CONCLUSION AND PRAYER

For all these reasons, the Judgment of the trial court should be reversed, and

this case should be remanded for a new trial on all issues of liability and damages.

March 17, 2015 Respectfully submitted,

LAW OFFICES OF DOUGLAS R. LITTLE

By /s/ Douglas R. Little
Douglas R. Little
State Bar No. 12416600
- 75 -
 The Lyric Centre, Suite 900
440 Louisiana Street
Houston, Texas 77002
713.275.2069
doug@douglasrlittle.com

CAMPBELL, HARRISON & DAGLEY
L.L.P.

By /s/ Robin L. Harrison
Robin L. Harrison
State Bar No. 09120700
909 Fannin Street, 40th Floor
Houston, Texas 77010
(713) 752-2332
(713) 752-2330 Facsimile

COUNSEL FOR APPELLANTS ADEEL
ZAIDI, A. K. CHAGLA, PRESTIGE
CONSULTING, INC., AND APEX KATY
PHYSICIANS – TMG, LLC

CERTIFICATE OF COMPLIANCE

I hereby certify that this brief was produced on a computer using

WordPerfect 12 software and contains 18,716 words, as determined by the software’s

word-count function, excluding those sections of the brief listed in Texas Rule of

Appellate Procedure 9.4(i)(1) as being excludable.

/s/ Douglas R. Little
Douglas R. Little

- 76 -
 CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing pleading has

been served upon all counsel listed below via eFileTexas.gov or electronic mail on

the 17th day of March, 2015:

Jeremy Gaston
Andrew K. Meade
Hawash Meade, et al.
2118 Smith Street
Houston, Texas 77002

/s/ Douglas R. Little
Douglas R. Little

- 77 -
APPENDIX
 APPENDIX TABLE OF CONTENTS

1. Judgment of July 24, 2014

2. Findings of Fact and Conclusions of Law of October 3, 2014

3. Supplemental Clerk's Record 1

4. Supplemental Clerk's Record 2

5. Supplemental Clerk's Record 3

6. Supplemental Clerk's Record 4
TAB 1
 Cause No, 2009-02578

APEX KATY PHYSICIANS, L.L.C, IN THE DISTRICT COURT OF
Plaintiff,

vs.
HARRIS COUNTY, TEXAS
ADEEL ZAIDI, ET AL.
Defendants, 61st JUDICIAL DISTRICT

Consolidated with Cause No. 2009-03055

STEPHEN M, KOCH, M.D., Individually, IN THE DISTRICT COURT OF
et al.,
Plaintiffs,

vs.
HARRIS COUNTY, TEXAS
PANKAJ K. SHAH, M.D., et al.
Defendants, 11th JUDICIAL DISTRICT

FINAL JUDGMENT

On March 17, 2014, this case was called for trial.

Plaintiff, Apex Katy Physicians, LLC (the "Landlord"), appeared through its corporate

representative and through its attorney. Plaintiff Pankaj K. Shah ("Dr. Shah"), appeared in

person and through his attorney.

Defendant, Adeel Zaidi appeared in person and through his attorney. Defendant, AK

Chagla appeared only through his attorney. Defendant, Prestige Consulting, Inc., appeared only

through its attorney. Defendant, Apex Long Term Acute Care — Katy, L.P., appeared only

through its attorney. Defendant, Apex Katy Physicians — TMG, LLC, appeared only through its

attorney, Defendant, US TMG, LLC, appeared only through its attorney.

All parties announced ready for trial.

Plaintiffs sued Defendants asserting causes of action for civil conspiracy; alter ego;

common law fraud; statutory fraud under the Texas Securities Act; statutory fraud under

1
section 27.01, TEX. Bus. & COM, CODE; fraudulent inducement; fraudulent transfer; unjust

enrichment; constructive trust; money had and received; breach of fiduciary duty; fraud by non-

disclosure; preferential transfer; financial fraud and concealment; gross negligence; negligent

misrepresentation; breach of contract; tortious interference with contract; violation of the Texas

Theft Liability Act; accounting; contribution; and promissory estoppel.

All matters in controversy, legal and factual, were submitted to the court for its

determination. The court heard the evidence and arguments of counsel and announced its

decision for Plaintiffs.

The court hereby RENDERS judgment for Plaintiffs against Defendants Adeel Zaidi,

A.K. Chagla, Prestige Consulting, Inc., Apex Katy Physicians-TMG, LLC, and Apex Long Term

Acute Care-Katy, L.P.

1. The court orders that the Landlord recover damages from defendants, jointly and

severally, in the sum of $4,071,584.00, prejudgment interest on that sum at the annual rate of

5% per annum, in the sum of $1,119,684.50, postjudgment interest on the total sum at the annual

rate of 5% per annum, and court costs.

2. The court orders that Dr, Shah recover damages from defendants, jointly and

severally, in the sum of $9,336,920.00, prejudgment interest on that sum at the annual rate of 5%

per annum, in the sum of $2,567,653.00, postjudgment interest on the total sum at the annual rate

of 5% per annum, and court costs.

3. The Landlord has requested exemplary damages. The court has made the findings

required by Chapter 41, TEx, CIV. PRAC. & REM. CODE, as set forth in the court's findings of fact

and conclusions of law. The court therefore orders that the Landlord recover exemplary damages

as follows:

a. from Adeel Zaidi: $8,143,168.00;

b. from AK Chagla: $2,035,792.00.

2
 4. Dr. Shah has requested exemplary damages. The court has made the findings

required by Chapter 41, TEX. CIV. PRAC. & REM. CODE, as set forth in the court's findings of fact

and conclusions of law. The court therefore orders that Dr. Shah recover exemplary damages as

follows:

a. from Adeel Zaidi: $18,673,840.00;

b. from AK Chagla: $4,668,460.00.

5. Plaintiffs requested attorney fees under the Texas Securities Act, TEx. Civ. REV.

STAT. Art. 581-33-1(3)(4); TEx. Civ. PRAC. & REM. CODE §§ 38.001, 134.005; and TEX. Bus. &

COMM. CODE § 27.01. The parties stipulated that the Landlord incurred reasonable and necessary

attorney fees in the amount of $175,000.00 and that Dr. Shah incurred reasonable and necessary

attorney fees in the amount of $175,000.00. The court orders Defendants to pay the Landlord

$175,000.00 for attorney fees and to pay Dr. Shah $175,000.00 for attorney fees.

6. The court FINDS that defendants engaged in a civil conspiracy against plaintiffs

and finds that each of the defendants is jointly and severally liable for plaintiffs' damages, except

with respect to plaintiffs' exemplary damages.

7. All relief not granted is expressly denied.

8. This judgment is final, disposes of all claims and all parties, and is appealable.

9. The court orders execution to issue for this judgment.

JUL 2 4 2014
DATE SIGNED

3
TAB 2
 Cause No. 2009-02578

APEX KATY PHYSICIANS, L.L.C, IN THE DISTRICT COURT OF
Plaintiff,

vs.
HARRIS COUNTY, TEXAS
ADEEL ZAIDI, ET AL.
Defendants, 61st JUDICIAL DIS
L.
Consolidated with Cause No. 2009-03055

STEPHEN M. KOCH, M.D., Individually, IN THE DIki!-t, T COURT OF
et al.,
Plaintiffs,
m
vs. 0
S COUNTY, TEXAS
PANKAJ K. SHAH, M.D., et al.
Defendants, tit JUDICIAL DISTRICT

Findings of Fact onclusions of Law

Stipulations an liminary findings and elections

The Court takes judicial of the docket of this case and the contents thereof, and of

the parties' post-trial stipulati as follow:1

i. Dr. Shah qilandlord respectively incurred reasonable and necessary attorneys'
fees in t140ase of $175,000.00 each.

A oCrnla founded Prestige Consulting, Inc. and presently owns approximately
2 deel Zaidi owns the remainder.

"Illfre Landlord purchased the real property located at 25660 Kingsland Blvd, in
aty, Texas (the "Property") and closed the transaction on March 22, 2007 (the
"Closing").

iv. The Landlord's members did not unanimously consent nor approve the
$9,000,000.00 MetroBank mortgage used to fund the $13,500,000.00 purchase of
the Property.

1 The parties approve these stipulations as to form and substance.

1 RECORDER'S MEMORANDUM
This instrument is of poor quality
at the time of imaging
 At trial, the Court heard testimony from Adeel Zaidi in his individual capacity and as the

representative of Prestige Consulting, Inc, and the Court FINDS that Adeel Zaidi is a

!74
sophisticated businessman who understood the transactions at issue and that Adeel Zaidi was not

a credible witness.

At trial, the Court heard testimony from Dr. Shah, and the Court / a S that Dr. Shah
was a credible witness. 0
The Court ELECTS to make all reasonable inferences the evidence against AK
ry
Chagla, except as between AK Chagla and Adeel Zaidi.

Findings of Fact e
At the March 17-20, 2014 trial, the parties p ed their respective cases. Considering

the evidence at trial, docket and pleadings in this and the parties' stipulations, the Court:

1. FINDS that AK Chagla was y served with notice of this lawsuit in Houston
and was validly served witl a 'al subpoena, but he failed to personally appear
for trial. 0

2. FINDS that Defen ? do business, individually and collectively, as the
Turnaround Mana t Group.

3. FINDS that Def ants, individually and collectively, owed fiduciary duties to
the Plaintiffs, *vidually and collectively, including the duties of candor,
loyalty, an sure.
D.
4. FINDS ghat Defendants, individually and collectively made material
0a
misree.%*-ntations to the Plaintiffs, individually and collectively.

5. F etob that Defendants, individually and collectively, failed to disclose material
s to the Plaintiffs, individually and collectively.

6,`FINDS that Defendants, individually and collectively, had conflicting interests in
the transactions at issue in their capacity as fiduciaries to Landlord, Tenant, Apex
TMG, Dr. Shah, and Prestige.

7. FINDS that the Defendants, individually and collectively, favored themselves and
their affiliates over the Plaintiffs.

8. FINDS that the Defendants understood and could foresee that the Defendants'
actions, inactions, guidance, misrepresentations, and lack of disclosures could
2
 •- k

cause harm to the Plaintiffs, individually and collectively.

9. FINDS that the Defendants knew or recklessly disregarded that the Defendants'
actions, inactions, guidance, misrepresentations, and lack of disclosures posed an
extreme risk of harm to the Plaintiffs, individually and collectively, but that the
Defendants acted without regard to the consequences of their actions, inactions,
disclosures, and non-disclosures;

10. FINDS that the Defendants, individually and collectively, k oncert and with
malice, knowingly and intentionally conspired to secure (. Shah's investment
in Landlord, (b) the Landlord's purchase of the Prop: K t at Closing, (c) and
Plaintiffs' execution of all documents related to thNo vestment and Closing,
through deception, to their detriment for the benefit '..N.1-)e Defendants.
kr
I;,<

11. FINDS that the Defendants, individually and :'47ectively, in concert and with
malice, amended the Landlord's secure tette redit that was put in place and
intended to secure investment in Landlord, dlord's purchase of the Property,
and the Landlord's lease with Tenant, wi ,,v consent, authority, or disclosure to
Plaintiffs to Plaintiffs' detriment for theP4.'endants' benefit.

12. FINDS that the Defendants, indiv ally and collectively, in concert and with
malice, failed to ever pay the tong c ed rent in full as owed by the Tenant to the
Landlord under the terms a editions of the Landlord-Tenant lease, which
deprived the Landlord of fu • -,..)- cessary for its continued business operations, to
the Landlord's detriment b r the Defendants' benefit.

14. FINDS that the Defe s, individually and collectively, in concert and with
malice, paid thems their officers, and related parties in preference to the
Plaintiffs from hat directly and indirectly belonged to Plaintiffs to their
detriment for the Pendants' benefit.

14. FINDS that ndants, individually and collectively, in concert and with malice
took poss s on of Landlord investor funds intended for the Landlord, but failed
to acco for all of the funds to the Landlord or to turn over or use all of the
funds' the Landlord's benefit, to the Landlord's detriment but for the
D nts' benefit.

15. 1*DS that Defendants, individually and collectively, in concert and with malice,
ok possession of Landlord investor funds intended for the Landlord and paid by
r. Waseem Peracha and Mac Haik, yet did not turn these funds over to the
Landlord to the Plaintiffs' detriment for the benefit of the Defendants.

16. FINDS, with regard to this Court's previous Partial Summary Judgment entered
against Dr. Shah, that the Defendants, individually and collectively, in concert
and with malice caused Dr. Shah's breach of the Landlord Company Agreement
through deceptive inducement of the execution of the relevant documents; that the
Defendants had the same standing as Dr. Shah, executed the same documents as
Dr. Shah, and induced Dr. Shah to breach the company agreement in question
3
 through misrepresentations surrounding Defendants having obtained the
necessary consent, which they had not.

17. FINDS that the Defendants engaged in this acts, omissions, representations and
non-disclosures individually and collectively in conspiracy.

18. FINDS that the Defendants engaged in these acts, omissions, representations and
non-disclosures to the Plaintiffs' detriment but for the Defendants' benefit.

19. FINDS that the Defendants engaged in these acts, omissio presentations, and
non-disclosures and that this proximately caused h d damages to the
Plaintiffs, individually and collectively.

Conclusions of Law
O
Plaintiffs sued Defendants on a variety of legal theor he Court, applying the law to

the findings of fact set forth above, has reached the folio conclusions of law:

Preliminary matters.

The Court concludes that default judgme hall be entered against Apex TMG because

Apex TMG forfeited its corporate privilege r to trial.

The Court concludes that Mr. Z , with malicious intent to deceive the Court and with

knowledge of each statement's me made false statements under oath. The Court finds that

Adeel Zaidi committed perjury ore than one occasion during his March 17, 18, and 20, 2014

testimony.
o

The Court con- `s-•es that that Mr. Chagla failed to comply with a properly served

subpoena to testi trial and thus enters the following sanctions: (a) the authenticity of Mr.

Chagla's sig e and notary seal are established for all purposes against him and his co-

conspirator; (b) as between Mr. Chagla and Plaintiffs, the Court will resolve all doubts and

indulge all reasonable inferences supported by evidence against Mr. Chagla; and (c) as between

Mr. Chagla and Mr. Zaidi, the Court will resolve all doubts and indulge all reasonable inferences

supported by evidence against Mr. Zaidi.

4
Defendants' fraud.
Common Law Fraud — The Court concludes that Defendants knowingly made material

representations to Dr. Shah and to the Landlord that were false with the intent that Dr. Shah and

the Landlord would rely on those false representations. The Court concludes that Dr. Shah and

the Landlord in fact relied on those false representations, causing therk\lr.r ury. The Court
(re
concludes that Mr. Zaidi and Mr. Chagla are liable for fraud against the I ntiffs.

Statutory Fraud (Texas Business & Commerce Code § — The Court concludes

that the underlying transactions in this lawsuit involved real e hat Mr. Zaidi with the aid of

Mr. Chagla, made false representations of existing materia and false promises to Plaintiffs,

intending that Plaintiffs would rely on those false esentations and promises; and that

Plaintiffs in fact relied on those false repress tions and promises in entering into the

transactions. The Court concludes that Mr. and Mr. Chagla are liable for their statutory

fraud under Texas Business & Commerce § 27.01.

Fraudulent Inducement — %ourt concludes that several contracts existed between
O
Plaintiffs and Defendants and, mg previously found the elements of fraud, the Court

concludes that Plaintiffs we4bduced to enter into each of those contracts as a result of

Defendants' fraud. T1- ourt further finds that the Defendants fraudulently induced the

Plaintiffs to enter M n everal contracts with third parties and that it was foreseeable that the
O
Plaintiffs would fer damages as a result. The Court concludes that Mr. Zaidi and Mr. Chagla

are liable fo k udulently inducing Plaintiffs to enter into those contracts.

Fraudulent Transfer — The Court concludes that Defendants, through the Apex TMG,

was a debtor with respect to the Landlord under Texas Business & Commerce Code § 24.002;

that Apex TMG made transfers in violation of Texas Business & Commerce Code §§ 24.005 and

24.006; and that Landlord's claims against the Apex TMG arose before any of those transfers

5
were made. The Court concludes that the Apex TMG are liable for fraudulent transfers under

Texas Business & Commerce Code §§ 24.005 and 24.006.

Fraud by Non-Disclosure — The Court concludes that Mr. Zaidi, as fiduciary of the

Landlord, concealed material information in violation of his fiduciary duty to the Landlord,

which includes, but is not limited to: concealing the Landlord's tru ancial position;

concealing Apex TMG's possession of Landlord's funds; concealing` fendants' real estate

commissions; concealing the waiver of the Landlord's lien itenant's receivables; and

concealing the amendment of the letter of credit that was to Landlord's rents. The Court

concludes that Mr. Zaidi are liable for fraud by non-dis pure to the Landlord and that Mr.

Chagla participated through his notarization of key d ents, including his double notarization

of the Landlord Waiver to conceal that it was back.ted.

Civil conspiracy and alter ego.
The Court concludes that Mr. Zai4r. Chagla, Prestige, Apex TMG, Tenant, and US

TMG engaged in a civil conspiracy and the Plaintiffs, to breach fiduciary duties owed to

the Plaintiffs, to misappropriate ntiffs' funds, to conceal the appropriation of the Plaintiffs'

funds, and to invade the P4itiffs' property rights, thereby causing Plaintiffs' substantial
r0"
,
financial injury. The Ct4_4 finds and concludes that the Defendants are jointly and severally

liable for all damage lsing as a proximate result of Defendants' conspiracy. The Court further
O
concludes that t rporate separateness of Prestige, Tenant, US TMG, and Apex TMG (on the

one hand) f Mr. Zaidi and Mr. Chagla (on the other hand) are disregarded, and that Mr. Zaidi

and Mr. Chagla should each be held individually liable, jointly and severally, for the liabilities of

Prestige, Tenant, US TMG, and Apex TMG.

Defendants' breaches of fiduciary duty.
The Court concludes that a fiduciary owes his beneficiaries a strict duty of good faith and

6
candor, as well as the general duty of full disclosure respecting matters affecting the

beneficiaries' interests; that all transactions between a fiduciary and his beneficiaries are

presumptively fraudulent and void therefore, the burden lies on the fiduciary to establish the

validity of any particular transaction in which he is involved; that where a fiduciary relationship

exists, the burden is on the fiduciary to show that he acted fairly and infor he other party of

all material facts relating to the challenged transaction.
VJ
The Court concludes that Mr. Zaidi owed fiduciary duties ,e Landlord, to the Tenant,

to the Apex TMG, and to Dr. Shah as a member of each. T bourt concludes that Mr. Zaidi

favored himself and his companies above all others; that ,I- 0i'vored the Tenant and Apex TMG

over the Landlord and Dr. Shah; that Mr. Zaidi breacerei s fiduciary duties to the Plaintiffs; and

that the breach injured the Plaintiffs while benef g Mr. Zaidi. The Court concludes that Mr.

Zaidi is liable for breach of the fiduciary due he owed to the Plaintiffs. The Court concludes

that Mr. Chagla participated in Mr. Zaidi' eaches of fiduciary duty through his notarization of

key documents.

Defendants' gross negligence.
The Court conclud s 1 Mr. Zaidi's conduct, beginning in the summer of 2006,

involved an extreme dege of risk, considering the probability and magnitude of the potential

harm to others. Mr. tOi , as a sophisticated business man, had actual, subjective awareness of

the risk involve I -.I t nevertheless proceeded with conscious indifference to the rights and
•
welfare of o including the Plaintiffs.

Defendants' negligent misrepresentations.
The Court concludes that Mr. Zaidi and Mr. Chagla made misrepresentations in the

course of their business and in transactions in which they had a pecuniary interest, for the

guidance of Plaintiffs in the course of Plaintiffs' business, without exercising reasonable care or

7
 competence in obtaining or communicating the information, and that Plaintiffs suffered

pecuniary loss as a result. The Court concludes that the actions of Mr. Zaidi and Mr. Chagla

involved an extreme degree of risk and that Mr. Zaidi and Mr. Chagla had actual, subjective

awareness of that risk but nevertheless proceeded in conscious indifference of the rights, safety,

and welfare of the Plaintiffs. The Court concludes that Defendants be held (1: Ie to Plaintiffs for

grossly negligent misrepresentation.

Plaintiffs' contract claims.
Breach of Contract — The Court concludes that seve id contracts existed between

Plaintiffs and Defendants, including company agreements, es, mortgage documents, and sale

and purchase agreements; that the Plaintiffs performe r obligations and that the Defendants

did not; and that Plaintiffs sustained damages as, ult. The Court concludes that Defendants

are liable to Plaintiffs for breach of these cant

Tortious Interference with Cont — The Court concludes that the Landlord's lease

with Tenant, as well as the mortgag; merits, were contracts subject to interference; that Mr,

Zaidi, Mr. Chagla, and all Defe is willfully and intentionally interfered with these contracts
L.
by withholding rent and destr i the Landlord's interests securing the payment of rent; that the
O
interference proximatel sed Plaintiffs damages; and that Plaintiffs suffered actual damages
41.
and loss. The Cou eludes that the Defendants are liable for tortious interference.

Any con on of law more properly characterized as a finding of fact is hereby adopted

as such. A inding of fact more properly characterized as a conclusion of law is hereby

adopted as such.

DATED: OCT 0 8 2014
TAB 3
 NO. 2009-02578

APEX KATY PHYSICIANS, L.L.C., IN THE DISTRICT COURT

Plaintiff,

VS.
HARRIS C Y, TEXAS
ADEEL ZAIDI, APEX LONG TERM
ACUTE CARE — KATY, L.P., APEX
KATY PHYSICIANS — TMG, L.L.C.,
and US TMG, L.L.C.,

Defendants. 61st JUDICIAL DISTRICT

ORDER REGARDING DEPOSITION CUT R GARY PERRYMAN
•
The Court having considered Defendants', y proffered excerpts from the deposition of

Gary Perryman, attached hereto as Exhibit 1teloy

ORDERS as follows: 0

1. The excerpts listed upon ached Exhibit 2 are admitted into evidence.

2. The excerpts listed u Qhe attached Exhibit 3 are not admitted into evidence but are

made a part of Defendants xceptions by this Order. SEP 2 2 2014

SIGNED at Hou‘).n, Harris County, Texas, on

-•=—.) Chris Daniel
E
District Clerk

SEP 2 2 2014
Time:
Harris County, Texas
By
Deputy

RECORDER'S MEMORANDUM
Thjs instrument is of poor quality
at the time of imaging
 NO. 2009-02578

APEX KATY PHYSICIANS, L.L.C., IN THE DISTRICT COURT OF

Plaintiff,

VS.
HARRIS COUNTY, TEXAS
ADEEL ZAIDI, APEX LONG TERM
ACUTE CARE — KATY, L.P., APEX
KATY PHYSICIANS — TMG, L.L.C_,
and US TMG, L.L.C.,

Defendants. 61st JUDICIAL DISTRICT

DEFENDANTS' OFFER FROM THE
DEPOSITION OF GARY PERRYMAN

START STOP
1:1 8:25
27:15 29:21
29:25 32:13
33:22 35:7
37:3 38:17
40:8 45:18
57:14 62:10
62:15 63:18
69:20 70:10
70:16 72:9
72:18 73:9
80:9 83:9
84:8 84:22
98:13 100:25
105:6 108:7
110:12 111:20
113:9 113:13
139:14 140:16
141:1 153:9
154:8 155:12
158:10 162:11
229:4 230:23
248:6 249:12
250:18 250:22
251:15 251:21
255:6 255:24
272:25 273:14
284:6 284:19

EXHIBIT 1
 NO. 2009-02578

APEX KATY PHYSICIANS, L.L.C., IN THE DISTRICT COURT OF

Plaintiff,

VS.
HARRIS COUNTY, TEXAS
ADEEL ZAIDI, APEX LONG TERM
ACUTE CARE — KATY, L.P., APEX
KATY PHYSICIANS — TMG, L.L.C.,
and US TMG, L.L.C., L

Defendants. st JUDICIAL DISTRICT

DEFENDANTS' OFFER FR 141E
DEPOSITION OF GARY PE MAN

START tth:
1:1 5
27:15 9:21
29:25 32:13
33:22 35:7
37:3 38:17
40. 45:18
5 62:10
63:18

ofigpiaraisoliggimise

80:9 83:9
84:8 84:22
98:13 100:25
105:6 108:7
110:12 111:20
113:9 113:13
139:14 140:16
14111 153:9
154:8 155:12
158:10 162:11
229:4 230:23
248:6 249:12
250:18 250:22
251:15 251:21
255:6 255:24
272:25 273:14
284:6 284:19

EXHIBIT 2
 NO. 2009-02578

APEX KATY PHYSICIANS, L.L.C., IN THE DISTRICT COURT OF

Plaintiff,

VS.
HARRIS COUNTY, TEXAS
ADEEL ZAIDI, APEX LONG TERM
ACUTE CARE - KATY, L.P., APEX
KATY PHYSICIANS - TMG, L.L.C.,
and US TMG, L.L.C.,

Defendants. (' st JUDICIAL DISTRICT

DEFENDANTS' OFFER FR 1r 1HE
DEPOSITION OF GARY PE .,;? MAN

111"11.41111.1.1111111.11.
-35.911,(1111,1 . 111.

9:20 70:10
70:16 72:9
72:18 73:9
vtopionimmniiijmor

mfRifristigesismfalfliliso
11.9.1111".111.."iirlmo

EXHIBIT 3
 GARY GLEN PERRYMAN

1
IN THE UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF TEXAS

In re: ) CASE NO. 09-37096-H1-11
APEX Long Term Acute Care
-- Katy, LP, Debtor. ) CHAPTER 11

--------------- ---------------
ORAL AND VIDEOTAPED DEPOSITION OF

GARY GLEN PERRYMAN

JANUARY 27, 2010

ORAL AND VIDEOTAPED DEPOSITION OF GARY GLEN

PERRYMAN, produced as a witness at the instance of the

APEX PHYSICIAN, LLC, and duly sworn, was taken in the

above-styled and numbered cause on the 27th day of

January, 2010, from 10:09 a.m. to 6:07 p.m., before

Mikki R. Sauer, CSR in and for the State of Texas,

reported by machine shorthand, at the offices of Kelly

Sutter & Kendrick, P.C., 3050 Post Oak Boulevard, Suit

200, Houston, Texas, pursuant to the Federal Rules of

Civil Procedure and the provisions stated on the recor

or attached hereto.

DepoTexas
888.893,3767
 GARY GLEN PERRYMAN

4

1 APPEARANCES 1 EXI IIBITS (Confirmed)
2 2 NO. DESCRIPTION PACE
3 3
4 18 Med istar Menlo dated 2-15.08 184
For APEX Pi IYSICIANS, LEO 19 Memorandum to Mower Flourani dated 187
Mn Robert R. Burford 20 Lease Agreement 192
6 BURFORD & MANLY, P.C. 5 21 4-29-09 E-mail from APEX Hospital to 199
700 Louisiana, 46th Floor APEX Hospital
7 Houston, Texas 77002 6 22 Medistar Pro Prim a Project Cosi Analysis 209
713.273.1111 Pin Oak HospitallMOB(Land
8 7 23 7-24-07 E-mail from Abeet Sager to 219
9 FOR P. K. SHAH, MD.; Debbie Lightfoot
Mr. Fred \Vali:hob 8 24 1-17-0S Letter to APEX Katy Physicians, 221
10 MUNSCE HARDT KOPF & HARP, PC LLC, from Adeel Zaidi and Steve Koch
700 Louisiana Street, Suite 4600 9 25 6-26-08 Letter to Med Zaidi and 2.29
18 Houston, Texas 77002 Meer Sager from Monier Hourarti
713.222.1469 10 26 8-25-08 Letter to P. K. Shah and 230
12 Adeel Zaidi and Abeet Sager frOin
11. Paul. Tapscott
13 FOR BANK OF AMERICA:
27 2-27-07 Email E-mail to Abeer Sager 212
MR. RICIIARD G. DAFOE
12 And others from Cameron Smith
1 VINCENT LOPEZ SERAFINO JENEVE1N
28 9-8-08 Email E-mail chair printout 234
2001 Bryan Street, Suite 2000
13 ending with E-mail dated 9-3-08 from
15 Dallas, Texas 75201
Paul Tapseott to Zaidi, Sager, Hodge
214.979.7427 14 and Monzer
16 29 2-8-07 Email E-mail printout from 254
17 FOR MEDISTAR CORPORATION: 15 Cameron Smith to Zaidi, Sager and others
Mr. J. Douglas Sutter 30 Letter of Agreement, Medistar and TMG 268
18 KELLY, SUTTER & KENDRICK, P.C. 16 31 Mcdistar Pro Forma Financial Analysis 268
3050 Post Oak Boulevard, Suite 200 Pin Oak flospital/MOB/Land
19 Houston, Texas 77056 17
713.595.6000 18
20 19
21 ALSO PRESENT: 20
Mr. Peter Keierlieber, Videographer 21
22 22
23 23
24 24
25 25

3 5
1 INDEX
2 PAGE
THE REPORTER: Is the witness going to
3 Appearances .2 2 read and sign?
4 Stipulations. 5
5 GARY GLEN PERRYMAN 3 MR. SUTTER: Yes, please. Send it to me.
Examination by Mr. Burford
6 Examination by Ma ...... 241 4 THE REPORTER: By the Rules?
Examination by Stiller 218
5 MR. BURFORD: Yes, of course.
Signature and Changes.... ......... „... . 291 6 MR. SUTTER: That would be fine with me.
a
Reporter's Certificate 293 7 THE VIDEOGRAPHER: Today's date is the
10 8 27th day of January, 2010. The time is 10:09 A.M.
EXHIBITS
11
9 We're now on the record. This is the beginning of
NO. DESCRJP1 ION PACE 10 Tape 1.
12
1 Deposition Notice 11 GARY GLEN PERRYMAN,
13 2 Memorandum of Understanding 38
3 Meeting Notes 48 12 having been first duly sworn, testified as follows:
It 4 9-7-06 Letter to APEX Physicians from 54
MonzerItouran i 13 EXAMINATION
15 5 Fax oover sheet from TMG to Mr. Houma i 75 14 BY MR. BURFORD:
and attachments
16 6 Operating Agreement 78 15 Q. Good morning.
7 Bank of America Deposit Account 86
3. 7 Documentation Signature Card 16 A. Good morning. -
8 104-08 E-mail from Stephen Koch to 87
The Zaidis •
I -7 Q. Would You stale your name for the record,
9 Delegation of Authority 89 18 please?
9 i 0 Limited Partnership Agreem int of 91
APEX Long Terrn Acute Cure-Italy, EP 19 A. Gary Glen Perryman.
20 il 11-20-06 Memo to Manner 14ourani From 102
A. K. (3-mgla and Lease Agreement 20 Q. All right. And do you understand,
2l. 12 Lease Agreement 3 04
13 12-21-06 Letter to Adeel Zaidi and Ali t E G.
21 Mr. Perryman, that my name is Robert Burford and hi
22 Physicians from Mon.er 1-fourani 22 I'm here today on behalf of Katy Physicians, LLC?
14 Memorial Swap 165
23 15 Agreement of Purchase arid Sale of Real t 71 23 A. Yes.
Property and Improvements
24 16 Agreement of Purchase and Sale of Real 171 24 Q. All right. And for ease of reference, can you
Property and improvements
25 17 Alamo Title Con-warn, Sen[erncnt Starement 100
25 and I call Katy Physicians, LLC, the landlord?

(Pages 2 to 5)

DepoTexas
888.893.3767
 GARY GLEN PERRYMAN

8
1 A. Yes. 1 capacity for Medistar?
2 Q. I mean, that's kind Man easy way to refer to 2 A. I arm
3 it, don't you think? 3 Q. Now, do you work For Medistar?
4 A. That's good. A. I'm retired. I do do consulting with Medistar
5 Q. Okay. And in connection with kind of getting 5 and am in the office a lot more these days than 1 woult
6 the names of the parties out, there's a party called 6 he.
7 APEX Long Term Acute Care - Katy, LP, that's an mat:, 7 Q. Okay. Did you retire from Medistar?
8 Do you understand that? 8 A. Yes, I did.
9 A. Yes. 3 Q. Okay. How long were you there?
10 Q. And can we call that the tenant or the 10 A. Well, I started Medistar in 1993; but I was
11 hospital for ease of reference? 11 there way before that with our conglomerate of
12 A. Yes. 12 companies.
13 Q. That would he an easy way to refer to it, 13 Q. Okay. So you've been involved with the
14 right? 14 Medistar entities for some 17 years or thereabouts?
15 And then there's a third party we're going 15 A. I would say some 35 years or so.
16 to run into, I_ think, today; and that's APEX Katy 16 Q. Oh, okay. So it's been a lot longer than
17. Physicians-TMG, LLC. Are you familiar with that entity`? 17 that. My math is really off. I thought you said 1993.
18 A. Somewhat. 18 A. Medistar started in 1993. There were
19 Q. Yes. And that is the general partner of the 19 predecessor companies.
20 tenant or the hospital, right? 20 Q. All right. I got you. Now, you understand
21 A. As I understand, that's correct. 21 that the testimony you're giving here today is made
22 Q. Okay. And can we call that the general 22 under the pains and penalties of perjury, right?
23 partner of the tenant or the hospital as we go through 23 A. I do.
24 today? 24 Q. All right. And, now, your current position is
25 A. Yes. 25 that of consulting. Is that a paid arrangement?

7
1 Q. Okay. Because we've got all these names that 1 A. It is.
2 sound alike, and I would like to use some vernacular 2 Q. And what is your hourly rate?
3 that I think we can understand a little bit easier. 3 A. I'm not charging on an hourly rate.
4 Okay? Is that all right with you? Q. Okay. What is your compensation with respect
5 A. That's good. to your involvement in Medistar?
6 (Exhibit No. I marked.) 6 A. It's typically around 15,000 a mouth, plus or
7 Q. (By Mr. Burford) All right. Now, first of 7 minus.
8 all, we're here today to take your deposition in Q. Okay. Plus or minus what? Discretionary
9 connection with a notice of oral and video deposition 8 bonuses?
10 that I served on Medistar Corporation's designated 10 A, Correct.
11 representative, and that's -- I will hand you that as 11 Q. Do you have ownership positions in Medistar
12 Exhibit No, I. Actually the second notice. 12 properties?
13 MR. I3URFORD: I normally have some moie 13 A. No. I elected not to have that many years
14 copies, but for this one -- all right? 14 ago.
15 MR. SUTTER: Okay. lust call this 15 Q. Alt right. Now, do you do you have some
16 Perryman I? 16 personal knowledge of Medistar's involvement with the
17 MR. 13URFORD: Yeah. We'll call this -- 17 landlord and the tenant and the general partner of the
18 we'll call this Medistar I. 18 tenant?
19 MR.. SUTTER: Medistar I. 19 A. I do have some personal knowledge.
20 Q. (By Mr. Burford) Ail right, sir. This is the 20 Q. All right. And in connection, also, did you
21 notice of deposition of the 30(B)(6) oral videotaped 21 do anything to prepare today for your deposition? Like,
22 deposition of Medistar Corporation's designated 22 did you interview any employees or officers of lviedisW?
23 representative.. Do you see that? 23 A. I have done preparation for this particular
24 A. Yes, I do. 24 case of testifying as a corporate representative. I
25 Q. And are you here today to serve in that 25 reviewed corporate documentation. I'm quite familiar

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1 was any, could it have been used for other purposes? 1 Q. Yes. And I'm trying to figure out the parties
2 A. It depends on the type purpose that you would 2 here. TMG, is that -- that's Turn-Around Management
3 use it for. 3 Group, right?
4 Q. But there were other purposes? 4 A. Yes.
5 A. Keeping in mind — 5 Q. And APEX Katy Physicians, that is a general
6 MR. SUTTER: Let him finish, please. 6 term for the physicians that could invest in the Katy
7 A. Keeping in mind, please, that Texas Department 7 Project, right?
8 of Health regulates hospitals in the state of Texas. So 8 A. Well, this one reads "APEX Physicians."
9 there are certain things that you may not be able to use 9 Q. Right. Right. So that would mean physicians
10 spare for, and there arc certain things that are 10 that were -- at this point in time there wasn't -- the
11 allowable to be used for. 11 investment hadn't been closed yet, right?
12 Q. (By Mr. Burford) All right. All right. But 12 A. That's correct.
13 there were some -- as far as you know, there were some 13 Q. So you had to refer, then, generically to the
14 allowable purposes for vacant space for an LTACH at this 19 people that were going to invest, right?
15 point? 15 A. That would he correct.
16 A. That there -- they could use space for other 16 Q. I mean, the -- ultimately the tenant that --
17 purposes within the framework, you know, of the 17 the APEX Katy long-term care -- acute care hospital tha'.
18 statutes. 18 you and I are calling the tenant or the hospital, that
19 Q. Okay. And do you know Mr. Ivan Wood? 19 wasn't formed until later, right?
20 A. I do. 20 A. That's correct.
23 Q. And did he consult with Medistar or 21 Q. Okay. So in your Memorandum of Unclerstandir g
22 Turn-Around Management Group with respect to the 22 here in the formation process, you would have to refer
23 purposes of the LTACH? 23 to these potential investors in some manner, right?
24 A. I don't know bow much involvement that Ivan 24 A. Correct.
25 Wood had on the Katy LTACH out there other than I think 25 Q. And APEX Physicians would probably be a good

27 29

1 meeting with some physicians that he represents. 1 way of referring to those potential investors, right?
2 Q. Okay. A. That's correct. Now, these -- to make the
3 A. But I do know Ivan Wood, a very capable distinction, though, these would be investors in the
LI healthcare attorney at Strasburger Price here in town. real estate.
5 I have dealt with him on many occasions through mail 5 Q. In the real estate. But it says TMG and APEX
6 hospital projects and physician ownership projects. 6 physicians shall have an option to participate in the
7 Q. All right. Arid if he would have given the 7 land and the building. Now, as far as you know, were
8 opinion at the time that he thought that any excess 8 all the physicians that were members or limited partners
9 space could be used for other purposes, you wouldn't 9 in the hospital -- were they all given a chance to
10 have any information contrary to Mr. Wood, right? 10 participate in the landlord?
11 A. I would not because he is pretty well up on 11 A. At the — at the time of this agreement?
12 th e statutes when he's advising attorneys-- I'm 12 Q. Yeah.
13 sorry -- advising his clients' decisions as an attorney. 13 A. I don't know who was available on the
14 Excuse rne. 14 physician side that wasn't — we were not negotiatin",
15 Q. All right. Now, in Bullet Point No. -- 1, 2, 15 with physicians at that time.
15 3, 4 -- 5, it says "TMCi/Apex Physicians." And APEX 16 Q. Okay.
17 Physicians, those are the physicians that were going to 17 A. Only the `I'iNIG.
18 actually be associated with the hospital, right? It 18 Q. All right. But later on Medistar, for
19 says, "TMG/Apex Physicians shall have an option to 19 example, sent out letters of intent that were binding
20 participate in the land and the building 32 to 20 upon physicians with respect to the acquisition of their
21 34 percent, hospital land and building and medical 21 units in the landlord. Do you recall that?
22 office building plus 8.4 acres. pins 2.9 acres." That's 22 MR. SLY 1ER: Could you identify what you
23 what it says, right? 23 mean by letters of intent?
24 A. That's the first part of the bullet point. 24 MR. BURFORD: Well, I'm going to ask him-
25 Correct. 25 Q. (By Mr. Burford) First of all, do you recall

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1 that Medistar sent out letters of intent that were 1 physicians to send this out to.
2 signed by physicians with respect to potential 2 Q. Okay. That was the -- to your belief, that
3 acquisitions in the landlord? 3 was Mr. Zaidi and Mr. Sager's responsibility to make
9 A. 'file answer is yes. 4 sure all the hospital physicians had an opportunity to
5 Q. Okay. 5 invest?
A. There were some letters sent out. A. Well, it would be up to Turn-Around Managemer t
7 Q. Okay. And those letters -- and I'm just S Group.
8 trying to make sure. Generally, was the investment in 8 Q. Right. And it was certainly in their best
9 the landlord made available to the investors in the interest to try to get as many physicians to participate
10 hospital? Did you want -- was the plan here to try to 10 as possible, right?
11 get as many physicians in the hospital to also invest in 11 A. Well, -- I don't know that.
12 the landlord? 12 Q. Okay.
13 A. I think that may be TMG's -- their method f 1. 3 A. Okay.
19 acquiring a hospital. 14 Q. Well, ultimately they were not able to get
15 Q. Okay. 15 enough --
16 A. And in this particular agreement, we're 16 MR. SUTTER: Have you finished your
1.7 saying, yes,.that we will allow someone to invest -- 17 answer? Okay,
18 Q. Right. 18 Q. (By Mr. Burford) Ultimately they were not
19 A. -- up to this 32 or 34 percent with this 19 able -- I say "they." Turn-Around Management Group was
20 particular document. 20 not able to close a deal on these terms, tight?
21 Q. Okay. Medistar would not intentionally 21 A. I don't know that, but --
22 exclude any of the physicians of the hospital to be an 22 Q. In other words, in other words, ultimately --
23 investor in the landlord, also, right? 23 MR. SUTTER: Make sure you finish your
24 A. Well, I don't think that ever came about. Si 24 answers. Okay? Were you finished with that one?
25 I don't know. 25 THE WITNESS: Yes.

33_ 33
1 Q. Okay. Medistar, to your knowledge, did not 1 Q. (By Mr. Burford) Ultimately Turn-Around
2 exclude arty of the investors -- any of the physicians 2 Management Group --
3 that invested in the hospital from also investing in the 3 MR. SUTTER: Wait a minute. Can we --
4 landlord, right? anyway, we need to let you finish your question so he
A. No. But we're real estate owners. We 5 can finish his answers, okay, because he starts to
wouldn't be involved in the other side of the answer; and then you cut him off. So --
7 operations. MR. BURFORD: All right. I apologize to
8 Q. All right. When you were talking about -- for 8 you.
9 example, Medistar did make projections that it provid' d 9 MR. SUTTER; All right.
10 to prospective investors, right? 10 MR. BURFORD: I'm not trying to do that.
11 A. On the real estate. 11 I'm just trying to --
12 Q. Yes. 12 MR. SUTTER: I don't want to be a
13 A. The real estate. 13 referee. Let's just make sure he gets his answer out
19 Q. Right. And what I'm trying to get at is: You 14 MR. BURFORD: Yeah.
15 didn't try to limit the information that you provided 15 Q. (By Mr. Burford) And, sir, Mr. Perryman, any
16 that to to only a few select physicians that were going 16 time you need to supplement your answer as I go along,
17 to be participants in the hospital, right? 17 if Pve out you off, just let me know; and I'll --
13 A. Not that I recall, le let you finish your answer. All right?
19 Q. That offering, to your knowledge, would be 19 A. I appreciate that.
20 generally available to all of the physicians in the 20 Q. I'm just trying to speed things along. I'm
21 hospital, right? 21 not trying to, you know, belabor things here. Okay?
22 A. I think that's correct -- well, all that TI4.G 22 Now, ultimately this bullet point here
23 would want to send out. 23 where it says 'CMG APEX Physicians shall have an opti
24 Q. Okay_ 24 to participate in the and and the building up to an
25 A. That wasn't our election as to which 25 amount of 32 to 34 percent, that had -- that didn't get

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1 accomplished, did t? They actually the physicians should have been probably substantially more than that.
2 actually bought all the land, right? 2 Q Okay. All right. So you don't believe that
3 A. Well, f think there were -- I think what provision was --
4 happened is that this particular agreement was a series 4 A. Well, let me--
5 of agreements that were entered into -- 5 Q. -- really onerous?
6 Q. Right. 6 A. No, I do not. There-- like I say, we own
7 A. -- to an ultimate, I guess, understanding or a 7 hospital facilities; and in many occasions it's -- those
B project agreement. 8 type provisions are greater than one year, much greate
9 Q. Right. 9 than one year, and even to the point of credit tenants.
10 A. And this was the start. 10 Q. Okay. The landlord would not be overreaching
11 Q. Right. 11 with respect to the hospital to get terms like that in
12 A. And there was a correction. So they actually 12 the lease, right, as far as you're aware?
13 exceeded, okay, the amount of this 32 to 34 percent; an 13 A. That is correct.
14 when they exceeded that amount, then we sent out this Q. In your extensive experience in the hospital
15 letter that you referred to earlier to physicians -- 15 business, right?
16 Q. Uh-huh. 16 A. Correct.
17 A. -- that basically said we'll allow that from 17 Q. Now, did this agreement essentially envision
13 the 33 percent up to 50 percent -- 18 at this time kind of the joint development of the APEX
19 Q. Right. 19 Katy -Project?
20 A. -- participation in these -, and as an 20 A. Could you repeat that, please?
21 addition to from this agreement, there were more thin 21 Q. Yeah. Did this agreement, Exhibit No. 1 to
22 that were added into the new agreement. 22 the depo notice -- was it envisioning kind of the joint
23 Q. Right And I think l'il get to that in a 23 development of what ultimately became the Katy Project?
24 little while. 24 A. I don't know what you mean by "joint
25 A. Okay. So -- so when you say this wasn't done, 25 development." This was more of a landlord/tenant

35 37

1 it was actually exceeded. relationship with the possibility of physicians being
2 Q. Right. And then ultimately when the deal 2 invited in to participate hi the real estate.
3 closed between the landlord and Medistar, the landlord 3 Q. All right. Well, looking back at Bullet Point
4 actually acquired all of the property, right; and 4 No. -- 1, 2, 3, 4 -- 5 where it says TMG physicians
5 Medistar owned an interest in the landlord at that 5 shall have an option to participate in the Land and the
6 point, at the time of closing in March of 2087? 6 building, do you see that?
7 A. That would be correct. A. I do.
8 Q, Okay. Now, in -- now, it says the lease will 8 Q. It says, "There will be 4-50 units for the
9 be guaranteed by the accounts receivable of the hospit I 9 project and 144 to 150 shall be offered to the
10 and shall start four months after the closing of the 10 participating physicians at the rate of 40,000 per
11 deal, right? 11 unit" All right. "There shall be a time limit of
12 A. That's what the document says. 12 45 days starting July 28, 2006, to purchase these
13 Q. And then the next line in that bullet point 13 units."
14 says, "The first year tease shall be guaranteed by a 14 Did I read that correctly?
15 letter of credit equivalent to one year rent." And that 15 A. You read it correctly.
16 was an early -- a provision that was put on early in 16 Q. Now, what were -- what were the units
17 between Medistar on the one hand and Turn-Around 17 that the -- units in what? Units in an entity to be
18 Management Group on the other, right? 18 formed for the landlord?
19 A. Correct. 19 A. That would be correct,
20 Q. Okay. The debtor has -- the debtor in this 20 Q. Okay. And at this point--
21 case, which is the hospital or the tenant -- 21 A. Let me let rue -- let me state this: In
22 A. Yes. 22 this particular case, early on the "landlord" would nit
23 Q. -- has criticised that provision as being 23 refer to the same landlord that you're referring to --
24 somewhat onerous. Are you aware of that? 24 Q. I understand that.
25 A. Well, Fin sure they have their opinion. It 25 A. -- in the start of the deposition here.

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1 Q. It would be "landlord" without capitalised? 1 Exhibit I to your deposition and Exhibit 2 or
2 A_ Okay. That's correct. 2 Exhibit I to your notice of deposition and Exhibit 2 to
3 Q. Okay. 3 your deposition. Okay?
4 A. The landlord would be, you know -- 4 A. Yes.
5 Q. Just generically. 5 Q. Do you understand what we got in front of us
6 A. -- one of the Medistar corporation entities. 6 here?
7 Q. Right. Okay. At this point in time, Medistar 7 A. Yes, I do.
8 was going to own the prospective landlord, not the 8 Q. Now, Exhibit 2 to your deposition is also
9 landlord that ultimately became my client, right? 9 signed July 28th, 2006, down at the bottom, right?
A. That's correct. 10 A. Yes, it is.
1.1 Q. Okay. Now, in effect, this project was kind 11 Q. And it is agreed to by Mr. Monzer on behalf of
12 of in the -- the APEX the Katy Project, the landlord 12 Medistar, right?
13 and the tenant, was kind of in its infancy at this 13 A. Correct.
14 point, right? 14 Q. And Adeel Zaidi and Abeer Sager on behalf of
15 A. Yes. Phis would be the start of something 15 Turn-Around Management Group, right?
16 to -- that would ultimately come about and be, you knoN 16 A. Correct.
17 a total different package. 17 Q. Now, the the Exhibit 1 to your deposition
18 (Exhibit No.2 marked.) 18 notice, it says at the top Purchase and Lease Agreement.
19 Q. (By Mr. Burford) Okay. Now, let me show you 19 You said you believe that was Monzer Hourani's writing,
20 what Pm going to mark as Exhibit No. 2. It was 20 right?
21 previously marked to Dr. Noor's deposition_ That's 2, 21 A. I believe so.
22 Medistar Exhibit 2. 22 Q. And then this second exhibit to your
23 A. Okay. This is not the exhibit that's in the 23 deposition is also called a Memorandum of UnderstandiN.,
24 Exhibit 2 that's in the notice for deposition. 24 Medistar & TMG Katy Project. Do you see that at the
25 Q. No. It's Exhibit 2 to your deposition. 25 top?

39 41

A. Okay. 1 A. I do.
2 Q. Okay. The Exhibit 2 in your notice is 2 Q. And it's from Turn-Around Management Group to
3 different; but it's also referred to -- it's also 3 Mr. Monzer Hourani down at the bottom, president of
4 referred to as Noon Exhibit No. 3, right? Do you see 4 Medistar, who -- and he signed and agreed to it, right?
5 that? 5 A. Correct.
6 A. Yes, I. do. Q. Now, what are the differences between Exhibit
7 Q. When I took Dr. Noor's deposition, I used it No. 2. to your deposition and Exhibit No. Ito the notice
8 with him, also. Okay? 8 of deposition? Why did you -- why did they need these
9 Now -- now — 9 two -- who documents dated the same day, if you know'?
10 MR. SUTTER: When did he get deposed? 10 A. It appears to me -- and I was n ot there when
11 MR, BURFORD: He got deposed a month a 11 this was done.
12 MR. SUTTER: This last month. 12 Q. Okay.
13 MR. BURFORD: It lasted ail of an hour 13 A. Okay? But it does appear to me that one is an
14 before they settled. 14 expanded version of the other, So one came first. The
15 MR. SUTTER: We'll talk later. I'm 15 other came later —
16 sorry. I didn't mean to interrupt you. 16 Q. Okay.
7 MR. BURFORD: Yeah. Yeah, Anyway, we A. -- after discussions.
18 can talk about it at a break. 18 Q. All right. Do you know which one came first?
19 Q. (By Mr. Burford) Medistar No. -- No. 2 has 19 A. Well, it would appear to me in reading this
20 been marked to your deposition. Do you have you sepri 20 that the Medistar Exhibit No. 2 would have been the
21 this document before? 1 21 first document; and after discussions, Exhibit No. I to
22 A. I have. 22 my notice would be the second document. That's the wa,,
23 Q. Now, let's compare it to what was marked as 23 I would interpret it.
24 Exhibit Ito the notice of deposition. Do you see that? 24 Q. I .et use show you something. You see the
25 Put them side by side, if you can. Let's compare 25 first -- the first document to your deposition notice

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1 says Purchase arid Lease Agreement? 1 projects?
2 A. t do. 2 A. The dollars that comes into the company,
3 Q. Now, look with me at the first bullet point on 3 Medistar Corporation being the operating company--
4 Deposition Exhibit No. 2. 0. says, "Medistar shall 4 Q. Uh-huh.
5 furnish" and then it says: Same notes as purchase and 5 A. -- most all uf the payments are made out at
6 sale lease agreement (sic). Do you see that? 6 Medistar Corporation. Even though this was an affiliate
7 A. Yes, 1 see that. 7 company of Medistar --
8 Q. You see purchase and sale lease agreement 8 Q. Oh-huh.
9 referred to in Exhibit I to your notice? 9 A. -- many other operations --
10 A. I do. 10 Q. Okay.
11 Q. So it looks like Exhibit 2 actually came after 11 A. and other subsidiary companies are paid out
12 Exhibit No. I to your deposition, right, because Exhib 12 of Medistar Corporation.
13 No. 2 refers to Exhibit No. I, dues it not, to the 13 Q. Okay. It just so happened that Turn-Around
14 notice? 14 Management Group had some other relationships, and they
15 A. Well, I'm not for sure that it does, hut it 15 got a lee paid -- some fees paid to them in connection
16 could be construed as that. 16 with those other relationships on or about the time of
17 Q. And then look with me on the side, on the 17 the closing, right?
18 right-hand column_ It says, "same notes as Purchase 18 A. That's correct. Tea.
19 Lease Agreement." And, again, Exhibit I to your 19 Q. Okay. And do you remember roughly how much
20 deposition notice says Purchase & Lease Agreement," 20 money these affiliates of Turn-Around Management Group
21 right? 21 got?
22 A. Yes. 22 A. In this particular case or other cases?
23 Q. So does it look like maybe this Exhibit No. 2 23 Q. No. In this particular ease.
24 is a -- is maybe a supplement in some way to Exhibit 24 A. Yes. I do remember reviewing that
25 to your notice of deposition? 25 documentation. Some 900-and-something-thousand doltais

43 45

1 A. I can see where you're coming from, but 1 for two or three of the participants --
2 don't know that that's the case. 2 Q. Oh-huh.
3 Q. Okay. Loot: with me at the last bullet point. 3 A. — and another one a certain other amount o'
4 A. Yes. 4 money was paid --
5 Q. it says Medistar shall issue 10 percent 5 Q. Ulm-huh.
6 shares, cash flow and ownership of the project to TMG at 6 A. -- in this particular case at this particular
7 the time of execution of the above contracts. Was that 7 time,
8 a term that Medistar agreed to? Q. Okay. A certain doctor was paid about
9 A. In this particular document, it appears that 9 $400,000 at the time of closing, too. Do you recall
10 the discussions, they were -- they were agreed to at 10 that?
11 that time, 11 A. Yes. That's correct.
12 Q. Now, ultimately at the closing of the actual 12 Q. And what was his name?
13 acquisition of the land by the landlord, my client, did 13 A. I don't remember.
14 Medistar pay TMG or any of its affiliates a fee? Q. Peractia maybe?
7.5 A. There was a fee paid. 15 A. It could be. I'm sure we have documents
16 Q. Right. 16 that's been produced that will --
17 A. Rut not for this. 17 Q. Okay.
18 Q. Okay. Why was there a fee paid at the closing 18 A. -- that wilt show that.
79 of the landlord to the affiliates of Turn-Around 19 Q. Okay. And the doctor that Medistar paid at
20 Management Group? 20 the time of closing, he then turned around and bought
21 A. There -- Turn-Around Management Group an 21 units in the landlord, right?
22 others in that group bad performed services for Imlay 22 A. I think that is correct. I'm not for sure
23 on some of our other projects. 23 about what the timing was on that.
24 Q. Okay. So they were paid out of the proceeds 24 Q. Okay. It was about the same time that he
25 of the sale for services they had performed on other 25 received the fee, right?

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1 Q. Right. And any -- it's true that any That's why it gave Nledistar, of course, an upper edge o
2 potential buyer for the and could have also negotiated negotiating a better --
3 the release of those restrictions, right? Q. Right.
4 A, It's a possibility. Correct. A. -- purchase because we had the land that they
5 Q. All right. Now, at this point and at this wanted. We owned the land in both cases by their
6 meeting here, it doesn't appear that Dr. Peracha or 6 hospital and prevented their expansion of their hospital
7 Dr. Coch or Dr. Shah was there, right? system. So that's probably the better answer.
8 A. I don't know that. I wasn't involved in the 8 Q. Okay. So it's your belief that Medistar had a
9 meeting. 9 negotiating advantage beyond --
10 Q. Okay. Now, was Dr. Shah or Dr. Coch or 10 A. Very much so,
11 Dr. Peracha involved about the decisions in the 11 Q. Okay. Now, but obviously somebody else could
12 development of the landlord and the hospital at this 12 have paid maybe Memorial Hermann a little bit more moni
13 point? 13 or had something else that Memorial Hermann wanted,
14 A. I don't --I don't know. I wasn't involved in 14 right?
15 that -- in those talks at that particular time. 15 A. Probably not.
16 Q, Alt right. To your knowledge, did they have 16 Q. Okay. Memorial Hermann is a big hospital
17 any involvement at this point in the development of th 17 system, isn't it?
18 hospital, to the best of your knowledge? 18 A. Yes.
19 A. I don't know that at this particular time, 19 Q. Okay. They've got -- they've got hospitals
20 9-11-06. 20 all over, right?
21 (Exhibit No. 4 marked.) 21 A. They have several hospitals, but not hospitals
22 Q. (By Mr. Burford) Okay. Look with ins now a 22 all over.
23 Exhibit No. 4. 23 Q. Do you -- I'm sorry, sir. Do you know what
24 MR. BURFORD This is Exhibit 4 to 24 their needs arc, their land needs?
25 Medistar, Doug. It had been — previously been markeli 25 A. Yes. They came to us and told us, actually.

55 57
in a deposition of Abeer Sager. We're -- like I say, we're in the hospital development
MR. SUTTER; Okay. business. So we're quite attuned as to most of the
MR. BURFORD: That's why you see a number hospitals in the Houston market area and what their
on there needs and wants are. As a matter of fact, almost all of
MR. SUTTER: Is that how you say her the systems conic and talk to us concerning those need s.
name? Q. Who from Memorial Hermann told you in the fall
MR. BURFORD, It think it's Sager. of 20(76 what their land needs were'?
THE WITNESS: Sager 8 A. Marshall Heins, who was the director of their
MR. BURFORD, Sager. I'm sorry. I'm 9 facilities.
10 trying to say it right. Abeer Sager. 10 Q. Okay. And you and he had discussions?
11 THE WITNESS: That's the way I've heard 11 A. He -- I'd been in discussions with him
12 it pronounced. 12 concerning that, as well as other members of Medistar
13 MR. BURFORD: It's S-A-Q -- 13 Corporation.
14 THE WITNESS: -- 14 Q. Okay. Look with me at Exhibit — at Exhibit
15 MR BURFORD: S-A-Q-E-R_ 15 No. 4 of the deposition of Medistar.
16 A. Can I supplement something you said a white 16 A. Yes.
17 ago? 17 Q. Okay. Do you see -- do you recognize that as
18 Q. (By Mr. Burford) Yes. Any time. 16 one of the binding letters of intent sent out to
19 A. In the previous question, you had indicated 19 investor -- potential investors in a landlord for the
20 that, I guess, any buyer could have the possibility to 20 Katy Project?
21 negotiate something. 21 A. Yes, I recognize this form.
22 Q. Okay. 22 Q. Okay. And this is from -- sent out from
23 A. That is a true statement as I answered it. 23 Mr. Monzer Hourani; is that right?
24 However, would those other people have what Memoril 24 A. This is sent out under Medistar with Monzer
25 Hermann wanted? And the answer is no, they didn't. 25 executing the letter. That's correct.

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1 Q. And it's addressed to APEX Katy Physicians, 1 A. Yes.
2 right? 2 Q. -- did -- well, strike that.
3 A. Et is. 3 Let's just go on down and see what it says
4 Q. And those are the potential investors? 4 here. It says under Real Estate, No. I. what
5 A. These are the potential investors for the real 5 Hourani was telling the physicians that were gains
6 estate side, yes. to invest in the real estate, he said: The Katy Pin Oak
7 Q. What ultimately became my client, the Hospital comprising 101,105 square feet of rentable
8 landlord, right? space on six acres of land shall he acquired and minor
9 A. Correct. renovations/abatement performed to allow the facility to
10 Q. All right. And it says: To all APEX Katy 10 operate as a long-term acute care hospital. And then i
11 Physicians? 11 says "LTACH," right?
12 A. It does. 12 A. Correct.
13 Q. It says to all of them, right, not just some? 13 Q. And that was a representation that Mr. Houran
14 A. Yes. It says: "To All APEX Physicians." 14 made, right?
15 Q. "APEX Physicians," right? 15 A. That was -- T don't know if you would call it
16 A. Whoever those might be. 16 a representation. It's basically a statement that he ts
17 Q. All right. ft says: This binding letter of 17 making.
18 intent shall set forth the intended obligations of the 18 Q. Right. He's making a statement to the -- to
19 physician as it relates to the following project, right? 19 the investing physician, right?
20 A_ That's what it says. 20 A. Correct.
21 Q. And it's a binding -- it's a binding letter of 21 Q. All right. And then the next statement that
22 intent, if you look on the next page, between Monzer 22 Mr. Hourani makes to the investing physicians is that
23 Hourani of Medistar and the particular physician 23 "APEX Hospital-Katy shall lease the entire hospital
24 investing in the real estate, right? 24 facility at $20 per square foot and be responsible for
25 A. Again, these are letters of intent with 25 all operating costs of the hospital facility (absolute

59 61

1 physicians, varying physicians; and there were many 1 net lease). CPI increases shall apply to the lease rate
2 Q. Uh-huh. 2 after the second year of operations. The lease shall be
3 A, -- saying what their intent was to -- to 3 guaranteed by the accounts receivable of the hospital
4 invest. 4 and the first year rents shall also be guaranteed with
5 Q. In the real estate, right? 5 an equivalent letter of credit," right?
6 A. Correct. 6 A. That's what it says.
7 Q. And at this point in time, the real estate was 7 Q. That's what Mr. Hourani was telling these
8 going to be held by Medistar, was going to be the owner 8 investing physicians that the lease would contain,
9 of that landlord, right? 9 right?
10 A. Yes. Medistar would be the landlord. Excuse 10 A, That's correct.
11 me, The physicians that this went out to that actually 11 Q. Now, ultimately the landlord, my client, did
12 Turn-Around Management Group actually took to this 12 get a letter of credit from Bank of America, right, that
13 physicians -- 13 was supposed to be used to secure the first year's rent?
14 Q. Uh-huh. 14 A. Well, at the particular time of September
1.5 A. -- and invited those to participate -- 15 the 7th when this was written, this was under a leas E..
16 Q. Right. 16 scenario, not a purchase.
17 A. Okay. -- that landlord would -- meaning 17 Q. I understand that, but ultimately --
18 Medistar would be a landlord and landlord was then 18 MR,. ail [ER: Let him finish, please.
19 inviting these physicians in to participate in the real 19 A. So if we're jumping to a subject where the
20 estate. 20 business deal actually changed —
21 Q. Right. And the landlord would have been run 21 Q. Right,
22 by Medistar? 22 A. -- and then the purchase took place --
23 A. That is correct, one of Medistar's entities. 23 Q. Right.
24 Q. Now, at the time that these letters were going 24 A.. -- versus a lease --
25 out-- 25 Q. Right.

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1 A. -- and now you're talking about a different project -- profit, right?
2 landlord A. That's essentially what it says.
3 Q. Right? Q. And the project includes approximately
4 A. -- and a different tenant -- 8.4 acres of land directly across Medical Center Drive
5 Q. Right. which can he sold or developed by our venture for
6 A. Is that what we're talking about? additional profit, right?
7 Q. Well, it was -- it became a different tenant, A. Correct.
8 also? Did anything change with respect to the tenant 8 Q. And then it talks about the location of the
9 A. I think that it, perhaps, did; and I'm not fo 9 project. Mr. Hourani is telling the physicians
10 sure of how it changed. 10 information about the location of the project in this
11 Q. Okay. So you're not sure how the tenant 11 letter, Exhibit -- Exhibit No. 5, right?
12 ultimately changed, right? And that's the debtor, 12 A. Correct.
13 right? 13 Q. And he says -- for example, Mr. Hourani
14 A. Correct. 14 represents or says -- in the second sentence under
15 Q. Ali right. But you say the landlord changed, 15 Location, he says: The Katy area has seen unprecedented
16 and that's -- and the landlord changed in that Medista 16 growth in the last year -- years as the area is booming
17 didn't own and control all of the landlord, right, as it 17 with residential and commercial growth.
18 was going to do -- it was going to -- the landlord was 18 That's a real -- a very positive
19 going to essentially -- at this point in time, 19 statement, right?
20 September 7th, 2006, the landlord or the entity owning 20 A: Correct.
21 the property was going to be essentially controlled by; 21 Q. It says: The Katy area is positioned to
22 Medistar, right? 22 access ail the business benefits of being located in one
23 A. It would be controlled by Medistar. 23 of the world's most vibrant economic regions and has
Q. Okay. And the terms of the lease between tha 24 merged as one of the hubs of commercial activity on the
25 landlord and the tenant was set forth right here in this 25 booming west side.

63 65
1 letter of -- letter to these physicians, right? I Once again, that's a very positive
2 A. Part of the terms of the lease. representation by Mr. Hourani, right?
3 Q. Yes. And ultimately it became -- the lease A. In the letter, correct; but, see, most of
4 that was ultimately executed between my client and th 4 these statements were taken from the Katy busines,
ni hospital also contained a 20-dollar-per-square-foot 5 development people that's out there. Okay.
6 provision, right? 6 MR. BURFORD: Excuse me for just a
7 A. That's correct. There were certain changes ii 7 minute. Let me turn this thing off. I lost it, and
8 the lease when that took place. 8 then I found it. I had to turn it back on. All right.
9 Q. Okay. And do you also require, though, that 9 Q. (By Mr. Burford) Well, whether or not he got
10 the -- that the lease between my client and the hospital 10 this information -- whether or not thank you, sir,
11 or the debtor also required that a letter of credit be 11 Whether or not he got this information
12 put up to secure the first year rents? 12 from others, he was certainly passing it on to the
13 A. That's what my I had heard. Correct. 13 investing physicians, right?
14 Q. All right. Do you know whether my client was 14 A. That would be correct.
15 ever able -- my client, the, quote, "landlord" was ever 15 Q. All right. And then on the next page, it
16 able to draw upon that letter of credit? 16 talks about investment and the amount, I unit, 40,000;
17 A. I don't know because that would have been 17 150 units, 6 million; 225 units, 9 million, right?
18 outside of Meclistar's involvement at that time. 18 A. ft does.
19 Q. Okay. Now, this goes on to talk about leasing 19 Q. And then it says: Please see attached
20 of the medical office building, right, 36,000 square 20 five-year physicians projected net dollar return for the
21 feet of rentable space in Item No, 2? 21 above ownership levels. Right?
22 A. It does. 22 A. Correct.
23 Q. In Item No. 3 it says: The project includes 23 Q. And if we look on the next page, we see some
24 approximately 2.9 acres of adjacent land, which can bet 24 projections, right?
25 sold or developed by our venture for additional A. We do.

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1 Q. And those are projections that Medistar 1 So he was letting them know that they
2 prepared and sent to the investing physicians to give 2 could call him or the Medistar staff at any time that
3 them information about their proposed investment in the 3 they wanted to talk to them about this Katy Project,
4 Katy Project land and building, right? 4 right?
5 A. Medistar prepared the letter and also these 5 A. That's correct.
6 projections. 6 Q. And did some of the physicians do that?
7 Q. Right. 7 A. I wasn't involved with a lot of the
8 A. And these were given to the folks at the 8 discussions with Cameron or Larry concerning this; bi.t
9 Turn-Around Management Group in order to distribut. 9 this is typical --
10 Q. Okay And, well, they were given for them to 10 Q. Okay.
11 distribute; but Mr. Hourani, he signed the document, 11 A. in our business and this is typically what
12 right? 12 happens. We as landlords and also as venturers with
13 A. He did. 13 these people that participate with us in our projects --
14 Q. All right. Ile certainly wouldn't put anything 14 and most of our projects arc participated out with
15 in here that he believed to be inaccurate, to your 15 physicians --
16 knowledge, right? 16 Q. Lih-huh.
17 A. No. That's correct. And I think-that's why 17 A. -- that we open our doors, our books and
18 you find the statement on these projections as Medistar 18 discuss with them whatever their their questions are.
19 cannot guarantee -- 3.9 Q. Okay. And do you update them as you go along
20 Q. Right. 20 in these deals for changes?
21 A. -- the cap rate and the future land sales 21 A. In cases where we have direct contact--
22 price will be determined by future market conditions. 22 Q. Right.
23 Q. Sure. You can't guarantee any rate of return, 23 A. -- yes, we do.
24 right, to any deal? 24 Q. Right.
25 A. Markets change. Economics change. 25 A, In other eases where, for an example, a

67 69

Q. Right. 1 company like Turn-Around Management Group or, we'll sr y,
2 A. People change. 2 a Memorial Hermann or a St. Luke's or a Methodist — and
3 Q. Things.change like -- 3 we've done business with all these folks -- where
4 A. The government changes. 4 they're directing what happens in these facilities, then
5 Q. Right. For example, in the hospital deal that 5 our participation and discussion with some of these
6 actually happened, the long-term acute care hospital's 6 folks arc limited except in relationship to the real
7 license was actually delayed several months, right? 7 estate.
B A. That was my understanding. 8 Q. Okay. And, for example, with respect to the
9 Q. Yes. And that's not a good thing for the 9 real estate here, as you're sending out these letters of
10 economics of a hospital, is it? 10 intent --
11 A. It certainly would not be a good thing for the 11 A. Yes.
12 economics of the hospital. I don't know exactly the 1.2 Q. -- and these people are investing this money,
13 absolute cause of all the delay. 13 you understand --
14 Q. All right. In any event, the projections -- 14 A. Yes.
15 it says five-year-per-unit return was 104 -- 5104,761 in 15 Q_ and Mr. Mouser Hourani is giving these
16 return for a 40,000-unit -- -dollar investment, right? 16 projections about this landlord --
17 A. That's what it says. 17 A. Yes.
18 Q. Okay. And then on the next page -- on the 18 Q. -- as proposed for $40,000 a unit--
19 prior page, the second-to-last paragraph, it says: 19 A. Yes.
20 Mr. Hourani says please do not hesitate to contact -- 20 Q. -- do you understand that there were any
21 NI let you get there. 21 updated projections provided by Medistar to any of the
22 On the second page of the exhibit, Exhibit 22 actual investing physicians in the landlord, my client?
23 No. 5, Mr. Hourani says: Please do not hesitate to 23 A. f don't know that because the deal changed,
24 contact me or the Medistar staff, Cameron Smith or Larry 24 the landlord, your client. This was a separate deal
25 Valle with any questions related to the Katy Project. 25 that was here. So--

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Uh-huh. 1 A. Yes.
2 A. you know, this started out in an infancy 2 Q. What negotiations do you know that Mr. Shah
3 and rose to the occasion of all of a sudden the deal 3 did with any of the investing physicians?
4 changed. 4 A. With the investing physicians? I'm talking
5 Q. That's fine. 5 about --
6 A. So what took place at a future -- 6 Q. In the landlord.
7 Q. Right. 7 A, Well, that's your landlord.
8 A. -- thing, you know -- 8 Q. Yeah.
9 Q. I just -- 9 A. We have to separate these.
10 A. -- is different. 10 Q. All right.
11 Q. I lust want to know if you've seen one single 11 A. Okay.
12 document whereby Medistar sent out a letter to any of 12 Q. What -- what --
13 the investors in my client whereby it said, "The deal 13 THE REPORTER: I need you-all to talk one
19 has changed," one single document, 14 at a time, please.
15 A. I don't -- I don't know that. 15 MR. BURFORD: Yeah. You got that.
16 Q. Do you know of one single phone call made to 16 MR. SUTTER: You keep interrupting.
17 any of the doctors in -- the investing doctors 17 Finish your answer, please.
18 that whereby they were told the deal has changed? 18 A. That's where the separation comes in. I
I
19 N. Oh, I'm sure there were some. 19 realize it may be confusing for you because you
20 Q. Okay. 20 didn't -- you know, you weren't hi it and didn't live
21 A. I mean, because you have people like Dr. Coc 21 it, I was there as a corporate representative because
22 that's involved in both the real estate and -- 22 there are in.any projects going on at the same time th s
23 Q. iih-huh. 23 project is going on, many, many. So you have to
24 A. -- on the other side as a hospital operator, 24 separate out these entities.
25 you know, in the operations side. 25 At the time when all of this was issued

71 73
1 Q. Right. He would know that the deal had 1 here and it evolved, so to speak, from a lease being
2 changed, right? 2 Medistar as the landlord to an ultimate purchase as
3 A. He would — he would certainly know that the 3 someone else being the landlord and someone else being
4 deal was changed. 1 think some of the other physician 4 involved in those things with their investors, then
5 would, also; but I wasn't involved in those specific 5 that's when Medistar, you know, didn't participate as
6 contacts. 6 much in those talks.
7 Q. All right. 7 Q. Okay.
A. So I can't answer those questions. 8 A. So I think that's the distinction that needs
9 Q. Se Dr, Coch, he was one of the people, since 9 to be drawn.
10 he became a managing member of the general partner of 10 Q. Okay. How long -- let me ask you this:
11 the hospital, he would certainly — and he was also an 11 During this time period in the fall before the deal
12 investor in the landlord. He certainly would have had 12 changed, okay, were investors actually putting up their
13 talks with you guys about how the deal had changed from 13 money?
14 a lease to an acquisition, right? 14 A. These letters that we're addressing now --
15 A. Well, that would be only one example. I guess 15 Q
16 a better example would be P. K. Shah. 16 A. -- that were signed --
17 Q. Right. P. K. Shah might be another example? 17 Q. Yeah.
18 A. Yeah. Re would 18 A. Okay? -- is the intent of particular
19 MR. SUTTER: Let him finish, please. 19 physicians to make those investments.
20 A. He would certainly be in the upfront of the 20 Q. All right.
21 negotiations, as it turned out 21 A. And I think that those some of those
22 Q. (By Mr. Burford) Okay. 22 investments were made as time went on. I do not recal
23 A. -- from a lease-type project to a purchase. 23 dates when those investments conic in because Medistar
24 Q. Now, you say ''the upfront of the 29 did not handle those dollars that came in,
2.5 negotiations_" 25 Q. Okay_

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1 Q. Okay. Let me show you a few more document I anything to do with that.
2 related to that group; and when Fm talking about "that
2 Q. Okay. Did Medistar ever ask to see a copy of
3 group," I'm talking about the affiliate that was -- 3 the operating agreement of the general partner of the
4 MR. SUTTER: 1 think he's getting ready 4 hospital?
5 to torn you off. 5 A. I don't know that.
6 MR. BURFORD: Yeah, You need to turn me 6 Q. Okay. To your knowledge -- to your howled
7 off? 7 it did not?
8 THE VIDEOGRAPHER: Not yet. 8 A. I'm not aware if they did or they didn't.
9 MR. BURFORD: Go ahead. How many mo 9 Q. Okay. That's fair. Have you ever seen before
10 minutes do I got'? 10 today a copy of the operating agreement of APEX Kat:,
11 THE VIDEOGRAPHER: You got about a 11 Physicians-TMG, LLC?
12 minute. 12 A. I've seen this document that had been
13 MR. BURFORD: Okay. Why don't we change 13 produced —
14 the tape. I don't want to -- 14 Q. Right.
15 THE VIDEOGRAPHER: Going off the reco d 15 A, -- in production for this case.
16 at 11:53. 16 Q. Okay. But have you ever seen a signed copy?
17 (Brief recess.) 17 A. I've seen a copy just like this one.
18 THE VIDEOGRAPHER: The time is 12:07. 1 t3 Q. Just like this one. You got what I got,
19 Back on the record, Beginning of Tape 2. 19 right? Okay. Look with me on the second page of this
20 (Exhibit No. 6 marked.) 20 purported operating agreement, all right, of the general
21 Q. (By Mr. Burford) All right. I'm going to 21 partner. It says: The purpose of the company is to
22 hand you what's been marked as Medistar Exhibit Nos 22 engage in the business of the construction, developmer t
23 MR. BURFORD: I have a copy. 23 and operation of a medical care facility to be known as
24 MR. SUTTER: Thanks. 24 APEX Hospital-Katy.
25 Q. (By Mr. Burford) Sir, this purports to be an 25 That's the hospital, right?

79 81
1 operating agreement of APEX Katy Physicians-MK-3% LLC, 1 A. Yes.
2 which you and I have been vernacularly referring to as 2 Q. That was to be formed as of October 9, 2006,
3 the general partner of the hospital today. Do you see 3 in Katy, the APEX project, right?
4 that? 4 A. I believe that to be correct.
5 A. I do see it. 5 Q. Okay. Now, took with me on the fifth page.
6 Q. Now, it's -- en the first page, it says 6 There's a listing of owners there, and it's just --
7 effective date October 9th, 2006. And then if you look 7 under members, this has got ownership interest,
8 for the last page, there's no signature pages, although 8 Turn-Around Management Group, 50 percent, but nothi ig
9 there is a franchise tax certificate attached to the 9 else, right? It's blank after that?
10 very back page. Ali right? Do you know -- naw, if we 10 . A. 1 do see that;.and I do see that, you know,
11 tool: on each of the pages after the first page, there's 11 it's blank on page 6.
12 a little scribble at the bottom right-hand corner. Do 12 Q. All right.
13 you see that scribble? 13 A. I also don't see any initial on page 6.
14 A. I do. 14 Q. Ali sight. Okay.
15 Q. It looks like souse initial_ Do you know -- 15 MR. SUTTER: There's no page 2 either.
16 have you seen those initials before? 16 Q. (By Mr. Burford) I'm just giving you what
17 A. I don't recognize it. 17 I -- what I got. Okay?
18 Q. Okay. Do you know who drafted this operating 18 A. Correct. No page 2.
19 agreement, this version of the operating agreement, of 19 Q. In the version you've seen, have you ever seen
20 the general partner? 20 a page 2?
21 A. No, I don't. 21 A. I haven't. I've only seen, I think, what you
22 Q. Do you know whether it was ever signed or a 22 have here.
23 version of it was ever signed? 23 Q. Okay.
24 A. I don't know that. I mean, this would be the 24 A. At least for myself, I have only seen that.
25 other parties' agreement. So Me.clis ta r wouldn't have ha ri 25 Q. Okay. Look with me on page 7 of the document

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1 under 3.01, Management. Do you see that? 1 Q. All right.
2 A. I do. 2 A. -- for an absolute.
3 Q_ If says: The company -- and that's the 3 Q. All right. Now, do you know whether fir. Coch,
4 general partner of the hospital -- shall be managed by 4 Peracha or Shah -- at what point in time any of them
5 two managers. The initial managers of the company shall 5 might have rotated in as the other managing member of
6 be — shall be Adeel Zaidi representing Turn-Around 6 the general partner of the hospital?
7 Management Group and Dr. P. K. Shah or Dr. Stephen Co h 7 A. I do riot.
8 or Dr. Wasccm Peracha on a rotational basis representing 8 Q. Let me show you — do you know if Dr. Shah
9 APEX Long Term Acute Care-Katy LP_ 9 ever rotated in as a managing member of the general
10 And that's the hospital, right? 10 partner of the hospital?
11 A. I believe that's what they were determining it 11 A. The only thing that I know there was that
1.2 would be called at that time. 12 Dr. Shah was — had spoken, you know, on behalf of th s
13 Q. Okay. 13 company.
19 A. But, again, I don't have firsthand knowledge 14 Q. How do you know that?
15 of this. 15 A. I've spoken with Dr. Shah. I also sit on a
16 Q. Okay_ 16 hospital board of which Dr. Shah is a partner in that.
17 A. I only see what's in the document. 17 And so it's -- I would see Dr. Shah at least -- at least
18 Q. Okay_ Do you know in your dealings -- or did 18 once a month.
19 you have any dealings with the general partner that 19 Q. All right. So you said he's -- he's spoken
20 would allow you to detennine, you know, who was runnin 20- for the general partner. What did he say?
21 the general partner of the hospital? 21 A. About ongoing negotiations basically on the
22 A. The -- now, are we talking about -- 22 . setup and moving forward on this Katy facility.
23 Q. At any point in time. 23 Q. What specifically did he say? Do you recall?
24 A. At any point in time? 24 A. I can't recall, I mean, this is back in --
25 Q. Right. 25 Q. Okay.

83 85

1 A. At any point and period of time, I think 1 A. — late '06 and then early '07.
2 earlier on that it appeared to rue that Adeel Zaidi wool 2 Q. Okay. So you can't specifically recall what
3 be the person that would be maybe the spokesperson, a. 3 he said, right?
4 it were; but then in the negotiations as -- when this 4 A. Correct.
5 turned into a different type of project than originally 5 g All right. Now, looking with me at Medistar
6 planned, at least from Medistar's point of view, then I 6 Exhibit No. 7 --
7 think two people came up front. 7 MR. BURFORD: I gave you mine,
8 Q. Who was that? 8 MR. SUTTF.T.: We'll take that one.
9 ___ A. And that would be Adeel Zaidi and P. K. Shah. 9 MR. BURFORD: That's got all my secrets
10 Q. Okay. And did Mr. Zaidi and Mr. Shah say they 10 on it, man.
11 represented the general partner, or do you not -- were 11 MR. SUTTER: I know it.
12 you not at arty of those meetings? 12 MR. BURFORD: We can re-mark it --
13 A. I was not personally at any of those meetings. 13 MR. SU1 I ER: A little short grab and we
14 Q. Okay. Now, this says -- it says the initial 1 14 would have had it.
15 manager of the company shall be Adeel Zaidi, and that's 15 MR. BURFORD: Yeah. I was quick there.
16 consistent with your understanding of who managed the 16 Did you notice that?
17 general partner, right? 17 MR. SUTTER: I don't give them back once
18 A. Well, I think that I just indicated what 1 18 I get them, you know. 1 had that in a deposition
19 thought had happened; but not having the direct 19 recently --
20 knowledge — 20 MR. BURFORD: Really?
21 Q. Right_ 21 MR. SUTTER: -- where a Haynes & Boone
22 A. -- and being inside the working of that 22 lawyer gave me -- went through the whole deposition SI
23 company -- 23 about six exhibits until he realized he was giving the
24 Q. You're not quite sure, right? 24 witness his own copies.
29 A. -- I can't tell you -- 25 MR. BURFORD: Yeah_

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1 A. Yes, that's what it says, 1 A. I don't know. I haven't reviewed that check;
2 Q. Are you familiar with this addendum? 2 but I do know it was in an escrow account and I think it
3 A, I have seen it, 3 was at the time of the other deal closing, when the
4 Q. The first bullet point says: "TMG shall 4 purchase took place of the project, it was put in as a
5 provide in addition to the written confirmation given to 5 credit, I think, toward that purchase.
6 Medistar for 33 percent of the real estate two weeks ago 6 Q. Okay. So it was ultimately used -- this down
7 binding letters of intent from the physicians by 7 payment that we're talking about here was ultimately
8 October 6, 2006," right? a used at the final -- final deal that was consummated?
9 A. That's what it reads. 9 A. When there was a purchase of the property.
10 Q. And you and I have gone over some of those 10 Q. Okay. In Bullet Point No. 3 it says:
11 letters of intent, right? 11 "Medistar shall provide a draft lease agreement to `MG
12 A. Yes. They were an exhibit that you handed m 12 by the 22nd reflecting the understanding between TMG an
13 Q. Right. And then the next page -- the next 13 Medistar." Is that correct?
14 bullet point says: "TWIG shalt provide a down payment f 14 A. That's what if says.
15 $500,000 towards the purchase of the 33 percent or 50 15 Q. And Medistar provided TiVIG with a copy of such
16 percent shares of the Katy Project by October 31st, 16 a lease, right?
17 2006." And that's for the purchase of what would be the 17 A. Yes, they did.
18 entity to acquire the building, right, and land? 18 Q. May. And Medistar drafted that lease, right?
19 A. I'm sorry. What was -- what was the question 19 A. I'm not for sure exactly who drafted that
20 Q. Yeah. At this point that would be for a 20 lease --
21 purchase of the shares of the building and the land that 21 Q. Uh-huh.
22 was to be acquired in which the hospital would operate? 22 A. -- if it were one of our attorneys or taken
23 A. Well, I would view it as probably a -- like, a 23 from another project.
24 good-faith deposit for a business deal? 24 Q. Do you know a Mr. Chagla?
25 Q. Well, but it related to -- it related to a 25 A. No.

99 1.01

1 down payment toward the purchase of 33 to 50 percent cf 1 Q. In any event, Medistar provided a draft lease
2 the shares of the Katy Project; that's what this says, to TMG, right?
3 right? A. Correct.
4 A. I see what it says, but -- Q. Of the terms of the lease that they thought
5 Q. All right. would be acceptable?
6 A. But, again, I guess this is written by . A. The terms as had been negotiated, correct.
7 Turn-Around Management Group -- Q. Okay. Did the draft lease agreement that
8 Q. Uh-huh. Medistar provided to TMG -- did that -- did any of the
9 A. -- that probably is not skilled in writing 9 provisions from that draft change when Medistar actuall
10 such documentation. 10 entered into a lease with the hospital prior to the
11 Q. Right. Well, whether or not it was written by 11 actual closing on the purchase of the land -- of the
12 Turn-Around Management Group, it was signed by 12 real estate?
1.3 Mr. Monzer Hourani 13 A. The only thing that I've seen in this
A. That's correct. 14 documentation is a signed lease — okay?
15 Q. -- of Medistar, right? 15 Q. Okay.
16 A. Right, with the intent -- okay -- that's 16 A. -- that was operated under for a very short
17 involved in all of our projects would typically ash for 17 period of time until the purchase came about.
18 earnest money-type things — 18 Q. And that signed that initial signed lease
19 Q. Okay. 19 was between Medistar on the one hand and the hospital n
20 A. -- you know, to hold to people's promises. 20 the other; true?
21 Q. All right. Did TMG provide you with $500,000 21 A. Well, we'll have to took at that document.
22 A. To my knowledge, the 500,000 was deposited 22 Q. Uh-huh.
23 into an escrow' account. 23 A. ButI think that that may be an incorrect
24 Q. All right. And where did the $500,000 come 24 statement us to the relation that you had first
25 from? 25 indicated to me of who was going to be the hospital.

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1 Q. All right. Well, let's take a look. A. Well --
2 A. Yes. 2 -- it would certainly look like it was --
3 Q. I luckily have these documents here. 3 A. But the question is: Did this document come
4 (Exhibit No. II marked.) 4 out of Medistar's files, meaning did Medistar make tilt
5 Q. (By Mr. Burford) First of all, look with me 5 document --
6 at Medistar Exhibit No. 11. This is dated Q. Or did they receive it.
7 November 20th. 2006. from A. K. Chagla at TMG. Is h A. Yes, they received it.
8 the chairman of a company called Prestige? Q. Okay. Now -- and then you and I talked about
9 A. I don't know. I'm really not familiar with 9 an initial lease that had been entered into between
10 him. That may be the person that -- that I've heard f 10 Medistar on the one hand and the hospital on the other,
11 that's also operating with TMG. 11 right?
12 Q. All right. It's to Monzcr Hourani. Now, he 12 (Exhibit No. 12 marked.)
13 is certainly with Medistar, right? 13 A. Okay.
14 A. Correct. 19 Q. (By Mr. Burford) Right? And look with me,
15 Q. And it says; With reference to yesterday's 15 sir, at Medistar Exhibit No. 12.
16 discussions with Adeei. 16 A. Thank you.
17 That's Mr. Zaidi, right? 17 Q. This -- this document, Exhibit No. 12, says
18 A. Correct. 18 Lease Agreement -- Lease Agreement. Agreement of few e
19 Q. "Please find enclosed a sample lease which 1.9 made and entered into as this 4th day of January, 2007,
20 could form the basis of the lease for the subject 20 by and between Medistar Corporation, or assigns --
21 property." 21 that's the --that's -- and it says "a Texas
22 A. Okay. 22 corporation' and then it says "landlord," right?
23 Q. And it says: We are asking our attorney to 23 A. Correct.
24 suitably amend the sample lease to bring it in line. 24 Q. So at this point in time, Medistar was the
25 And then up at the top, there's some 25 landlord, right?

103 105
1 writing, right? 1 A. That's correct.
2 A. Handwritten -- 2 Q. And then it says 'rand APEX Long Term Acute
3 Q. Handwritten. 3 Care-Katy, LP." That's the tenant or the hospital,
4 A. -- notes you're referring to? Yes. 4 right?
5 Q. Yes. And on the left-hand side, it says, "not 5 A. Yes.
6 used," right? 6 Q. So even after December 22nd of 2006, Medistar
7 A. I see that. 7 to be heavily involved in the APEX Katy
8 Q. And on the right-hand side, it says "PT,'' 8 Project, right?
9 "CS," "FP" and "DL," right? 9 A. That's correct.
10. A. Yes. 10 Q. And, in fact, it was so heavily involved that
11 Q. "PT' is -- referred to Mr. Paul Tapscott, 1.1 it entered into an interim lease So that construction
12 right? 12 could start on the hospital, right?
13 A. Correct. 13 A. Actually, that's incorrect.
14 Q. "CS' would be Cameron Smith, right? 14 Q. Okay. Why did it enter into the interim
15 A. Correct. 15 lease?
16 Q. "DI.," would be Debbie Lightfoot? 16 A. The long-term acute care Katy hospital needei
17 A. Correct. 17 to have its license. Okay?
18 Q. Who was "FP"? 18 Q. lib-huh.
19 A. Frank Patout, 19 A. And so the business deal at that particular
20 Q. Okay. Are they all with Medistar? 20 junction was to give them the ability to go in and start
21 A. They are.. 21 operating the hospital --
22 Q. All right. So this would appear to be a copy 22 Q. Okay.
2.3 of a document that came out of Medistar's files, right 23 A. -- in order to maintain their acute care
24 A. I don't know. 24 setting, but go into the prerequisites for getting their
25 Q. Well, if it's got all these initials on it -- 25 long-term acute care license. And so the hospital hat

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1 to be is operations in order for them to do that. And 1 Q. Okay.
2 since Med istar owned the hospital at that time, there 2 A. -- where in the other lease with Medistar and
3 needed to be an interim lease between the two entities 3 the different tenant, Medistar was responsible for
4 entered into; and that was the purpose for entering int 4 those.
5 this lease. 5 Like I say, this was entered into as a —
6 Q. Okay. And this is a lease agreement that was 6 as a temporary stop for -- to allow the physician grou fs
7 executed in the first part of January, if we look on the to get a head start on their LTACH licensing.
8 last page, page 23, between the hospital by Mr. Zaidi, 8 Q. Okay.
9 its general partner, right -- 9 A. And so when your group or your -- that you
10 A. Correct. 10 represent, the LLC, entered into an agreement with tlx
11 Q. -- and landlord, Medistar Corporation, signed 11 tenants or the bankrupt entity, then the documents
12 by Mr. Monzer Hourani, right? 12 changed to reflect those — those things --
13 A. Correct. 13 Q. Okay. Do you know of any --
19 Q. And do you know whether -- when the actual 14 A. --which is substantial change.
15 lease was executed between my client, the landlord, and 15 Q. Do you know of any other changes other than
16 the hospital whether the names were just changed; and 16 the obligation of build-out?
17 the exact same lease was used? 17 A. Well, besides the names, as we've discussed --
18 A. That's incorrect. 18 Q. Okay.
19 Q. That's incorrect. Okay. 19 A. -- before.
20 A. There is a distinct difference-- 20 Q. Now, you said the tenant was different. This
21 Q. Okay. 21 says APEX Long Term Acute Care-Katy, LP. That is the
22 A. — in the two leases. 22 hospital.
23 Q. All right. And what are the distinct 23 A. I don't know who was all involved at that
29 differences in the leases, as you know? 24 particular time.
25 A. Well, in preparation for this case and 25 Q. Right. But that's --

107 109
1 reviewing the documents, I compared the documents. 1 A. Okay.
2 Q. Uh-huh. 2 Q. Tiles the same tenant that the -- that my
3 A. And there's one big difference in those leases 3 client signed the lease with, right?
4 besides the name, of course -- 4 A. Okay.
5 Q. Okay. 5 Q. Isn't that correct?
6 A. -- and who the landlord was at that particular 6 A. Well, I don't know if all of them arc. I
7 time -- 7 mean, if we're going in to name all the tenants or a
8 Q. Sure. 8 of the participants in that agreement, I don't know
9 A. -- naturally -- 9 that.
10 Q. Sure. 10 Q. Okay. But the --
11 A. and who, then, was the tenant, who is 11 A. That -- that was my point.
12 totally different. So, yeah, two different entities 12 The entity was the same, though, right?
13 entering into this tease. But one big difference, yes, 13 A. It very well could have been.
14 if they wanted to use our lease, we didn't have an 14 Q. All right. You're not suggesting that
15 objection to them doing that; but they did make one big 15 Medistar entered into a lease with a different party
16 distinction. They changed -- from the previous 16 than my client, right?
17 agreements as we have gone over here today, it clearly 17 A. As far as the entity, no; but as far as the
18 states that Medistar has a responsibility to do certain 18 participants in the entity, probably so.
19 things and build out, as you started to say, you know, 19 Q. But you don't know one way or the other, do
20 why this is entered into -- 20 you?
21 Q. Uh-huh. 21 A. Well, I'm -- I'm pretty for sure that some of
22 A. -- arid — which wasn't the purpose. But -- 22 the participants in this group had changed.
23 and the distinction from the lease of your client and 23 Q. Who? Who changed?
24 the lease that Medistar had was that now the tenant is 24 A. And there were more — more participants
25 responsible for all the build-outs and et cetera — 25 added, I believe.

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1 Q. Okay_ 1 inquiry by other physicians --
2 A. But, again, that's what -- that's without 2 Q. Right.
3 having firsthand . knowledge. 3 A. -- which brings us back to my point --
4 Q. Okay. 4 Q. Well --
5 A. And, you know, you're asking me as a corporate 5 A. -- that other physicians wanted to buy in --
6 representative and reviewing the documents; and that. 6 Q. Right.
7 what I recall. 7 A. -- in the real estate side. And there were
8 Q. Okay. That's fair enough. You recall that others that wanted to participate in the operational
9 there may have been more participants in the tenant when 8 side, too. And so I think there were people that were
10 my client actually signed the lease, right? 10 added as time went along.
11 A. I think that's probably correct. 11 Right. Well --
12 Q. Now, let's talk a little bit about my client, 12 A. So Medistar, being a seller, basically --
13 all right-- 13 Q. Right.
14 A. Yes. 14 A. — of the real estate actually said that we'll
15 Q. — this -- the APEX Katy Physicians, LLC. All 15 allow the physicians we don't want to hold up this
16 right? it's the landlord, right? It actually owns the 16 operation; we want to make sure it's successful.
17 building and the associated property, right? 17 Q. Right,
18 A. As it exists today, that's correct. 18 A. So, yes, we would allow, you know, that
19 Q. Okay. And your client, Medistar, claims an 19 management company to sell, you know, shares that we
20 ownership interest in my client, right? 20 have --
21 A. We hold units. 21 Q. Right.
22 Q. Yes. flow many units? 22 A. — to other doctors.
23 A. I think at present time it's, like, 52 units. 23 Q. And who got the money for those shares?
24 Q. Okay. Well, how many units did it originally 24 A. Who received the money?
25 have at the time of closing? 25 Q. Yes.

111 113
1 A. I believe there were, like, 70 units that were 1 A. Since the shares belonged to us —
2 issued. 2 Q. Right.
3 Q. Did it later acquire additional units from my 3 A. Okay. -- then the money was turned over to
4 client? a Medistar for their shares that the company had sold fo
5 A. Not that I'm aware of. 5 themn-
6 Q. So it's only had 70 units the entire tine? 6 Q. Okay. Were they generally sold at about
7 A. I believe that's correct. 7 40,000 a unit?
Q. Okay. Did you ever hear that Medistar claimed A. That's correct.
9 to have 100 units? Q. All right. Now, the 70 units that
A. I reviewed a document one time by a person /0 Medistar acquired, did it pay 70 -- $40,000 a unit for
11 inside of the Turn-Around Management Group, I guess, o 11 those 70 units?
12 the managing partner -- 12 A. No. What it.did is provide services for those
13 Q Right. 13 units.
14 A. -- of that entity that there was purported 14 MR. SUTTER: Will you tell us when you're
25 there was a hundred units; but that -- that person was 15 at a stopping point? Because we're past the time I
16 mistaken. it was never -- nothing was ever issued on 16 wanted to lunch.
17 any of that. 17 MR. BI R:FORD: Okay. That's fine. Let me
18 Q. Okay. So only -- Medistar only 18 finish my question.
19 received 70 units, as far as you know? 19 MR. SUTTER. Sure.
20 A. That's correct, 20 MR. BURFORD, I'm going to go one
21 Q. Okay. And of that 70 units, it has now 21 question, and we'll go to lunch.
22 sold 18 units? 22 Q. (By Mr Burford) What were the services that
23' A. Medistar didn't sell anything. 23 Medistar provided as o f the time of closing to receive
24 Q. Right_ 24 its 40 -- its 70 units?
25 A. We actually sent a letter because of an 25 A. Well, there were. many, many different services

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together -- 1 and how it's to be paid --
2 Q. (By Mr. Burford) Right. 2 Q. Well, I want you to explain to me what is --
3 A. Okay, with -- with your representation of 3 A. -- and interest.
4 the LLC. Q. -- what is owed and how it's going to be paid.
5 Q. Right. 5 First of all, did you talk to somebody about this
6 A. And certain things have come about, you know 6 document to leans what it meant? Did you talk to
7 Q. Right. 7 somebody?
8 A. And so -- 8 A. The answer is yes, I have. I've talked to
9 Q. And I've -- you know, I've just gotten 9 Monier Hourani about the document. I've reviewed
10 involved a month or two ago. So I'm really just trying 10 document and know what it represents.
11 to learn all the facts I can learn. You understand 11 Q. Okay. So you had to talk to Mr. Hourani,
12 that, Mr. Perryman? 12 because he was the person that was actually here at this
13 A. And I -- I hope we're helping. 13 meeting, to know what it meant?
14 Q. Yeah. You agree -- 1 mean, I wasn't around 14 A. That's correct.
15 until, like, a month or two ago, right, as far as you 15 Q. In order to know what it meant, right?
16 know? 16 A. That's correct.
17 A. Yes. 17 Q_ Okay.
18 Q. Okay. 18 MR. SUTTER: Do you-all have the typed
19 A. You know, we had heard about the invoivemen 19 copy here or --
20 before; but it was kind of in reference to p. K. Shah, 20 M.R. BURFORD: Yeah. We'll get to that.
21 not to the LLC. And then, of course, I did attend the 21 MR, SUTTER: Oh, okay. I'm sorry.
22 meetings -- 22 MR. BURFORD: Yeah. get to that
23 Q. Right. 23 one. I want to start with this one.
29 A. -- at your office concerned with the LLC -- 24 MR. SUTTER.. All right.
25 Q. Right. 25 MR. BURFORD: All right?

139 141

1 A. -- in which you explained that you were, at 1 Q. (By Mr, Burford) At the top -- and this is --
2 that time, representing the LLC. 2 is this the one Mr. Hourani says was actually signed on
3 Q. Okay. You understand Mr. Fred Wahrlich here 3 December 22nd of '06?
4 is actually representing -- A. Yes. He said it was -- this document was
5 A. I've never met him. I don't know. signed, as well as the other documents were signed.
6 Q. Okay. Looking back with me at Exhibit 3 to Q. Okay. Work with me down the page.
7 the notice of your deposition, now, there's three pages 7 A. Yes.
8 to this document, right, Exhibit No, 3 to your 8 Q. What's the 18,5?
9 deposition notice which was previously marked as Exhibit 9 A. The 18.5 was the price for the complex.
10 No. t to your to your depo, right? 10 Q Okay. And how do you know that?
11 A. have it as Exhibit 3 -- 11 A. That's -- that's what had been discussed
a2 Q. Yeah. Exhibit 3 to Exhibit I. 12 through Medistar. It was— actually started out much
13 A. -- to the notice. 13 greater than that when these negotiations started out.
14 Q. Okay. And on Exhibit 3, there's three pages, 14 Q. Uh-huh,
15 right? 15 A, I wasn't involved in the actual negotiations
16 A. I have three pages here. 1.6 with Mr. Shah and Mr. Zaidi and Monet con cerning this
17 Q. Now, what is the first page? Can you explain 17 but I was quite aware of the negotiations going on. It
18 it to me? originally started out at about 25 million through the
19 A. It looks like a handwritten document. This is 19 discussions and then had dropped down to this
20 a document that we're saving, you know, exists as --as 20 December the 22nd, if you want to call it, deadline.
21 a note dated December 22nd of 'OG. 21 Q. Ail right.
22 Q. Does it say "note" anywhere on here? 22 A. And so there was a figure that was arrived at,
23 A. It doesn't say "note" on -- anywhere on the 23 that 518 1/2 million going into the conversations.
24 face of this document. However, there is such things in 24 Q_ Okay. But you would have to be part of the
25 the document that explains, you know, about what is owed 25 conversations in order to know what that18_5 meant,

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1 right? I mean, just a normal person looking at the four 1 say "Katy Project" on it, right?
2 corners of this document wouldn't know what that 18.5 2 A. It does not.
3 is, right? 3 Q. Okay. And it doesn't describe any land,-
4 A, Well, I think you would if you were involved 4 right?
5 in the purchase of -- 5 A. No.
6 Q. Right. 6 Q. The legal description, right?
7 A. -- of a facility. 7 A. It does not.
8 Q. Right. Q. Okay. In fact, none of the three pages here
9 A. I think you would definitely know that. 9 describe have a legal description of any land, right?
10 Q. But if you -- if you're a person like me that 10 A. No. But it does have reference to what they
7_1 just looks in here, looking at this document, there's 11 were talking about.
12 nothing that says that 18.5 is the purchase price on 12 Q. Okay. And you go down -- what's the minus 1.0
13 this document, right? 13 there? 18.5 minus 1.0, what's the 1.0?
19 A. No. And it doesn't say what it is; but, then 14 A. This is in reference to the last day before
15 again, if you've got an 18.5 and you've got interest 15 this deal would go off the table. And in order to help
16 rates calculated and the amount of payments arid, yo .1 16 the participants on the other side, Medistar had agreed
17 know, et cetera -- 17 to discount the selling price of the entire campus by
18 Q. Yeah. 18 SI million, but only if this was to happen immediately.
19 A. then you would certainly realize that it 19 Q. Okay. And did Mr. Hourani tell you that?
20 would be a document referring to a note, something 20 A. Mr. Hourani told me that; but in addition to
21 somebody was going to agree to and pay. So -- 21 that, there were -- in discussing this business
22 Q, It refers to a note. Okay. But -- 22 opportunity, you know, in the upper corporate
23 A. Now -- 23 management --
24 Q. All right. Was going to agree to -- 24 Q. Oh-huh. .
25 A. This -- 25 A. this was something that would be agreed to.

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MR. SUTTER: Have you finished? 1 Q. Okay. By Medistar?
2 A. Well, what I was going to say is: This is not 2 A. Correct.
3 unusual, especially when -- when you're talking to 3 Q. And then you have something called 3 million
4 people at nights and on weekends and et cetera in 4 cash. What is that, on the left-hand right under the
5 business deals. This type of thing, through Medistar 5 1 -- minus 1.0? Is that plus 3 million or minus 3
6 Corporation's history, you can -- you can very well see 6 million?
7 that transactions take place like this. 7 A. No. This this is the cash that would be
8 Q. (By Mr. Burford) Okay. And it is attributable at the time to the -- to purchase this --
9 contemplated that later on, I guess, that a real note 9 this complex of buildings.
10 would be signed and executed, right, would be -- the 10 Q. Okay. Where did that --
11 terms and language would be agreed to? 11 A. If they bring 3 million cash and then the
12 A. Not necessarily. I think that moving forward 12 negotiation was that the 2.9 acres of land, the Goodrie t
13 with a transaction, you could actually use this type of 13 foundation, who had an option on this property --
14 documentation. 14 Q. 0th-huh.
15 Q. Okay. 15 A. was ready to exercise their option. And so
16 A. Typically -- typically there are other 16 we at Medistar had agreed that we would give them the
17 documents that reference the business deals and 17 benefit -- "them" meaning the purchaser-- the benefi
18 et cetera in a lot of transactions. This particular 18 of the 2-million-dollar sale on the 2.9 acres. So you
19 transaction, I think, had gotten to a point and period 19 have a total of $5 million.
20 of time when people were finished negotiating with eac 20 Q. All light. And how does that $5 million work
21 other and — 21 into this equation?
22 Q. 0th-huh. 22 A. Well, that would -- if, in fact, they
23 A. -- it was either fish or cut bait. And so 23 brought 3 million cash -- so since I wasn't there at the
24 this is a document that was arrived at. 24 meeting --
25 Q. Okay. Now, this handwritten note, it doesn't 25 Q_ Uh-huh. Uh-hull.

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1 A. —1 can only surmise that they said, "Well, 1 A. No. It doesn't say that.
2 look, 1 can bring 3 million. 2 Q. Okay. Who gets the 5 million?
3 Q. Uh-huh. 3 A. It doesn't say -- it's not talking about
4 A. And he is saying, "Okay. You bring 3 millio 4 somebody getting5 million here.
5 cash," as it says here. 5 Q. Okay. So this Exhibit 3, the first page, does
6 Q. Right. 6 not talk about anyone getting $5 million due to cash
7 A. "And then, you know, you're going to get 2 7 plus acres, right?
8 million at closing because we'll exer -- we'll let them 8 A. I don't see it written on there.
9 exercise the option to buy the 2.9 acres. That gives 9 Q. Okay. And you don't know of Mr. Hourani
10 you $2 million. So you'll have $5 million" -- 10 telling you that either, right?
11 Q. Right. 11 A. No. It's simply showing a loan ratio.
12 A. -- "to put toward this purchase." 12 Q. Okay. Well, if you're going to ask the bank
13 Q. Right, Okay. So the total purchase price is 13 for 13,5 -
14 18.5 million, right, or 17.5 million? 14 A. Uh-huh.
1.5 A. Going down, just like you said -- 15 -- and the purchase price --
16 Q. Yeah. 16 A. Uh-huh.
17 A. -- the 18 1/2 minus a million is 17,5. 17 Q. -- is 18,5 --
18 Q. All right And then you said minus 5. 18 A. Uh-huh.
19 A. Pin saying they're talking here this -- if you 19 Q. -- where does the rest of the money come from'
20 brought 3 million, then we can give you 2 million. 20 A. Okay. Well, if you took this literally going
21 Therefore, you will have 5 million. 21 down this way --
22 Q. 5 million. And 5 million -- and you said 22 Q. Right.
23 minus 1 was the reduction. So that gives you 17,5. And 23 A. -- then you would work it to where there is --
24 then you said then you're going to have 5 million. So 24 18,5 is the selling price, You have 5 million cash to
25 why doesn't that add up to 12.5 million? 25 put down. Then you would ga ask the bank for 13,51.

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1 A. I don't think that's what's being discussed Q. Okay.
2 here. 2 A. That gives you the 18,5 purchase price. As
3 Q. All right. Welt, what's being discussed? 3 the discussions went down the fine here and everybody
4 A. What's being discussed is that Hyatt 4 signed off on and prior to, I'm sure, signing off they
5 brought 3 million -- 5 say, "We can't do that deal. We don't have enough mane)
6 Q. All right. 6 to do that deal" and Monzer comes in and says, "Well,
7 A. -- we'll give you 2 million. You would have 5 7 Medistar will give you a million-dollar discount if you
8 million. 8 do this now."
9 Q. Right. 9 Q. Okay.
10 A. And if you had 5 million and you were to go 10 A. And so, you see, in the interpretation of this
11 out and ask the bank for a 13.5-million loan, as stated 11 and how it was explained to me, they came back and gave
12 here -- 12 S1 million off the 18,5 purchase price, bringing it down
13 Q. Right. 13 to 7 point-- 17.5 million.
14 A. -- then if you looked at the loan ratio, 14 Q. Okay.
15 that's 37 percent. A. So that's how you would interpret this
16 Q. All right. 16 document that was signed and everybody agreeing to this
17 A. So you should be well suited at that point if, 17 payment schedule and the amount of money to -- for the
18 in fact, you brought S million cash into this deal -- 18 project.
19 Q. Ali right. 19 Q. Okay. So the 13 -- the 18.5, then, is the
20 A. -- and you brought, you know, the 13,5 into 20 purchase pi ice --
21 this deal, that you should have enough dollars in ord •r 21 A. Correct.
22 to go get a loan at the bank on this 13,5. 22 Q. -- for the land, right? Is that correct?
23 Q. Okay. 23 A. For all of the facilities.
24 A. Now -- 24 Q. Anti was that the deal that was ultimately
25 Q, So Medistar was going to get this 5 million? 25 consummated?

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1 A. With a million-dollar discount. 1 Q. Did they bring that $5 million ultimately?
2 Q. Okay So the deal that ultimately was 2 A. No. This was the agreement that was reached
3 consummated was paying ¶17.5 million for the land, 3 on December 22nd.
4 right? 4 Q. Okay. But did that deal happen?
5 A. Correct. Well, you say "the land." It's not 5 A. What happened on this deal was that this note
6 just the land. 6 constituted a 4-million-dollar payment to purchase
7 Q. Well, it's the Iand and the buildings, right. 7 everything that was in, you know, the land, the
8 fixtures -- 8 buildings, everything that was in the buildings,
9 A. And fixtures and equipment. This is -- this 9 et cetera --
0 is a big deal. 10 Q. Oh-huh.
11 Q. Right, 11 A. -- and that they would go out and get a
12 A. This is not just land. This is much greater 12 13-and-a-half-million-dollar loan or money or howevc
13 than land. 13 they were going to arrange that.
14 Q, Right. it's land plus a lot of other real 14 Q. Okay.
15 estate and stuff, right? 15 A. So the total amount to Medistar would be
16 A. I mean, the entitlements -- the entitlements 16 $17 1/2 million for this entire complex.
17 that you have there to operate an LTACII unit has eldreITI 17 Q. Now, it doesn't say anywhere on here that
18 value. 18 they're paying ¶17 1/2 million fora specific piece of
19 Q. All right. And so it says if you pay 13 down, 19 real estate and all this other stuff you're describing?
20 we agree on a total price, 17,5? 20 It doesn't say that anywhere on this piece of paper,
21 A. Correct. 21 does it? •
22 Q. So who is the "we'? Is that Monzer? 22 A. No, it doesn't; but, then again, with --
23 A. That would be -- well, Monier is writing this 23 everybody who is in the meeting that is obligated or
24 down. "We" meaning everybody who is in that meeting. 24 obligating theirselves to pay would know that.
25 Q. Did he -- did Mr. Monier tell you that "we" 25 Q. Right. They -- those people know, but they

151 153

1 meant everybody in the agreement? might all have different interpretations since it's not
2 A. Yes. spelled out, right?
3 Q. Okay. And then it says, remainder 4 million. A. I don't think so.
4 I thought the remainder -- we're talking about they were Q. Okay.
5 going to get credit for 5 million up there at the top, 3 A. I mean, I don't don't know of a prudent
6 million in cash and 2 million in acreage. How do you investor who wouldn't know.
7 square that? Q. All right.
8 A. No. No. No. No. No. A. And I think everyone involved in that in ectin
9 MR, SUTTER: Objection. That doesn't 9 was pretty well a prudent investor.
10 make sense. 10 Q. Okay. Well, you know, I'm a lawyer. You know
11 A. I'm sorry. You must have misunderstood. If 11 that, right?
12 "they," meaning, you know, the purchasers 12 A. I do.
13 brought 3 million rash, if they did -- 13 Q. Arid I look at this thing, and I have a
19 Q. Uh-huh_ 14 difficult time understanding it. I want you to tell me,
5 A. and then we would give 2 million cash -- 15 sir, what these stars are. "Remainder 4 million," what
16 Q. Uh-huh. 16 does that mean?
17 A. -- that would give them $.5 1? MR. SUTTER: Objection to your argument
18 Q, Okay. 18 in that.
19 A. Okay. 19 MR. BURFORD: I understand.
20 Q. All right. 20 Q. (By Mr. Burford) 1 apologize to you.
21 A. That's what that meant. 21 MR. SUTTER.: Just answer the question --
22 Q. Okay, 22 MR. BURFORD: Yeah. Yeah.
23 A. Why -- I mean, they would have to bring the 23 MR. SUTTER: -- and ignore all the
24 money. How are we going to give them credit for mone. 24 argument about him understanding.
25 they didn't bring? 25 MR. BURFORD: l apologize. I really

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1 don't understand it. Okay? All that's sidebar. 1 A. Well, I think you have -- like I say, okay,
2 MR_ SUTTER: That, too. Just answer his 2 you're an attorney; but you would know that if, in fac
3 questions. What do they mean? 3 someone was there that did not get a part of soniethin
4 Q. (By Mr. Burford) What do they mean? 4 why would they pay anything?
5 THE VIDEOGRAPHER: Five minutes left on 5 Q. Right. But I -- looking at the four corners
6 this tape. 6 of the document, it doesn't say that Dr. Shah is going
7 MR. BURFORD: Okay. 7 to -- is the only one guaranteeing?
8 Q. (By Mr. Burford) What do they -- let's try to 8 A. Nor does this document say I'm purchasing
9 get through this document here. 9 this --you know, this facility.
10 A. Okay. Here's what -- here's what the documen 10 Q. Okay.
11 represents; and you can see it reading, going down it: 11 A. Okay.
12 It says if you pay $13 1/2 million now, we agree on the 12 Q. All right. And that would be the same thing
13 117 1/2 million, which would be the purchase price. 13 for Exhibit B, right, the next page?
14 Q. Ali right. 14 A. Meaning?
15 A. Okay. Which the remainder, taking 17,5 -- 13 15 Q. He doesn't describe any property and -- you
16 million, point 5, from 17 million, there's a 16 know, actually the next page doesn't even have any
17 4-million-dollar remainder. 17 guarantees at all, right?
18 Q. All right. 18 A. Pin sorry.
19 A. And here's bow you can pay that to me. 19 Q. Yeah. The -- on the next page --
20 Q. Okay. 20 A. Yes.
21 A. You can pay me, on June of '08, $500,000. You 21 Q. it says sale price 18,5 and down at
22 can pay me, in December of '08, $500,000. And you ca 22 closing, eight. Who is going to give the eight?
23 pay me, in December 2009, 11 million; and then in 23 A. The purchaser.
24 December of 2010, 12 million. 24 Q. Who is the purchaser?
25 Q. Okay. 25 A. Whoever the purchaser would be at the time o

155 157
1 A. That's how the 4 million remainder would be 1 this closing.
2 paid, plus interest at 6 percent, which is stated here. 2 Q. So you don't know who the purchaser would h
3 Q. Okay. And who are the -- who is supposed to 3 A. Well, the people that was there representing
4 be paying this $4 million? 4 the purchaser.
5 A. My indication is that Mr. Shah took the Q. Who -- was the purchaser in existence at this
6 obligation upon himself to pay that. 6 time?
7 Q. Only Mr. Shah? A. I have no idea about --
8 A. That's -- I wasn't in the meeting. I'm Q. Okay.
9 telling you what I've been told. A. — that time period.
10 Q. Okay. Who told you that. 10 Q. All right. And it doesn't identify the
11 A. Mr. Hourani told me that. Adeel Zaidi told m 11 purchaser, right?
12 that, and Abeer Sager told me that. 12 A. well, I think it identifies people by their
13 Q. Well, that would be in Mr. Sager's and 13 signatures.
14 Mr. Zaidi's best interest to tell you that only Mr. Shah 14 Q. Well, which one of these people by their
15 was guaranteeing this, right? 15 signature -- by the way, what signatures are these?
16 MR. SUTTER: How's he supposed to know 16 A- I recognize Adeel Zaidi's signature.
17 that? 17 Q. Okay. That's "AS"?
19 Q. (By Mr. Burford) Well, if they don't have to 18 A. Right. I recognize P. K. Shah's signature,
19 pay their part of the $4 million, that's a good thing 19 Q. That's over all the way to the — is that in
20 for them, isn't it? 20 the middle?
21 A. 'Welt, I guess it would depend on who gets to 21 A. Under the personal guaranty.
22 reap the benefit, doesn't it? 22 Q. Okay. You're on the first page now?
23 Q. All right. Well, who -- where does it say on 23 A. Yes. You want to go to the second page?
24 here that only Mr. Shah is personally guaranteeing the 24 Q. Yeah. We can stay on the first page.
25 debt'? 25 THE VIDEOGRAPHER: I'm almost out of

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1 tape. 1 guaranty.'
2 MR. BURFORD: Okay. Let's — let's 2 A. That looks like -- that looks like
3 change the tape because I'm getting a little confused 3 P. K. Shah's signature and then Abeer Sager and tlieu
4 here. So let's change the tape. 4 Monzer and then Adeel Zaidi.
5 THE VIDEOGRAPHER: 2:32. Going off tt 5 Q. Okay. And right under --
6 record. 6 A. That's kind of what it appears to be.
7 (Brief recess.) 7 Q. Right under "personal guaranty" what is that?
El THE VIDEOGRAPHER: The time is 2:40. 8 A. Okay. Well, there is --
9 We're back on the record. 9 Q. Right under the words "personal guaranty," you
17)-- Q. (By Mr. Burford) All right. Staying with 10 got one signature and then another one on the left-hand
11 this Exhibit No. 3, the first page, attached to your 11 side of the page.
12 depo notice, it says on the left-hand side.- under 12 A. You have two signatures, correct?
13 remainder 4 million, it says the words "personal 13 Q. Right. Who is that?
14 guaranty," right? 19 A. The first one I thought might have been
15 A. Correct. 15 Adeel's, but I don't know whose that is.
16 Q. And then how many signatures are under that? 16 Q. Okay. Who is the second one?
17 A. There's -- it appears to be two signatures 17 A. And that looks like P. K.'s signature there.
18 that's under that personal guaranty line item, if yo 18 Q. Alt right. Nov, let's go to the middle of the
19 will. 19 page.
20 Q. Who is that? 20 A. But I'm not for sure who this other one is,
21 A. It appears to be who signed the document is 21 taking a look at it.
22 Adeel Zaidi and P. K. Shah -- 22 Q. No.2, you mean?
23 Q. All right. 23 A. The first one under "personal guaranty" titer
24 A. -- there. 24 Q. It doesn't look like "Zaidi" to you?
25 Q. And then right under the numbers, under the 25 A. You know, I was thinking that it might have;

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1 equals sign, who signed -- whose signature is that? 1 hut, then again, I'm looking at this one over here o
2 A. Under the equals signs? 2 Zaidi's and it doesn't really look alike.
3 Q. Yeah. 3 Q. All right.
4 A. Equals signs? 4 A. You see that?
5 Q. Yeah. Do you see the 2008 -- 2010 equals Q. Yeah. Which one is i -- which one is in the
6 52 million? middle here under the equals sign? It hooks like --
7 A. Oh, okay. Below that? A. That looks like P. K. Shah's.
8 Q. Yeah. Alt right.
9 A. Yeah. There's Monzer's signature. They 9 A. And that's P. K.'s.
10 is -- 10 Q So P. K. signed it twice?
11 Q. Monzer is all the way to the right, right? 11 A. Under the personal guaranty, yeah.
12 A. No. His is kind of in -- his is third from -- 12 - And he signed it again over here apparently?
13 from the left. 13 A. Well, 1 think they all four signed it over
14 Q. Third from the left. Okay. Who is the 14 here.
15 fourth? 15 Q_ Okay. And who signed it under the 2
16 A. And then Adeel's appears to be -- 16 Who is this under the 2-million-dollar note?
17 Q. The fourth from the left? 17 A. Well, no. I think it's just on the bottom of
18 A. -- fourth. And there's -- 18 the page, is the way I look at it.
19 Q. Fifth, who is that? 19 Q. Yeah. On the bottom of the page, who signed
20 A. Well, there's four only there, isn't there? 20 that?
21 Q. What's all that scribble all the way to the 21 A. There's P. K., Abeer Sager, Monzer Houra
22 right? 22 and, looks like, Adeel Zaidi,
23 A. I -- okay. Let's look -- you want to start 23 Q. Okay.
24 with the first one? 24 A. That's what it looks like there.
25 Q. Let's start with the first one under "personal 25 Q. Okay. So how do I know which one is

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1 personally guaranteeing the 4 million, according to the 1 Q. Okay. Under the second one, it says
2 signatures? It doesn't say -- 2 Scenario 11; and they all sign it, also, right?
3 A. Well, there's P. IC. Shah's signature. You 3 A. Correct.
4 know, I'm not for sure what is this first part. 4 Q Okay. And then on the next page is a lease,
5 Q. Yeah. There's another signature there, right? 5 the third page. Why -- why was it necessary to have
6 A. t don't know what that is. 6 this document?
7 Q. So just the fact that the signatures -- 7 A. Well, 1 don't know what took place in that
B I don't know who that is under the personal 8 conversation that was there. E don't even know if this
9 guaranty other than I do know that's P. K.'s -- 9 document was done at the same time the other documen
10 Q. There's a -- 10 were done.
11 A. signature right there. 11 Q. Okay. I'd need to ask Mr. Hourani?
12 Q. There's a limited amount of space down there 12 A. Yeah, because I wouldn't I wouldn't know.
13 at the bottom of the page under December 2010, right? 13 Q. Okay. So you don't know_ You don't know why
19 limited amount of space under here, right? 14 this third document is here or whether it was even
15 A. I'm not for sure what you're getting at. 15 talked about at that night or that day, whatever,
16 Q. We're down at the bottom of the page here, 16 December 22nd?
17 right? 17 A. 1 don't, no.
18 A. Yeah, you're at the bottom of the page. 18 Q. Okay_
19 Q. Right. So -- and then everybody is signing, 19 A. I do know that in investigation of all the
20 right? 20 documents, that under this December 22nd, '06,
21 A. The people we've talked about, and we're 21 A Scenario, the IS million down to 17 I/2, was -- was
22 un-for-sure about that -- this. 22 later documented in a little better format, I guess, a
23 Q. All right. There's one signature we don't 23 typed format.
24 know whose it is. 24 Q. Oh-huh.
25 A. I don't know if it's a signature. I don't 25 A. And everybody had signed it.

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1 know. 1 Q. Welt, we're going to go through this,
2 Q. Don't know what it is. 2 All rig,ht. Now, was A, Option A on the
3 A. It could be -- 3 first page you see under -- by December 22nd --
4 Q. Okay. 4 A. I don't see an option. I don't know what you
5 A. -- P. K.'s first name. I don't know. 5 mean.
6 Q. You don't know? 6 Q. It just says "A" over to the -- over to the
7 A. I don't know. 7 left at the top, "A"?
B Q. So you don't Oven know who signed the thing? 8 A. It says "A," yes.
9 A. No. 9 Q. And then the next page it says "B." Both of
10 Q. Okay. 10 them are signed, right?
11 A. Butt do know these signatures here. 11 A. Well, this one says Scenario B, and then --
12 Q. All right. 12 Q. The first one just has an "A"?
13 A. And I know P. K.'s because, like I say, we're 13 A. Correct. And this second one says Scenario B.
14 partners -- we sit on the same board. 14 Q. Right.
15 Q. What board is that? 15 A. And then "B."
16 A. A Nova Hospital. 16 Q. So which one was in effect, "A" or "B"?
17 Q. Oh. okay. Now -- all right. Look with me at 17 They're both signed.
18 the next page. 18 A. Well, it's proven out by the consequences that
19 A. Sure. 19 happened and as it was portrayed out through the
20 Q. And that's it says Scenario B. Was 20 purchase, it was this December 22nd, '06, "A" that w
21 Scenario B -- that was an option? That was another 21 signed and agreed to and followed through on.
22 option that was offered at the time? 22 (Exhibit No. 14 marked.)
23 A. It may be something that was discussed, but 23 Q. (By Mr. Burford) Okay. Look with me at
24 that's not -- that's a scenario. It doesn't say on the 24 Medistar 14.
25 first one it's a scenario. 25 MR, BIJRFORD: I've only got one -- one

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1 Q. Okay. And then it says: Used at closing, 1.2 1 MR. SUTTER: -- and be very patient; bul
2 million. We agree. 2 at the same time, we have a corporate representathr,
3 So another 12 million that looks like was 3 here.
4 used by the hospital_ 4 MR. BURFORD: I understand.
5 A. Okay. 5 MR. SUTTER: And you're asking him to
Q. And it says: Deposit to Metro, $150,000. 6 look at third-party documents --
A. Well, I do know in looking at some of the 7 MR. BURFORD: Fair enough.
8 documentation like "used in closing,' the $1.2 million, 8 MR. SUI IER: -- and try to guess or
9 I've seen something in the document production that 9 interpret them. We've done it numerous times, and I
10 was -- Mr. Shah, when he purchased or made a down 10 don't --
11 payment on his units, that money went into a company 11 MR. BURFORD: Fair enough.
12 that was put into the escrow agreement and was utilize 4
12 MR. SUTTER: I think it's a waste of our
13 to close the facility, if I remember correctly -- 13 time.
19 Q. Okay. 14 MR. BURFORD: Let's move -- let's move
15 A. -- when the facility was purchased. So 15 on.
16 that -- that part, you know, would ring a bell on things 16 MR. SU1 ER: It doesn't --
17 that I've seen in this document production. 17 MR. BURFORD: Let's move --
15 Q. This doesn't refer to Dr. Shah; this refers 18 MR. SUTTER: -- mean anything, what ha j

19 to -- 19 thinks it means.
20 A. No. But I'm saying if this is what we're 20 MR. BURFORD: Let's move on. Okay?
21 talking about and you're utilizing the deductions that 21 THE WITNESS: Thank you.
22 we're talking about now as if— and basically I'm 22 MR. BURFORD: Let's move on.
23 saying to you I have seen that figure. 23 Q. (By Mr. Burford) You don't know anything
24 Q. Uh-huh. 24 about the dollars owed by the managing -- GP to the
25 A. And if it were used at closing, that figure, 25 landlord or to the hospital, right?

227 229

1 along with other monies, was produced to pay forth A. I didn't review the third-party documents Elm':
2 additional money at closing. are out there.
3 Q. Pay for hospital? (Exhibit No. 25 marked.)
4 A. To purchase the land. 4 Q. Yeah. Okay. Look with me at Medistar 25
5 Q. No. Well, this says "used at closing" by the 5 This is a document you should know something about.
6 hospital. Do you understand that? This is --
7 A. The purchase of the hospital. MR. SUTTER: 25?
8 Q. Not -- not the land, not the land. MR. BURFORD: 25.
9 A. Okay. 9 Q. (By Mr. Burford) This is a document from
0 Q. It's used by the hospital, itself. In other 10 Mr. Paul Tapseott to Mr. Adeel Zaidi and Ms. Abeer
11 words, this is money that was loaned to the hospital -- 11 Sager. This says: The undersigned attorney represents
12 A. But what does "closing" mean? 12 Medistar Corporation and Monzer Hourani.
13 Q. -- owed to the landlord. 13 And the undersigned attorney is Paul
14 That's right, closing money. 14 Taps6ott, right?
15 A. Closing of what? 15 A. Correct.
16 Q. Closing of the land deal, 16 Q. And it says: Please refer to the sale of Pin
17 A. Okay. That's what I'm talking about. 17 Oak -- that's the Katy Hospital -- from Medistar
18 Q. Yeah. But it's money that was -- that did not 18 Corporation to the landlord. Right?
19 go to the landlord, Did you understand that? Did you 3.9 A. Yes.
20 understand that there were certain monies that the 20 Q. It says: In sale of the Pin Oak Hospital each
21 general partner was holding for the hospital and the 21 of you signed and personally guaranteed an amount to p ty
22 landlord? 22 S4 million plus 6 percent in interest per annum. Right?
23 MR. SUTTER: Just a second. I don't 'want 23 A. That's what it's reading.
24 to interrupt and I've tried not to interrupt today -- 24 Q. Now, that's completely contrary to your prior
25 MR. BURFORD: Right Right. 25 testimony to rue that Exhibit No. 3 to your notice of

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1 deposition meant that only Shah was obligated for the 1 agreement to pay 54 million plus 6 percent interest."
2 $4 million, right? 2 So, once again — and then down at the bottom it says,
3 A. It would purport to be; arid I'm saying on this 3 "Monzer demands this interest obligation he paid
one here, l think that Paul Tapscott is incorrect. 4 immediately." Then ills copied to Mr. Monzer. Do you
5 Q. Okay. So just like Mr. Hodge was incorrect a 5 see that?
6 while ago, you're saying that the general counsel -- 6 A. Yes.
7 A. I'm sorry. Mr. [lodge was incorrect on what? 7 Q. All right. And then the prior exhibit dated
8 Q. He was incorrect on some information that he 1 June 26, 2008, all right, that was also copied --
9 had provided to Monzer Hourani. He sent hint an E-mail 9 that -- that document, that demand letter to Mr. Zaidi
10 talking about the hundred units. 10 and Ms. Sager, that was also copied to Monzer Hourani,
11 A. Oh, yeah. And I think that he took that off 11 right?
12. of a document, the same document that we reviewed her 12 A. It was.
13 that's been -- 13 Q. So Mr. Hourani, who had been there at the
19 Q. Okay. 19 December 22nd meeting who told you that only Dr. Shah
15 A. -- reversed by the person that sent it in. 15 guaranteed the 4 million, apparently was getting copies
16 Q. In any event, Mr. Tapscott sent a demand 16 of demand letters being sent out by his counsel to Shah,
17 letter for the, quote, "purported default" under the 17 Zaidi and Sager, all three, that they guaranteed the
18 4-million-dollar loan -- 18 $4 million, right?
19 A. Yes, II. see that. 19 A. Correct.
20 Q. -- to Zaidi and Sager, right? 20 Q. Arid did -- to your knowledge, did Medistar
21 A. Yes. I see that. 21 ever correct these letters and tell Mr. Zaidi and
22 Q. And you believe it's wrong, right? 22 Ms. Sager that they weren't personally liable on the
23 A. f do. 23 4-million-dollar debt?
24 Q. And look with me at Medistar 25. 24 A. To my recollection, the answer was yes. And f
25 (Exhibit No, 26 marked.) 25 think that, as you can see from the documents that wer

231 233

1 Q. (By Mr. Burford) 26, 1 guess, is what we're 1 written, June 26, 2008, and August 25th of 2008, that
2 on. And now I've filled in the gap to 27. 2 obviously, you know, Mr. Tapscott was looking at
3 MR. WAHRLICHt You already had a 26. 3 documents and interpreted it maybe for himself and
MR. BURFORD: Well — 4 sending out these agreements. However, let's address
5 MR. SUTTER: No, we don't have a 26 in the point of --
6 that. Q. Right.
7 THE WITNESS: We have a 26 now, just now 7 A. -- Mr. Hourani. As you know, he has been
8 MR. BURFORD: We have a 26 now. Yeah. pretty much in and out for some time.
9 There you go. look and see. 9 Q. Ail right.
10 THE VIDEOGRAPHER: .You got about eight 10 A. Now, whether -- because this company operates
11 minutes left on this tape. 11 probably half a billion dollars' worth of projects a
12 MR. BURFORD: Okay. 12 year --
13 Q. (By Mr. Burford) All right. Are you looking 13 Q. Right.
14 at 26? 14 A. -- there's a lot that goes on.
15 A. Yes. 15 Q. Right.
16 Q. And this particular 26 we're looking at, in 16 A. And he is not privy to reading every document
17 case there's another one in the record, is a Medistar 17 that's sent out. I think that it probably was corrected
18 document from Paul Tapscott, dated August 25th, 2008,80 18 internally.
19 Dr. Shah, AdeeI Zaidi and Abeer Sager, right? 19 Q. Right.
20 A. Correct. 20 A. And that's my explanation for it.
21 Q. And it's similar to the prior letter except 21 Q. Do you know of a specific letter -- can you
22 that it adds Dr. Shah, right? 22 identify it for me by date -- that was sent to Zaidi and
23 A. That's correct. 23 Sager saying, "You don't owe us any money under the
29 Q. And it says: the sate of Pin Oak Hospital I 24 personal guaranty"?
25 each of you signed and personally guaranteed an A. I don't recall reviewing any of that.

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have talked to either Adeel Zaidi or -- 1 that what you're saying?
2 A. P. K. Shah. 2 A. Yes, that's correct, in discussion for an I,TAC
3 Q or -- 3 unit in the Katy facility.
9 A. And -- 4 Q. Okay. And we know that Mr. Shah -- excuse me.
5 Q. Well, wait a minute. Let me finish. You're 5 You've got me doing that.
6 telling me this based on conversations with Adeel Zaidi, 6 We know that Dr Shah met with Monzer
7 Abeer Sager or Monier Hourani, correct? 7 Hourani in December of-2006, correct?
8 A. hi addition to P. K. Shah. 8 A. Yes.
9 Q. Okay. But, see, the questions -- I'm not 9 Q. We have looked at some documents that show
10 talking to you about your conversations with P. K. Shah 10 that.
11 that you had with him during the Nova board meetings. 11 A. Yes.
12 That's riot what I'm talking about. Right now I'm 12 Q. Okay. Before that December meeting, do you
13 talking about during the setup, during when Medistar was 13 know of any other meetings that Dr. P. K. Shah asked you
14 trying to promote this project. 14 to set up with Monzer Hourani?
15 A. Yes. 15 A. Oh, yes.
16 Q. Okay. And what time period was that? 16 Q. What meetings were those?
17 A. Well, let me correct your statement. Ws not 17 A. don't remember when the dates were there,
18 that Medistar was trying to promote a -- you know, this 18 but it was prior to those dates. But what you have to
19 project with all these people. Medistar -was acquiring 19 remember is that we've known P. K. Shah for a very Ion g
20 this facility. And P. K. Shah, Adeet Zaidi, the 20 time.
21 Turn-Around Management people had come to Monier betat se 21 Q. Okay.
22 they had heard that we were going to purchase this 22 A. Okay. And that when this came about, in other
23 facility and wanted to ben part of that. 23 words, our purchase or our swap, so to speak, P. K. Sha
24 Q. Okay. 24 got word of that; and then that's when he had asked to
25 A. Now, my conversations -- 25 set up these meetings. And obviously we know, because

247 249

1 Q. But I need to he specific because I want to 1 of that, he got involved; and you see what's happened.
2 know when P. K. Shah came to you at Medistar -- didn't 2 He is involved.
3 come to you specifically, but came to Medistar and said, 3 Q. And, you know, as a matter of fact, you know,
4 "We want to purchase," you know, this Memorial Herman 4 the documents we've been looking at show they were from
5 front Medistar. 5 either Adeel Zaidi or Abeer Sager before the December
S A. Okay. Those questions you'll have to ask to 6 meeting; and Dr. Shah is not even mentioned in a lot of
7 the people that he met with. 7 those documents until December of 2006, correct?
a Q. Okay. Et A. That's the only thing you see here --
9 A. I didn't meet with him on that purchase. 1. 9 Q. Right.
10 simply had conversations with him that he was setting u 10 A. --in these documents.
11 meetings anti please help him set up meetings with 11 Q. Do you have other documents?
12 Monzer. 12 A. Oh, there are many meetings before that.
13 Q. And so when was -- when were these discussions 13 Q. Do you have other documents that show that
14 that you had with P. K. Shah? 14 Dr. Shah was at --
15 A. It was prior to tine purchase. 15 A. No. I -- no. I can tell you from seeing
16 Q. Do you know when? 16 Dr. Shah in the Medistar offices on other projects where
17 A. No, I don't. It would I could look back 17 Adeel was in there and where P. K. Shah was in there ar.
18 and see when those hoard meetings were. 18 deals that we've turned. clown between the two of them
19 Q. Was it at every board meeting that you had 19 prior to this particular deal,
20 that discussion with P. K. Shah? 20 Q_ Okay.
21 A. No, because P. K. wasn't at every board 21 A. One of them in point was the -- the Pearland.
22 meeting. 22 Q. I'm -- I understand. I understand, sir, that
23 Q. Uh-huh. So sometime before the purchase, you 23 you would talk --
24 had a discussion with Mr. Shah -- Dr. Shah in which he 24 A. There were many meetings.
25 asked you to sot up a meeting with Monzer Hourani? Is 25 Q. Right. There were many times that you were

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1 talking to other -- lots of other individuals about lots I Dr, Shah inet with Monzer Hourani after December. lit- 's
2 of other deals before this; but I'm just focusing in 2 not my -- that's not my point. Right now I'm asking
3 right now on the Katy hospital project. 3 about times that Mouser Hourani met with Dr. Shah about
4 A. Okay. 9 the Katy hospital before the December 22nd meeting. And
5 Q. Okay. That's all Pm focusing in on. And so 5 that's all I'm talking about right now. Okay?
6 before the December meeting that Dr. Shah participated 6 A. Okay. So you must have misunderstood me.
7 with Monzer Hourani, there were no other meetings that 7 Q. So let me finish. I'm just trying to set the
Dr, Shah had with Monzer Hourani, correct? 8 stage right now,
9 A. No. I don't I don't think that's true. I 9 MR. SUTIER: Is that a question?
10 think that's an incorrect statement that you're makin 10 MR. WAHRLICH: Yes, it was.
11 Q. Okay. Well, then, tell me -- 11 MR. SUTTER: Okay. Then' object. It's
12 A. And that comes from my knowledge as a 12 not a question unless you're going to let him answer it.
13 corporate representative. I was not involved in those 13 Q. (By Mr. Wahrlich) So the point -- the
14 meetings. 19 question that I'm asking you is: Based upon that, you
15 Q. Okay. 15 don't know the dates when Monzer Hourani met with
16 A. But I do know that there were other meetings 16 Dr. Shah before the December 22nd, correct?
17 that Monzer had with P. K. Shah. A, 1 don't know the specific dates.
18 Q. And tell me when, as the corporate 13 Q. Right.
19 representative, that Dr. Shah met with Monzer Hourani o 19 A. I do know that he did meet with him.
20 the Katy hospital deal before December of 2006. 20 Q. Okay, And -- but in terms of you don't know
21 A. I don't have those dates. 21 what he met with him on, what topics, though, do you?
22 Q. Okay. So you don't know? 22 A. Oh, yes, I do.
23 A. No, I didn't say that. You heard what ! said 23 Q. Okay. Tell us those topics.
24 when I said it. I said that I do know that he was in 24 A. Those topics were specifically the Katy
25 those offices of Medistar. I don't know those specific 25 Project,

251 253

1 dates, is what I referred to -- 1 Q. Anything else?
2 Q. You said he was in the offices -- 2 A. No, not at that time --
3 MR. SUTTER: Let him finish, please. 3 Q. What about --
Q_ (By Mr. Wain-Heti) You said that he was -- 4 A. -- other -- other than prior to the Katy
5 MR. SUTTER: Wait a minute. Wait a 5 Project, okay, was the other one that I talked to you
6 minute. Let him finish. You're talking over him. 6 about; and that's the Pearland project.
'7 Q. (By Mr. Wahrlich) You said that you — 7 Q. On the Katy Project, what did Monier Hourani
6 MR. SLITTER: Are you finished? 8 and Dr. Shah meet about?
9 Q. (By Mr. Walrlich) -- knew that he was in the 9 A. I wasn't involved in the meetings.
1p offices? 14 Q Okay. Was Dr. Shah the only person meeting
11 A. You haven't -- okay. 11 with Monzer Hourani at those times?
12 MR. SUTTER: Can you let him finish, 12 A. No. On occasion there would be Adeel Zaidi
13 please? You can't stop him. You can make an objection 13 meeting with Monzer and with P. K. Shah, and in some
if you want, but let him finish. 14 instances so was Abeer Sager.
15 A. My point to you was the fact that Mr. Shah -- 15 Q. And you don't know how many occasions those
16 Dr. Shah was in many meetings at Medistar. And do I 16 were, do you?
17 remember the specific time periods when he was there? 17 A. No, I don't.
18 I do not remember time periods. Do I think that it wa, 18 Q. And you don't know the what they discussed
19 concerning the Katy Project or do I know it was 19 in those meetings either, do you?
20 concerning the Katy Project? The answer is yes, I do. 20 A. I wasn't involved in the meetings.
21 I don't remember those dates. 21 Q. Was Adeel Zaidi also involved in the Pearland
22 MR. WAHRLICH: I object to the response 22 project?
23 as nonresponsive. 23 A. My understanding was that Adeel Zaidi and
24 Q. (By Mr. Want-hell) Specifically, sir, what fin 24 P. K. Shah brought to Medistar a possibility of doing an
25 talking about is -- I. understand that you're saying that 25 LTAC facility in Pearland. Medistar turned that

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254 256

1. facility down. 1 you're relying upon, sir, as a Medistar representative?
2 Q. And that deal never happened, right? 2 A. How about the -- the note that was signed --
3 A. Not that I'm aware of. 3 Q. Okay.
4 Q. Okay. You have Exhibit No. 27 in front of A. -- December 22nd?
5 you, don't you? 5 Q. Okay.
6 A, That's the one that was out of order? 6 A, I mean --
7 MR. SUTTER: Yeah. -7 Q. Other than that?
8 A. Okay. Pll have to search for it. 8 A. That's his signature.
9 Q. (By Mr. Wahrlich) I think it came after 22. 9 Q. Is that --
10 A. After 22? 10 A. So we know that he was involved in all of
11 MR. SUTTER: 27. Here, you want to look 11 this.
12 at mine? 27. Here, just look at mine. 12 Q. Other than the December 22nd document, is
13 THE WITNESS: I would like to find it. 13 there any other document that you have?
14 MR. SUTTER: All right. If you want, 19 A. 'Well, there's the leases that are signed
15 I'll take a look for it. You want rue to find it? 15 that's in here that shows his signature on it. There
16 A. Okay. There's 22. So it would be -- 16 were --
17 Q. (By Mr. Wahrlich) It's the Gmail. 17 Q. Those were after the closing, though, weren't
18 A. Let me see if it's this next one. I have it. 18 they?
19 Q. Let me also give you Exhibit No, 29. 19 A. No. I think it was January, wasn't it?
20 (Exhibit No. 29 marked.) 20 That's before the closing.
21 MR. SUTTER: Thanks. 21 Q. Well, we've already established that the
22 Q. (By Mr. Wahrlich) Do you have those two 22 January date is probably wrong because -- because you'i
23 documents in front of you? 23 not suggesting that the LLC was trying to lease the
24 A. I do_ 24 property when it didn't own it, right?
25 Q. These are E-mails from Medistar to Aheer Saq 25 A. You heard my testimony from before,

255 257

1 and Adeel Zaidi, correct? 1 Q. Uh-huh.
2 A. They are. 2 A. I think probably so, and there was a purpos
3 Q. And they're about the APEX Katy Hospital sal 3 in it.
4 right? 4 Q. So -- so as far -- Medistar would sign a lease
A. Yes. 5 with the hospital on January 4th and, at the same time,
6 Q. Is the Pin Oak closing the same thing as the 6 negotiate a deal with the LLC so that they could lease
7 APEX Katy Hospital sale? the hospital to the tenant at the same time? Is that
8 A. Yes, it would be. what you're saying?
9 Q. Okay. So Medistar is sending its 9 A. I'm saying it was set up probably because of
10 correspondence to, you know, Sager and Zaidi; but 10 the fact that it needed to move forward. I've got
11 Dr. Shah is not included in these E-mails, is he? 11 P. K. Shah's signature with his writing on the date
12 A. His name doesn't appear on these document. 12 January the 4th that's here on this document and -
13 Q. And do you know whether -- but you -- and in 13 Q. What's the document number you're referring
14 terms of the deal points and the deal -- the people 14 to?
15 doing the business points, those were being handled b 15 A. Tins is -- this is the lease document.
16 Sager and Zaidi, correct, with Medistar? 16 Q. Yeah. What's the lease — what's the exhibit,
17 A. At this particular time? 17 sir?
18 Q. Yes, at this particular time. 18 A. The signature to the lease.
19 A. No, they weren't. And we already know tha 19 Q. What's the exhibit number in your hand?
20 from the facts that have already been presented tin t 20 A. Exhibit Medistar 24.
21 P. K. Shah -- 21 Q. Okay. And so -- but we're not suggesting --
22 Q. What document do you have in front of you -- 22 you're not trying to suggest that Medistar negotiated a
23 A. -- that P. K. Shah was involved in the whole 23 lease with the hospital on the same day that it's
29 purchase. 24 authorizing the 11,C, Mr. Burford's client, to negotiate
25 Q. What document do you have in front of you Mil t 25 with the hospital for that same lease property, arc you'

65 (Pages 254 to 257)

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1 A. — other than typically when we produce 1 part of the December 22nd Exhibit "A" or Scenario "B"?
2 documents like this — and I can answer this as a 2 A. It's the same type of calculation, but it's
3 corporate representative -- we do produce documents and 3 based upon these particular numbers that's plugged int
4 we do work with our clients even after a sale or when the pro forum
5 sales are inked. The things that they need to move 4 Q. And i guess so — but this doesn't represent
6 forward with a successful project, we try to accommodate either Scenario "A" or Scenario "B," does it?
7 them. 6 A. It doesn't purport to be. It represents what
8 Q. This Exhibit No. 31, it actually has two 8 a loan to ratio (sic) would be as to the amount of maney
9 preliminary discussion and budget proposals here, 9 that the project is valued at and the cost of the
10 correct, sir? Excuse me. I should say two financial 10 project versus the amount of loan to the project.
11 analyses. One is page 1 and 2 and then page 3 and 4. 11 Q. And if you look at the --
12 They're two separate financial analyses, aren't they? 12 A. It's a value, a valuation.
13 What makes me say that is, look at the 13 MR. WAHRLICH: Okay. Sir, I think I'm
14 loan request line. 14 just about done, if you'll just give me a moment.
15 A. Yes, 1 saw that. I saw a loan amount on the 15 THE WITNESS: Certainly.
16 first one here at 9 million, 8 and the second one at 16 MR. WAHRLICH: Why don't we just go off
17 8, million, 8. 17 the --
18 Q. You see the loan -- 18 THE VIDEOGRAPHER: The time is 5:40.
19 A. Do you want me to tie in the correlation of 19 Going off the video.
20 those? 20 (Brief recess.)
21 Q. Do you know what the correlation is? 21 THE VIDEOGRAPHER; The time is 5:45.
22 A. Well, if you remember correctly, there's 22 We're back on the record.
23 documents inside of here that was produced earlier that 23 • Q. (By Ms. Wahrlich) Sir, I just have a few more
24 was a million-dollar difference. 24 questions in a different area of conversation now
25 Q. Oh-huh. You think that's what this is, sir? 25 In terms of Dr. Shah, you personally

271 273

1 A. Yeah. 1 weren't involved in bringing him into the Katy hospital
2 Q. Okay. You see the loan-to-cost ratio, 2 deal, were you?
3 64 percent on the first analysis and 65 percent on the 3 A. I was not.
4 second analysis? 4 Q. Okay. In terms of Medistar -- and I'm asking
5 A. Yes. 5 you now as the corporate representative of Medistar --
6 Q. Did that have anything to do with the 6 was Medistar involved in bringing Dr. Shah into the Katy
7 loan-to-cost ratio in the December 22nd document? 7 Project?
8 A. I think that loan-to-cost -- it's calculated B A. No.
9 very similarly; but this has to do specifically with 9 Q. Okay. Do you know who brought Dr. Shah into
10 this particular run and each run that it's done on. 10 the Katy Project?
11 Q. So it's -- 11 A. I think that probably Dr. Shah this may
12 A. In our format, that's an automatic production 12 sound funny -- may have brought himself into the
13 with the formulas in this format. So when you plug iar 13 project. I think that he heard about the project and
19 these numbers and the amount of loan that's requestd 14 contacted people in order to be a part of the project.
15 and the lease rates that are there, et cetera, then it 15 Q. And what makes you say that, sir?
16 comes up with a loan-to-cost. 16 A. When things were first talked about on this
17 Q. So these loan-to-cost ratios probably have 17 particular project back in -- very, very early on in,
18 nothing to do with the ones that were mentioned on, I 18 we'll say, June of -- what was it '05 or '06 -- '06,
19 Mink it was, Medistar Exhibit 1, which is the notice of 19 I guess, or '05 maybe, is when -- no, '06. I'm sorry --
20 deposition and there was an attachment, Exhibit No. 3, 20 that this was starting to come about. We met --
21 is that -- which had, also -- 21 Medistar met Adeel Zaidi.
22 A. That's correct. These would be -- these would 22 Now, I think prior to that time that Adeel
23 be according to the calculations that's on this 23 Zaidi and P. K. Shah were in other business ventures r r
24 pro forma. 24 perhaps not in a venture but were participating and
25 Q. Okay. So you don't think these were done as 25 trying to bring about another project. When this cam

69 (Pages 270 to 273)

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1 would be in their face, holding them up on their 1 as to when that person is ever going to be bound? Is it
2 expansion if, in fact, they didn't achieve the purchase 2 when he signs this document or when he actually pays the
3 or we didn't purchase or do the exchange, I guess you 3 money and signs the documents?
would call it, do the exchange on the real estate for 4 A. Well, of course, when he — when he purchases
5 the old Katy hospital. 5 the unit. That's the only time he's bound.
6 Q. And how did -- 6 Q. And also, there was some discussion with you
7 A. So we had a substantial advantage. 7 with regard to the fees that had been paid to Abeer and
8 Q. How did that assist the buyer to have that 8 Adeel and their companies and, I think, also a
9 equipment when they opened the doors and bought it? 9 Dr. Peracha. Do you recall that?
10 A. Well, let me just give you an example as to 0 A. I do.
11 what values that are out there. And everybody -- we've 11 Q. Okay. Now, was that paid at closing; or was
12 talked about these documents here being, you know, $20 a 12 it simply paid after the closing, utilizing those monies
13 square foot rent on the hospital and that sort of thing 13 for services previously rendered?
14 that's in these leases, the Sugar Land hospital, just 14 N. It was paid after the closing and everybody is
15 the hospital itself, only the hospital itself, is a 15 trying to draw a correlation between the closing and the
16 net, net lease of over $3.4-and-some-odd cents per square 16 payment and that's just incorrect to do that. They're
17 foot. This was a $20-a-square-foot lease but also 17 separate documentations, separate services that were
18 included all the furniture, fixtures and equipment that 18 rendered, et cetera. It has no -- does not have to do
19 was in there, which is multimillions of dollars' worth 19 with this particular closing.
20 of equipment and furniture. 20 Q. And with regard to the 70 units that Medistar
21 Q• Okay. Now, with regard to the $20 a square 21 owns, have you been involved in any meetings with any o
22 foot, in your capacity as a representative of Medistar 22 the physicians that are in the limited partnership from
23 Corporation, did you ever note in any of your review of 23 time to time?
24 documents whether or not the appraisal for Metro Bank 24 A. I have been.
25 opined on whether the $20 a square foot was market rate 25 Q. Okay. And have discussions about the 70 units

283 285
1 or not? 1 been brought up?
2 A. As a matter of fact, it did; and it opined in 2 A. It has.
3 the appraisal that -- that it was at a market value. 3 Q. I-las anybody ever objected or said that they
4 Q. Now, if you would very briefly, look at 9 did not know about that in those meetings?
5 Exhibit No. I to your deposition. I just want to go A. No, they never have. As a matter of fact, 1,0

6 to 1. It's at the very top. 6 just to the contrary, they indicated that they knew a 1
7 A. Okay. 7 the way through.
8 Q. Yeah, right there. If you would go to the Q. Now, with regard to your testimony about
9 attached Exhibit I, which is the MOLL or Memorandum f 9 saying the corporate resolution wasn't necessary with
10 Understanding, dated July 28, 2006. Are you there, sir? 10 regard to the 4-miilion-dollar note, do you recall that,
11 A. I am there. 11 sir?
12 Q. Okay. And -- let me see. I got the wrong 12 A. Yes.
13 one. Excuse me. I have the wrong one. Just a second. 13 Q. Okay, And, now, on that one, there was no
19 What Pm looking for is the letter. It is Exhibit 14 corporate resolution, correct?
15 No. 4. Excuse me_ 15 A. No.
16 A. Medistar Exhibit 4? 16 Q. Was there any title company --
17 Q. The September 7th, 2006, letter. It went to 17 A. No need for it.
18 physicians. And this is an exhibit -- or example of one 18 Q. — that required it?
19 signed by a doctor, Arc you there, sir? 19 A. No.
20 A. I have'it. I have it. 20 Q. Okay. And was that a recourse only as to
21 Q. Okay, And if you look at the second page 21 Dr, Shah and not to the land?
22 right above the signature, it says, "I intend on 22 A. Of course. It was only to an individual
23 investing in the Katy Project_" Do you see that? 23 person and has nothing to do with tying up or puttii
24 A. I do. 24 any type of lien-type situation on the land.
25 Q. What is your understanding as representative 25 Q. So none of that land out there in the rent and

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TAB 4
 NO. 2009-02578

APEX KATY PHYSICIANS, L.L.C,, IN THE DISTRICT COURT OF

Plaintiff,

VS.
HARRIS COUNTY, TEXAS
ADEEL ZAIDI, APEX LONG TERM
ACUTE CARE — KATY, L.P., APEX
KATY PHYSICIANS — TMG, L.L.C.,
and US TMG, L.L.C.,

Defendants. 61st JUDICIAL DISTRICT

DEFENDANTS' AMENDED RESPONSE TO PLAINTIFFS'
POST-TRIAL BRIEF ON "FABRICATED EVIDENCE"
AND MOTION FOR DEATH PENALTY SANCTIONS

TO THE HONORABLE AL BENNETT, DISTRICT JUDGE:

Defendants respond as follows to Plaintiffs' filing ("Brief') seeking to have certain of the

Defendants' pleadings struck and for enhanced punitive damages:

I. THE COURT'S QUESTION AND PLAINTIFF'S BRIEF,.

At the close of the evidence, the Court made several general comments and then asked a

more specific question:

THE COURT: To award exemplary damages, there is an intent
element associated with that. And I'm not saying this is
the case; but what if the intent necessary for the cause
of action that is pied has not been proven to my
satisfaction but I have determined that there was intent
in testimony presented to me that was intended to either
deceive the Court or to directly and intentionally
testify contrary to the facts as I have found them based
upon the documents. Two separate things.

So, there's intent of -- for instance - and I'm -- this
is part of the question, not part of me reciting what
believe to be a finding of fact or conclusion of law.
That's different from saying that someone, at the time
 that this transaction was going through, intended a fraud
or intended to deceive someone at that time; but now that
this case has been tried, sworn testimony has been
presented to me, and I find that testimony wholly
incredible based upon what the documents say and/or that
there was intent to deceive this Court into believing
that the document that I'm looking at did not represent
the facts as I've determined them to be.

Do you follow me?

All right. How do I resolve that? How am I to deal with
that?

(Reporter's Record 4 [4RR] 140:15-141:20; Emphasis added.) Defendants heard the Court trying to

deal with the fact that; although it did not seem that any intent to deceive or defraud in the

transactions as they happened had been sufficiently proved, it seemed that someone was trying to

misrepresent to the Court what certain documents meant or intended.

Plaintiffs candidly answer the Court's question by recognizing that there is NO precedent

in Texas to award punitive damages for courtroom perjury - assuming it actually to have occurred -

when the predicate facts necessary to support the causes of action giving rise to those damages are

not otherwise proven.

That precedent having been established, Plaintiffs then ask and answer a different

question: They assume that they have proven intentional fraud sufficient to support an award of

punitive damages and then ask whether perjury, under those circumstances, would support enhanced

punitive damages. They attack Mr. Zaidi and three separate entities with which he was then

affiliated, Prestige Consulting, Inc. (d/b/a TMG), Apex Katy Physicians - TMG, LLC ("Apex

TMG"), and US TMG, asserting that Mr. Zaidi perjured himself in Court and, apparently vicariously,

perjured these entities as well. Based upon their underlying assumption of guilt, Plaintiffs conclude

that punitive damages should be amplified as a consequence of Mr. Zaidi's asserted "perjury."

2 ZAWResPonse to Mei/5/05/14
 Defendants believe quite strongly that (a) Mr. Zaidi did not in fact perjure himself by the

fabrication of evidence or the giving of deliberately false testimony under oath, and that (b) there was

no proof that Mr. Zaidi intended to defraud or deceive anyone, including Dr. Shah. There is

absolutely NO evidence that Mr. Zaidi fabricated any evidence in this case. As we will discuss

below, he did testify inconsistently about the Metro Bank mortgage, and we acknowledge that, But

as we also know, because Plaintiffs mentioned it repeatedly, Mr. Zaidi's testimony about how that all

happened was the same at trial as it was in 2009, particularly at the Steering Committee meeting on

January 19 at which the non-Shah affiliated landlord owners were told that the mortgage had been

discovered AND that Dr. Shah and his colleagues had not paid for their units. (PX 67; Sager, 4RR.

89:18-91:21.) He did not try to hide, alter, or otherwise deny the existence of the mortgage

documents. One could conclude that his statement was wrong, but it remained essentially the same.

Mr. Zaidi did not manufacture a story to tell in Court in order to deceive this Court. The cases

Plaintiffs rely upon in the Brief to support their positions involve far more egregious situations,

however, in which each of the accused parties engaged in pervasive deceit and actually manufactured

new, or physically tampered with existing, evidence. That simply did not happen here.

Moreover, Plaintiffs proved, and everyone acknowledged, that Mr. Zaidi had zero financial

interest in the landlord, and therefore no upside. (E.g., Shah, 3RR 244:4-18; Zaidi, 4RR 101:16-

102:10.) The hospital and the landlord were in a symbiotic relationship; anything that hurt the

landlord hurt the hospital, and vice versa. Mr, Zaidi testified without contradiction that his sole goal

was to try to save the hospital (4RR 114-115) and that he never did anything with an intent to harm

Dr. Shah. (4RR 116:4-13.) If Mr. Zaidi was a defrauder, he was one of the worst in history, because

he could not earn one cent in profit or gain from the landlord. Apex TMG even gave Dr. Shah, the

"mark," $240,000 of his investment back. (3RR 76.) Not a good plan for a thief and defrauder.

ZAIDI/Response to Brie7/5/05/14
3
 On the other hand, Defendants strongly believe that Dr. Shah, with an overt intent to gain

benefit for himself at every turn, practiced deceit in the real estate deal as it unfolded and in the

courtroom. Dr. Shah deceived Mr. Zaidi and all of the Apex LLC owners who were not affiliated

with Dr. Shah by setting up and perpetrating his scheme to take control of the landlord and the real

estate without paying for it. Dr. Shah also attempted to deceive this Court as to the nature and extent

of his involvement and control over the real estate investment, which Dr. Shah controlled in fact

after the fateful meeting with Medistar on the evening of December 22, 2006. At that meeting, Dr.

Shah and Monzer Hourani straightened out - "changed" - the deal into the one in which Dr. Shah

would take control of the real estate. (PX 15, DX 10; Shah, 3RR153-54, 159:9, 166:8-14: "1 don't

know if I'm in control or not," 168:23; Zaidi, 4RR 66:2-69:21, 77:4-75:22; Sager, 80:11-81:23.)

Numerous material things that Dr. Shah told the Court in his heavily scripted testimony were untrue.

II, CREDIBILITY AND THE MOTIVES OF THE PARTIES:

The Court also made the following statement immediately after the close of the evidence:

What Z find myself faced with more than anything else in
this case is determining the credibility of the witnesses
that have been presented, more than anything else. .Azad in
that regard, I have found the credibility of certain
witnesses that were presented -- I have found some of the
statements made by some of the witnesses in this case
clearly contradicted by the documents which are now in
evidence and before me in this case.

(4RR139:21-140:4; Emphasis added.) In weighing the credibility of the "certain witnesses" the

Court speaks of, Defendants contend that the relative motives of those witnesses are key.

A. Plaintiff Shah's story was contrived after the fact.

Unlike Mr. Zaidi, Defendants strongly believe that Dr. Shah did in fact manufacture a story

to tell in Court in order to deceive this Court.

ZA1DI/Response to Brief/5/05/14
4
 1. At the time, in 2007, 2008, and 2009, this was just a no trial, albeit
occasionally contentious, business relationship between a landlord and a
tenant.

As the Court heard at length at trial, the disputes between Dr. Shah's real estate company,

and make no mistake, it was Dr. Shah's company (see, e.g., 3RR 61: "my company"), as the landlord,

and the hospital, as the tenant, arose in earnest in November 2008, with default notices, and then

seemingly reached a boiling point with eviction notices and court proceedings in January and

February 2009. (See, e.g., PX 55, PX 56, 3RR 96.) But then, nothing until the hospital declared its

no-asset Chapter 7 bankruptcy in September 2009. No fighting, no allegations of fraud or

wrongdoing, no anything.

To be sure, there had first been controversy in January of 2008, when Dr. Shah and the

hospital's Steering Committee exchanged stern but not hostile letters concerning the financial

dealings that had occurred between them since March 2007. (PX 40, DX 40.) Dr. Shah recounted

his positions on what the hospital owed him, and the hospital replied, for the most part agreeing with

Dr. Shahs positions and promising to try to pay him back. (3RR 272:22-278:24.) Far from

concealing anything from. Dr. Shah, Mr. Zaidi and the hospital Steering Committee freely disclosed

all pertinent financial information that existed at the time. Dr. Shah agreed on cross that he had no

evidence to suggest that the hospital was not in fact trying to repay the amounts they conceded were

due. (3RR 281:13-282:7.)

More importantly, the memo (PX 40) that Dr. Shah had sent to the hospital, setting out in

detail all of the loans he had made to the hospital (Shah, 3RR 281:13-282:7) and all of the funds he

contended that the general partner and the hospital had not yet accounted for, proves, as both Dr.

Odhav and Ms. Sager said, that everyone, including Dr. Shah, had complete information about the

Z/4101/Response to Mid/S/05/14
5
hospital's finances and financial conditions at all times; no one kept or tried to keep Dr. Shah in the

dark about anything. (Odhav, 3RR 182:6-184:2; Sager, 4RR 83:6-18)

The very next day after the hospital sent its reply to Dr. Shah's memo, on January 18,

2008, Dr. Shah claims that he tried to draw $638,000.00, the exact amount allowed under the

amended letter of credit securing his rent (that Plaintiffs pretended not to know about), but was

unable to do so because Mr. Zaidi had the document and refused to give it to him. (PX 43; 3RR 72-

74.) And then, nothing until the default letters were sent to the hospital in November 2008. No

fighting, no allegations of fraud or wrongdoing, no anything. I asked Dr. Shah if there was some

kind of peace that had existed in this period between January 2008 and November 2008, and he

replied, "There was no fight. So, why should we have peace? But there was a maybe the good period

of time, probably." (3RR 289:15-22.)

The contrast between Dr. Shah's actual behavior in 2008 and his story at trial is both stark

and impossible to believe.

• Dr. Shah said at trial that Mr. Zaidi stole the $700,000 that he claimed Apex LLC had

"borrowed" to and from itself to give to Apex TMG (the check was not given to Mr. Zaidi) to open a

new landlord account, for reasons unknown, for unknown signatories. Yet in his January 2008

memo he called it money "borrowed" from Metro Bank by the hospital and to be repaid. Indeed, in

perhaps a weak moment when he had strayed from his script on cross, he agreed that all of the sums

he listed as due in his January 2008 memo were loans he had made to the hospital. (3RR 281:13-

282:7.) He also admitted that he never asked anyone about or even mentioned the "missing" money

or the "new" account for over three and a half years. This was even though he knew the money had

been debited from the landlord's Metro Bank account in September 2007, and even though Dr. Shah

received monthly statements for the entire time. (3RR 264:18-272:21.)

ZA101/Response ro Brief/S/05/14
-6-
 Others did mention the $700,000 during this time, of course, and they completely

corroborated Mr. Zaidi's description of the cheek as a loan for hospital operations at a time when it

needed the funds. (Zaidi, 4RR 108:9-109:1.) Dr. Odhav, who was an independent witness, knew

about this loan and others from many discussions at the Steering Committee meetings. (3RR

184:18-185:12.) Ms. Sager likewise attended those meetings and heard much discussion about the

loan, and she also heard the Steering Committee thank Dr. Shah for having made it. (4RR 83:19-

84:12; "Q: Do you now believe after some of the things that we've been through that [Mr. Zaidi's] an

honest person? A. Yes." Sager, 4RR 89:10-13.)

Are we really to believe, if the claims he made at trial are true, that Dr. Shah said and did

nothing at all about Mr. Zaidi's now alleged malicious theft of $700,000 for three and a half years?

Nothing, that is, except attend numerous meetings and receive thanks for making the loan?

• Dr. Shah claimed at trial that in January 2008 he tried to draw upon the letter of credit

issued by Bank of America, but that Mr. Zaidi had effectively destroyed it by amending it in 2007.

In fact, the amendment was a ministerial non-event that only revised the letter of credit to reflect

draws that had already happened, and Dr. Shah's January 18 letter, which obviously was never sent,

purported to draw the exact amount allowable under the very amended letter of credit that Dr. Shah

pretended not to know about. (See PX 43, PX 44.) His Exhibit 94 shows, however, that over a

month later•, on February 25, 2008, his then lawyer Jeffrey Kaiser sent him an email telling Dr. Shah

that he needed to get the document so a draw could be made before February 27. Dr. Shah said he

asked for it, and Mr. Zaidi said Dr. Shah didn't and that he didn't have it. Then, nothing. No proof

of any actual draw attempt at any time, no correspondence from Bank of America about any such

draw attempt, no correspondence refusing to honor any draw, no correspondence or anything with

Mr. Zaidi about the "missing" letter of credit, no allegations of fraud or wrongdoing, no anything.

ZAIDTIResponse to Brief/5/05/14
7
Are we really to believe, if the claims he made at trial are true, that Dr. Shah did nothing at all about

Mr. Zaidi's alleged malicious destruction of his right to draw over $600,000 under the letter of credit

in January 2008? Nothing until 2010? This is simply not credible.

2. Plaintiffs' claims at trial were developed in 2010 and first revealed in
Plaintiffs Second Amended Petition of December 30, 2010, and Third
Amended Petition of December 31, 2010.

Dr. Shah's behavior in 2008 and 2009, including the examples cited above, when the

transactions involved here were unfolding and heading for their unfortunate demise in September

2009 (when the hospital gave up the fight and declared bankruptcy), is completely inconsistent with

the claims of malice, intentional fraud, and deliberate breaches of fiduciary duty that were made at

trial. Why? Because they are not true.

Dr. Shah and Apex LLC started the process of getting the hospital out of the real estate by

declaring defaults in November and December 2008, and then appeared to continue that process in

earnest in January and February 2009 (PX 55, 55a, 56), when formal eviction proceedings were

commenced. Rut then all such proceedings were dropped and never reasserted before the hospital

declared bankruptcy in September 2009. Does this sound like the behavior of someone who has

been defrauded or robbed or cheated by his adversary, or does this sound like a business deal that

everyone was trying to save until they simply couldn't do it? (Sager, 4RR 89:16-17: "Everyone was

an honest people trying to do the best on this project, as far as I know.")

During the contentious months of November 2008 through February 2009, when Dr. Shah

and Apex LLC had lawyers who wrote to and met with Defendants' lawyers repeatedly, no mention

was ever made in any conference, letter, memo, email, or meeting, about anyone stealing $700,000,

or anyone destroying a letter of credit, or anyone receiving illegal real estate commissions or kick-

backs. Dr_ Shah admitted this. (3RR 265:15-272:21.)

-8 2AIDE/Re5ponse In Brief/5/05/14
 Even when Dr. Shah saw fit for Apex LLC to file this suit, in January 2009, after he claims

to have had knowledge of the theft of his $700,000 (3RR 86), and after he claims to have been made

aware of the allegedly surreptitious landlord waiver (DX 17; see PX 45), and certainly after the

alleged destruction of his letter of credit in January 2008, he filed a basic garden variety fraud case

alleging, among other things, that Medistar and Zaidi had misrepresented the potential of the real

estate and the hospital to induce him to invest in the real estate and that certain of the Defendants had

misappropriated funds. Absolutely no mention was made of any of the malefactions of which he

now complains. No $700,000 check theft, no secret lien waiver, no amended and destroyed letter of

credit, and no so-called illegal real estate commissions.

Dr, Shah and Medistar settled the 2008 case that Medistar had filed against Dr. Shah, for

the $4,000,000 in purchase money that Dr, Shah had not paid, with a dismissal on April 30, 2010, so,

from that point on, Dr. Shah had to eliminate Medistar as a villain in his story.

Additionally, as the Court also knows, certain of the Apex LLC investors sued Dr. Shah,

but not Mr. Zaidi, alleging that Dr. Shah had breached the Apex LLC Company Agreement by

entering into the Metro Bank loan and mortgage. Dr. Shah admitted that he had not obtained the

unanimous consent of the members, and Mr. Zaidi, as co-manager, likewise did not. The difference

is that Dr. Shah testified in August 2009 in the Medistar case, before Dr, Shah's new story about how

much he had relied upon Mr. Zaidi's representations that consent had been obtained, that he had had

the authority to sign the loan and mortgage documents without the members' unanimous consent.

(3RR 248:16-251:7.) The Court granted summary judgment against Dr. Shah, as Mr. Meade

mentioned several times and Dr. Shah admitted (3RR 10102). Dr. Shah settled those claims with

the then-existing investor/members of Apex LLC for the payment of $512,500.00, over time,

ZAIM/Response la Brief/5/05/14
-9
effective December 1, 2010. Thus the Koch plaintiffs, and the troubling issues they presented to Dr.

Shah, were also now dealt with and out of the picture.

Twenty-nine days later, on December 30, Plaintiff's Second Amended Petition was filed,

and a day after that, on December 31, Plaintiffs Third Amended Petition was filed. For the first

time, Dr. Shah's story had morphed into what was testified to at trial: That Dr. Shah was a poor

innocent passive investor — a "whale" in counsel's terms — who had been fleeced by the "promoters"

of the real estate deal, including most centrally Mr. Zaidi. For the very first time, the allegation was

made that the $700,000 had been stolen, three and a half years after the fact. For the very first time,

the allegation was made that the landlord lien waiver had been fraudulently provided to Bank of

America, in secret, now over two years after the fact. For the very first time, the allegation was made

that the letter of credit had been fraudulently destroyed by Mr. Zaidi, almost three years after the fact.

For the very first time, the allegation was made that the consulting payments Medistar had made

from the profit it had collected from the real estate closing had really been illegal real estate

commissions.

Defendants contend strongly that all these allegations were contrived and manufactured

out of whole cloth. They are false. Dr. Shah's story is completely uncorroborated by any documents

or testimony one would have expected to see or hear, were the allegations true. Dr. Shah's motive

for telling it is obvious: Mr. Zaidi had told the other real estate members that Dr. Shah and his

colleagues Vora and Sunej a had caused the real estate to be mortgaged because they had not paid for

their interests. They sued Dr. Shah, and they won. Mr. Zaidi now had to pay.

The inconsistencies in Dr. Shah's story and their lack of inherent credibility, when

compared to the facts that were laid out, came out in his testimony. Some examples:

ZAID&Fiesporse to Bncf/5/05/14
- 10 -
 • Dr. Shah twice said that he was merely a passive investor (e.g., 3RR 56) who had

little if any involvement in the development of the real estate project. He also said that he was made

co-manager la Mr. Zaidi, who promised to "run everything." To the contrary, Mr. Zaidi testified that

he only agreed to Dr. Shah's request that he be a co-manager after Dr. Shah's colleagues, Dr. Sunej a

and Mr. Vora, declined to serve.

What are the facts? Gary Perryman, Medistar's President', said what we all know, that the

deal "changed" in December 2006, and that this was known certainly by Dr. Shah. (Perryman 70:16-

73:9.) In fact, Dr. Shah had been "in the upfront of the negotiations, as it turned out . . . from a

lease-type project to a purchase." (Perryman 71:20-21.) Dr. Shah was intimately involved from the

very beginning, and he helped set the deal up. In fact, he "brought himself into the deal." (Perryman

248:6-249:12, 256:6-24, 272:25-273:14.)

Dr. Shah also originally insisted that he did not know about the real estate deal until near

the end of the process in late 2006 (3RR 111-12), but then admitted that he had attended the

Medistar presentation in September, at which he made his subscription for 125 units at $40,000 per

unit. (3RR 136-37.) Dr. Shah originally said that the Medistar meeting on December 22, 2006, had

been set up by Mr. Zaidi. (3RR 59.) He admitted on cross, however, that he had instructed Mr.

Zaidi to set up the meeting so that he and Mr. Hourani could straighten the problem out. (3RR 159.)

He also admitted on cross that the reason for Medistar's December 21 ultimatum (PX 15) — the

failure of the investing group to have raised $6,000,000 by then — which led to the December 22

1
As of May 5, no ruling on the admission of Mr. Perryman's testimony under Texas Evidence Rule 804 has
been seen in the Clerk's file. As Defendants argued at trial, they have clearly satisfied the Rule 804 predicate for the
admission of the prior testimony, and they re-urge its admission now as a matter of right. Since it is technically hearsay,
because taken in a different case, the Court has some latitude to admit it because its probative value greatly outweighs
any possible prejudice. After reading Mr. Perryman's testimony, Defendants believe that the Court will agree that the
probative value is very clear. Refusing it could be reversible error; admitting it cannot be. Defendants respectfully
suggest that the interests of substantial justice between the parties compel its admission.

ZRIDI/Response io Brief/5/05/14
meeting, was his failure to have paid any of the amount he owed - $5,000,000 - for the 125 units for

which he had subscribed in September. (3RR 156:19- 157:25.)

Dr. Shah also admitted that he told Mr. Zaidi, and it was NOT the other way around, on

December 22 that he wanted to own the majority of the real estate, 55%. (3RR 153:10-154:5.) As of

December 22, the deal changed, and, with himself in charge, Dr. Shah would have his 55% with only

a nominal cash investment. (3RR 154-55, 247:22.) He was also forced to admit that there were

never any other documents signed by the investors that presented any different proposal than the cash

subscription offer that they had all signed up for (3RR 145). He was then forced to admit that he had

never told any of them that his deal, and the deal he made for his two colleagues, where they could

get all their units for a very reduced amount of cash and then a bank guaranty, was different than

everyone else's deal, which was to pay 100% cash. (3RR 163:1-166:7, 239:20-240:21.) His

admission of what he had done was in fact very direct:

Q. Did you, as the manager - comanager with Mr. Zaidi, I recognize - did you
ever tell any of your other partners at any time that your deal was "I only pay a
little bit and I guarantee, you pay it all in cash"? Did you ever tell anybody that,
sir?

A. The partners -

Q. Did you ever tell anybody that?

A. Yes, sir. Those partners who sign with me, the few of the partner I brung it
them, I told them, sir.

Q. Okay. You told Vora and Suneja?

A. Vora, Suneja, yes, sir.

Q. You didn't tell anybody else?

A. And Medistar knows about that when they sign the paper with me, sir.

- 1. 2 - ZAIDIIResponSe Iq BrIef/5/05/14
 Q. They weren't one of your - well, they were a partner in the sense that they had
70 units that they didn't pay anything for?

A. That's true, sir. I was thinking about a different - a deal for different - for
other people. Sorry, sir.

Q. So, we have two classes of people. We have Medistar and the three of you that
are in this class; and all the other poor schmucks that are in this class, they are
paying cash, right?

A. Yes, sir.

(3RR 165:7-166:7; Emphasis added.) Dr. Shah simply structured the deal to benefit himself and his

friends at the expense of his fellow investors, and he knew it. What he also knew, but continues

indignantly to deny to this day, was that his friends at Medistar in fact did have a 70 unit interest that

they didn't pay for either.

As to who would be the co-managers, what makes sense? That, after the December 22

change when Dr. Shah took complete control of the real estate side (Zaidi, 4RR74:4-75:22; Sager,

4RR. 81:17-23), it would be Mr, Zaidi, who had absolutely no financial interest in Apex LLC and no

real estate experience, who would run things and direct Dr. Shah to be a co-manager? Or that Dr.

Shah, who had been involved from the beginning, who had personally effected the change of the

structure of the deal with Medistar so that he would become the majority owner (Perryman 71:20-21;

Sager 80:21-81:6), and who intended to quietly procure that majority interest without paying full

price for it, would direct Mr. Zaidi to be co-manager so he could keep an eye on him and use him for

ministerial duties when needed, as he did? The answer is obvious, but it is not consistent with Dr.

Shah's story.

• Plaintiffs repeatedly stressed that if the hospital did well, Mr. Zaidi (actually TMG)

would do well. Plaintiffs ignored that fact that, under the joint Venture Agreement with TMG,

Sager, and Peracha, Dr. Shah would also do just as well. When Dr. Shah was confronted with the

zAIDI/Fiesponse to Brief/S.405/14
- 13 -
Joint Venture Agreement (DX 5, pp. 3 and 4) that he had demanded from Mr. Zaidi when he learned

that Sager and his friend Peracha were involved in it, and which gave him the exact same 25%

interest as the others had in the management fees to be earned by TMG from running the hospital, he

looked at it and calmly declared, totally against its plain and clear terms, that it was for "future"

projects. Ile also said, however, that this was just something that he was offered, out of the blue

(3RR 96-97), and that, if people offer him money, "I will take it." (3RR 149.)

These claims are false. Dr. Shah was an owner of or had a financial stake in every entity

involved: TMG, Apex TMG, the hospital, and the landlord. He leveraged himself into this 25%

interest in TIvIG's fee because he wanted the money. No other person had this level of pervasive

involvement.

• Dr. Shah pretended that he had no idea what the $4,000,000 in "additional" purchase

money for the real estate was (DX 10) on direct examination. (3RR 60-64.) On cross, of course, he

was forced to admit that he had signed the guaranty and that Medi star had sued him, and only him,

for that very $4,000,000 (3RR 152), seeking to enforce that guaranty. (3RR 160:2-162:25, 166:15-

168:22.)

s Dr. Shah, on direct, tried to pretend that the structure of Apex LLC "set up by Mr.

Zaidi" — who we know had nothing to do with that structure — was the same as that for the hospital

investment. (3RR 57-58.) This is also completely false, and the quoted testimony above shows that

Dr. Shah knew it was false. Each of the hospital investors paid a small amount down, which was all

fully disclosed, and each signed a bank guaranty for a larger sum, also fully disclosed. The

guarantees were required by Bank of America, which was setting up a line of credit and the attendant

letter of credit to secure the hospital's rent payments. Everyone, including Dr. Shah, knew all of this.

(3RR 207:23-209:3.)

ZADI/Response to Brief/5/05/14
- 14 -
 There were no documents signed by everyone and fully disclosed to everyone in the real

estate deal that provided for everyone to have a small cash payment and a guarantee, of course, as Dr.

Shah was forced to admit. (3RR 142-44, 155:1-24, 163:1-166:7.) Only Dr. Shah and his special

"class" had that option.

• Dr. Shah insisted that he would not have invested in Apex LLC had he known that the

landlord's lien had been waived, yet the facts are that the letter of credit was important to him and he

"understood" that Bank of America had to have collateral for the Letter of Credit it issued for Apex

LLC's benefit. He also acknowledged that the landlord lien waiver was in fact listed as part of the

original credit deal that was done in January 2007, before he signed the closing papers in March.

(3RR 207:1-209:3, 210:8-214:19.) Every one of the hospital investors knew all of this. (4RR 72:15-

73 :15.) Even his banker friend, Mr. Tariq, who handled the loan for Metro Bank, after first saying

that Metro Bank would not have made the loan if the lien on accounts receivable had been waived

(2RR 106-07), agreed on cross that is was not at all abnormal for a lender in Bank of America's

position, with a start-up venture, to get as much collateral as possible, including such a waiver, and

that Dr. Shah had to know about the landlord lien waiver at the time. (2RR 121:8-16.)

B. Mr. Zaidi is admitted inconsistencies about the mortgage do not prove fraud

Defendants acknowledge, as they must, that Mr. Zaidi had a great deal of difficulty

explaining what and when he knew about the Metro Bank mortgage and loan. He admitted he knew

about the loan, but he said he was not sure what the mortgage was all about. His explanation was

that Dr. Shah had told him several times that he and his colleagues would be borrowing money to

buy their units, not as a company debt, and that he trusted Dr, Shah. (4RR 76-77.) The Court may

not find that explanation credible, but as noted, it was not made up recently to deceive the Court.

- 15 - ZAJOL/Response lo Brief/5/05/14
 But what does it prove? Dr. Shah said that he would not have signed the closing papers if

he had known that Mr. Zaidi did not have the authority of all the real estate members to do the deal.

This is preposterous and untrue. As discussed above, Dr. Shah had taken control of the real estate

part of the deal after December 22, leaving the hospital operation to Mr. Zaidi, Mr. Zaidi agreed that

this was in fact how things operated on a daily basis in 2007, and that he was very busy after January

1, 2007, with the hospital's staffing and opening (4RR 74:4-75:22.) When he testified in 2009 in

the Medistar case, before the new story had come out, Dr. Shah said, as he admitted at trial, that on

March 22 he considered that he had the full authority to sign the closing papers as a manager. Period.

He would have gone forward with the closing if Mr. Zaidi - who said he was there with authority

from the hospital partners (Schulte, 2RR 147-48; Zaidi, 4RR 77:23-78:18) - had not been there at

all. There simply was no other way to get his deal done and obtain the real estate for the small cash

price he had arranged using the loan from his personal bank. So how did he rely upon Mr. Zaidi?

And why ask Mr. Zaidi anything at all if you already felt, as Dr. Shah admitted he did, that you have

full authority as a manager anyway?

What Mr. Zaidi knew or didn't know about the mortgage simply had no affect on Dr. Shah,

although it might have mattered to the then-members of Apex LLC who were beneficiaries of the

Company Agreement. Defendants in this regard would only remind the Court that these members,

who sued Dr. Shah - but not Mr. Zaidi, even after they knew he had attended the closing with Dr.

Shah - and prevailed for breach of contract, are no longer part of Apex LLC. They are gone, as Dr.

Shah declared under penalty of perjury in Apex LLC's Bankruptcy Schedules filed in 2012. (DX 67,

pp. 36 and 37; ownership of Apex LLC is now Indus Associates [Shah], Suneja, and Vora.)

ZAIDI/Responso to Brie/5/05i/ 4
- 16 -
 There are two things about the closing that Dr. Shah and Mr. Zaidi agreed upon.

First, it had to happen when it did, come hell or high water, because Medistar had issued

another ultimatum, and all the doctors' money (including Dr. Shah's, as he acknowledged, 3RR

232:9-16), would have been lost to Medistar if the closing had not happened. (Shah, 3RR 230:22-

232:19; Zaidi, 4RR 99:8-101:15.) It seems very likely that this intense pressure explains a lot of

what happened. Dr. Shah knew this was the situation when he arrived at the closing, and since he

had absolutely no intention of allowing his money to be lost, he arrived at the closing knowing that it

was going forward. Mr. Zaidi says that he had not seen the Apex LLC documents before the closing,

and there is no credible evidence to prove that he had. Confronted with Medistar's ultimatum,

however, Mr. Zaidi believed that he was doing the best for the investors that he could by insuring

that they did not lose their investments before the project even got off the ground.

Second, there was a four-month period in which the loan could have been paid and the

mortgage cancelled, and at least Mr. Vora fully intended that this option should be exercised. (Shah,

3RR 255:19-257:17; Zaidi, 4RR. 98-101.) And Dr. Shah also admitted that ifhe and his colleagues

had paid even the smaller cash amount due for Dr. Shah's 125 units and his colleagues' 90 units,

there would never have been any need for either a loan or a mortgage. (3RR 259:8-21, 260:20-

261 :23.)

CONCLUSION

This ease is really about a business deal that started with promise and then went bad,

mostly because of circumstances involving the certifications and licenses for the fledgling hospital

that took far longer to come in than anyone could have imagined. Dr. Shah cannot be faulted for

finally giving up and demanding his due, although in retrospect it would probably have been better

for everyone if he could have waited longer. None of that converts this case into a massive fraud,

7,411)1/Response to Brief/5/05/14
- 17 -
however, as Plaintiffs have portrayed and pitched it. It would be the height — or depth — of irony if

Dr. Shah recovered the millions of dollars in damages he seeks, because he will in fact have profited

in the end from his selfish plan to take advantage of his fellow real estate owners.

Plaintiffs filed their Brief in their continuing attempt to demonize Mr. Zaidi. Thus they

seek both death penalty sanctions and enhanced punitive damages for the fraud claims they assume

they have proved. Substantial justice between these parties will not allow either result. Mr. Zaidi

testified about one thing inconsistently. He never denied the effect or meaning of the documents; he

just insisted that he didn't understand them that way at the time. Dr. Shah, on the other hand,

testified in a number of instances to "facts" that were directly contrary to the documents he was

confronted with. Ilis conduct is more reprehensible and should not be rewarded.

DATED: May 7, 2014 Respectfully submitted,

LAW OFFICES OF DOUGLAS R. LITTLE

By
Douglas R. Little
State Bar No. 12416600
Wedge International Tower
1415 Louisiana, 37th Floor
Houston, Texas 77002
713.275.2069
713.843.7901 (Fax)
doug@douglasrlittle.com

ATTORNEY FOR DEFENDANTS

- 18 - ZAIDVResporise lo Es:id/5/05/14
 CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing has been served upon counsel

listed below via eFileTexas.gov on the 7th day of May, 2014:

Andrew K. Meade
Hawash Meade Gaston Neese
& Cicak LLP
2118 Smith Street
Houston, Texas 77002

Douglas R. Little

ZAJDI/Response W Brief/5/DS/14
- 19 -
TAB 5
 Filed 09 August 10 P1:04
Loren Jackson - District Clerk
Harris County
ED101J015480113
By: Charleta Johnson
CAUSE NO. 2009-02578

APEX KATY PHYSICIANS, LLC IN THE DISTRICT COURT OF

V. HARRIS COUNTY, TEXAS

ADEEL ZAIDI, ET AL. 61ST JUDICIAL DISTRICT

CONSOLIDATED WITH

CAUSE NO. 2009-03055

STEPHEN M. KOCH, M.D., IN THE DIS T COURT
VICTOR ANKOMA-SEY, M.D.,
TERRY SCARBOROUGH, M.D.,
HATEM SAQR, et al.

V. UDICIAL DISTRICT

PANKAJ K. SHAH, et al. ARRIS COUNTY, TEXAS

PANKAJ K. SHAH, M.D.'S SU PLY TO PLAINTIFFS' REPLY TO
DEFEND 'S RESPONSE TO
MOTIONS FOR PAR SUMMARY JUDGMENT AND FOR
ONTINUANCE

TO THE HONORABLE J E OF SAID COURT:

COMES NOW, KAJ K.SHAH, M.D. (Dr. Shah), Defendant in the above

styled and number ° kause, and files his Sur-Reply to Plaintiffs' Reply to Defendant's

Response to Moj7s for Partial Summary Judgment and for Continuance.

Motion for Continuance

1. The Defendant, P. K. Shah, M. D.'s Motion for Continuance of the submission of

the Plaintiffs' Motions for Partial Summary Judgment (the "Motion") was precipitated by

the objection made by Plaintiffs' counsel to his own evidence, the Affidavit of Defendant

1 P age
P. K. Shah, M. D. (attached to Plaintiffs' Motions as Ex. C). By offering the affidavit as

summary judgment evidence, Plaintiff vouched for the evidence and sought to have the

Court rely on it, and Defendant was also entitled to rely on it to prove elements of his

defense. The relevant portion of the Affidavit states that the Members of the Company

were given notice of the $9 Million loan by either Dr. Shah or hi Manager, Mr.

Zaidi. This evidence shows a question of fact exists as to tlOether the Plaintiffs

consented to closing on the MetroBank Loan Commitment s t as in place when they

signed the Company Agreement2. The Company Ave ent contains two blanket

ratifications and approvals of the prior acts of th rgamzers and Managers of the

Company, as discussed more fully below.

2. Plaintiffs' counsel created a questioV act by attaching the affidavit of Dr. Shah.

Plaintiffs now seek to withdraw their entiary offer by asking that the objected to

portions (those relied on by Def t) be stricken as self-serving and conclusory. If

evidence provided by Movant chich Non-Movant relied is stricken, Defendant should

be allowed a continuance order to supplement the summary judgment record with

other evidence on ubject matter relating to the disclosure and approval of the

members to the osed $9,000,000 loan from MetroBank by their signatures on the
•
Company A ent. The deposition of Dr. Shah's Co-Manager, Mr. Zaidi, has yet to

be taken, which would be relevant to these dealings of the parties. For example, on

March 12, 2007, prior to signing the Promissory Note on March 22, Mr. Zaidi signed a

The MetroBank Loan Commitment Letter signed February 8, 2007 is Ex. E to Shah's Response to Motions for
Partial Summary Judgment.
2 Ex. B to Koch's Motion for Partial Summary Judgment is the Apex Katy Physicians, LLC Company Agreement
dated February 9, 2007, signed by all members.

2 j'age
Tenant Subordination Agreement3 on behalf of the LTAC (of which all Plaintiffs are

Members), acknowledging the loan from MetroBank and subordinating the LTAC's

interests to the Bank. Plaintiffs have not sued Mr. Zaidi or claimed that he breached the

contract by taking out the loan. As Co-Manager, Mr. Zaidi's duty to plaintiffs was

exactly the same as Dr. Shah's. Mr. Zaidi certified to MetroBank that quired actions

needed to authorize the loan had been taken, and this certificatickvonstitutes evidence
Zsi
,

that the consent requirement is satisfied as to Dr. Shah as well
‘. Zaidi certified that:
"The Members and Managers of the Company"'/have adopted such
resolutions and taken such other actions as are)tessary to authorize the
Company and its Managers/Members, acting al , e Company's behalf, to:
ro obligation of the Company
(a) execute and deliver the Note as a bin A -.(
enforceable in accordance with its terms;" Ni

Plaintiffs' Withheld Discovery Preju efendant's Presentation of Summary
Judgtenit Defenses

3. Defendant requests, on onal grounds, that the Court refuse to allow

Plaintiffs' Motions for SummaL Judgment motion to be heard or re-set until certain

discovery abuse practiced amtiffs has been remedied. Defendant sent interrogatories

to each of the plainti equesting information as to when and how each came to the

knowledge that ospital facilities had been purchased by use of the $9,000,000 loan
O
from Metro (See Interrogatories Nos. 14 and 155). Dr. Koch responded that he

first learned of the MetroBank loan in January 2009 from Mr. Zaidi. This response is

incorrect, as shown by the following:

3 Ex. 1 is the Tenant Subordination and Attornment Agreement dated March 12, 2007.
4 Ex.7, the Borrowing Certificate executed by Mr. Zaidi and Dr. Shah at paragraph 22.
5 Defendant's Interrogatories and Plaintiff Koch's responses are attached to Plaintiffs' Response to Defendant
Shah's Motion for Continuance.

3 IP age
• Dr. Shah received a letter signed by Dr. Koch dated January 2008 (Ex. 2), a full year
earlier, in which he acknowledged the MetroBank loan, and made a statement
inferring that all the members had knowledge of it. An essential basis of plaintiffs'
case is that this $9,000,000 loan on the hospital property was somehow kept "secret"
by Dr. Shah.
• Dr. Shah also received a letter dated December 21, 2006 (Ex. 6) from Medistar
addressed to "All Physicians" (referring to the movant/plaintiffs who were part of the
hospital deal), advising about the necessity of a loan to close the P4flak Hospital
purchase.
• Neither (1) the letter of January 2008, discussing the MetroB oan, nor (2) the
December, 2006 Medistar letter, was produced by plaintiffs 44, response to proper
discovery requests (See Request for Production No. 16).
• Dr. Koch has not amended or supplemented his incompRikjesponse to Request for
Production No. 16 to search for and produce the late 4nails and other documents
referring to the financing for the deal that are in his pde sion or control.
• Dr. Koch has not amended or supplemented his fa nswer to Interrogatory No. 14
to state the correct information as to when, an der what circumstances, he was
advised about the MetroBank loan.

4. Texas Rule of Civil Procedu 193.5 sets out the discovery

amendment/supplementation requiremen alnerally, under Rule 193.5(a), when a party

learns that a response to written dis ry was incomplete or incorrect when made, or
O
that it is no longer complete correct, the party must amend or supplement the

response at least 30 days b trial. The required supplementation has not been done
CD
with regard to the Su Judgment trial and prejudices defendant's presentation.

5. Prappas v. zami, 2009 WL 331898 (Tex.App.—San Antonio 2009, no pet. h.)

(mem. op.).T ase arose from a foreclosure sale. GM granted a lien on property to

MetroBank, which transferred the lien to Froseni. Prappas, the substitute trustee, posted

the property for foreclosure, and Entezami was the highest bid at the foreclosure sale.

Allegedly Prappas refused to accept Entezami's cashier's check, and Entezami sued

Prappas, Froseni, and GMB. Entezami filed motions to compel Prappas to produce the

4 1-.)age
foreclosure file. Prappas had asserted he was not properly appointed as substitute trustee,

but failed to produce the foreclosure file that would have contained evidence of the

appointment. The trial court granted sanctions prohibiting the defendants from

introducing evidence that Prappas was not properly appointed, and also permitted to the

jury to receive a spoliation instruction concerning the file. On appeal, urt of appeals

upheld the trial judge's sanctions order, concluding that it met the4 andards established

in Cire v. Cummings, 134 S.W.3d 835 (Tex. 2004). The court luded that the sanction

was directed at the abuse — failure to produce the foreclos r fde. The court also held that
°
the sanctions bore a direct relationship to the offe ((0 conduct; and that the record

reflected the trial court had considered a le sanction in prohibiting Prappas's
f( t,
summary judgment motion to be hea re-set until the foreclosure file was

produced.

6. Defendant seeks this same as a "lesser sanction" with regard to the summary

judgment proceeding because the withheld discovery and untruthful responses to

Interrogatories.

7. In Plaintiffs ponce to Defendant P. K. Shah's Motion for Continuance

plaintiffs argueecause Dr. Shah knows about the January 2008 letter (and therefore
O
the falsity o Koch responses to Interrogatories Nos. 14 and 15), that it is immaterial.

This implies that no effort is to be made to correct the false Interrogatory answers and

provide a true and correct answer, or to produce the correspondence and email files

reflecting the MetroBank loan as its subject matter. Defendant requests that the Court

decline to consider plaintiffs' Motions for Partial Summary Judgment while plaintiffs are

5IPage
in default of their discovery obligations.

8. The Court should grant defendant's motion for continuance, and require plaintiffs

to amend and supplement the discovery before considering their requests for summary

relief, and grant leave to defendant to file additional evidence following the completion

of the supplementation, including the evidence attached hereto.

Summary of the Argument

9. Dr. Shah and Mr. Zaidi, as Co-Managers of Apex, acce the Loan Commitment
00
for $9 Million from MetroBank on February 8, 2007, as 4ssed more fully below. On

February 9, 2007, before actually incurring the debt ecuting the Promissory Note on

March 22, 2007, all Members of Apex signed . ompany Agreement, which ratified

and confirmed all prior disclosed actions t y Dr. Shah and Mr. Zaidi on behalf of

the Company. This authorized and c nted to the Managers going forward with

the purchase of the hospital pro by use of the MetroBank loan.

10. Plaintiffs object that no Qher consent was obtained from the Members after the

Company Agreement wa ned. They argue that plaintiffs "could not ratify on

February 9, 200[7] aipkwtion that had not yet occurred." This ignores the fact that Dr.

Shah and Mr. Z ad already obtained the consent to go forward with the MetroBank

Loan Co nt signed February 8, 2007 when the members ratified and confirmed

the proposed loan on February 9, 2007, by signing the Company Agreement. The

Company Agreement only requires that the Co-Managers obtain the "consent" in writing

of the members to any debt over $500,000, whether before or after the fact. They did:

(1) the written approval and ratification of the mandatory language of the Agreement for

61Page
Purchase and Sale° of the hospital facilities constitutes that "consent" in writing; and (2)

the written ratification and confirmation of the terms of the accepted MetroBank Loan

Commitment for the $9,000,000 loan constitutes that "consent" in writing. No further

consents (or post-loan ratifications) are required by the Company Agreement. Plaintiffs'

breach of contract claims fail.

11. In addition to the approval and confirmation by all members e above contracts

requiring the $9,000,000 MetroBank loan, Dr. Shah points to r evidences of member

consents to the loan:

• Medistar assisted in obtaining the M- ank loan with its letter dated

January 22, 2007 to Mr. Tauri e MetroBank officer, in order to
<0
strengthen the Company's application, stated that Medistar would

0he management of the Company.?
participate as a consultant.
,0
• Suneja signed the lo 41= a guarantor, proving his consent.

• Vora also conetc4y signing the loan as a guarantor.

• Zaidi, as ager, applied for and obtained a loan commitment (which

was no epted) from Texas State Banks on behalf of the Company, in

d& to signing the MetroBank loan documents.
0
idi's execution of the Tenant Subordination Agreement on behalf of the

6 Ex. A to Defendant Shah's Response to Motions for Partial Summary Judgment, the Agreement for Purchase and
Sale, at Paragraph 2.1.5, entitled Loan, refers to the $9,000,000 loan (the balance of the Purchase Price) and reads as
follows:
The balance of the Purchase Price other than the cash due at Closing and the Note to Seller shall
be obtained by a first lien upon the Property to be held by a lender of Buyer's selection. Buyer
shall use all efforts to obtain the loan from such selected lender.
Ex. 9 is the January 22, 2007 Medistar letter to Tart.
8 Ex. 8 is the Texas State Bank Loan Commitment dated January 21, 2007, addressed to Mr. Zaidi.

71Page
 Tenant/LTAC, as its General Partner co-managing it with Dr. Koch.

Discussion of the Evidence Retarding
Plaintiffs' Consent to the Loan

12. The affidavits of the plaintiffs say nothing about whether the loan commitment

was disclosed to them at the time they signed the Company Agreeme There is no

evidence that any of these transactions were concealed from the p iffs, or that they

were not disclosed in the Company's books and records. The o' ed to evidence in Dr.

Shah's affidavit shows there is a question of fact, and sup Dr. Shah's position that

the Loan Commitment as well as the Agreement for \ase and Sale of the Pin Oak

Hospital and related properties (the "Property"), ing the requirement that a loan in

the amount of $9,000,000 be obtained in ord- purchase the Property, were disclosed

to, and ratified and approved by, the m Idlers. No further consent by the members is

required by the Company Agreement.
0
13. All these Agreements w isclosed to the Members as a matter of law. The

operative documents are:

(1) Agreement f rchase and Sale, at Paragraph 2.1.5, entitled Loan, refers to

the $9,000,0 n (the balance of the Purchase Price) and reads as follows:
O
T balance of the Purchase Price other than the cash due at Closing
the Note to Seller shall be obtained by a first lien upon the
roperty to be held by a lender of Buyer's selection. Buyer shall
use all efforts to obtain the loan from such selected lender.

(2) The MetroBank Loan Commitment for $9 Million necessary to effectuate the

purchase, and

(3) The Lease Agreement of the hospital to the LTAC, all of which were executed

81Pa2c
 prior to the signing of the Company Agreement on February 9, 2008.

This raises questions of fact that prevent summary judgment, because these

agreements were all "disclosed" in the company books and records, which each Plaintiff

warranted they had examined to their satisfaction prior to executing the Company

Agreement. (See §2.06, Representations and Warranties of Member > Plaintiffs have

not submitted any summary judgment evidence to contradict thek,own warranties that
.4))
they were familiar with the Company's business, or to shbO 1Nvhy Dr. Shah was not

entitled to rely on their own warranty and representatio they were advised of these
(0q)
transactions when the members approved, ratified anc ifirmed the transactions.

14. The Purchase Agreement was a prom.oQnal contract entered into by the
o

organizers prior to incorporation. Execu f the Agreement for Purchase and Sale

with Medistar Corporation was the onl siness in which Apex Katy Physicians, LLC

(the "Company") was intended J ngage — acquisition of the Pin Oak Hospital

properties. Prior to incorpor , Dr. Shah and Mr. Zaidi executed the Purchase

Agreement as the act and of an organizer (they had no other capacity on that date).

Contracts entered in n behalf of yet-to-be-formed corporation are referred to as

"promotional c " or, in the new nomenclature of LLC's, "Organizer contracts."
O
Companies free to adopt pre-organization contracts made on its behalf by its

Organizers (or promoters), but are not bound by them absent ratification. A company

lacks authority to contract prior to formation, as discussed in Defendant's Reply to the

Motions for Summary Judgment. In this respect, Plaintiffs' argument that "organizers"

are only persons who sign incorporation papers is incorrect. (See Paragraph 9 of

9IPage
Defendant's Response and the cases there cited.) The acts of "organizers" go beyond the

ministerial preparation of organizational documents where the company adopts and

ratifies the organizers' pre-incorporation contracts.

15. The Loan Commitment was a post-incorporation contract entered into by the Co-

Managers. The Apex LLC was incorporated on January 10, 2007. 6),• (.*;
incorporation,

in early February, Dr. Shah and Mr. Zaidi received a Loan Commitent from MetroBank

for the $9 Million loan, which was necessary to carry out00
th-Achase Agreement. At

this time, they were acting as Co-Managers. The Come Agreement, §3.07, ratified
o an
and confirmed all disclosed actions taken by the M ers prior to the effective date of

the Company Agreement.

16. The Members signing the Comp Agreement, ratified and approved the

organizational contracts necessary forte purchase and lease of the hospital. These

Agreements were fully performe j the Company at the closing on March 22 when

Apex made the loan and acquiiQtitle to the hospital. The Members consented to these

actions by the organizers anagers in writing when they each signed the Company

Agreement. See §§ and 9.05. The Agreement for Purchase and Sale expressly

mandated the M rs to "use all efforts to obtain the loan from such selected lender."
0
See Agreem 2.1.5 (Ex. A to Shah's Response.)

17. Dr. Shah and Mr. Zaidi, as Co-Managers, acted pursuant to that requirement that

they obtain a loan when, on February 6, 2007, Zaidi issued a check for the MetroBank

Loan Commitment Fee in the amount of $56,000, and Dr. Shah executed the Loan

10IPage
Commitment Letter on February 8, 20079 with MetroBank for the terms and conditions

of the $9,000,000 loan.

18. The Members then "ratified and confirmed" those disclosed acts of the Managers,

in writing, when the next day they each signed the Company Agreement §3.07. These

actions by the Members gave consent to the Managers to enter into t on the terms

stated and placing a first lien on the Property, exactly as called fc in the Agreement for
.,.
Purchase and Sale, and as agreed to in the MetroBank Loan C itment Letter.

Questions of Fact Exist as to the Effect of the AppriI nd Confirmation of the
(1) Loan Commitment and (2) Agreement. Kf c = urchase and Sale
in the Company Agreen-t.
ty
19. As noted in Paragraph 5 of the Plaintiffs' e y to the Response to the Motions for

Summary Judgment, the Court is to give e o all provisions of a contract. Forbau v.

Aetna Life Insurance Co., 876 S.W. 132 (Tex. 1994). Following this rule of

construction, questions of fact exit o what the Members did "ratify and approve" that

the organizers had done on behaof the Company. Similarly, the Court must give effect

to that which the Member tified and confirmed" that was performed by the Managers

on behalf of the Com y. The Managers obtained the written consent of the Members
O
to the loan and ase of the hospital facilities before the loan was made. Plaintiffs

argue that tl ourt should ignore the consents given, and require additional consent.

They mask this by arguing that the specific provision controls over the general. (See

Paragraph 5 of Plaintiffs' Reply.) They then argue that the broad authorizations could

not include authorization for a loan, because the broad authorizations do not specifically

9 Ex. E to Defendant Shah's Response to Motions for Partial Summary Judgment.

111Page
say "loan". What they ask the Court to do is ignore the express ratification sections of

the Company Agreement and render them meaningless.

20. The organizers and the Managers, Dr. Shah and Mr. Zaidi, did but one thing: they

followed and carried out precisely the ratified and approved Agreement for Purchase and

Sale by securing the title to the Pin Oak Hospital properties with cas a $9,000,000

loan, which acquisition was the sole object of the Company's exi‘ence. The following

issues of fact emerge:
aO
a. Did the Members approve the organizers' ke d deed of entering into the
Agreement for Purchase and Sale, contai ."the requirement for obtaining
a loan secured by a first lien on the PropOy?

b. Did the Members confirm the ners' act of entering into the Loan
Commitment with MetroBank fo funds necessary to make the purchase
of the Pin Oak Hospital prop ossible?

c. Did the Managers act wit $3, e prior written consent of the Members when
they entered into the ,100,000 loan secured by a first lien on the
Property?

d. Did the blanket raQcation and approval in the Company Agreement of the
organizers at.i.eco anagers' prior actions include the Loan Commitment
signed Feb if 2007 and authorize the managers to go forward with the
closing?
O
e. Are t•.:1, aintiffs estopped from claiming the Loan was not approved by
th-4•Phes and by accepting the benefits of the Loan, namely by buying
th* • spital and operating the hospital through the LTAC, which leases the
pital from Apex?

Unreliability of the Koch Interrogatory Responses as Contradicted by the Koch Letter
and Tenant Subordination Agreement

21. The affidavits of plaintiff Koch (Ex. A to his Motion and his sworn discovery

responses) are interested party affidavits, and are inherently unreliable for summary

121Page
judgment purposes, and raise no more than an issue of fact regarding notice of the

$9,000,000 loan agreements at the time of the confirmation and approvals set out in the

Company Agreement. The Koch interrogatory responses io claim no knowledge of the

$9,000,000 until January, 2009, when suit was filed. The falsity of the affidavit is

demonstrated by the January 17, 2008 letter, signed by Koch Zaidi, which

inconvertibly proves that "all people involved (members partners 4k, ank)" were familiar

with the $9,000,000 loan and in particular, the "recollecti that the lending bank,

MetroBank, understood that the Zaidi-Koch tenant, Hospital, would have "4-

Months No rent."

22. The Koch Letter shows that Dr. Koch wagare of the loan in January 2008, and

not in January 2009 as stated in his disco esponses. The significance of the Koch

letter is two-fold: (1) Koch withheld t letter from his production of documents four

days before the Defendant's Resp=C, o the Motion for Partial Summary Judgment was

due, not leaving enough time do additional discovery to root out other documents

which may have been wit on the same subject matter; and (2) the letter raises the

reasonable inference ich must be accorded non-movant) that all the "parties (partners
O
& Bank)" were of the terms of the loan.

23. The letter is signed by Koch, as General Partner Apex Katy Hospital and

Zaidi, as General Partner Apex Katy Hospital. It further conclusively proves the Koch

plaintiffs' knowledge of the MetroBank loan and agreement with the Apex Physicians'

1° Plaintiffs Responses to Interrogatories are attached to Plaintiffs' Response to Defendant's Motion for
Continuance. See Response to Interrogatory No. 14.

131Page
"Deposit to metro - $150,000" and "Used at closing - $1,200,000". The terms of the

closing arrangements were well known, and Koch and Zaidi were both General Partners

of the Tenant, as well as organizer members of the Landlord, concurrently handling the

financial arrangements of both Apex Katy Physicians — TMG, LP, and the Tenant—Apex

Katy Long Term Acute Care Hospital, LP, related to the Bank.

24. This knowledge is even more specifically demonste by the Tenant
4)
Subordination and Attomment Agreement executed by partner, Zaidi, and

delivered to MetroBank on March 18, 2007, in co n with the closing of the
.4?
$9,000,000 loan on March 22, 2007.11 This docume ries that:
0
Apex Long Term Acute Care-Katy N‘., a Texas limited partnership
(hereinafter referred to as the "Ten , understands that Apex Katy
Physicians, LLC (the "Borrower") re to obtain a loan (the "Loan")
from METROBANK, N. A. ("L Cf). The Tenant further understands
that payment of such Loan will secured by liens and security interests
encumbering that certain tram of real property and all improvements
thereon (the "Mortgaged 13.44%rty") situated in Fort Bend County, Texas,
commonly known as 560.i 1/4 dical Center Drive, Katy, Texas 77494.

25. Dr. Koch, as Genera-4:rtner of LTAC, accepted the benefits of the loan with full
0
knowledge of the burd s and the recognition that the loan was an integral part of the
0
17,
transaction for the Ii'vAisition of the hospital properties by Apex Katy Physicians, LLC.
S(0
Dr. Koch is bo ieby
c the knowledge of his partner, Mr. Zaidi, and his own management
O
as General rtner of the Tenant as a participant in the closing of the $9,000,000

MetroBank loan by Apex Katy Physicians, LLC. He cannot now be heard to disclaim the

burdens of the financial arrangements which he accepted the benefits of, and pretend no

1 Ex. 1 is the Tenant Subordination and Attomment Agreement dated March 12, 2007, signed March 18, 2007.

141Page
knowledge of those arrangements. Each of the plaintiffs suing Dr. Shah in this claim is a

member of the LTAC, and Dr. Koch and Mr. Zaidi are their General Managers and

agents.

26. The LTAC gave its written authorization and approval of the loan on behalf of its

partners, which include the plaintiffs in this claim. Since they appro e loan via this

Tenant Subordination Agreement, as well as by the Company Agrement, the request for

summary judgment should be denied.

27. This documentary evidence supports Dr. Shah's lavit testimony as correct in

its assertion that the tenns of the loan were "far fro ii et" and that the Members "were
4
made aware of the terms of the loan" by himse WIMr. Zaidi. Indeed, full information

about the loan appeared in the books of the nt (of which Koch was General Partner),
kv
the books of Apex Katy Physicians, LLB hich Koch and each plaintiff warranted in the

Company Agreement that he atisfied himself as to the terms of financial

arrangements), the December 2006 Medistar letter12 addressed to "All Physicians"

outlining the proposals for ncing the hospital purchase, and the Tenant Subordination

Agreement signed Zaidi as Co-General Partner with Dr. Koch for all

plaintiffs/memb the Tenant LTAC.

Koch was aso . ager of Apex Katy Physicians — TMG, LP which Handled the Financial
Arrangemwo s for the Agreement for Purchase and Sale, and the Organization of Apex
Katy Physicians, LLC

28. The reliability of Dr. Koch's affidavit in support of his Motion for Partial

12 Ex. 6 is the Medistar letter to Mr. Zaidi and "All Physicians" regarding the need for financing dated December 21,
2006.

15 'Page
Summary Judgment is completely eroded by the fact that Dr. Koch was a Manager of

Apex Katy Physicians — TMG, LP (hereafter "Apex - TMG"). This company was formed

in October 2006 and functioned as the corporate shell for the organizers (including Dr.

Koch and Mr. Zaidi) for the Pin Oak Hospital purchase by Apex Katy Physicians, LLC.

Dr. Koch was instrumental in the formative stages of the overall ar4- ments for this

major purchase from inception to post-closing management (as prow. by the January 17,

2008 Koch Letter regarding the MetroBank loan). Dr. Koc n paid his $240,000 to

Apex — TMG13 and has paid nothing to Apex Katy Physi4 LLC.

29. The Apex — TMG Operating Agreement14 prc es for its management in Article

3.01 as follows:

3.01. Managers. The Company s managed by two Managers. The
initial Managers of the Company be Adeel Zaidi representing Turn-
Around Management Group an ,4.. P. K. Shah or Mr. Stephen Koch or
Dr. Waseem Peracha (on a rotonal basis) representing Apex Long Term
Acute Care-Katy, L.P.

30. Questions of fact are CiSed by the evidence that Dr. Koch appears in the

transaction for the purchas, the Pin Oak Hospital and related properties from Medistar

through (1) his organ ional efforts as a Manager of Apex — TMG with Zaidi, Peracha,

and Shah; (2) akttheneral Manager of Apex LTAC, the Tenant of the hospital and its

acceptances benefits of the Lease of the facilities; (3) his participation in the closing

as Manager with Zaidi of the Tenant in the Tenant's management decision to subordinate

and attom to the MetroBank loan; and (4) his participation in negotiations with Zaidi for

13 Dr. Koch's $240,000 check is attached as Ex. 3.
14 Ex. 5 is the Apex Katy Physicians — TMG, LLC Operating Agreement.

16 IPage
additional benefits from the loan agreement as Manager of the Tenant shown by his letter

of January 2008. These actions by Dr. Koch raise issues of fact regarding ratification

(apart from the express ratification of the Company Agreement), written consent in the

Company Agreement to the Managers' actions to be taken to close the $9,000,000 loan

placing liens on the hospital facility by MetroBank, and the approval \ sly set out for

the organizers' acts (including his own as Manager of Apex — an organizer) in

entering the Agreement for Purchase and Sale of the hosp acility, calling for the
O
$9,000,000 loan secured by the Property being purchase . Koch's false testimony in

his interrogatory response alone would require deni his request for summary relief

because it casts doubt on the veracity of his inter~i witness affidavit. The extent of the

involvement of all the members/part aintiffs in the management of the

LTAC/Tenant in the acceptance and ,4ention of benefits from the closing of the

Agreement for Purchase and Sale e hospital facilities is proven by the Koch letter of

January 2008, as well as by the ffidavit of Dr. Shah which is subject to the plaintiffs'

objections and motion to s

Conclusion

31. This case t ready for summary disposition. The incomplete production by Dr.
•
Koch of his espondence regarding the loan, the scant summary judgment evidence

provided by plaintiffs to attempt to prove that the Company Agreement did not constitute

written consent to the closing of the Agreement for Purchase and Sale and the loan which

was required to make it possible. At a minimum the deposition of Mr. Zaidi is required

in order to ascertain the relationship between him and the plaintiffs, the degree of actual

171Page
notice regarding the dealings of the Company, and to confirm that the members signed

the ratifications and approvals in broad form as a result of information given to them by

Mr. Zaidi or Dr. Shah, as warranted by the Plaintiffs in the Company Agreement. Mr.

Zaidi's deposition is necessary to shed further light on Dr. Koch's involvement in these

transactions, as well as those of the other plaintiffs.

32. Wherefore, premises considered, the plaintiffs' Motion Partial Summary

Judgment must be in all things denied, or in the altemativ efendant's Motion for

Continuance should be granted, pending completion odovery as requested herein.

Defendant further requests the Court admit the evil e attached hereto as part of the

summary judgment proceeding, deny the objectio to the Shah Affidavit tendered by

plaintiffs, and for general relief as may be r ed, at law or in equity.

Respectfully submitted,

Tom F. Coleman
State Bar No. 04572000
402 Main Street, Suite 3 North
Houston, Texas 77002
(713) 225-6900
(713) 225-0264 -fax
Attorney for Defendants,
Pankaj K. Shah, MD., Bharati P. Shah,
and Indus Associates, L.L.C.

181Page
 CERTIFICATE OF SERVICE

This is to certify that a true and correct copy of Defendant's Sur-Reply to Plaintiff's

Reply to Defendant's Response to Motions for Partial Summary Judgment and for Continuance

was delivered to the following counsel of record on this 10th day of August, 200, U.S. Mail,

postage prepaid, hand-delivery, or facsimile:

John W. Havins, Esq. Via Facsimile: 713-650-33
Havins & Associates, P.C.
2211 Norfold, Suite 525
Houston, Texas 77098

Attorneys for Plaintiffs,
Stephen M. Koch, M.D., Victor Ankoma-Sey, M.D.
Ankoma-Sey PPSC, Ltd., Terry Scarborough,
Hatem Saqr, Erik B. Wilson, M.D.,
Waseem Peracha, M.D., and G. Thomas K

Jerry C. von Sternberg, Esq. acsimile: 713-856-7268
Heather S. von Sternberg
The von Sternberg Law Firm
820 Gessner, Suite 1720
Houston, Texas 77024

Attorneys for Defendant
Apex Long Term Acut- (16Nk-Katy, L.P.
Apex Katy Physici G, L.L.C.
and US TMG, L.

0
Robert D., Esq. Via Facsimile: 713-465-8018
b.$S--
Robert D....‹.: y Law Offices
Two NI....4:0 al City Plaza
820 - er, Suite 1720
Housto , Texas 77024

Attorneys for Defendant,
Adeel Zaidi.

19 1Page
Jeffery B. Kaiser, Esq. Via Facsimile: 713-571-8002
Kaiser & Conrad, L.L.P.
1911 Bagby, Suite 200
Houston, Texas 77002

Attorneys for Plaintiff,
Apex Katy Physicians, L.L.C.

W. Ashton Randall III Via Facsimile: 214-665-3601
Greenberg Traurig, L.L.P.
2200 Ross Avenue, Suite 5200
Dallas, Texas 75201

Attorneys for Defendants,
Katy Project, L.L.C., Upendra Vora,
and Randeep Suneja.

Matias Androgue Via Facsi 13-425-7271
Lyric Center
440 Louisiana Street, Suite 715
Houston, Texas 77002

Attorneys for Plaintiff
Sammy E. Khoury, M.D.

Tom F. Coleman

20IPage
 Filed 09 August 10 P1:04
FROM ; METRoonINK Loren Jackson - Distict Clerk
PHONE NO. Mar. 20 MOS/Maly P2
1.:ROM MErRetBANIC P1-ME Mar. 15 2org1:04424480113
By: Ch eta Johnson

ATTORNMENT AG-NT

IVIatch 12720r

Ivietronank;
9600 Be1ia4-0 Boulevard, Suite 252
Houston, Texas 7703

Ladies and •Oentlemett:

APEX 'LONG ThW•ACUTE CARE4CATY_, L.P., a Tuffs 3smit s. it, azereinafier
referred to as the •`-i•eount7),13;atlirstaPads, that AZEX KATY PixyaciA/z,.., (th e "AorioAverl,
desire to obtain a lean (the "Loan") from METIZOBANK, N.A. (L4 ....-7 ). The Tentint ftirther
mttders. tnirtiv that 'payment of snciv Loan %AU be weaned lay, dens and '..m.c• ty. interests eneturiheting
that certain tract of real property and all improvements thereon ( -Ayrtgage.d Property") situated
n-ort Bend:County, Texas, cornmonl-y knee:m.4446Q lizlediral • . :,.'. - * "ve, Katyi.Tettos -77494-,..
and more fu fillycleseribed in. Exhibit "A" Attaches! hereto and ineo4rated herein by reference for al/
pkupose-s. Ttuant further urtet=stands that tho Loan must b reed by a tat-at arel.priar lies anct-
security interests encumbering the Kari-gaged PrectutY-

Tonant has heretofore catered into that testa' . agreement (the "Lease"), a copy of
NvI6elcis attached .kereto as .Exhibit".8" anti in `• s'igt r . herein by reference for alt-- -by;
•h}
which Tenant now occupies all or a. portion of . - ...0,`,..;aged Propertif. The Burrower is ohtaioing 1
the Loan lion the Lender to plirelta= the Mart) y ..,. • roperty Rota the current owner thereof' As a‘.
prezequistite to making tale-teeter to- Borrower 1.4m t'es hasrequit ' ed thAt Tenant make tie hereittafr -
set out eovenants, agreements and warraAtiss, 'th and to Lender, Tenant understoncis that Lender
would not 1:i ranking the tear' to Bonefor-the cov.tiouibl, alrortaarits' and warranties` of--
zenan.t bercixatter set out. la- cOssic/V01/4 bf,the foregoing premises and the sum of ten doll= •
. „,t,
and other good and valuable conside paid to the Talent, the receipt and tufficieney of Miich
ishereby •aelenowledteq, Tenant h`•r)c\ .$* covenants and. .1Z: rt'At Vitilba..eXider atlaWatraat& to Leader
''...
as Follows

I. All' s nu& Tenacatia-- Mortmed- Yr-opertyi- whetiree-now.,
existing or herftafter. :a - - 2 • t:ira /WIlether arising:onder the Lease or otherwise, arc and shall rentain5
secondary, subordinate qtr to all nape .and seenrity inserts now or herepiierenertnahls,
aft or any portion of>r 16-04,-Tropevqt ‘to sectire..vitneent_ofalLar.any portions& the Loan.

2. A trua.greet and complete copy of the Lease is attached hereto as Exhibit "R” and • •
such Lease has 11,6-a cal-AtetW; morriatd, amended-Or xe ix dod sr whist erikt-pdi t. There-are .
no.other Or understandings by and between 801TOVitit and Tenant relaiing to Tenant's '
oempancy of tiOulortgaged Property except as set out in -the Leas.s_

3. Tenant-shall-nor litereafict-Ergreete-arry-cancciiat* terminatiotrof-the-Leale
any modification of the Lease which would either short= the term artier Lease or reduce or change
the lernr.5 of p2tynaznt of the re: orals payabfa ttztclt;cr the a wittl'ant the prior watt= ednsedit-of.\
Lendus, Tr-nzvnt shall 1:tother repay more thau one months rental =ler the Lease without the
prior written consent or

f

100
FIRM : PIETROBANK PHONE NO. mar. 23 2307 13:13111
F20.1 nErizawo Ft-niqz' NO. ; far. Z5 2007 ila;izer_im p3

4. Tenant, upon being notifiett h writing by Lender That Bormwor has clofatatal- mt4er
the ttrrta. DI any docummt or instruramt.Aviderieing or goring the T non, will immediately make
a =Mal _payments tintriller b.ecorning due under the use directly to Lender at its aarcss shower
above.

S. In the erect that either: (a) Lender shall hereafter obtain possession an _control of
the mortgaged Property by virtue of an order of a cona. or (b}- the liens in of Len&r
=limbed:1n the Morttoged •V'topert.T. are foradosed than., Tenant stroll attom 'the- I e to
Lender or any other patty that ar-quires legal Title to iheivfortgaged noperty as tof any auth.
foreektsnre 5alciatif thaLer d r or such other ir.rty,had oriel:ay been nanksidas tht Landlord in
tli Lase, tut provided further that neither Londor nor -my such other • otptiring title to the-,
Mortgaged Property--shall-bavo we" toatzonnilm any obligati cItttiAs of
Borrower to Tenant which arise or acme pior to the date that Letithz W $ch other gayly acquires
lewd. title to the lvfortgageet-Propext

6_ The terms and provisions iiercof SEarte bin.w>"" upon Tenant and Tr ens'-r.
stt egmsom end assisps- aziy sublessees under Ate Lcase. * N71
7 I. 'mum to the bane& of Lender '
and Leader's successors and assigns,
A-r,
- e7gc7t69-e _
At.r.
aatte• AM" 411riiiL

Ey;
N

'ME STATE OF RYAS §

COUNTY OF

This instrument was ac bef tbo-1181. clay of 2E'll?C'At 204-
by ,As .146, a iziy. to/JG--regt4 4C.v-TC
on Vcliar-M.saicl-

101
 AP E.HOSPITAL

January 17, 2008

Apex Katy Physicians, LLC
5605 Medical Center Drive
Katy, IX
Dear Dr. Shalt
Based on. your calculations provided to us on januaiy 13t , i
re have concerns about
the following areas and would like to speak with you up..• return:
• Expense for thd POB needs to be dedu
• Late Charges & the Rate of late C Why penaliZeyour mrtners in.
operation so inuch?
• Starting Date ofthe Rent — All Te involved (part uers86Banic'have
*611ection of 4-MonthA No g first month rent in August of
2007

Calculations as per
Partners capinils 40 40,000 — $1,600,000 (we agree)
Used at closing - $ 1 0 (we agree)
Deposit to metto- 00 (we agree)
we aDee)
Borrowed etro on 08121/07 = $700,000 (we agree)
Pr but/ding rental income after expense = $100,000 (needs veritIcation)
= $1,050,000
t and penalties due to ApexKaty physicians, LLC as of 1/6/2008 = 1,482,642
Total due from. Bank of America account = $2,532,642

%02 Cal Center Dr
Ka9., TrPas 7749+
Phoit= 283332.5700
Lease Payment
Fok 2s1332$2,5
(---70.crprxficyita.Cartn Terms of .kase:
Rent sf (a) -4 *pit leers date
tuair-moroma ) =90d4s afte:r-e'eri@e
'* to of occupancy
mrormietragrQRaus3 e 24) ;
tiohaiw ttrEgroupitsg.corn
EXHIBIT
• deliiering PatielltSatisfacticin`
2-
 • Certificate of Occupancy received on March 5th
• First Patient admitted on March 15th

Late payment charge

(a) 4% ofthe amount of each payment, if rent is not paid w 0 days,
(b) 18% per, annum, 30 days after due date until rent is poi
(
Rent/P.SP $20.

Rental Si. Ft :401105

Total rent due as of 01-07-08- With late paym penalties $1,482,64150
O
We, the General Partners of Apex Hospital, at a second offering to the Northwest
Physicians to raise funds to make the real taus whole at our earliest
con-Veil/cape. You are well aware of the faes fte there has been a large delay due to
regulations changing in the middle of our •.%„,t
.S.(:"-'Ct.

We appreciate your patience and pro‘si.enalisra to allow us to meet our operational •
obligations by loaning money at the e when we needed the funds..

Once again, we agree with the• numbers and would like to sit with you upon your
r
retina to resol D3iff01• Foam with out accountants..

e,
1 Steve Koch, MD
General Paltrier General Partner
Apex Katy Ho Apex Katy Hospital

C: aid Members

Rent Matrix; Attached per Dr, Si alt
 • ir VESSOMMIRSAMOSOV
&MUMMY c,2
ST.PliEN IVE KOCH
ANGELA KOCH
groulit 852
3207 AMHERST
HOUSTON, TX 77%64331 55-7265/212

$,0f19,ripro.dP
13:z;
Cuzyr 1 1A ACCOUNT
-2964
Englodcad airr-5, NJ. J

2 0 7 3 88
Amount: $500,000.00 Sequence Number: 6130806812
Account: 5781917967 Capture Date: 11/06/2006
Bank Number: 11300002 Check Number: 991

w.r-dr `zr. - s;- — lor i ; (1, (ficome rPtaerrrimo="irvx

te% pir ii)(00 0991
TK
t334

DATE
PAY
TO DIE
ORDER OF edisi-47/ 5,,A3zketzb.ii—
hel-e-et 7.714(1-y__-• DOLLARS 8 :SF:
BankofAmerica .., .,4'•
de .
4,- -
400.11111.'
10,011010
FOR /413141-/ray LAriP•6frer-,A? 'hi, 40I•.. ,....--
7.17i..7v,r 111 •w

C.3 YODOrici le I: 1110000 2 31: DOS 78 14 V ITO 50000000/ -I
1 v.....,..vc

EXHIBIT
I TAC000390

1008
 OPERATING AGRE NT

OF c)

APEX KATY P IANS-TMG, LLC

A Texas Li ted Liability, Company

E ve 9' October, 2006

EXHIBIT

5-
VAS00029
 OPERATING AGREEMENT
OF
APEX KATY PHYSICIANS-TMG,-LLC —

THIS OPERATING AGREEMENT is dated and adopted this 9th day of October 2006,
by the persons whose names are subscribed below, who constitute the members of APEX KATY
PHYSICIANS-TMG, LLC, a Texas Limited Liability Company.

The members agree as follows:

ARTICLE I
Organization of Company

1.01. Name. The name of the limited liability company that h n formed and will be
operated pursuant to this Operating Agreement is APEX KATY P ICIANS-TMG, LLC,
(hereinafter "the Company"), which is a limited liability compan ized under the Limited
Liability Company Act of the State of Texas,

L02. Registered Agent and Office. -The Company gistered agent in Texas is Adeel
Zaidi, whose business address is 6161 Savoy, Suite 1214 HOtston, Texas 77036. The Company
may designate other registered agents or offices at any tin this state or, if necessary, in other
states.
1.03. Principal Place of Business. The Com y's principal place of business is located at
6161 Savoy, Suite 1214, Houston, Texas 77036. Company may establish additional offices at
any time.

1.04. Term. The term of wds+Vp,ce of the Company shall begin with the filing or
acceptance of its articles of organizationiaWshall continue until the dissolution and termination of
the Company as provided in Article 8 ortU'Operating Agreement.

1.05. Purpose. The ose of the Company is to engage in the business of the
construction, development and ovas. on of a medical care facility to be blown as Apex Hospital-
Katy and to engage in any 1 siness or activity for which a limited liability company may be
organized under the Texas 'tad Liability Company Act.

ARTICLE 2
Membership and Capital

2.01. Qtial Members. The names and addresses of the initial members of the Company
are:

1

VAS00030
 REPRESENTATIONS AND WARRANTIES OF MEMBERS PARTN*S:
By signing this Agreement, each Member warrants and represents t lowing:
(a) That he recognizes that Section 4(2) of the Securities A 4933, as amended, (the
"Act") exempts the issue and sale of securities from registration tin fq the Act in transactions not
involving any public offering, and that he is purchasing his ership interest for his own
account, for investment, and with no present intention of rt.uting, reselling, pledging, or
otherwise disposing of that interest.
(b) That he is a resident of the State of Texas an at he is the beneficial owner of the
interest standing in his name, and that he has no don of reselling that interest to any
residents of states other than Texas.
(c) That he is a sophisticated investor and the e and amount of the. capital contributions
he agrees to make under this Agreement are stent with his investment program and that he
has sufficient liquid assets to meet promp calls for additional contributions and to absorb
the loss of his entire investment in the Par hip.
(d) That he has been furnishedsufficient written and oral information about the
Partnership, the General Partner, Property to be purchased and developed to allow him. to
make an informed investment dec. prior to purchasing an interest in the Partnership, and has
been furnished access to any ad nal inforniation that he may require.
(e) That he is fully &mil /with the business proposed to be conducted by the Partnership
and with the Partnership's e and proposed use of the proceeds of the sale of the Partnership
interests.
(f) That the offer purchase of his interest in the Partnership have been made in the course
of a negotiated tr etion involving direct communication between himself and the General
Partner on behalf, e Partnership.
(g) That s either had experience in business enterprises or investments entailing risk of a
type or to it)• egtee substantially similar to those entailed in an investment in the Limited
Partners; s....r
\ has obtained independent financial advice with respect to investment in the
PartneA.
(h) That he has been advised that his partnership interest may not be sold, transferred, or
otherwise disposed of in the absence of either an effective registration statement covering that
interest under the Securities Act of 1933 or an opinion of counsel satisfactory to the Partnership
and its_ counsel that registration is not required under the Securities Act of 1933, and that he will
have no rights to require registration of his interest under the Securities Act of 1933, and, in view
3

VAS00031
 of the nature of the transaction, registration is neither contemplated nor likely.
(i) That he agrees to hold the General Partner- and the Iimited_Paftnership or .any person ,
controlling the Limited Partnership and the respective successors, assigns, or other controlling
persons harmless and to indemnify them against all liabilities, costs, and expenses incurred by
them as a result of any sale or distribution by him in violation of the Securities Act of 1933_ All
representations, warranties, and indemnities made by him with reference to the Securities Act of
1933 shall be deemed to be equally applicable in connection with the securities law of Texas or
any other state.

(j) That he is an "accredited investor" who meets at least one of the flollow riteria:

1. A bank, whether acting in its individual or fiduciary capacity; insur company, investment
company registered under Section 2(a)(48) of Investment Company of 1940 or business
development company as defined in Investment Company A . ttf" 1940, small business
investment company licensed by the Small Business Administrat der Small Business Act of
1958, employee benefit plan within the meaning of Title I of rnployee Retirement Income
Security Act of 1974, if the investment decision is made t% plan fiduciary (as defined in
Section 3(21) of ERISA) that is either a bank, insuran.company, or investment adviser
registered under the Investment Advisers Act of 1940, a employee benefit plan, if the plan
has total assets in excess of $ 5 million.

2. A private business development company, as ed in Section 202(a)(20) of the Investment
Advisers Act of 1940.

3. A tax-exempt non-profit organization wi otal assets in excess of $ 5 million. .

4. A director, executive officer, or geei
- v.--partner of the issuer of the securities being offered or
sold, or any director, executive of n.,,,dor general partner of a general partner of the issuer of
securities being offered or sold.

5. A person who purchases a <1 st $ 150,000 of the securities being offered, if the purchaser's
total purchase price does no eed 20 percent of the purchaser's net worth at the time of sale, or
joint net worth with that n's spouse, for one or any combination of the following:

a. Cash.

b. Securities for chmarket quotations are readily available.
•e`•
c. Any un csn, Tonal obligation to pay cash or securities for which market quotations are readily
available, i tie obligation is to be discharged within five years of the sale of securities to the
purchaser.

d. Cancellation of any indebtedness owed by the issuer to the purchaser,

6. Any natural person whose individual net worth, or joint net worth with that person's spouse, at
4

erirkroln
 the time of the sale exceeds $ 1 million.

7. A natural person (1) who has had an individual income with that person's spouse in excess of
$200,000 in each of the two most recent years and (2) who reasonably expects income in excess
of $200,000 in the currentyear.

8. An. entity in which all of the equity owners are accredited investors under items (I) through
(4), (6), or (7), above
2.02. New or Substituted Members. New members shall be admitted to the Company
only upon the written consent of sixty-seven (67.0%) per cent in interest, not in er, of the
existing members. An assignee of a member's ownership interest in the Compan 1 be admitted.
to the Company as a substituted member only upon the written consent of six =s en (67.0%) per
cent in interest, not in number, of the members. A new or substituted me a ,"as a condition of
being admitted to membership in the Company, shall be fully bound by th s and provisions of
this Operating Agreement and all amendments thereto, whether or not thew or substituted member
actually signs this agieetnent or an addendum thereto.

2.03. Ownership Interests. The ownership interest of e member of the Company shall
be expressed in terms of a percentage. The total ownership of all members shall always
equal 100 percent. The ownership interests of new members # be determined prior to admission
by the existing members. The ownership interests of the i00, embers are set forth in section 2.04
of this Operating Agreement.

2.04. Capital Contributions. A mem apital contributions to the Company may
consist of- cash, property, services rendered, or tten promise to contribute cash, property or
services in the future. The value of all capital c ibutions shall be determined by the members. A
member shall not be entitled to withdraw _capital contribution without the consent of all other
members. A member shall not be entitled terest on or with respect to any capital contribution.
Additional capital contributions may de by a member only with the consent of all other
members. The capital contributions ed of new members shall be determined by the existing
members. The initial ownership inter is of the initial members of the Company are set forth below:

Member Ownership Interest

TURN-AROUND MWC.:;iMENT GROUP 50.0%

5

VAS00033
 2_05. Capital Accounts. The Company shall maintain a capital account for each member. A
member's capital account shall consist of the total amount of the member's capital contributions to the
Company, plus any net income or gain allocated to the member by the Company, plus the amount of
6

VAS00034
 any Company liability assumed or secured by the member, le-as the value of any money or property
distributed to thearnember by the Company, less any net losses allocated to the member by the
Company, less the amount of any liabilities of the member assumed or secured by the Company: - •

ARTICLE 3
Management

3.01. Managers. The Company shall be managed by two Managers. The initial Managers of the
Company shall be Adeel Zaidi representing Turn-Around Management Group and Dr. P. K. Shah or
Mr. Stephen Koch or Dr. Waseern Peracha (on a rotational basis) representing x Long Term
Acute Care-Katy, L.P.

3.02. Number, Election and Removal of Manager, The Company ave two (2) Managers.
Any managers after the initial Managers shall be elected by the Me at a regular or special
meeting of the Members in the manner set forth in this Ageement

Any Managers selected after the initial Managers shall be el with one (1) Manager being
selected by Prestige Consulting, Inc. and with one (1) Managp. being selected by the remaining
Members,

The first such election shall be held during the second# fdar year after the effective date of this
Agreement. Each Manager shall be elected for a term = one year. A Manager may be removed by a
vote of eighty (80.0%) per cent in interest, not in n r, of the Members at a special meeting of the
Members called for that purpose.

3.03. Powers and Authority of Manage xeept as otherwise provided in this Agreement or in
the Act, the Managers shall have the exc 6 authority to manage the Company and its business,
and to make all decisions regarding th mess of the Company, or to delegate these functions to
employees or agents of the Compan e Managers shall have the right, power and authority to do,
on behalf of and in the name of th 1iipany, all functions, acts and things as are, in the judgment of
the Managers, reasonably necess o carry on the business and purposes of the Company, including
the appointment of such office the Company as the Managers deem appropriate. The Managers
shall have all of the rights an era which may be granted to Managers under the Act. Any person
dealing with the Company rely on the authority of the Managers to perform any act or thnetion
on behalf of the Cornpa at is authorized by this Agreement or by the Act.

3.04. Decision eez- anagers. Differences between the Managers as to any matter within the
authority of the ke.a agers shall be decided by vote of the Managers, or, if this is not feasible, by a
vote of sixty rm (67.0%) percent Investment Interest, not in number, of the Members.

3.05. Restrictions on Authority of Managers. The Managers shall not, without the written
consent of all Members, have the authority to;

(1) perform any act or function in contravention of this Agreement;

7

VASCOMAA
 (2) perform any act or function that would make it impossible to carry on the business of
the Company, except as otherwise provided in this Agreement; -

cause the Company to possess property for other than a Company purpose;

sell or transfer all or a significant part of the Company assets;

dissolve or terminate the Company;

merge or consolidate the Company with another entity; or

(7) incur a Company liability in excess of $500,000.00.

Notwithstanding the above, it is agreed and acknowledged he management of the
hospital and the business associated with its operations sha contracted to Prestige
Consultants, Inc. under a management contract which shall prod part that said management
company shall be for a term of twenty years.

3.06_ Indemnification of Managers.

(I) The Company shall indemnify, holdess, and pay all judgments and claims
against a Manager that are related to anyoll lity or damage incurred by reason of any act
performed or omitted to be performed b Ve Manager in connection with the business of
the Company, including attorneys' caned by the Manager in connection with the
defense of any action based on any s act or omission.

(2) in the event of any actiuVy a Member against a Manager, the Company shall
indemnify, hold harmless, ark6:...y all expenses of the Manager, including attorneys' fees,
incurred in the defense of "s." action, if the Manager is successful in the action.
OJ .
(3) The Company sh indemnify, hold harmless, and pay all expenses, costs or liabilities
of a Manager whoe benefit of the Company makes a deposit, acquires an option, or
makes any oth lar payment or assumes any obligation in connection with any
property prop° be acquired by the Company and who suffers any financial toss as the
result of suc ion.

(4) N standing the above provisions in this section, no Manager shall be indemnified
from 'ability for acts or omissions that constitute willful or reckless misconduct.

3.07. RatKi.0tion. of Actions. All disclosed actions taken by the Managers on behalf of the
Company prior to the effective date of this Agreement are hereby ratified and contained by the
Members.

3.08. Voting Requirements. Except as otherwise provided in this Operating Agreement or in the
Texas Business Organizations Code, Chapter 101 (Limited Liability Company Act), all matters
8

VACkelfran
 requiring the vote, consent or approval of the members shall require the vote, consent or approval of a
majority of the members.

3.09. Membership Meetings. The members may hold regular or special meetings either in the
State of Texas or elsewhere. Regular meetings of the members may be held without notice at such
time and place as may be determined by the members. A special meeting of the members may be
called by any member by giving ten (10) days prior written notice of the time, place and purpose of
the meeting to the other members. Notice shall be as provided in section 9.03 of this Operating
Agreement. Notice of any meeting may be waived by any member.
-`'%
3.10. Action Without Meeting. Action may be taken by the members ut meeting if all
members sign a written consent to the action taken or in any other manner pr for in the "Action
Without Meeting" provisions of the Texas Limited Liability Company Act.

3.11. Telephonic Meetings. Members may participate in a me by means of conference
telephone or other video or audio communications equipment when, aa'1 persons participating in the
meeting can simultaneously hear each other. Participation in ns a meeting by a member shall
constitute the presence of the member at the meeting.

ARTICLE
Allocations and Dis iions
a:g--pa
o
4.01. Allocation of Income and Loss. It is e at 4% of the earnings shall be retained as a
reserve, for unanticipated expenses and debt red

4.02. Company Tax Provision. The mem expect and intend that the Company shall be treated
as a Company for federal income tax p es. The members agree individually that they will do
nothing with respect to their individ .a P come tax returns that is inconsistent with or that will
otherwise jeopardize the Company's any tax status.
0
4.03. Special Tax ProvisimOhe income, gain, loss or deduction with respect to an asset
contributed to the capital of th o npatty by a member shall, in accordance with Section 704(c) of
the Internal Revenue Code s lely for tax purposes, be allocated between the members so as to
take into account any v between the adjusted income tax basis of the property to the Company
and its actual value whe ntributed.

4.04. Allocat 4,\C4 - Tp
on Transfer. If, during an accounting period, a member transfers the
member's rights •-__
t" •mpany profits, losses and other income tax items to another person, the profits,
losses and o a items that would otherwise have been allocated to the transferring member for
the account „period shall be allocated between the transferor and the transferee pursuant to any
method chosen by the member that is permitted under Section 706 of the Internal Revenue Code.

4.05. Distributions. All distributions by the Company shall be made to the members in
proportion to their respective ownership interests as shown in the books and records of the Company.
However, Section 4.01 shall apply to create a capital reserve account and debt reduction prior to any
9

NiArirtn-17
 distribution to the Members other than for payment of dividends and compensation for management,
as provided under this agreement.

4.06. Restriction on Distribution. The Company shall not make a distribution to the members
unless immediately after giving effect to the .distribution, all liabilities of the Company, other than
liabilities to the members on account of their interest in the Company and liabilities as to which
recourse of creditors is limited to specified property of the Company, do not exceed the fair value of
the Company assets, provided that the fair value of any property That is subject to a liability as to
which recourse of creditors is so limited shall be included in the Company assets only to the extent
that the fair value of the property exceeds such liability.

4.07. Additional Capital Contributions. In the event the Managers d e that additional
capital contributions become necessary in order to maintain, operate,preserir protect the operation
of the building, then additional capital contributions may be requir -Cdf the Members in the
proportion of ownership as stated in Section 2.04 of this Agreement event a member is unable
or unwilling to make said additional capital contribution, then the r- Zing Members shall have the
option to make an additional capital contribution any such shortfal the ownership interests under
Section 2.04 shall be modified to reflect the percentage of a onal capital contribution by the
Members.

ARTICLE (
Accounting, Books 'Records
O
5,01. Accounting Practices and Tax Year ompany shall keep its books and records and
prepare its financial statements in accordanceenerally accepted accounting principles and shall
prepare its income tax returns using such methlo
'a. of accounting. The Company tax year shall be the
calendar year.

5.02. Location and Inspection. per and complete books of account and records of the
business of the Company shall be at the
, Company's principal office and at such other places as
may be designated by the mernb Nonce shall be given to each member of any changes in the
location of the Company boo records. The Company books and records shall be open to
Inspection, audit and cop 4 y member, or the designated representative of a member, upon
reasonable notice at an during business hours for any purpose reasonably related to the
member's interest in !..11 ompany. Any information so obtained or copied shall be kept and
maintained in strict co enee except as otherwise required by law.

5.03. Rellancer4tooks
, and Records. A member shall be fully protected in relying in good faith
upon the reco d books of account of the Company and upon such information, opinions, reports
or statement -. ented to the member, by the Company or any of its other members, officers, or
employees, or by any other person selected by the Company, as to matters which the member
reasonably believes are within such other person's field of expertise, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities, profits or losses of the
Company or any other facts pertinent to the existence and amount of assets from which distributions
to members might properly be paid.
10

VAS0003R
 5.04. Reports and Tax Returns. A .financial statement for the Company shall be made and
reported en as of the end of each calendar year. A copy of the annual financial statement and report
shall be transmitted to the members within ninety days after the end of each year. The Company
shall, within ninety days after the end of each fiscal year, file a federal income tax informational
return and transmit to each member a schedule showing the member's distributive share of the
Company's income, losses, deductions, credits, and other information necessary to enable the
members to timely file their federal income tax returns. The Company shall also file, and provide
information to the members regarding, all applicable state and local income Wit returns. The
Company's "Tax Matter Partner' shall be Adeel Zaidi, who shall have the Guth o exercise the
functions provided in Sections 6221-6223 of the Internal Revenue Code and ority to delegate
those functions to another person.

ARTICLE 6
Distribution Upon Sale of Primary Ass

6.01. Distribution Upon Sale of Primary Assets. No Landing any provision to the
contrary regarding the ownership interests of the Members in th5 ompany, upon the termination of
the business of Apex Acute Long Term rare, LP., the net Beds, after payment of expenses of
sale, outstanding mortgages, taxes, and outstanding bills o y the Company shall be distributed as
follows:

ARTI
Indemnification an ithtion of Liability

7.01. Indemnification. A member shall J;z!il,kdernaified for all damages and expenses, including
attorneys' fees, and held harmless by ompany from any liability resulting from any act or
omission committed by the member on f of the Company to the fullest extent permitted under
the Limited Liability Company Act, er laws of the state of Texas.

7.02. Exculpation. A atembeuhl a I not be liable to the Company or to any other member for any
act, omission or error cornrrkktjel by the member while acting on behalf of the Company in
accordance with the stand 6- onduct, if any, established in the Texas Limited Liability Company
Act.
a-e„,
7.03. Limitation, 4ability. No member shall be personally liable for any debt, liability or
obligation of the any solely by reason of being a member of the Company.

ARTICLE 8
Dissolution and Termination

8.01. Dissolution. The Company shall be dissolved upon the first to occur of the following events:
(I) The expiration of the term or period of existence, if any, set forth in its Articles
• of Organization.
(2) The unanimous written consent of the members to dissolve the Company.
11

VASo0039
 (3) The entry of a decree of judicial dissolution as provided in the Texas Limited
Liability Company Act.

8.02. Winding Up. The members shall have the power and authority necessary to marshal the
Company assets, pay the Company creditors, distribute the Company assets, and otherwise wind up
the business and affairs of the Company upon dissolution. The members shall also have the authority
to continue to conduct the business and affairs of the Company after dissolution to the extent
reasonably necessary to effect an orderly and profitable winding up of the Compans business and
affairs.

ARTICLE 9 (j)
Miscellaneous
94
9.01. Amendment. This Operating Ay -cement, or any provision th, may be amended at any
time by a majority vote of the members at a special meeting duly c or that purpose, except that
any provision of this Operating Agreement that provides for a m C - ship vote, approval or consent
of greater than a majority may be amended only by a members<,1 ' ote that is equal to that specified
in the provision sought to be amended,
— el,
9.02. Governing Law. This Operating Agreement< I be governed by the Limited Liability
Company Act and other laws of the state of Texas, a,sp...i.c Act and laws may from time to time be
amended. `z,,""'

9.03. Notices,. Any notice given by a memercjanother member or to the Company, or given by
the Company to a niernber, shall be in writin d shall be deemed effectively given upon personal
delivery or upon deposit in the U.S. Mail egistered or certified mail, return receipt requested, or
upon confirmed facsimile transmission ivery to the company or to such member, at the address
or facsimile number shown in the tee f the Company.

9.04. Definition. The term " ers" as it appears in this Operating Agreement includes those
persons who are members of pany under the terms of this Operating Agreement at the time
in question.

9.05. Ratification anizer. The acts and deeds of the organizer or organizers performed in
the course of organk* e Company are hereby approved and ratified by the members.

9.06. Entire Agr ent. This Operating Agreement and the amendments thereto, if any, constitute
the entire age t among the parties with respect to the Company and the operation of its business.

9.07. Binding Effect. This Operating Agreement and the amendments thereto, if any, shall be
binding on, and shall inure to the benefit of, the Company, the members, and their respective
transferees, successors, assigns and legal representatives.

9.08, Covenant Not to Compete. All members agree and covenant that for a period of five (5)
12

VAS00040
years from the date hereof and in the event of sale/transfer of their membership interests for a period
of two years from the date of such saleftransfer neither they or any of their immediate family
members shall directly or indirectly own, lease, manage or be directors of any long term acute care
hospital within a radius of ten (10) miles of Apex Hospital.

IN WITNESS WHEREOF, the members have subscribed their names to this Operating Agreement
on or as of he day and year first above written.

C

O.

VAS00041
December 21, 2006 skficol tun Drizivro

Mr. Adeel Zaidi and All Physicians
Turn Around Management Group
616 Savoy, Suite 1214
Houston, Texas 77036

Re: Final Proposals

Dear Adeel and Doctors:

The purpose of this letter is to explain to you once and for all Med' rs position and what
Medistar and its Trust is willing to do.

At this time, l need you to know that Medistar did not change You have changed the
deal and tried to use our property that is free and clear to a you and your partners. This
situation is very unfair, demanding and non-workable.

Medistar has spent a lot of time on this deal, which 1 lly ready to cancel by tomorrow
at 12:00 noon and return your earnest money if not resolve all issues now. In the
meantime, we have told you that Medistar now ch better offers than yours, but out of
loyalty and good faith dealing, we have put (3) offers on the side, contingent on a
resolution of our situation and our deal.

Let me remind you that you changed our ginel deal, either because you do not have the
investor in real estate, or you did not sell dough shares, or you are trying to have a free ride on
Medistar's experience and take ad of our free and clear assets. With total respect to
you, Mediator does not change , You should also be aware that APEX is a start-up
company without a strong back 4 in LTACHs and no strong backing or strong financial

position to take on such a deal. `Mand 1 have tried every way humanly possible to assist
you and your physicians by .1Oring other avenues of making this project achievable, by
introducing you to banks- t ve rejected loan requests because there is no financial strength
and no history of opera ‘11111anaging an LTAC.

We have negotiated Lig assured Memorial Hermann to provide you and your physicians with
finniture, equip `. d other assets. We have promoted you to other healthcare companies, and
we have spent a %endous amount of time, efforts and money to assist you and work with you.

Medistar hasn`teently experienced tremendous financial losses on a start-up company, Innova,
which le us liable on a $25 Million building in Houston and an $18 Million building in San
Antonio, in addition to the loss of millions of dollars.

Medistar resigned from the Town and Country project, because it was a start-up company run by
smoke and mirrors and false promises, and now that hospital is a disaster for everyone. Medistar
lost money on that project but Med istar was wise not to work with the Town and Country
dishonest management.
EXHIBIT

;CD Wilikloai • 1 • 1-Inuitn. f4%15 7706 I •i14)111n '71 ft Itir Writ) 41; 7
024
Page 2
Mr. Adeel Zaidi
December 21, 2006

I am giving you arid all of your partners and physicians until 12:00 noon, Friday, December 22,
2006, to give us your final response on the following proposals.

A. Original Scenario as agreed to by APEX:
APEX/Physician partners to Invest between 56,000,000 to $9,000,000
• Ownership interest would be between 33% and 50% based upon amou `dal.
• Partnership gets between 33% to 50% of net cash flow and net sales
• APEX/Physicians to put down $500,000 Earnest Money.
• APEX/Physicians to provide remainder of funds to Medistar weeks prior to
closing.
• APEX/Physicians get preferred return of 710 on investmen
• Modister gets preferred return of '7% on its investment.
APEX — Lease
• 20-year tam
• 120.00 psf absolute net (NNN)
• CPI increases (estimate 2.0%) after year two
• 4 months free base mu (tenant still pays tax wand all other operating expenses of the
building)
• $2.000,000 LOC for Lease Guaranty for i onths
Medistar is willing to close and honor this p, • 4) and agreement,

After the original scenario, you came idea of financing and placing a loan on our
ProPertYA presented this concept to s, but, as you know, the banks rejected APEX
The 'Dust and I also rejected your i • using our free and clear assets for the benefit of you
and your physicians, without at orovidiniretcarity_for our assets that you are usln,
which is not fair from you orb partners. Therefore, Medistar presented the following
proposal:

B. Second Proposer1 `IKON cash and Letters of Credit
• APEX/Physic' provide $2,700,000 cash
• APEX/Physici provide $2,000,000 LOC for 16 months to secure the rents.
• to provide $6,300,000 LOC until sale of the project or until the project
th a non-recourse loan.
• terms as Original Scenario
• ysicians get preferred return of 8% on $2,700,000.
• Medistar gets preferred return of 8% on $9,000,000
• Net cash flow after preferred returns and debt to be spilt 50/50.
• Net profits on sale to be split 50151
• Meister, APEX and its investors to obtain $15,546.000 loan.
• LOCs will both be assigned to Lender as additional collateral for loan.
• LOCI to be drawn on first in case of default.
• Both LOCs to be drawn on by Median in event of lease default.
Medistar Is willing to close and honor this proposal and agreement.

025
Page 3
Mr. Adeel Zaldi
December 21, 2006

In a further effort to assist you and the physicians, 1 gave you a proposal to buy the Hospital,
MOB, 2.9 acres and 8 acres for 825 Million on a four (4) year payout with a 7% interest rate.
Then, to assist ail of you, I reduced my price to $19.5 Million for a 4-year payiut, in which
Master and I would retain 5% of ownership in the net profits of the hospital_ rations and
hospital real estate. Medistar b also willing to close on this proposal,

The bottom line is that you and your partners cannot use our assets that a y paid for free
and clear from any debt for you and your partners' advantage wfthanC_ securi a art
or our assets. Simply stated, it will not work. You also told men' es, us times that you had
already raised the S6 Million, and you wanted to put the S9 oval 50% of our project.
Under the original scenario, these funds were to have been pro 7:.; to Medistar two (2) weeks
prior to closing on the properties. My question is what happen
. 0-
Ilvledistar is giving you until 12:00 Noon, December 22 to6c use and live with any of these three
(3) proposals; otherwise, consider all agreements v us null and void, and we will return
your earnest money and go our separate ways.

Sincerely,

Mo

MH/dI

cc: Bob Hodge
Larry Valle
David Steidley
Cameron Smith
Paul Tapscott,,
The Manfrcrllitst
Abeer

026
 BOR4OWING CERTIFICATE
(Limited Liability Company)

This Borrowing Certificate ("Certificate") is made and given this c2e2 day of
, 2007 by APEX KATY PHYSICIANS, LLC., a Texas limited liability
company (the "Company") to METROBANK, N.A (the "Lender") in connection with Lender's loan (the
"Loan") evidenced by the promissory note (the "Note') dated of even date herewith executed by the
Company payable to the order of Lender in the principal amount of NINE MILLION DOLLARS
(S9,000,000.00) and secured by various liens and security interest including, but notilinited to, the liens
and security interests of the Deed of Trust and Security Agreement (the "Deed of T 1) encumbering the
real property described in Exhibit "A" attached hereto and impmvementsn q.,ot (collectively, the
"Mortgaged Property"). The Note, the Deed of Trust and the other doeu niFevidencing, securing or
guaranteeing the Loan or executed at Lender's request regarding the Lo nk herein referred to as the
"Loan Documents". The Company and its members ("Members") ea ve acknowledged and agreed
that Lender may rely upon the contents and accuracy of this C 7."• e in making the Loan. The
Company executes and delivers this Certificate as a material Ind • i. to Lender to close and fund the
Lean. The Company represents and warrants to Lender, its sack and assigns and any subsequent
holder of the Note as follows:

I. No consent of any other party, and no co license, approval of authorization of or
registration or declaration with, any federal, state, m •r other governmental authority is required
in connection with the execution, delivery, perfo e, alidity or enforceability of the transactions
contemplated by the Loan Documents.

2. The Company understands that(0 losing of this Loan,. including the execution of this
Certificate, the Note and other documents e mg and/or seeming the Loan, does not obligate Lender
to make or fund the Loan Likewise, a parti of this Loan chali nut obligate the Lender to fund
subsequent portions of the Loan. Theer may require that other and additional documents be
executed and delivered to the Lend9t,l5n he Company or by other parties before any or subsequent
..•

funding of the Loan. occurs.

3. To the best of eoMpany's knowledge, the Company is not in violation of or in default
in any material respect of any or provision of any mortgage, indenture, contract, agreement, license,
instrument, judgment, writ eeree applicable to the Company. To the best of the Company's
knowledge, the Company in violation or default of any law, ordinance, statute, rule or regulation
applicable to the Company

4. As.be date hereof, all federal, state, city and other taxes payable by the Company,
including but ied to, income taxes, payroll taxes, real estate taxes and sales taxes which have
heretofore berac due, have been paid and all such future taxes will be paid on or before the date that
such taxes

5. All warranties, representations and certifications previously made, and all information
and/or materials previously submitted or caused to be submitted, to Lender in connection with the Loan
are to the best of the Company's knowledge, true and correct in all material respects. There have been no
material changes in or conditions affecting any of such warranties, representations, certifications,
materials or information prior to the date hereof The financial statements and other financial information
heretofore furnished to the Lender regarding the Company arc true, correct and complete and no adverse
change in the financial condition of the Company has occurred since the date for which such financial
information was furnished.

EXHIBIT
2
a 7 120
 The proceeds of the Loan are to be used solely for commercial purposes excluding
agricultural purposes,.

7 The Company's execution and delivery of the Loan Documents will not (a) violate any
provisio4 of any agreement or other instrument applicable to the Company or any of its property; or (b)
conflict Aidith, or constitute a breach or (with notice or lapse of time) a default under, any such agreement
or other trument; or (c) result in any lien, charge or encumbrance of any nature whatsoever upon any of
the Co any's property or assets, other than those created by the Loan Documents.
I
81 There is no judgment, claim, action, suit or proceeding or inves pending or, to the
best of tie Company's knowledge, threatened, affecting the Company or , which may (a)
result in any material adverse change in the Mortgaged Property, in the ' id use of the Mortgaged
Property,i or in the business, operations or condition, financial or oth of the Company or any
Member, Lor (b) result in any material impairment of the right or ability Company or any Member to
carry on its business substantially as now conducted, or (c) result in terial liability on the part of
the Company or any Member, or (d) be likely to impair materially ity of the Company to perform
under the terms of the Loan Doctunents.

90 The Company has no knowledge of, or tion about, any circumstances or
conditi4 whatsoever, including, without limitation, with, t to the Deed of Trust, the Mortgaged
Property, !the Company, any Member or otherwise at variance with any of the representations and
warranties set forth in this Certificate or in the o t oar Documents or in any documentation or
information provided by the Company, or any M that could adversely affect the current value or
marketability of the Mortgaged Property or the L. The Company has no knowledge of any fact which
would make the appraisal of the Mortgaged Cr perty delivered to Lender with respect to the Loan
inaccurate.

10. The Company shall no Lender immediately if the Company discovers that any
representation made by the Companyt der in this Certificate or in the other Loan Documents or any
documentation or information that ompany or any Member has furnished to Lender or any other
party purluant hereto or with res o the Loan or the Loan Documents is or has become incorrect or
incomplete in any material respect.

I 11, No =term change, financial or otherwise, has occurred in (1) the conditfon of
the Coml$any or any , (ii) the actual or pro forma operating statements for the Mortgaged
Property from the statements most recently submitted to Lender by the Company or any
Member 4r any supp g data submitted therewith, and all such information is complete and correct, or
A..oan from that disclosed to Lender.
(iii) any feature of t.ke)

l2..(* ,. .One of the Company or any Member, is or has ever been, incapacitated or a debtor in
any state prlederal bankruptcy, reorganization or insolvency proceeding or any other debtor-creditor
proceeditr otherwise the subject of any such proceeding, or has ever made an assignment for the
benefit of; creditors, and the Company knows of no pending or threatened claim or litigation that might
result in the incapacity or insolvency or bankruptcy of the Company or any Member,

13 None of the Company, any Member, or any person or entity directly or indirectly
exercising any authority over the management of the Company or the Mortgaged Property, is, or has ever
been, accused or convicted of a crime or, to the best knowledge of the Company, is, or has any such
person ever been, the subject of any investigation relating to the commission of a crime.

2 121
 14. All inspections, licenses, permits, consents, permissions, approvals, authorizations and
certificates required, whether by law, regulation or insurance standards (collectively, "Applicable Law")
to be made or issued with respect to the conduct of the Company's business, the operation of the
Mortgaged Property and the use and occupancy of the same, including, but not limited to, certificates of
occupancy, sewer permits, building permits and fire underwriter certificates (collectively, "Licenses"),
have been made by or issued by all necessary authorities or other authorities having jurisdiction over the
Mortgaged Property and/or the Company, are in full force and effect, and the Company and the
Mortgaged Property are in compliance with all such Applicable Laws including wain* building, parking
ratio and environmental laws. The Company has not received notice of any *ion or failure to
conform with any such Applicable Law or License. No major improvements or s alterations have
been made to any of the Mortgaged Property after the issuance of a certificat ecupancy or the like
with respect thereto.

15. The Company is a limited liability company duly o presently existing and in
good standing under the laws of the State of Texas. The Company is ,d authorized to transact business
in the State of Texas.

6. All of the Members of the Company, and Member's percentage of ownership
interest in the Company is set forth on Exhibit B attached

7. The present Managers of the Corn
Pankaj K. Shah
Adeel Zaidi
0)

16. Attached hereto as C" is a true, correct and complete copy of the Articles of
Organization of the Company inclu „,* y and all amendments thereto.
'0
17. Attached hereto aiihibit "D" is a true, correct and complete copy of the Certificate of
Organization of the Company.

20. Attached as Exhibit "E" is a true, correct and complete copy of the Regulations of
the Company including any and all amendments thereto.
o
21. R hereto as Exhibit "F" is a Certificate of Good Standing for the Company issued
by the Texas Co .her of Public Accounts.
O
22. `(fhe
,, Members and Managers of the Company have adopted such resolutions and taken
such other44larn.s as are necessary to authorize the Company and its Members/Managers, acting on the
Company's behalf, to:

(a) execute and deliver the Note as a binding obligation of the Company enforceable in
accordance- with its terms;

3 122
 (b) execute and deliver the Deed of Trust and Security Agreement encumbering the
Mortgaged Property to secure payment of the Loan as a binding obligation of the
Company enforceable in accordance with its terms;

(c) execute and deliver each and all of the other Loan Documents to which the Company
is a party.

Executed and dated this day of , 200

COMPANY:
APEX KATY P S, LLC.,
a Texas limited ty company

By:
P

4

4 123
VI , Al *NV[ 11.1.1.10

4 TEXAS
STATE
BANK

January 51, 2007

Mr, Adeel Zaidi
APEX Katy Physicians, Ltd.
dio Turn.Around Management Group
6161 Savoy, Suite 1214
Houston, Texas 77035

RE: New Real Estate Term Loan for.58,2500,000—
To acquire an 80 bed Long-Terni Agate Care Facility and Medi , fliet Building
in Katy, Tams,

Dear Mr. Zaidi:

Texas State Bank-Riverway is very pleased with the Oppartuait vide financing to APEX
Katy Physicians, Ltd. The new real estate loan was approved Bank's Loan Committee
meeting on January 31, 2007. The proposed terms of the lo art as follows:

Burrower: APEX Katy Physicians, Ltd.

Purpose?, To acquire an 80 bed LTAC fad ' Medical Office Building in Katy, Texas.

Amount: 58,800,000 (65% advance tat total project cost of 513,500,000
Borrower's equity connibutj 35Y. = $4,700,000 contributed at closing).

Rate: 90 day LIBOR +220 Adjusted,' business day every 90 days.

Term: 3 years.

Repayment: Monthly in rigmanly for first 12 months then converts to Principal and Interest
payments Y T on a 20 year amortization with a balloon at maturity. Annual
recast rincipal payment to maintain a 20 year amortization schedule.

Fee: erS44,000,

Collateral: lien deed of trust on 20.76 acres of land and (2) buildings totaling 140,006
gross s.f. Assivunent of Rents and Leases. (*) Assignment of Letter of Credit in
the amount of 52,000,000 to-Texas State Bank (issuing bank subject to Texas
State Bank acceptance) or pledge a Texas State Bank interest bearing deposit
account of $2,000,000.

(9 Release Clause: Release of the Letter of Credit or Texas State Bank interest bearing account
will be conditioned on APEX Long-Term Acute Con-Katy (Lessor) meets

1

EXHIBIT
015
2
1JA,J1.14VVE n,L,Fat

January 31, 2007
Mr„ Adeel Zaidl
Continued-Page 2

specific net income performance benchmarks in year 2. (To be mutually agreed
upon before loan closing).

Guarantors: Dr, Pankaj Shah, Dr. Randeep Suneja, Mr. Upendra Vora, jointly and severally,

Loan Agreement—
Financial Reporting Covenants:
• Quarterly operating statements on the borrower.
• Annual financial staterent on the borrower due within 30 day-s.
• Annual tax return on the herrn10/67 due within irt0 &Ye of frlirr
• Annual anemia] ararernents and tax return on the guarantors.
• Quarterly opening enemata on thew hospitai and MOB due within 30 da

Closing requirements: Subject to the Bank obtaining:
• Current Amanda! "As Stabilized" minket value with a minimum valor l3,Si1O,OOD.
• Tide Policy
• Chum Phase 1 Envitonmareal report
• Survey
• Entity document on borrower.
• Closing Pees to be paid by the Borrow,
• Open and maintain a Texas State Bank Depository A
• copy otesecuted Leese Agreement on Hospitat lest Ottice

This commitment will remain valid until F )14, 2007. The loan must close by :February
28, 2007. If these terms arc agreeable, pl below and return prior to February 14, 2007.

Sincerely, Agreed and Accepted by:

PA#41tAit.
Scott M. Steveng APEX Katy Physicians, Ltd.
Senior Vice President
By. Adoel Zaidi Date
Title;

Guarantors:

Dr. Pankaj Date

Dr. Randeep Smelt Date

Mr. Upendra Vera Date

2

016
 ROE 3 San. 24 RV +34:16P4
370 M 4:1 L

famatry 22, 2007

Mehgrors.ad 'Twig
Soaks Vice Presideut
Area Br4less Dowlopratat Merig.ga 1
151,44 3.W. F:rcv•
Usu Lazd, Text* 7143

AP: Pia ealc ta zM INAcEad Buil&;at

.0.t Tarici;

letter is to catilLne eettc iiiNTniCork today Yt1 era t1 p}xth
prc*t McciiStr is selling the Pia 04. asto I grelgat Ciatmi„et,.ata
FiQctitZ15. MtEstgr IA:62nd Fit Olk ivizraorizi Iii*13.ton tiro* a Major swxst,
c: 7rvivriit$, =I the deal vig.s g few 'Nub ;444A/ono Titit CorriPszY. The
p-,:thuttr arms Modistar 1744:1140 aoustsnlibte4cticiigter, Ltd.

kz:vIrriirtzr is oxpadtrow4 ix;the devq) ensiem =6113 re tr)1:0M.S. ux lbw
34:der.1 wit Apt= to zmatikA az thitt the bc-spitelearl 24,108 ana 1/41
ArXX 41)4 tbelabrixiera t' titake'4,1001041 aucauts htve elsaPsub rue.
and 'into other 120:Timis pbreician Fr"te City of Katy Etozaral:
Or3ptassiat :ptaple, And tis'ieednorkw vita will =tit,Nft the Mayor o:r Ape)-
nr..azss:571iEtingin,s; ATlitYsielxus, WhDzi, :pa-mittly know pm:
ots, For Mfglistes -MocEstat will dta..7e A.pelt a Are of3 KR, of gros-ii•
pr4U fzc blziklizax and s. MotligAT Slettlidag herl for tr. ultimate sizccti-
of rJ-ie bespitai moo. r. pars of ;arsi,

41V Ivat•rivrey :tr: 3 -*oft -r.”20-6t9ri • Frt.: 7,:,41r17.717:
-c°377,i
 pig
CAUSE NO. 2009-02578

APEX KATY PHYSICIANS, LLC IN THE DISTRICT COURT OF

V. HARRIS COUNTY, TEXAS

ADEEL ZAIDI, ET AL. 61S1 JUDICIAL DISTRICT

CONSOLIDATED WITH

CAUSE NO. 2009-03055

STEPHEN M. KOCH, M.D., IN THE DIST4 T COURT
VICTOR ANKOMA-SEY, M.D.,
TERRY SCARBOROUGH, M.D.,
HATEM SAQR, et al.

V. DI C IAL DISTRICT

PANKAJ K. SHAH, et al. °IIARRIS COUNTY, TEXAS
go%
sow
PANKAJ K. SHAlf .D.'S RESPONSE TO
MOTIONS FOR PAMAL SUMMARY JUDGMENT

TO THE HONORABLE JUDGE 0 ID COURT:

COMES NOW, PAN AH, M.D. (Dr. Shah), Defendant in the above styled and

numbered cause, and, subjec the Motion for Continuance, files his Response to Motions for

Partial Summary Judgmeqled by some of the remaining Plaintiffs Stephen M. Koch, M.D.,
;%:•••
Terry Scarborough,,, 101., Erik B. Wilson, M.D. and Sammy Khoury, M.D. (the "Koch

Plaintiffs") purs to Rule I 66a(c) of the Texas Rules of Civil Procedure.

SUMMARY OF ARGUMENT

1. Koch Plaintiffs in this Partial Summary Judgment proceeding are four individuals

claiming to be members of Apex Katy Physicians, LLC ("Physicians LLC"), which claims are

being questioned by the Company. Physicians LLC purchased the Pin Oak Hospital facilities

and leased it to a related entity. Plaintiffs seek partial summary judgment only against Dr. Shah,

1
in his individual capacity, for breach of contract. The contract alleged to have been breached

was the Company Agreement of Apex Katy Physicians, LLC. Mr. Zaidi and Dr. Shah were

Organizers and Co-Managers of Physicians LLC. Plaintiffs allege that Dr. Shah, as Co-

Manager, caused Physicians LLC to execute a note which was not authorized. The Koch

Plaintiffs do not sue Mr. Zaidi, a Co-Manager of Physicians LLC, who iie'the note with Dr.

Shah. Moreover, the conduct of the Co-Managers in entering into than Commitment was

ratified and approved by Plaintiffs when they signed the Comp greement. The Company

Agreement also ratified both the pre-incorporation agreemex urchase the hospital facilities,

which required the loan, and the lease agreement with L which form the foundation of the

company's business. In the partial summary judg motions, Koch Plaintiffs do not allege

bad faith or willful or malicious misconduct, w e required for Dr. Shah to be individually

liable for his actions as Co-Manager. Signifi y, no summary relief has been requested against

or on behalf of Physicians LLC for breadaf contract.
EZ9
• TEMENT OF FACTS

2. The dates of the operatigreements which Zaidi or Dr. Shah executed on behalf of

Physicians LLC, all of were ratified, approved and confirmed by Plaintiffs in the

Company Agreement'
o
6-6,
-
a. J. re 3, 2007 — Zaidi and Shah, on behalf of Physicians LLC, executed the
4Nment for Purchase and Sale2 of the hospital properties with Medistar for
;\ 500000,,approximately $8.8M to be paid by a loan. (Paragraph 2.1.5)

January 4, 2007 — Shah, as Organizer and Co-Manager on behalf of Physicians,
executes the Lease Agreement" between Physicians LLC and LTAC leasing the
hospital facilities to be purchased to LTAC. Zaidi, as General Manager of LTAC,
executes the lease for LTAC.

The Apex Katy Physicians, LLC Company Agreement is attached as Ex. A-2 to Ex C to each Plaintiffs' Motion for
Partial Summary Judgment on Claim for Breach of Contract.
2 Ex. A — Agreement for Purchase and Sale of Pin Oak Hospital, medical office building and related properties.

3 Ex. B — Lease Agreement dated January 4, 2007.

2
 c. January 10, 2007 — Certificate of Formation4 of Physicians LLC filed with
Secretary of State, listing Zaidi and Dr. Shah as Co-Managers.

d. January 31, 2007 - Texas State Bank issues a Loan Commitments to Zaidi.

e. February 1, 2007 — MetroBank issues Commitment Letter6 for a $9,000,000 loan
to Physicians LLC, requiring guarantee by Shah and others, is the purchase of
the hospital facility pursuant to the Agreement for Purchase tr:;Co ale.
c2) .
f. February 6, 2007 — Zaidi issues TMG's check for Meer Loan Commitment
fee.

g. February 8, 2007 —Zaidi and Dr. Shah, as Co- agers for Physicians, LLC,
execute MetroBank' s Commitment Letter ace the loan.

h. February 9, 2007 — Plaintiffs execute theme 4"parry Agreement ratifying all pre-
incorporation agreements by the Organiz nd all actions taken by the Managers
prior to February 9.

i. March 22, 2007 — Zaidi and Dr. execute Promissory Notes with MetroBank
in accordance with the terms o ommitment Letter of February 8, 2007.

Plaintiffs Gave their Written sent by Execution of the Company Agreement
which ratified the Loa ommitment Executed the Previous Day.

3. The Company AgreementOCCPpex Katy Physicians, LLC, signed by all the plaintiff

Members, is dated February , one day after the Loan Commitment and one month after

the Agreement for Purchat d Sale of the hospital, were signed by the Co-Managers. The

Company Agreement e contract plaintiffs allege was breached but actually contains the

Plaintiffs' conse e Organizers' actions. Dr. Shah signed the Loan Commitment Letter on

and on February 9, 2007, obtained approval and ratification of all members

before exeeg the Loan Agreement and associated Promissory Note on March 22, 2007.

4. The Company Agreement, as executed on February 9, 2007, contains the Ratification of

4 Ex. C - Certificate of Formation of Apex Katy Physicians, LLC and Certificate of Filing dated January 10, 2007.
s
Ex. D — Texas State Bank Loan Commitment dated January 31, 2007.
6
Ex. E — MetroBank Commitment Letter dated February I, 2007, accepted by Dr. Shah February 8, 2007.
7 Ex, F — Check for MetroBank Commitment fee.
Exhibit D to Plaintiffs' Motion.

3
Organizer provision, reading as follows:

Section 9.05. Ratification of Organizer. The acts and deeds of the organizer
or organizers performed in the course of organizing the Company are hereby
approved and ratified by the members.

5. The Company Agreement, as executed on February 9, 2007, contains the Ratification of

Actions provision, reading as follows:

Section 3.07. Ratification of Actions. All disci actions taken by the
Managers on behalf of the Company prior to the eff date of this Agreement
are hereby ratified and confirmed by the Members." eg

6. All these actions taken by the Organizers were ential to the performance of the

business plan of the Company to purchase the Pin 0 ospital and related properties because

the funds committed by the investors, includingc. Shah, were insufficient to pay for the

properties. Affidavit of Dr. Shah attached • ' Motions, Ex. C, ¶2.
CP tiffs'
to
7. In the Company Agreement, P graph 2.06, Representations and Warranties of

Members, each plaintiff warranted tl ey were "fully familiar with the business proposed to
O
be conducted [by the LLC] and the Company's use and proposed use of the proceeds of the

sale of the Company interest Section 2.06(e)); and that "he has been furnished with sufficient
0
written and oral info a n.... to make an informed investment decision...and has been
O
furnished access to dditional information that he may require."(Section 2.06(d)).

7. The Ph s LLC's books and records were available for inspection by the members.

Tex. B Code §§ 3.252(a), 101.109, 101.501, and Company Agreement, Article 5.

Plaintiffs' carte blanche affirmation and ratification of the Organizers' prior agreements and the

actions of the Co-Managers necessary to fulfill those agreements estop any claim that Dr. Shah

was not authorized.

4
 ARGUMENT AND AUTHORITIES

The general rule is that a corporation may adopt any
agreement that is within its power to perform.

9. "That a corporation may adopt a contract and assume a debt made by its promoters and

organizers prior to its incorporation is not an open question." Farrell v. Drw. Floral Co., 125

S.W 2d 606, 614 (Tex. Civ. App. — Ft. Worth 1939, writ of error dim' A corporation is not

liable for a contract made for its benefit by an organizer unless it ios ed after the completion
O
of the formation of the Company. Wenzel v. Brooks-Asbeck,JW 211 S. W. 2d 611, 613 (Tex.

Civ. App. - Galveston 1948, writ ref'd, n.r.e.). Here the ui p1bers ratified the pre-incorporation

agreements for purchase and sale, the lease of the ho facilities and the post-incorporation

loan commitment and loan approval, all of which the foundation for the very existence of

Physicians LLC.

10. Plaintiffs offered Shah's affidavit evidence in this proceeding which states that his

personal guarantee for the $9M loan Q the over $1.2M cash he invested was necessary, and
O
without which "Physicians wou have secured the loan and would not have purchased the

real property. The terms of t 9M loan were far from a secret. Members were made aware of

the loan and its terms h or by Mr. Zaidi." Affidavit of Shah attached to Plaintiffs Motions,

Ex, C', paragraph 2.

II.By offericbis evidence, coupled with their warranties in the Company Agreement,

Plaintiffs' o vidence demonstrates that the Co-Managers were authorized to incur the debt.

5
 Under the summary judgment evidence, Dr. Shah signed the Loan Agreement with
MetroBank as a Co-Manager of Physicians LLC, and is not personally liable for his actions
as a Co-Manager of the LLC.

12. Managers of LLC's are statutorily protected from liability for corporate debts, obligations

and liabilities, except to the extent the company agreement specifically provers otherwise. Tex.

Bus. Orgs. Code § 101.114. Plaintiffs have not alleged any ground, ignoring this well-

established rule of law. Simply put, Plaintiffs may not recover fro . Shah for any breach of

agreement by the corporation. The corporate form shields Dr, ► from liability for corporate

obligations. See also, Tex. Bus. Orgs. Code 07.001, 21. Willis v. Donnelly 199 S.W.3d

262, 271-72 (Tex. 2006).

13. The recent Willis, supra, opinion by the Supr e Court, states the rule flowing from Tex.

Bus. Orgs. Code §21.223(a) as follows:

Under current law, by statute, a hareholder "may not be held liable to the
corporation or its obligees with ect to . . . any contractual obligation of the
corporation . . . on the basis the holder . . . is or was the alter ego of the
corporation or on the basis tual or constructive fraud, a sham to perpetrate a
fraud, or other similar . ."(fn13) The liability of a shareholder for a
contractual corporate de der this statute "is exclusive and preempts any other
liability imposed for bligation under common law or otherwise."(fnl 4)9

14. The sole case 444)by Plaintiffs in support of their motions for the principle that they

have established (necessary elements for breach of contract is Winchek v. American Express

9 See Farr v. ,110 orld Say. Ass'n, 810 S.W.2d 294, 296 (Tex.App.- El Paso 1991, no writ) ("Largely because
of the uproar i •sotc I usiness community over the ramifications of Castleberry on stockholder liability, the 71st
Texas LegisIN,„) amended Article 2.21A...."). The 1996 Bar Committee Comment to Article 2.21 of the Business
Corporation Act states:
Castleberry, in particular its use of constructive fraud as a basis of piercing the corporate veil, was
considered by many practitioners to be incorrectly decided. Further, while questionable in the
context of tort claims, the use of constructive fraud as a means of piercing the corporate veil
created a cloud on the sanctity of contract and the public policy of recognizing corporations as
separate entities apart from their shareholders. In response to Castleberry, Article 2.21 of the
TBCA was amended in 1989 to establish a clear legislative standard under which the liability of a
shareholder for the obligations of a corporation is to be determined in the context of contractual
obligations and all matters relating thereto.

6
Travel Related Services, 232 S.W.3d 197, 202 (Tex. App. — Houston [1st Dist.} 2007, no pet.),

which involved breach by a cardholder's failure to pay under a credit card agreement, a

collection case. It does not stand for the proposition that individual members of a LLC may sue

a Manager and hold him personally liable for conduct that exceeds corporate authority.

Plaintiffs as members lack standing or capacity to sue Shah for an ultra vir et of entering into

the MetroBank loan agreement without authority.1° Under Tex. Bu Viks. Code § 20.002(c),

the remedy for any supposed action by the corporation that exce the corporation's authority

is either (a) a suit to enjoin the action brought by a memb ) an action by the corporation

brought directly or through members in a representatipacity; or (3) suit by the attorney

general. Here, rather than sue on behalf of the co Z ion, the plaintiffs seek a judgment for

themselves individually, which is not authorized

Dr. Shah is not personally,e for breach of Physicians' contract
abs*t proof of bad faith.

15. Physicians LLC is a Lim 'ability Corporation for which the same principles for

piercing the corporate veil appl in corporations generally. Sanchez v. Mulvaney, 274 S.W.3c1

708, 712 (Tex. App. — San nio, 2008, no writ). Absent evidence of fraud, Dr. Shah is not

individually liable for 1each of contract. Id.

16. An essen ement of a cause of action to hold a manager personally liable for

misconduct is ow that he acted in "bad faith". In each of their Motions, Plaintiffs admit:

"Shah sigtia)the Note as the manager of Apex. (Ex. D, at 6)." [Paragraph 4 of Plaintiffs'

ID
Plaintiffs' Motions did not even accurately recite the elements for a breach of contract claim. The
plaintiffs entirely omit the requirement to prove damages. No evidence of damages has been submitted
and the motions must be denied on that ground alone. The quote from Winchek actually reads as follows:
To be entitled to summary judgment on its breach of contract claim, Amex was required to prove,
as a matter of law, the essential elements of a breach of contract claim: (1) the existence of a valid
contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by
the defendant; (4) damages sustained as a result of the breach. Prime Products, Inc. v. S.S.I.
Plastics, Inc., 97 S.W.3d 631, 636 (Tex.App.-Houston [1st Dist.] 2002, pet. denied).

7
Motions.] Shah would not be personally liable for any "breach" by the company so long as he

acted in good faith on the corporation's behalf. A corporate officer's acts are considered acts of

the corporation itself, and a "governing person", i.e. a Manager, is not liable for breach of

contract, even when wrongfully inducing a breach of contract. ACS Investors, Inc. v.

McLaughlin. 943 S.W2d 426, 423 (Tex. 1997); Holloway v. Skinner, 898 S. 793, 795-6 (Tex.

1995). Plaintiffs produced no summary judgment evidence, or any titi6n, of bad faith, which
is necessary to impose personal liability on Shah for his conduct o-Manager.

Plaintiffs' claims seek damages com N to Unit holders
and constitute a deriva e ction.

17. The Company's remedy for an unauthorized o a vices act is to either set aside the

transaction or to affirm it and assume the benefits. IQct, since the inception of Physicians LLC
sO
in 2007, no alleged member, including the Plaintiffs, have taken any steps against the

lender Metro Bank, the hospital tenant (A TAC) or the other organizers of Physicians LLC

(Zaidi, Medistar and Mr. Hourani) tct aside the very acquisition loan agreement they now

complain of. Instead, the Koch ffs benefitted while Physicians LLC enforced the terms of

the Loan and Lease Agreeme^R instituting two eviction lawsuits against the non-paying tenant

and the companion law i or fraud and an accounting against the former co-manager and

Organizer, Mr. Zaidi the other Organizers at Medistar, including Mr. Hourani.

18. No perso 'ability for damages is visited on the Manager. Individual Unit holders have

no standin cover damages belonging to Physicians, LLC.11 The plaintiffs' Motions fail to

I A cause of action for injury to the property of a corporation or for impairment or destruction of
its business is vested in the corporation, as distinguished from its shareholders. Redmon v.
Grth, 202 S.W.3d 225, 236 (Tex. App.-Tyler 2006, pet. denied) (citing Davis v. Sheerin, 754
S.W.2d 375, 381 (Tex. App.-Houston [1st Dist.] 1988, writ denied)); see Murphy v. Campbell,
964 S.W.2d 265, 268 (Tex. 1997); Hajdik v. Wingate, 753 S.W.2d 199, 201 (Tex. App.-Houston
[1st Dist.] 1988), affd, 795 S.W.2d 717 (Tex. 1990). To recover for wrongs done to the
8
prove the fact of damages, and must be denied for that reason, and because the managers are not

liable personally to the members for any such damages.

19. Plaintiffs do not ask for judgment against Physicians LLC. Plaintiffs attempt to gain an

independent personal recovery for themselves alone. This is not permitted.

Objections to Plaintiffs' summary judgment eyiden,

20. Defendant objects to plaintiffs' statements in paragraph 9 of thci;Motions, that there is

evidence that "Shah did not want the other members to know" of transaction whereby he was

guaranteeing the loan and substituted the guarantee for p yt'ent in cash Plaintiffs do not

support this summary judgment claim with any evidencrkpefendant objects to plaintiffs' bald

assertion in paragraph 9 of their Motions that Dr. S* was supposed to pay only cash for Units

in Physicians. There is no evidence of any sue uirement in the summary judgment record.

A contribution by an organizer to an LLC i ange for Units does not have to be in cash, but

may include a guarantee of debt. Tex BO Orgs. Code Sec. 1.002(9). See also the Company

Agreement at Article 5. Plaint qtave wholly failed to support this argument with any

evidence. Defendant requests Q Court sustain the objections and strike the unsupported

portions of the Plaintiffs ns for Partial Summary Judgment.

Conclusion

The mon partial summary judgment seek judgment solely on the ground that Dr.

Shah, as Co- per, breached the Company Agreement by entering into the loan transaction

with MetrOink for the acquisition of the hospital facilities without authorization. This is

factually inaccurate as Dr. Shah received the consents in the Company Agreement, which

corporation, the shareholder must bring the suit derivatively in the name of the corporation so
that each shareholder will be made whole if the corporation obtains compensation from the
wrongdoer. Redman, 202 S.W.3d at 236-37 (citing Faour v. Faour; 789 S.W.2d 620, 621-22
(Tex. App.-Texarkana 1990, writ denied)).

9
contains the express ratifications of the organizers and Managers with regard to the pre-

incorporation agreements for borrowing $9 million with which to purchase hospital facilities. Dr.

Shah, as Manager, cannot be held personally liable for actions taken as Co-Manager in the

absence of the showing of bad faith; so that the purported individual actions on which the partial

summary judgment is based must be dismissed, and finally Plaintiffs hav led to submit any

evidence of damages as required.

WHEREFORE, PREMISES CONSIDERED, Defendant . Shah requests the court

deny the Plaintiff's motions for partial summary judgmen grant such relief as Defendant

may be justly entitled within the premises.

Respectfully submitted,

By lAn
Tom F. Coleman
Texas Bar No. 04572000
817 Westheimer, 1st Floor
Houston, Texas 77006
Tel. (713)523-2800
Fax. (713)523-2804
Attorney for Defendant Pankaj K Shah,
M.D.

10
 CERTIFICATE OF SERVICE

I hereby certify that a true and correct of the foregoing was sent to the parties listed
below by U.S. Mail and /or Facsimile on the 17th day of July, 2009, as follows:

John W. Havins, Esq. Via Facsimile: 713-650-3301
Havins & Associates, P.C.
2211 Norfolk, Suite 525
Houston, Texas 77098

Attorneys for Plaintiffs,
Stephen M. Koch, M.D., Victor Ankoma-Sey, M.D.,
Ankoma-Sey PPSC, Ltd., Terry Scarborough, M.D.,
Hatem Saqr, Erik B. Wilson, M.D.,
Waseem Peracha, M.D., and G. Thomas Keith, M.D.

Jerry C. von Sternberg, Esq. Via Facsi 713-856-7268
Heather S. von Sternberg
The von Sternberg Law Firm
820 Gessner, Suite 1720
Houston, Texas 77024

Attorneys for Defendants,
Apex Long Term Acute Care-Ka
Apex Katy Physicians-TMG,
and US TMG, L.L.C. aD

Robert D. Remy, Esi Via Facsimile: 713-465-8018
Robert D. Remy L.A.i070
t ctf ices
Two Memorial "laza
820 Gessner, ti.'te 720
Houston, Te X.' 024

Attorne eCt Defendant,
Adeel

Jeffery B. Kaiser, Esq. Via Hand Delivery
Kaiser & Conrad, L.L.P.
1911 Bagby, Suite 200
Houston, Texas 77002

Attorneys for Plaintiff,
Apex Katy Physicians, L.L.C.

11
W. Ashton Randall III Via Facsimile: 214-665-3601
Greenberg Traurig, L.L.P.
2200 Ross Avenue, Suite 5200
Dallas, Texas 75201

Attorneys for Defendants,
Katy Project, L.L.C., Upendra Vora,
and Randeep Suneja.

Matias Androgue Via Facsimile: 713- 71
Lyric Center If:=3
440 Louisiana Street, Suite 715
Houston, Texas 77002

Attorneys for Plaintiff,
Sammy E. Khoury, M.D.

12
 CAUSE NO. 2009-02578

APEX KATY PHYSICIANS, LLC IN THE DISTRICT COURT OF

V. HARRIS COUNTY, TEXAS

ADEEL ZAIDI, ET AL. 61ST JUDICIAL DISTRICT

CONSOLIDATED WITH

CAUSE NO. 2009-03055

STEPHEN M. KOCH, M.D., IN THE DI T COURT
VICTOR ANKOMA-SEY, M.D.,
TERRY SCARBOROUGH, M.D.,
HATEM SAQR, et al.

V. § liT CIAL DISTRICT

PANKAJ K. SHAH, et al. § lLARMS COUNTY, TEXAS

AFFIDAVIT DCiOM F. COLEMAN
ON>
BEFORE ME, the undersigned ry, on this day personally appeared TOM F.
COLEMAN, a person whose ident known to me. After I administered an oath to him, upon
his oath he stated as follows:

1. "My name is F. Coleman and I am a resident of the State of Texas. I am the
attorney for the Def-, t Pankaj K. Shah in the above numbered and styled lawsuit. I
have personal kn ge of all the facts in this affidavit, which are true, and am in all
respects compete o make this affidavit.

2. At . iN hereto as Exhibit A is a true copy of the Agreement of Purchase and
Sale of R4C\
• " Iroperty and Improvements as produced in discovery in this case by
plaintif O.

3. Attached hereto as Exhibit B is a true copy of the Lease Agreement as produced
in discovery in this case by plaintiff.

4. Attached hereto as Exhibit C is a true copy of the Certificate of Formation of
Apex Katy Physicians, LLC as produced in discovery in this case by plaintiff.

5. Attached hereto as Exhibit D is a true copy of the Texas State Bank Commitment
Letter as it appears in files of P.K. Shah.
 AGREEMENT FOR PURCHASE AND SALE
OF REAL PROPERTY AND IMPROVEMENTS

THIS AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY ("Agreement") is
made and entered into as of this day of January, 2007, by and between IvIEDISTAR
CORPORATION, a Texas Corporation, its successors and assigns ("Seller") and APEX KATY
PHYSICIANS, LTD., a Texas Limited Partnership ("Buyer"), with reference to the following
facts:

A. Seller owns or will own certain real property located in Harris ty, Texas, and
more specifically described in Exhibit "A" attached hereto "Land"),
commonly known as Katy Pin Oak Hospital ("Hospital") aty Pin Oak
Medical Office Building ("MOB"), and such other impr i ents and assets, as
the same are herein described, together with other v acts of raw land.

E. Seller desires to sell to Buyer and Buyer desires trchase from Seller the Land
and the associated assets.

NOW, THEREFORE, in consideration of the mutual c ts, premises and agreements herein
contained, the parties hereto do hereby agree as folio

Purchase and Sale.

1.1. The purchase and sale include,ad at Close of Escrow (hereinafter defined)
Seller shall sell, transfer, granaid assign to Buyer, Seller's entire right and
interest in and to all of the Mlowing (hereinafter sometimes collectively, the
"Property"):

The Land, o ether with all structures, buildings, improvements,
naachinM, fixtures, and equipment affixed or attached to the Land and
all ea*-- -ads, development rights, rights of way, and other rights
apptiOh'itrit to the Land (all of the foregoing being collectively referred
tclein as the "Real Property");
Q.
1 1.2.,F leases (the "Leases"), including associated amendments, with all
V persons ("Tenants") leasing the Real Property or any part thereof or
A hereafter entered into in accordance with the terms hereof prior to Close
of Escrow, together with all security deposits, other deposits held in
connection with the Leases, Lease guarantees and other similar credit
enhancements providing additional security for such Leases;

1.1.3. MI tangible and intangible personal property owned by Seller located on
or used in connection with the Real Property, including, specifically,
without limitation, equipment, furniture, tools and supplies (the
"Personal Property");

KOC H00613
 1.1.4. All service contracts, agreements, warranties and guaranties relating to
the operation, use or maintenance of the Property, which Seller may have
in its possession (the "Contracts"); and

1.1.5. To the extent transferable, all building permits, certificates of occupancy
and other certificates, permits, licenses and approvals relatinAto the
Property (the "Permits").

1.1.6. The Personal Property being transferred in this sale shallIclude
furniture, fixtures and equipment worth approx. $1. 0 and a phone
system worth approx. $79,000, as more partic fisted on Exhibit-"B".
It is expressly stated that Seller is making no .r entations br
warranties about such Personal Property.

2. Purchase Price.

The total Purchase Price of the Property shall be Thin Million Five Hundred
Thousand and No/100 Dollars ($13,500,000) ( y chase Price"). The Purchase Price
shall be payable as follows:

2.1. D •osit/C dits/Further Pa en

2.1_1. Deposit. Simul usly with the execution ofthis Agreement,
which is intended to following the date a fully executed original of
this Agreement 'Slivered to the "Title Company", which is Alamo
Title Cornpa .99 San Felipe, Suite 1400, Houston, Texas 77056
Attn: Caro er (such delivery date hereinafter the "Effective
Date"), shall deposit with the Title Company the amount of Two
o Hundred Thousand and No/100 Dollars ($2,200,000)t-.cv7... --- ,
(the osit"). If the transaction closes, then the Deposit shall be e „4,
etf;d d to Buyer as a portion of the Purchase Price. Upon the "-1.orty ••4
epriveyanee of the Hospital and MOB to the Seller by Memorial
*mann Hospital System ("MIIHS"), then the Title Company shall WriA
'transfer the Deposit to the Seller. Upon transfer of the Deposit to
Seller by the Title Company, then this Deposit shall become non-
refundable to the Buyer in all events, except for the default by Seller of 4.' .‘"e-s
the non-conveyance of the Property to the Buyer at the Closing when
Buyer is ready, willing and able to close.

2.1.2 Prior Escrow with Seller. Buyer has already deposited Five Hundred
Thousand Dollars ($500,000) with Seller. At Closing, Seller shall credit
Buyer the sum of the $500,000 as a portion of the Purchase Price. If the
transaction does not close, then such money, shall become the sole
property of Seller,

2

KOCH00614
 2.1.3. Goodrich Option Tract Credit. At Closing, Seller shall credit Buyer
the sum of Two Million Dollars ($2,000,000) which shall be a credit
derived from the sale of a piece of the Property which is under an Option
known as the Goodrich Option Tract, The Goodrich Option Tract
contains 2.90 acres, and it is located adjacent to Pin Oak Road and
Medical Center Drive in Katy, Texas. Seller is to receiver. Is 'Ilion
Dollars ($2,000,000) for the sale of the Goodrich Option gA t from
MHHS, and Seller shall credit Buyer with the total $ ii',97;(;0 at
Closing.

2.I.4 Balance of Purchase Price. On or before Clos crow, Buyer shall
deposit with the Title Company to be held hk, w the balance of the
Purchase Price, in immediately available wire transfer made
payable to Title Company.

2.1.5. Loan. The balance of the Purckatte Price other than the cash due at
Closing and the Note to Seller sh is obtained by a first lien upon the
Property to be held by a lender yer's selection. Buyer shall use all
efforts to obtain the loan fi•onisueh selected lender.

2.1.6. Return of Deposit. In nt that this Agreement is terminated by
Seller, the Deposit sh enuriediately and automatically paid over to
Buyer without the ne or any further action by either party hereto.

3. Title to Property.

3.1. Title Insurance.

Seller will, at Selle r sole expense, cause the Title Company to issue an Owner's
Policy of Title nee (the "Title Policy") for and on behalf of Buyer in the
total amo e Purchase Price and obtainable at standard rates insuring good,
marketabInsurable title in and to the Real Property. The Title Policy shall
be free.,an, lear of exceptions except as follows:

3.1D
vReal property taxes and assessments, which are a lien not yet due;

The Permitted Exceptions (hereinafter defined) included in such policy
and approved by Buyer as herein described.

3.2. Procedure for Approval of Title.

Seller shall, no later than three (3) business days following the Effective Date,
provide to Buyer a current title insurance commitment and/or preliminary title
report for the Real Property, including legible copies of all item; identified as

3

KOCH00615
 exceptions therein (the "Title Documents"). Buyer shall have ten (10) days
following the later of (a) the Effective Date; and (b) the receipt of the later of the
Title Documents and the Survey (hereinafter defined) to review and approve, in
writing, the condition of the title to the Real Property ("Title Review Period"). If
the Title Documents or the Survey reflect or disclose any defect, exception or
other matter affecting the Real Property ("Title Defects") that is unacceptable to
Buyer, then Buyer shall provide Seller with written notice of Buyer' ea' ejections
no later than the conclusion of the Title Review Period; provided lei ever, if
Buyer shall fail to notify Seller in writing within the Title Revie,\ e riod either
that the condition of title is acceptable or of any specific objcr. i to the state of
title to the Real Property, then Buyer shall be deemed to heve:Ojected to none of
the exceptions to title or other conditions or matters which, shown on the
Survey or described in the Title Documents. Buyer agree, at Buyer cannot
object to any and all restrictions placed upon the L emorial Hermann
Hospital System. Seller may, at its sole option, elect,` written notice given to
Buyer within three (3) days following the conclusiep of the Title Review Period
("Seller's Notice Period"), to cure or remove ejections made or deemed to
have been made by Buyer; provided, howe eller shall in all events have the
obligation to (i) act in good faith in makings uch election and curing any Title
Defects that Seller elects to cure, (ii) cally remove any monetary
encumbrances affecting the Real Prop , and (iii) remove any Title Defect that
attaches to the Real Property subset to the conclusion of the Title Review
Period. The failure of Seller to delir written notice electing to cure any or all
such objected to exceptions d4g the Seller's Notice Period shall be deemed an
election by Seller not to cure sich exceptions. Should Seller elect to attempt to
cure or remove any objecp Seller shall have five (5) days from the conclusion
of the Title Review Pe Cure Period") in which to accomplish the cure. In
the event Seller elect iris deemed to have elected) not to cure or remove any
objection, then Buy 11 be entitled, as Buyer's sole and exclusive remedies,
either to (i) term' this Agreement and obtain a refund of the Deposit or (ii)
waive any obj es that Seller has not elected to cure and close this transaction
as othe-rwis templated herein. The failure of Buyer to provide written notice
to Seller ' In three (3) days following the expiration of the Seller's Notice
Period,. ng any objections Seller has not elected to cure shall be deemed an
electio Buyer to terminate this Agreement. Any exceptions to title accepted
by Oer pursuant to the terms of this paragraph shall be deemed "Permitted
ptions."
r
4. DueAigenee Items.

4.1. Omitted

4

KOC HOO61 6
5. Inspections/AS IS Warranty.

5.I. Occupation and Use of Property and Premises. It is understood that
Buyer is to occupy the Land and Property on or before January 5, 2007. Buyer
shall solely be in possession of the Land and Property at that time, and Seller shall
not be in possession of the Land and Property. Buyer shall solely be responsible
for all operations, expenses, insurance, use, utilities, and all other as 6.'4, •n• of the
Land and Property front the date of Buyer's occupation until the da.t. .01k e, Closing.

5.2. Procedure., Indemnity.

Buyer, at its sole expense, has already conducted feasibif '''"enviromnental,
engineering and physical studies of the Real Property.o g,-)

5.2. Approval.

5.2.1. Notwithstanding anything to the contr ntained herein, Buyer hereby
agrees that in the event this Agreemen terminated for any reason, then
Buyer shall promptly and at its so ense return to Seller all Due
Diligence Items which have be vered by Seller to Buyer in
connection with Buyer's insp n of the Real Property.

5.2.2. Buyer hereby acknowl Seller has made Buyer aware that there
are portions of the Prop*, which contain asbestos and asbestos related
products. The presenci4 asbestos shall not be a basis for Buyer to object
to all or any portion4the Property.

5.3 Warranty. AS IS, W IS: Notwithstanding anything to the contrary herein,
Buyer acknowledges and a s that neither Seller nor any of it agents or employees has
made any written or oral presentations or warranties to Buyer relating to the condition
of any of the Property nd or Personal Property. BUYER FURTHER EXPRESSLY
AGREES THAT(" IIS CONTRACT IS MADE WITHOUT RECOURSE,
REPRESENTA 0 -)R WARRANTY (EXCEPT AS TO THE REPRESENTATIONS
EXPRESSLY, E HEREIN AND AS TO TITLE IN THE DEED) OF ANY KIND,
EXPRESS, TED OR STATUTORY, AND SELLER IS TRANSFERRING THE
PROPER OVERED HEREBY "AS IS, WHERE IS," AND WITH ALL FAULTS,
AND W UT REPRESENTATIONS OR. WARRANTY (ALL OF WHICH SELLER
HEISCLAIMS) AS TO FITNESS FOR ANY PARTICULAR PURPOSE,
ME NTABILITY, DESIGN, QUALITY, LAYOUT, FOOTAGE, PHYSICAL
CONDITION, OPERATION, COMPLIANCE WITH SPECIFICATIONS, ABSENCE
OF LATENT DEFECTS, OR COMPLIANCE WITH LAWS AND REGULATIONS
(INCLUDING, WITHOUT LIMITATION, THOSE RELATING TO HEALTH, SAFETY
AND THE ENVIRONMENT) OR ANY OTHER MATTER AFFECTING OR
RELATED TO THE PROPERTY. BUYER HEREBY FURTHER ACKNOWLEDGES
THAT SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY

5

KOCH00617
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES AS TO WATER, SOIL
OR GEOLOGY OF THE PROPERTY AND AS TO INCOME TO BE DERIVED FROM
THE PROPERTY. WITHOUT LIMITING THE FOREGOING, SELLER DOES NOT
AND HAS NOT MADE ANY REPRESENTATION OR WARRANTY REGARDING
THE PRESENCE OR ABSENCE OF ANY HAZARDOUS SUBSTANCES (AS
HEREINAFTER DEFINED) ON, UNDER OR ABOUT THE PROPERTY OR THE
COMPLIANCE OR NON-COMPLIANCE OF THE PROPERTY TH THE
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPEN N AND
LIABILITY ACT, THE SUPERFUND AMENDMENT AND RE d RIZATION
ACT, THE RESOURCE CONSERVATION RECOVERY AC FEDERAL
WATER POLLUTION CONTROL ACT, THE FEDERAL, IRONMENTAL
PESTICIDES ACT, THE CLEAN WATER ACT, THE CUB AIR ACT, ANY
TEXAS STATUTE OR CODE REGULATING NATuRA SOURCES, SOLID
WASTE, WATER OR HAZARDOUS SUBSTANCES, A -CALLED FEDERAL,
STATE OR LOCAL "SUPERFUND" OR "SUPER .h, STATUTE, OR ANY
OTHER STATUTE, LAW, ORDINANCE, CODE, R GULATION, ORDER OR
DECREE REGULATING, RELATING TO OR IMP G LIABILITY (INCLUDING
STRICT LIABILITY) OR STANDARDS OF DUCT CONCERNING ANY
HAZARDOUS SUBSTANCES (COLLE ELY, THE "HAZARDOUS
SUBSTANCE LAWS"). FOR PURPOSES') THIS CONTRACT, THE TERM
"HAZARDOUS SUBSTANCES" SHALL MEAN AND INCLUDE THOSE
ELEMENTS OR COMPOUNDS WHI CONTAINED ON THE LIST OF
HAZARDOUS SUBSTANCES D BY THE UNITED STATES
ENVIRONMENTAL PROTECTIO AGENCY AND THE LIST OF TOXIC
POLLUTANTS DESIGNATED B CONGRESS OR THE ENVIRONMENTAL
PROTECTION AGENCY OR ER ANY HAZARDOUS SUBSTANCE LAWS.
BUYER HEREBY FURTHER` OWLEDGES AND AGREES THAT BUYER IS
RELYING SOLELY UP e ITS OWN INSPECTION, EXAMINATION. AND
EVALUATION OF THE rg FRTY AND THAT PRIOR TO THE CLOSING DATE
WILL HAVE INSPECTETHE PROPERTY TO ITS SATISFACTION (OR HAD
REPRESENTATIVES * E SUCH INSPECTIONS) AND BUYER IS FULLY
RELYING ON SU SPECTIONS OF THE PROPERTY AND NOT UPON ANY
STATEMENTS (0 OR WRI it EN) WHICH MAY HAVE BEEN MADE OR MAY
BE MADEDIP PURPORTEDLY MADE) BY SELLER OR ANY OF ITS
REPRESENT ES. BUYER HEREBY EXPRESSLY ASSUMES ALL RISKS,
LIABILITI 'CLAIMS, DAMAGES, AND COSTS (AND AGREES THAT SET 3 PR
SHALL T BE LIABLE FOR ANY SPECIAL, DIRECT, INDIRECT,
CON ENTIAL, OR OTHER DAMAGES) RESULTING OR ARISING FROM OR
RE D TO THE OWNERSHIP, USE, CONDITION, LOCATION,
MAINTENANCE, REPAIR OR OPERATION OF THE PROPERTY. BUYER
ACKNOWLEDGES THAT ANY CONDITION OF THE PROPERTY WHICH BUYER
DISCOVERS OR DESIRES TO CORRECT OR IMPROVE PRIOR TO OR Ali LER
THE CLOSING DATE SHALL BE AT BUYER'S SOLE EXPENSE. BUYER
EXPRESSLY WAIVES (TO THE EXTENT ALLOWED BY APPLICABLE LAW)
ANY CLAIMS UNDER FEDERAL LAW, STATE OR OTHER LAW THAT BUYER '

6

KOCH00618
 MIGHT OTHERWISE HAVE AGAINST SELLER RELATING TO THE USE,
CHARACTERISTICS OR CONDITION OF THE PROPERTY. THE SALES PRICE IS
A DISCOUNTED PURCHASE PRICE REPRESENTING THE FACT THAT THE
PROPERTY IS BEING PURCHASED BY BUYER ON AN "AS _IS," "WHERE IS"
AND "WITH ALL FAULTS" BASIS. IN THIS REGARD, SELLER HEREBY
REPRESENTS THAT THERE IS ON OR UNDER THE .:PROPERTY RD
POLYCHLORINATED BIPHENYLS (PCB's), AND/OR OTHER
MATERIALS, WHICH DO EXIST IN CONJUNCIION WITH A 1.0 ANT SOIL
OR GROUND WATER CONTAMINATION AND TO SEL lAer ACTUAL
KNOWLEDGE, SELLER HAS PROVIDED TO OR SHA " 0,9 ITH BUYER
ENVIRONMENTAL REPORTS OR SURVEYS COVERING " OPERTY AND
BUYER CONFIRMS THAT BUYER'S INVESTIGATIONS VE REVEALED
SUCH SUBSTANCES AND BUYER IS PREPARED TO> "41:11 "DIATE SAME AT
BUYER'S EXPENSE. BUYER CONFIRMS THAT A SA UCH INFORMATION
FURNISHED BY SELLER AND ACCEP i 'D BY BU "'WAS PREPARED BY A
THIRD PARTY AND SELLER CAN NOT BE HELD LE FOR THE TRUTH OR
INACCURACY OF ANY SUCH INFORMATION. T Provisions of this Section shall
survive the conveyance of the Property to flity9.,_--,Any termination of this Contract
notwithstanding any contrary provisions hereot-Sifier may enter this contract in any
proceeding involving the Property..

6. Escrow.

6.1. Opening.

Purchase and sale of the Pr shall be consummated through an escrow
("Escrow") to be opened Title Company within two (2) business days after
the execution of this meat by Seller and Buyer. This Agreement shall be
considered as the E instructions between the parties, with such further
consistent instruc s as Title Company shall require in order to clarify its duties
and responsibili Title Company shall require further Escrow instructions,
Title Comp y prepare such instructions on its usual form. Such further
instructio s so long as not inconsistent with the terms of this Agreement, be
promptly ed by Buyer and Seller and returned to Title Company within three
(3) bus days of receipt thereof. In the event of any conflict between the terms
itions of this Agreement and any further Escrow instructions, the terms
arte>nditions of this Agreement shall control.

6.2. 4kse of Escrow.

Escrow shall close at a mutually agreeable date ("Close of Escrow"), but in all
events on cir before forty-five (45) days from the date that Seller acquires the
Property from Memorial Hermann Hospital System. If the Buyer's lender
requires an extension of closing, then a Closing extension shall be granted in order
to assist the lender.

7

KOCH00619
6.3. Buyer Required to Deliver.

Buyer shall deliver to Escrow the following:

6.3.1. In accordance with Paragraph 2, the Deposit;

6.32. On or before Close of Escrow, the balance of the Purchase .1W,
provided, however that Buyer shall not be required to d • 4..„;' e balance
of the Purchase Price into Escrow until Buyer has bee I t„ ed by Title
Company that (i) Seller has delivered to Eserow each @the documents
and instruments to be delivered by Seller in connect with Buyer's
purchase of the Property, (ii) Title Company has .t:,0 mated to issue and
deliver the Title Policy to Buyer, and (iii) the oj mpediment to Close
of Escrow is delivery of such amount by a*, ehalf of Buyer,

6.3.3. On or before Close of Escrow, such oti, cuments as Title Company
may require from Buyer in order to i e Title Policy; and

6.3.4. A counterpart original of an A ent and Assumption Agreement in
the form attached hereto as E C (the "Assignment Agreement"),
duly executed by Buyer assi all of Seller's right, title and interest in
and to the Leases, Contraet(and Permits from and after the Close of
Escrow.

6.4. Seller Required to Deliver. C--Di

On or before Close of rk it 0w, Seller shall deliver to Escrow or Buyer, as
applicable, the follow? """

6.4.1. A duly e cuted and acknowledged Special Warranty Deed, conveying
fee tit e Real Property in favor of Buyer,

6A2. pleted Certificate of Non-Foreign Status, duly executed by Seller
0 43?
er penalty of perjury;

6. A Bill of Sale, for the Personal Property, if any, in favor of Buyer and
duly executed by Seller;

Such other documents as Title Company may require from Seller in
order to issue the Title Policy;

6.4.5. A counterpart original of the Assignment Agreement duly executed by
Seller, assigning all of Seller's right, title and interest in and to the
Leases, Contracts and Permits to Buyer from and after the Close of
Escrow;

8

KOCH00620
 6_4_6_ To Buyer, all keys to all buildings and other improvements located on
the Real Property, combinations to any safes thereon, and security
devices therein in Seller's possession;

6.4.7. To Buyer, the original Leases; and

6.42. To Buyer, all records and files relating to the rnanagetnen operation
of the Real Property, including, without limitation, al cc policies,
all service contracts, all tenant files (including corr ence), property
tax bills, and all calculations used to prepare stetne e a. of rental
increases under the Leases and statements of n area charges,
insurance, property taxes and other charges w e paid by Tenants of
the Real Property.

6.5. Buyer's Costs.

Buyer shall pay the following:

6.5.1. One-half (1/2) of Title Compapy.ls fee, costs and expenses; and

6.5.2. All other costs custom ne by purchasers of real property in Harris
County, Texas.

6.6. Seller's Costs. 0
Seller shall pay the fo g:

6.6.1. One-half ( of Title Company's fees, costs and expenses;

6.6.2. The c recording the Deed and any transfer tax;

6.6.3. 1 Iebompany premium for the Title Policy; and
of7,6
6.6.4.; n 11 other costs customarily borne by sellers of real property in Harris
County, Texas.

Items to be Prorated, The following shall be prorated between Seller
and Buyer as of the Close of Escrow with the Buyer being deemed the
owner of the Property as of the Close of Escrow:

(a) Taxes and Assessments. Buyer is responsible for all
real property taxes, assessments and other governmental impositions of

9

KOCH00621
 any kind or nature, including, without limitation, any special
assessments or similar charges (collectively, 'Taxes"), which relate to
the Property from the date of Buyer's occupation of the Property. With
respect to any portion of the Taxes which are payable by any Tenant
directly to the authorities, no proration or adjustment shall be made.
The proration for Taxes shall be based upon the most recently issued
tax bill for the Property. If the most recent tax bill is not
current tax year, then the parties shall reprorate within j., (30) days
of the receipt of the tax bill for the current tax year., .4e Jthe Close of
Escrow and subject to the adjustment provided abgb- uyer shall be
responsible for real estate taxes and assessmentse Property
payable from and after the Close of Escrow. Innis event shall Seller be
charged with or be responsible for any inerenein the taxes or
assessments on the Property resulting fr sale of the Property or
from any improvements made or leases ei d into after the Close of
Escrow. With respect to all periods fofwhich Seller has paid Taxes,
Seller hereby reserves the right to *lite or continue any proceeding
or proceedings for the reductio Ole assessed valuation of the
Property, and, in its sole disc , to settle the same. Seller shall
have sole authority to contra..e progress of, and to make all decisions
with respect to, such proc but shall provide Buyer with copies
of all communications e taxing authorities. All net tax refunds
and credits attributa any period prior to the Close of Escrow
which Seller has p r for which Seller has given a credit to Buyer
shall belong to an d the property of Seller, provided, however, that
any such refit d credits that are the property of Tenants under
Leases shall*, romptly remitted by Seller directly to such Tenants or
to Buyer fotth.e credit of such Tenants. All net tax refunds and credits
attributable4o any period subsequent to the Close of Escrow shall
belon ..and be the property of Buyer. Buyer agrees to cooperate
'116 • in connection with the prosecution of any such proceedings
o take all steps, whether before or after the Close of Escrow, as
be necessary to carry out the intention of this subparagraph,
-.including the delivery to Seller, upon demand, of any relevant books
and records, including receipted tax bills and cancelled checks used in
payment of such taxes, the execution of any and all consent or other
documents, and the undertaking of any acts necessary for the collection
of such refund by Seller. Buyer agrees that, as a condition to the
transfer of the Property by Buyer, Buyer will cause any transferee to
assume the obligations set forth herein.

(b) Rents. Buyer will receive a credit at closing for all
monthly rents collected by Seller from the time Seller buys the
Property to the date that Buyer buys the Property. Buyer shall
cooperate with Seller after Closing to collect any rent under the Tenant

10

KOCH00622
 Leases which has accrued as of the Closing; provided, however, Buyer
shall not be obligated to sue any Tenants or exercise any legal
remedies under the Tenant Leases or to incur any expense over and
above its own regular collection expenses. All payments collected
from Tenants after Closing shall first be applied to any rent due to
Seller for the period prior to Closing; second it is to be applied to the
month in which the Closing occurs, then to any rent due t e yer for
the period after Closing; provided, however, notwith g the
foregoing, if Seller collects any payments from Ten r Closing
through its own collection efforts, Seller may firskap such
payments to rent due the Seller for the period pd. t ‘'d Closing.

(c) CAM Expenses. To the exte at Seller is in
possession of any CAM charges and Terre reimbursing the
landlord for common area maintenanc other operating expenses
(collectively, "CAM Charges"), CA — arges shall be prorated at
Closing and again subsequent to C g, as of the date of Closing on a
lease-by-lease basis with each eing entitled to receive a portion
of the CAM Charges payable r each Lease for the CAM Lease
Year in which Closing oceurr5-w ich portion shall be equal to the
actual CAM Charges incu during the party's respective periods of
ownership o f the Prop ng the CAM Lease Year. As used
herein, the term "C se Year" means the twelve (12) month
period as to which nal CAM Charges are owed under each Lease.
Five (5) days pri5.1 Closing the Seller shall submit to Buyer an
itemization of ctual CAM Charges operating expenses through
such date e amount of CAM Charges received by the Seller as of
such da ther with an estimate of CAM Charges to be incurred to,
but not i tiding, the Close of Escrow. In the event that the Seller has
recei 'CAM Charges payments in excess of its actual CAM Charges
op- 0 a g expenses, the Buyer shall be entitled to receive a credit
t the Purchase Price for the excess. In the event that the Seller
ha received CAM Charges payments less than its actual CAM
harges operating expenses, to the extent that the Leases provide for a
"true up" at the end of the CAM Lease Year, the Seller shall be entitled
to receive any deficit but only after the Buyer has received any true up
(CD payment from the Tenant. Upon receipt by either party of any CAM
Charge true up payment from a Tenant, the party receiving the same
shall provide to the other party its allocable share of the "true up"
payment within five (5) days of the receipt thereof.

To assist the Buyer in preparing "true up" reconciliation at the end of
the CAM Lease Year, the Seller shall deliver to the Buyer at Closing
records of all of the Seller's CAM Charge expenditures, but only to the
extent that such are in Seller's actual possession.

11

KOCH00623
 (d) Operating Expenses. All operating expenses shall be
borne, be the responsibility of and paid for by Buyer after the date on
which Buyer occupies the Property.

(e) Security Deposits. Security deposits under Tenant
Leases, if and to the extent that such deposits are in Sellet*tual
possession or control and have not been otherwise appp',00y 4 Seller to
any obligations of any Tenants under the Tenant 1,ea1,1 be
credited against the Purchase Price, and upon the ipOsing, Buyer shall
assume fall responsibility for all security depositk_e refunded to the
Tenants under the Tenant Leases (to the exter44, same are required to
be refunded by the terms of such Tenant Lear applicable), In the
event that any security deposits are in th o of letters of credit or
other financial instruments (the "Non Al ecurity Deposits"), Seller
will, at Closing cause Buyer to be as beneficiary under the Non-
Cash Security Deposits. Buyer wil receive a credit against the
Purchase Price for such securi sits. In the event that the Buyer
cannot be named the beneficiaryder the Non-Cash Security
Deposits as of the Close o ow, an escrow shall be established at
Closing in an amount equa all Non-Cash Security Deposits under
which Buyer is not th iciary as of the Close of Escrow.

(f) Leas Costs. Seller shall receive a credit at the
Closing for all leasi costs, including tenant improvement costs and
allowances, an pro-rata leasing commissions, previously paid by
Seller in co on with any Lease or modification to an existing
Lease w as entered into after the Effective Date and which is
approv deemed approved by Buyer pursuant to this Agreement,
which _proval included approval of the tenant improvement costs,
Th pro-rata share shall be equal to a fraction which has as its
ator the number of months left in the base term of the Lease after
blose of Escrow and which has as its denominator the number of
r, „months in the base term of the Lease. Seller shall pay for all tenant
improvement allowances and leasing commissions with respect to the
premises leased as of the Effective Date by the Tenants pursuant to the
Tenant Leases in effect as of the Effective Date, to the extent that such
improvement allowances and leasing commissions are unpaid as of the
Close of Escrow.

(g) Insurance. Buyer shall solely be responsible to provide
any and all insurance needed for the Property and Improvements for
the Hospital and MOB. Buyer shall provide Seller at the time of
occupation of the Property copies of any and all insurance showing
that the insurance coverage exists and that Seller is an additional
named insured on such insurance policies. If Seller has to pay for the

12

KOCH00624
 insurance because Buyer does not provide the insurance, then Buyer
shall reimburse at Closing the Seller for all costs which Seller incurs in
acquiring such insurance.

6.7.2 Calculation; Reproration. Seller shall prepare and deliver to Buyer no
later than two (2) days prior to the Close of Escrow an estimated
closing statement which shall set forth the costs payableer
subsection (d) and the prorations and credits provided forig his
section and subsection (e) and elsewhere in this Agri .Any item
which cannot be finally prorated because of the una s bility of
information shall be tentatively prorated on the b of the best data
then available and adjusted when the informati° available in
accordance with this subparagraph. Buyers otify Seller within
one (1) day after its receipt of such estim. _ `osing statement of any
items which Buyer disputes, and the p 1 attempt in good faith
to reconcile any differences not later t one (1) day before the Close
of Escrow. The estimated closing ent as adjusted as aforesaid
and approved in writing by the pal (which shall not be withheld if
prepared in accordance with fs A went) shall be referred to herein
as the "Closing Statement". f the prorations and credits made under
the Closing Statement she ve to be incorrect or incomplete for any
reason, then either p. be entitled to an adjustment to correct
the same; provided, hver, that any adjustment shall be made, if at
all, within sixty (60 ays after the Close of Escrow (except with
respect to CAM Cges and Taxes, in which case such adjustment
shall be made tin thirty (30) days after the information necessary to
perform su ustment is available), and if a party fails to request an
adjustme i e Closing Statement by a written notice delivered to
the other, within the applicable period set forth above (such notice
to spey in reasonable detail the items within the Closing Statement
that .1i.--party desires to adjust and the reasons for such adjustment),
prorations and credits set forth in the Closing Statement shall
Minding and conclusive against such party.

items Not Prorated. Seller and Buyer agree that none of the insurance
policies relating to the Property will be assigned to Buyer and Buyer
shall responsible for arranging for its own insurance as of the Close of
Escrow; and utilities, including telephone, electricity, water and gas,
shall be read on the Close of Escrow, and Buyer shall be responsible to
pay for all such utilities from Buyer's date of occupation of the
Property. If there are any refunds or overpayments to the extent
applicable to the period prior to the Close of Escrow, and any utility
deposits which it or its predecessors may have posted, then Seller shall
be entitled to such refunds or overpayments.
•

13

KOCH00625
 63.4 Indemnification. Buyer and Seiler shall each indemnify, protect,
defend and hold the other harmless from and against any claim in any
way arising from the matters for which the other receives a credit or
otherwise assumes responsibility pursuant to this Section.

6.75 Survival. This Paragraph shall survive the Close of Escrow.

7. Seller Representations, Warranties., and Covenants.

7.1. Representations and Warranties.

Seller hereby represents and warrants as of the date hero?, l'e.• as of the Close of
Escrow by appropriate certificate to Buyer as follows: , iii'

7.1.1. Seller is a Texas Corporation duly formed, -validly existing under the
laws of the State of Texas. Seller hasofullpower and authority to enter
into this Agreement, to perform this ement and to consummate the
transactions contemplated hereby. Py execution, delivery and
performance of this Agreement documents contemplated hereby
by Seller have been duly and, v y authorized by all necessary action
on the part of Seller and all consents and approvals have been
duly obtained and will no It in a breach of any of the terms or
provisions of, or constitWa default under, any indenture, agreement or
instrument to which Slier is a party or otherwise bound. This
Agreement is a legatRalid and binding obligation of Seiler, enforceable
against Seller in,,aerdance with its terms, subject to the effect of
applicableb.40; .tcy, insolvency, reorganization, arrangement,
moratoriu • Mol. .r similar laws affecting the rights of creditors
generally.

7.1.2. Seller good and marketable title to the Real Property, subject to the
Peak Exceptions. There are no outstanding rights of first refusal,
of reverter or options relating to the Real Property or any interest
rein, except the Goodrich Option Tract for 2.90 acres which is
onveyed hereunder subject to an Option Right for $2,000,000. To
Seller's knowledge, there are no unrecorded or undisclosed documents
or other matters which affect title to the Real Property. Subject to the
Leases, Seller has enjoyed the continuous and uninterrupted quiet
possession, use and operation of the Real Property, without material
complaint or objection by any person.

7.1.3. Seller is not a "foreign person" within the meaning of Section 1445(f) of
the Internal Revenue Code of 1986, as amended (the "Code").

14

KOCH00626
7.1.4. There are no on-site employees of Seller at the Real Property, and
following the Close of Escrow, Buyer shall have no obligation to employ
or continue to employ any individual employed by Seller or its affiliates
in connection with the Real Property.

7.1.5. Except as set forth on any schedule of litigation delivered pursuant to
Paragraph 4.1.9, there are no actions, suits or proceedings p « ding, or to
the best of Seller's knowledge, threatened against Seller ecting
any portion of the Real Property, at law or in equity, o re or by any
federal, state, municipal, or other governmental co artment,
commission, board, bureau, agency, or instrumen domestic or
foreign.
o
7.1.6. Seller has not received any notice of any violihns of any ordinance,
regulation, law, or statute of any govemnken .;0 agency pertaining to the
Real Property or any portion thereof.

7.1.7. There are no unpaid bills, claims, r i tls in connection with any
construction or repair of the Real Property except for those that will be
paid in the ordinary course of,business prior to Close of Escrow or which
have been bonded over or th 411: Yuma of which has otherwise been
adequately provided for tp4*satisfaction of Buyer.

7.1.8. Seller is unaware of Ns! aterial physical or mechanical defects in the
buildings or any mate settlement or earth movement affecting the
Real Property, but,giyer should be aware that Seller has not occupied
the Property. L,,-5)

7.1.9. To Seller's to wledge, the zoning of the Real Property permits the
currentding and use of the Real Property, and to Seller's knowledge
there i pending, or contemplated, rezoning. To Seller's knowledge,
the, f Property complies with all applicable subdivision laws and all
cal-Ordinances enacted thereunder and no subdivision or parcel map
!ready obtained is required to transfer the Real Property to Buyer.

7.1 o the best of Seller's knowledge and belief, the information in the Rent
Roll is true, correct, and complete. Seller has or will pursuant to
Paragraph 4 and Paragraph 7.3 deliver to Buyer true, accurate and
complete copies of ail of the Leases and there are no leases, subleases,
licenses, occupancies or tenancies in effect pertaining to any portion of
the Real Property, and no persons, tenants or entities occupy space in the
Real Property, except as stated in the Rent Roll. There are no options or
rights to renew, extend or terminate the Leases or expand any Lease
premises, except as shown in the Rent Roll and the Leases, to the best of
Seller's knowledge and belief. No brokerage commission or similar fee

15

K0CH00627
 is due or unpaid by Seller with respect to any Lease, and there are no
written or oral agreements that will obligate Buyer, as Seller's assignee,
to pay any such commission or fee under any Lease or extension,
expansion or renewal thereof, t o the best of Seller's knowledge and
belief. The Leases and any guaranties thereof are in full force and effect,
and are subject to no defenses, setoffs or counterclaims for the benefit of
the Tenants thereunder, to the best of Seller's knowledge an elief. To
the best of Seller's knowledge and belief, neither Seller no Ito Seller's
knowledge, any Tenant is in default under its Lease, a er is in full
compliance with all of the landlord's obligations und e Leases, and
Seller has no obligation to any Tenant under the Leas, to further
improve such Tenant's premises or to grant or ---thay rent or other
concessions. To the best of Seller's knowledg belief, no rent or
other payments have been collected in adv.' r more than one (1)
month and no rents or other deposits are lte1 y Seller, except the
security deposits described on the Rent Rc21 and rent for the current
month.

7.1.11. To Seller's knowledge, there arpresently pending or contemplated
proceedings to condemn the Real operty or any part of it.

7.1.12. To Seller's knowledge, er, sewer, gas, electric, telephone and
drainage facilities, and aklither utilities required by law or by the normal
operation of the Real • erty are connected W the Real Property and are
adequate to service t ' cal Property in its present use and normal usage
by the Tenants an• ocupants of the Real Property and are in good
working orde 16 epair.

7.1.13. To Seller's wledge, Seller has all easements and rights-of-way which
are rep in order to continue the present use of the Real Property and
ens ate vehicular and pedestrian ingress and egress to the Real
Pr

7.1.14. ept for the Leases and the Contracts, there are no agreements or other
ligations which may affect the current use of the Real Property, except
for the restrictions of Memorial Hermann Hospital System, Seller has
fully performed all of the obligations required to be performed by Seller
(10 under the Contracts, and to Seller's knowledge, the other parties to the
same are not in default thereunder.

7_1.15. To the best of Seller's knowledge and belief, the operating statements
furnished to Buyer in connection with or pursuant to this Agreement (a)
accurately reflect the financial condition of the Real Property as of the
date thereof and (b) do not fail to state any material liability, contingent

16

KOCH00628
 or otherwise, or any other facts the omission of which would be
misleading.

7.1.16. Seller has no knowledge of nor received any written notice of violation
issued pursuant to any environmental law with respect to the Real
Property or any use or condition thereof, except for the asbestos on the
Property which Buyer is aware of.

7.2. Indemnity; Survival.

The foregoing representations and warranties of Seller are by Seller as of the
date hereof and again as of Close of Escrow and shall survive Close of Escrow
for a period of one year and shall not be merged as of e of the Close of
Escrow hereunder. Seller shall indemnify and defe er against and hold
Buyer harmless from, and shall be responsible for aims, demands, liabilities,
losses, damages, costs and expenses, including enable attorney's fees, that
may be suffered or incurred by Buyer, iricluding* third party due diligence
expenses incurred by Buyer, if any represe tai or warranty made by Seller is
untrue or incorrect in any material respec 0 made. The terms of Seller's
indemnity set forth above with respect, 1;1.e representations and warranties made
herein shall survive for a period of o following the Close of Escrow.

7.3. Covenants of Seller. Seller her bj venants from and after the Effective Date as
follows:

7.3.1. To cause Buyer t e in force fire and extended coverage insurance
upon the R erty, and public liability insurance with respect to
damage or to persons or property occurring on the Real Property
in at least s amounts as are acceptable to Seller. If Buyer does not pay
for sue rance, then Seller shall pay for such coverage and the cost
of su uranee shall be added to the Purchase Price at Closing.

7,3.2. ‘eause Buyer to maintain any building constituting an improvement on
ie Real Property in the same physical condition as it was at the date of
uyer's inspection, reasonable wear and tear excepted, and to cause
, (tee
Itv Buyer to perform all normal maintenance from and after the Effective
Or Date in the same fashion as prior to the Effective Date.

.33. To not enter into any new lease with respect to the Real Property,
without Buyer's prior written consent, which shall not be unreasonably
withheld. Exercise of a mandatory renewal option shall not be
considered a new lease. To the extent specifically disclosed to Buyer in
connection with any request for approval, any brokerage commission
and the cost of Tenant improvements or other allowances payable with
respect to a new Lease shall be prorated between Buyer and Seller in

l7

KOCH00629
 accordance with their respective periods of ownership as it bears to the
primary term of the new Lease. Buyer shall have five (5) business days
following receipt of a request for any consent pursuant to this paragraph
in which to approve or disapprove of any new Lease or any modification
or cancellation of any existing Lease. Failure to respond in writing
within said time period shall be deemed to be consent. Seller's
execution of a new lease or modification or cancellation of 'edging
Lease following Buyer's reasonable refusal to consent t shall
constitute a default hereunder.

7.3.4. To not sell, assign, or convey any right, title, or in c i whatsoever in or
to the Real Property, or create or permit to attach* lien, security
interest, easement, encumbrance, charge, or con affecting the Real
Property (other than the Permitted Excepti f'

7.3,5. To not, without Buyer's written approvgja) amend or waive any right
under any Contract, or (b) enter into aie*,Serviee, operating or
maintenance agreement affecting tli/teal Property that would survive
the Close of Escrow.
g"_52'
7.3.6. To fully and timely compl all obligations to be performed by it
under the Leases and C , and all Permits, licenses, approvals and
laws, regulations and applicable to the Real Property.

7.3.7. To provide Buyer copies of (a) any default letters sent to or
received from s and, (b) any copies of correspondence received
from a Tenni-4f it is discontinuing operations at the Property or
seeking toi)gotiate its lease and (c) notices of bankruptcy filings
received 'respect to any Tenant.

7.3.8
-n
To o %le - or cause others to operate the Real Property from and after
theql e hereof in substantially the same manner as prior thereto.

8. Buyer Represen Ons and Warranties.
r _5,
Buyer her*, represents and warrants to Seller as of the date hereof and as of the Close of
Escrow b4propriate certificate that:

Buyel a limited partnership duly organized and validly existing under the laws of the
State of Texas. Buyer has full power and authority to enter into this Agreement, to
perform this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and all documents contemplated
hereby by Buyer have been duly and validly authorized by all necessary action on the part
of Buyer and all required consents and approvals have been duly obtained and will not
result in a breach of any of the terms or provisions of, or constitute a default under, any

18

KOCH00630
 indenture, agreement or instrument to which Buyer is a party or otherwise bound. This
Agreement is a legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting the rights of
creditors generally.

9. Conditions Precedent to Close of Escrow.

9.1. Conditions Precedent.

The obligations of Buyer to purchase the Property pursuant, Ay. is Agreement
shall, at the option of Buyer, be subject to the following ens precedent:
o
9.1.1. All of the representations, warranties and ents of Seller set forth
in this Agreement shall be true and corret . .11 material respects as of
the date hereof and as of the Close of Ek„ w, and Seller shall not have
on or prior to the Close of Escrow, f 'Ao meet, comply with or
perform in any material respect enants or agreements on Seller's
part as required by the terms of greement.

9.1.2. There shall be no change in the, matters reflected in the Title Documents,
and there shall not exist a4*cumbrance or title defect affecting the
Real Property not desc • b ,WH
io in the Title Documents except for the
Permitted Exceptions atters to be satisfied at the Close of Escrow.

9.1.3. Seller believes,, y management agreement affecting the Real
Property sha] already been terminated.
U
9.2. Effect of Failure.

If Buyer no Seller of a failure to satisfy the conditions precedent set forth in
this Para Seller may, within five (5) days after receipt of Buyer's notice,
agree to,s0sfy the condition by written notice to Buyer.

19

KOCH00631
10. Damage or Destruction Prior to Close of Escrow.

Since the Buyer shall be in total possession of the Property and shall have the sole
responsibility for obtaining insurance for the Property and improvements thereon, Buyer
shall be solely responsible for the.repair for any and all damage or destruction to the
Property and improvements.

11. Eminent Domain.

If, before the Close of Escrow, proceedings are commenced for the tang by exercise of
the power of eminent domain of all or a material part of the Real which, as
reasonably determined by Buyer, would render the Real Propert4a ceptable to Buyer
or unsuitable for Buyer's intended use, Buyer shall have the *y giving written
notice to Seller within thirty (30) days after Seller gives no - * the commencement of
such proceedings to Buyer, to terminate this Agreement, ch event this Agreement
shall automatically terminate, the Deposit shall be retu e* J.•Buyer without any further
action required from either party and neither party shave any continuing obligations
hereunder. If, before the Close of Escrow, proce ?are commenced for the taking by
exercise of the power of eminent domain of less a material part of the Real Property,
or if Buyer has the right to terminate this Agrent pursuant to the preceding sentence
but Buyer does not exercise such right, th i4 Agreement shall remain in full force and
effect and, on the Close of Escrow, the nation award (or, if not theretofore
received, the right to receive such po the award) payable on account of the taking
shall be assigned, or paid to, Buyer. shall give written notice to Buyer within three
(3) business days after Seller's receg notice of the commencement of any proceedings
for the taking by exercise of the,. of eminent domain of all or any part of the Real
Property. The foregoing not nding, in the event the taking results in the
cancellation of, or rent abat under, any Lease, Buyer shall have the option to
terminate this Agreement.

12. Notices.

All notices, dernandS, or other communications of any type given by any party hereunder,
whether requi (by this Agreement or in any way related to the transaction contracted for
herein, shalt I,did and of no effect unless given in accordance with the provisions of
this Paragt All notices shall be in writing and delivered to the person to whom the
notice is acted, either (a) in person, (b) by United States Mail, as a registered or
certifiedm, return receipt requested, (c) by telecopy or (d) by a nationally recognized
over t delivery courier. Notices delivered by telecopy or overnight courier shall be
deemed received on the business day following transmission. Notices delivered by
certified or registered mail shall be deemed delivered three (3) days following posting.
Notices shall be given to the following addresses:

20

KOC H00632
 Seller: Mr. Monier Hourani
Mr. Robert M. Hodge
Medistar Corporation
7670 Woodway, Suite 160
Houston, TX 77063

With Required Copy to:

Buyer: APEX Katy Physicians, L

With Required Copy to:

13. Remedies.

13.1. Defaults by Seller. If there is y material substantial default by Seller under this
Agreement, following noti o Seller and three (3) days thereafter during which
period Seller may cur efault, Buyer may terminate this Agreement but the
Deposit and $500,01 f 1 still remain the property of Seller. The foregoing
notwithstanding, nQ ri t to cure shall extend the Close of Escrow.

112. Defaults b Bu there is any default by Buyer under this Agreement,
following to Buyer and three (3) days, during which period Buyer may cure
the defauler may, as its sole remedy, declare this Agreement terminated, in
which e Deposit shall be paid to Seller as liquidated damages and each
party s thereupon be relieved of all further obligations and liabilities, except
any ch survive termination. The foregoing notwithstanding, no right to cure
sh-ctli) xtend the Close of Escrow.
ce,,cee

In tle ent this Agreement is terminated due to the default of Buyer hereunder, Buyer
shall, in addition, deliver to Seller, at no cost to Seller, the Due Diligence Items.

14, Assignment.

Buyer may not assign any or all of its rights and obligations under this Agreement to any
one or more persons or entities.

21

KOCH00633
15. interpretation and Applicable Law.

This Agreement shall be construed and interpreted in accordance with the laws of the
State where the Real Property is located. Where required for proper interpretation, words
in the singular shall include the plural; the masculine gender shall include the neuter and
the feminine, and vice versa. The terms "successors and assigns" shall inci '-tlae heirs,
administrators, executors, successors, and assigns, as applicable, of any p creto.
0
16. Amendment.
0 .4,
This Agreement may not be modified or amended, except by an %ement in writing
signed by the parties. The parties may waive any of the conditi ntained herein or
any of the obligations of the other party hereunder, but any ,;s, aiver shall be effective
only if in writing and signed by the party waiving such conOns and obligations.
ce
17. Attorney's Fees.
Q/'
In the event it becomes necessary for either pa le a suit to enforce this Agreement
or any provisions contained herein, the prevailiwarty shall be entitled to recover, in
addition to all other remedies or damages, reasonable attorneys' fees and costs of court
incurred in such suit,

18. Entire Agreement; Survival.

This Agreement (and the items to. rnished in accordance herewith) constitutes the
entire agreement between the ° s pertaining to the subject matter hereof and
supersedes all prior and co raneous agreements and understandings of the parties in
connection therewith. No sentation, warranty, covenant, agreement, or condition not
expressed in this Agree shall be binding upon the parties hereto nor shall affect or be :!
effective to interpret, c e, or restrict the provisions of this Agreement. The
obligations of the i hereunder and all other provisions of this Agreement shall i
survive the Closep serow or earlier termination of this Agreement, except as expressly j
limited herein, * ;

19. CounterpartS

ThisA,gpment may be executed in any number of counterparts, all of which when taken
togeWshall constitute the entire agreement of the parties.

20. Acceptance.

Time is of the essence of this Agreement. If the final date of any period falls upon a
Saturday, Sunday, or legal holiday under the Federal law or laws of the State of Texas,
then in such event the expiration date of such period shall be extended to the next day '

22

KOCH00634
 which is not a Saturday, Sunday, or legal holiday under Federal law or the laws of the
State of Texas.

21. Real Estate Commission.

Seller and Buyer each represent and warrant to the other that neither Seller nor Buyer has
contacted or entered into any agreement with any real estate broker, agent, fl -1.-4r any
other party in connection with this transaction, and that neither party has y action
which would result in any real estate broker's, finder's or other fees or • r, ' ssions
being due and payable to any party with respect to the transaction con‘e*lated hereby.
Each party hereby indemnifies and agrees to hold the other party harr4els from any loss,
liability, damage, cost, or expense (including reasonable attorneys,:,fees) resulting to the
other party by reason of a breach of the representation and wan,inade by such party in
this Paragraph.
(s)
SIGNATURE PAGE FOR. AGREEMENT FO' :PURCHASE
AND SALE OF REAL PROPERTY AND ESCR INSTRUCTIONS

EXECUTED on this '"e day of January, 2007.

SELLER:

MEDISTAR CORPORATION,
a Texas Corporation.

By:
jact2 '".":. • 43.
Name:
Title: C., . . ED

LA) '

23

KOC H00635
EXECUTED on this day of.lanuary, 2007.

BUYER:

APEX KATY PHYSICIANS, LTD.,
a Texas Limited Partnership

By:
Name;
Title:

24

KOC1-100636
 EXHIBIT A

Legal Description ofthe Real Property

KOCH00637
 )3XHIBIT B

Description of the Personal Property

26

KOC H00638
 Exhibit "C"

Assignment and Assumption Agreement

This Assignment and Assumption Agreement (the "Assignment") is made o
20 , by and between
(the "Assignor"), in favor of ,a
("Assignee"). efe

77
For good and valuable consideration, the receipt and sufficiency .ch are hereby
acknowledged, Assignor hereby grants, conveys, transfers and assigns signee all of
Assignor's rights, title and interest in, to and under any and all of th wing to the extent they
are related to that certain real property located in the County of
commonly known as and more p larly described in Exhibit A
attached hereto (the "Real Property"):

a, all leases (the "Leases"), including associitinendments, with all persons
leasing the Real Property or any part there t except for certain payments for
tenant improvements previously adv ?by Assignor, as set forth on Exhibit B,
together with all security deposits, t eposits held in connection with the
Leases, Lease guarantees and oth=r ilar credit enhancements providing
additional security for the Leas

b. all tangible and intangible p onal property owned by Seller located on and used
in connection with the Real, roperty, including, specifically, without limitation,
equipment, furniture, 1, and supplies, any website maintained by Assignor, and
all related intangibl tiding Seller's interest in the name "Katy Pin Oak
Hospital";

c. all service cox, agreements, warranties and guaranties relating to the
operation, t( t maintenance of the Real Property (the "Contracts"); and

d. to the ex transferable, all building permits, certificates of occupancy and other
eertifiea , permits, licenses and approvals relating to the Real Property.

Assignortli eby agrees to indemnify, protect, defend and hold Assignee harmless from
and against a all claims, demands, liabilities, losses, costs, damages or expenses
(including, out limitation, reasonable attorneys' fees and costs) arising out of or resulting
from any breach or default by Assignor under the terms of the Leases and the Contracts arising
prior to the date hereof.

Assignor hereby covenants that it will, at any time and from time to time upon written
request therefor, at Assignee's sole expense and without the assumption of any additional liability
thereby, execute and deliver to Assignee, its successors and assigns, any new or confirmatory
instruments and take such further acts as Assignee may reasonably request to fully evidence the

KOCH00639
assignment contained herein and to enable Assignee, its successors and assigns to fully realize
and enjoy the rights and interests assigned hereby.

Assignee hereby accepts the foregoing assignment and agrees to assume, pay, perform
and discharge, as and when due, all of the agreements and obligations of Assignor under the
Leases and Contracts and agrees to be bound by all of the terms and conditions of the ..eases and
the Contracts.

Assignee hereby agrees to indemnify, protect, defend and hold Assigns( less from
and against and any all claims, demands, liabilities, losses, costs, damages omcpenses
(including, without limitation, reasonable attorneys' fees and costs) arising4tof or resulting
from any breach or default by Assignee under the terms of the Leases and1- Ontracts arising on or
after the date hereof.

The provisions of this Assignment shall be binding upon, shall inure to the benefit of,
the successors and assigns of Assignor and Assignee, respectivel

This Assignment may be executed in any number -nterparts, each of which shall be
deemed an original, but all of which when taken together I constitute one and the same
instrument.

IN WITNESS WHEREOF, Assignor an gn.ce have caused their duly authorized
representatives to execute this Assignment as of t date first above written.

ASSIGNOR:
a,

ASSIGNEE:

By:
Its:

Exhibits: -1
Exhibit A: Legal Description of Real Property
Exhibit B: Excluded Payments

2

KOCH00640
 PROMISSORY NOTE

Houston, Texas
$9,000,000.00 2007

FOR VALUE RECEIVED, after date, without grace, in the manner, on the dates, and in the amounts so
herein stipulated APEX KATY PHYSICIANS, LLC., a Texas limited liability any hereinafter called
"Maker," hereby promises to pay to the order of MEI HOBANK, N.A., a n 1 banking association,
hereinafter called "Lender," at 9600 Bellaire Boulevard, Suite 252, Houston, 7036, in Harris County,
Texas, or at such other address as Lender may hereafter designate to Maker in , the principal sum of NINE
MILLION DOLLARS ($9,000,000.00), in lawful money of the United Stat America, which shall be legal
tender, in payment of all debts and dues, public and private, at the time of ent, and to pay interest on the
whole of the principal amount hereof from time to time outstanding prior maturity of this Note at a rate per
annum equal to the lesser of the Contract Rate (as hereinafter de or the Maximum Lawful Rate (as
hereinafter defined). All past-due principal and all accrued and past4d terest on this Note shall bear interest
until paid at the "Default Rate" as hereinafter defined.

Payment Terms.

Accrued and unpaid interest, computed on the ou ding unpaid principal balance of this Note, shall be
due and payable on April 25, 2007 and on the same day of succeeding month to and including July 25, 2007.

A portion of the principal and interest of etc shall be due and payable in consecutive monthly
installments of SEVENTY ONE THOUSAND HUNDRED TWENTY SIX and 71/100 DOLLARS
($71,726,71) each, commencing on August 25, )and continuing regularly thereafter on the same day of each
succeeding month to and including June 25_, 2 This payment is based on a twenty (20) year amortization,

ALL UNPAID INDEBTEDNESS ENCEI) BY THIS NOTE, INCLUDING UNPAID PRINCIPAL
AND ACCRUED AND UNPAID NT AND ALL FEES AND OTHER CHARGES, IF ANY, PAYABLE
HEREUNDER, SHALL BE DUE ABLE ON JULY 25 2012.

If any payment shall becorne due on this Note on a Saturday, Sunday, or public holiday on which the
Lender is not open for business, ayment shall be made on the next succeeding day on which Lender is open
for business and such extension time shall in such case be included in computing interest in connection with
such payment.

Unless otherwi,se eed or required by applicable law, all payments made on this Note will be applied
first to accrued and ti-.4p interest, then, to the extent of any excess, to outstanding unpaid principal and then, to
the extent of any excess; to other unpaid charges on this Note.

For the uses of this Note, periods of one or more months shall end on the day of the month which is
the same as of the month on which this Note is dated; provided that any month thereby ending on the 29th,
30th or 31st da and which does not contain such day, shall end on the last day of such month_

LoanAgreement. This Note is the promissory note referred to as the "Note" in that certain Loan
Agreement (the "Loan Agreement") of even date herewith between Maker, Pankaj K. Shah, Randeep Suneja,
Upendra N. Vora and Lender. If for any reason the principal of this Note is not funded in full on the date hereof
but is funded by one or more advances made by Lender to or for the benefit of any Maker subsequently, then the
date and amount of each such advance shall be entered in the records of Lender and such records shall be
rebuttably presumptive of the date and amount of each such advance. Notwithstanding any other term or

Page 1 of 6 Initialed for Identification

KOCHD13841
 provision hereof, interest shall commence to accrue on each portion of the principal advanced on this Note on,
and not before, the date that such principal portion is advanced.

Contract Rate. The term "Contract Rate" as used in this Note shall mean a rate of interest equal to seven
and one quarter percent (7.25%).

Maximum Lawful Rate. For the purposes of this Note the term "MaximumUt-Wful Rate" shall mean
the maximum rate of interest which the Lender may charge any Maker on the a evidenced by this Note
without thereby charging interest which is usurious or unlawful under the state of al laws applicable for the
purpose of determining the maximum lawful rate of interest which may be charg on such loan and this Note;
and provided that all fees, "points", and other charges which constitute inte,rekt)hall be included and taken into
account in determining such Maximum Lawful Rate. It is expressly provid stipulated that, notwithstanding
any other provision of this Note, any document evidencing, securing, giteeing, or otherwise governing the
loan evidenced by this Note, in no event shall the aggregate of (i) the e interest which has accrued on this
Note from the date hereof through the date of such calculation, an ) the aggregate of any other amounts
accrued or paid which, under applicable laws, are deemed to cons interest upon the loan evidenced hereby
from the date hereof through the date of such calculation, ever ' the
Maximum Lawful Rate on the principal
balance of the loan evidenced by this Note from time to time ruing unpaid. In this connection, it is expressly
stipulated and agreed that it is the intent of the Lender and ea Ilaker in the execution and delivery of this Note
to contract in strict compliance with the usury laws, if any, acable to this Note. None of the terms of this Note
or the security instruments securing same shall ever be ,c trued to create a contract to pay interest for the use,
forbearance or detention of money, at a rate in exc the Maximum Lawful Rate. Each Maker, and any
guarantors, endorsers or other parties now or lima coming liable for the payment of this Note, shall never
be liable for interest in excess of the Maximum Ali Rate, and the provisions of this paragraph shall control
over all other provisions of this Note and the -ty instruments securing same which may be in apparent
conflict herewith. For the purpose of determinin e Maximum Lawful Rate permitted by the applicable laws of
the State of Texas, the "weekly ceiling?' fro e to time in effect as defined in Chapter 303, as amended, of the
Texas Finance Code shall be the ceiling 'cable to this transaction. Notwithstanding the foregoing sentence,
to the extent United States federal la 'is a greater amount of interest than is permitted under Texas law,
Lender will rely on United States f law instead of such Chapter 303, as amended, for the purpose of
determining the Maximum Lawful Rte. Additionally, to the extent permitted by applicable law now or hereafter
in effect, Lender may, at its opte- Oind from time to time, implement any other method of computing the
Maximum Lawful Rate under sta*t , hapter 303, as amended, or under other applicable law by giving notice, if
required, to Maker as provid4iy applicable law now or hereafter in effect. In no event shall the provisions of
Chapter 346 of the Texas -Tinanee Code (which regulates certain revolving credit loan accounts and revolving
tnparty accounts) apply,to, indebtedness evidenced hereby. All sums paid or agreed to be paid to the holder
of this Note for the us orbearance or detention of money shall, to the extent required to avoid or minimize
usury and to the ext P - :, :a.- 'tted by applicable law, be amortized, prorated, allocated and spread throughout the
full term of this not • that the interest rate does not exceed the Maximum Lawful Rate. The provisions of this
Paragraph shall eat • 1 over all other provisions of this Note and other agreements, whether now or hereafter
existing and a written or oral, between Maker and Lender.

Notwithstanding any term or provision of this Note to the contrary, each Maker confirms to Lender that
neither Maker nor its legal counsel, if any, is aware that this Note, or the transaction in connection with which this
Note was issued, is or may be usurious in any respect. To induce Lender to make the loan evidenced by this Note,
each Maker agrees with and covenants to Lender that if at any time Maker believes or discovers that any term or
provision of this Note or any action taken by Lender in connection with this Note is or may be in violation of the
usury laws or any other applicable law, Maker will immediately give notice to Lender specifying with particularity
the nature and extent of any such potential violation of the usury laws or any other applicable law, and afford to
Lender a reasonable period (of not less than 60 days) within which to cure same. Each Maker agrees with and

Paget of 6 Initialed for Identification
A • ...— .0
KOCH00642
 covenants to Lender that in no instance will Maker make any claim, bring any suit, prosecute or otherwise assert
any cause of action, claim, counterclaim, or defense in respect of any violation of the usury laws or any other
applicable law, unless, as a condition precedent thereto, Maker has given to Lender such notice and afforded to
Lender such opportunity to cure as provided in this paragraph. No term or provision of this Note shell ever be
construed to require any Maker to pay any unearned interest.

Default Rate. The term "Default Rate" as used in this Note shall mean the um Lawful Rate or if
there is no Maximum Lawful Rate then a rate per annum equal to the Contract Rate p percent (5.00%).

360 Day Year. Except as hereinafter specifically provided in this p ph to the contrary, accrued
interest on this Note will be calculated on the basis of a 360-day year. The ine accruing on this Note will be
calculated on the outstanding principal balance of this Note by dividing the interest per annum provided for
in this Note by 360 and then multiplying the result first by the outstanding ...t.cipal balance of this Note and then
by the actual number of calendar days for which interest is being acee e4 under this Note on such principal
balance. Notwithstanding the foregoing, however, calculations of theeemum Lawful Rate ;tinder this Note will
be based on the actual number of days (365 or 366) contained in each involved in such calculations.

Security. The payment of the entire indebtedness evil'.' d by this Note, including principal, interest,
fees, and other charges, if any, is secured by various liens ancle4urity interest including but not limited to: (a)
the liens of that certain Deed of Trust and Security Agr- - - 4i e "Deed of Trust") dated of even date herewith,
executed by Maker, encumbering certain real property col ig of all that certain 8.4388 acres of land being that
same tract described in Deed dated October 1, 1999, fr2rn Katy Medical Center, Inc. to Memorial Hermann
Hospital System, recorded at Film Code No. 199908f 3, of the Official Records of Fort Bend County, Texas,
being a portion of Reserve "E", Life/nark Medic er, according to the plat thereof recorded at Volume 28,
Page 21, of the Plat Records of Fort Bend Co --Texas; and all that certain 9.5782 acres of land being all of
reserves "B" & "C", Lifemark Medical Centerr ording to the plat thereof recorded at Volume 28, Page 21, of
the Plat Records of Fort Bend County,•Texas any improvements and other properties and interests therein and
thereon all as more fully described in said of Trust; and (b) a vendor's lien retained in the deed of even date
herewith conveying such real property ovements to Maker.

As additional security for t s ote and all other indebtedness which may at any time be owed by any
Maker to the Lender, whether sucheindebtedness is incurred directly or acquired from third parties, each Maker
gives to the Lender a security tete,st and contractual right of setoff in and to all money and property of any
Maker now or at any time her coming within the Lender's custody or control, including without limitation,
all certificates of deposit anf. er deposits and accounts, whether such certificates of deposit or accounts have
matured or not and whe rexeroise of such right of setoff results in loss of interest or other penalty under the
terms of the certificateent osit or other account agreement.

Good Fun fiy check, draft, money order or other instrument given in payment of all or any portion of
this Note may be aopted by the Lender or any other holder hereof and handled for collection in the customary
manner, but thete shall not constitute payment hereunder or diminish any rights of the Lender or any other
holder hereof, t to the extent that actual cash proceeds of such instrument are unconditionally received by
the Lender or . . y other holder hereof and applied to this indebtedness as herein provided.
. --,

No Lender Waiver. Any failure by Lender to insist, or any election by Lender not to insist, upon strict
performance by Maker of any of the terms or provisions of this Note shall not be deemed to be a waiver of same
or of any other term or provision or condition hereof,. and Lender shall have the right at any, time or times
thereafter to insist upon strict performance by Maker of any and all of such terms and provisions of this Note.
Each Maker agrees that its liability shall not be in any manner affected by any indulgence, extension of time,
renewal, waiver, or modification granted or consented to by Lender and each Maker consents to any indulgences

Page 3 of 6 Initialed for Identification

KOCH00643
 and all extensions of time, renewals, waivers, or modifications that may be granted by Lender with respect to the
payment or other provisions of this Note, and to any substitution, exchange or release of the collateral, or any part
thereof, with or without substitution, and agrees to the addition or release of any makers, endorsers, guarantors, or
sureties, all whether primarily or secondarily liable, without notice to any Maker and without affecting its liability
hereunder.

Joint and Several Liability. Should this Note be signed or endorsed by more than one person and/or
entity, then all of the obligations herein contained shall be the joint and several o ations of all Makers and
endorsers hereof.

Time of Essence. Time is of the essence of this Note and as to all dates' herein.

Late Char!e. If any payment on this Note is not received in full ex within ten (10) calendar days
after the date when due, then in addition to interest accruing at the Defa Fate on such overdue payment as in
this Note provided, Maker shall also pay to Lender, upon demand, date charge a reasonable amount not
exceeding five percent (5.00%) of the amount of such overdue pay Maker acknowledges that it would be
extremely difficult or impracticable to determine Lender's actual, s and damages resulting from any late
payment, and such late charges are reasonable estimates of tlbo j osts and damages and do not constitute a
penalty.

Waivers by Maker. Each Maker and all sureti timers and guarantors of this Note, and each party
hereafter assuming or otherwise becoming liable hereoni aive demand, presentment for payment, notice of
intention to accelerate the maturity of this Note and. !are the entire balance of the indebtedness evidenced
hereby due and payable, notice that the entire balan e indebtedness evidenced hereby has been declared due
and payable, notice of nonpayment, protest, notic otest and all other notices, filings of suit and diligence in
collecting this Note or enforcing any of the see erefor, (ii) agree to any substitution, exchange or release of
any such security or the release of any party p +>'ly or secondarily liable hereon, (iii) agree that Lender or other
holder hereof shall not be required first to ineA u e suit or exhaust its remedies hereon against any Maker or others
liable or to become liable hereon or enfor &it's rights against any security herefor in order to enforce payment of
this Note by it, (iv) consent to any ext or postponement of time of payment of this Note and to any other
indulgence with respect hereto withou40 ice thereof to any of them; and (v) to the full extend permitted by law,
waives and renounces for itself, its.uccessors and assigns, all rights to the benefits of any moratorium,
reinstatement, marshalling, forbe _ ce, valuation, stay, extension, redemption, appraisement, or exemption and
homestead laws now provided, et ch may hereafter be provided, by the laws of the United States and of any
state thereof against the enfo(re t and collection of the obligations evidenced by this Note.

Default and Remedies. It is especially agreed that if default shall be made in any payment due hereon,
either principal or inter" or if there is a default in any of the terms, covenants, agreements, conditions or
provisions set forth .gly deed of trust, security agreement or other instrument or document given to secure this
Note or executed 1taneously with this Note or hereafter, or if any certificate, affidavit and/or financial
statement furnished] Lender in connection with the loan evidenced by this Note is false or misleading or omits to
state any mateqct, or should any Maker, endorser, surety or guarantor hereof become insolvent or commit an
act of banknim Y or make an assignment for the benefit of creditors or authorize the filing of a voluntary petition
in bankruptcy, or should a receiver of any of their property be appointed, or should involuntary bankmptcy
proceedings be filed or threatened against any Maker, endorser, surety or guarantor hereof, or should Lender
reasonably believe that the prospect for payment hereof is impaired or deems itself insecure, or should any event
occur which results in the acceleration of the maturity .of any indebtedness of any Maker, endorser, surety or
guarantor hereof to Lender under any mortgage, deed of trust, security or loan agreement, indenture, note or other
undertaking, or should any other Event of Default (as defined in the Loan Agreement) occur then in any such
event, at the option of the holder hereof at any time thereafter, without demand or notice, the unpaid principal

Page 4 of 6 Initialed for Identification

KOCH00644
 balance of this Note, and all accrued interest shall immediately become due and payable and shall thereafter bear
interest until paid at the "Default Rate".

Costs of Collection. If this Note is not paid at maturity, however such maturity may be brought about,
and the same is placed in the hands of an attorney for collection or if collected by suit or through bankruptcy,
probate, receivership or other legal or judicial proceedings, all Makers hereof agree to pay an additional amount as
Lender's costs of collection and reasonable attorney's fees.

Prepayment. Any Maker hereof may at any time and from time to time p d prepay the full amount
or any part of this Note; provided that any such prepayment shall be accompam payment to the Lender of a
fee (the "Prepayment Fee") equal to a percentage of the principal of this Noi mg prepaid which shall vary
depending on the month following the date of this Note in which prepeyment occurs and which shall be
determined as follows:

Period in which Prepa t Fee as a Percentage of
Prepayment Occurs opal being_Prepaid

1-4 months None
5-16 months 2.00%
17-28 months 1.00%
29-40 months 0.50%
Thereafter None
P3
Any prepayment made shall be credited first*any required Prepayment Fee, and the remainder shall be
applied as provided for herein, Such Prepaymer shall be paid without prejudice to the right of Lender to
collect any other amounts to be paid hereunder c un er any document securing payment of this Note.
0
Notwithstanding the foregoing, if Meyr establishes, to Lender's satisfaction, that any prepayment is being
made without anyone (including Maker e-aity\ purchaser of the property encumbered by the Deed of Trust)
obtaining financing from a bank, savin credit union or other financial institution, then no Prepayment Fee
shall be payable regarding such prep

EACH MAKER AC WLEDGES AND AGREES THAT SUCH PREPAYMENT FEE
REPRESENTS A REASON 4 FAIR ESTIMATE OF COMPENSATION FOR THE LOSS THAT
LENDER MAY SUSTAIN PREPAYMENT OF THIS NOTE. EACH MAKER ACKNOWLEDGES
AND AGREES THAT 4 R HAS NO RIGHT TO PREPAY THIS NOTE WITHOUT PAYING THE
PREPAYMENT FEE EXPT AS SPECIFICALLY PROVIDED HEREIN.

Headings. aragraph entitlements hereof are inserted for convenience of reference only and shall in
no way alter, modi r define, or be used in construing, the text of such paragraphs.

Gove Law. THIS NOTE SHALL BE PAID AND PERFORMED IN THE STATE OF TEXAS,
AND THEA S OF THE STATE OF TEXAS SHALL GOVERN THE CONSTRUCTION, VALIDITY,
ENFORCEMENT, AND INTERPRETATION HEREOF, EXCEPT TO THE EXTENT THE LAWS OF THE
UNITED STATES OF AMERICA OTHERWISE GOVERN THE VALIDITY, CONSTRUCTION,
ENFORCEMENT, AND INTERPRETATION HEREOF. Many additional rights or remedies are hereafter granted
to creditors under the laws of the State of Texas or under the laws of the United States of America, the Lender
shall also have and may exercise any such additional rights or remedies. Venue for any action brought on this
Note shall be proper in any Texas or federal court sitting in Texas, and having jurisdiction of such action.

Page 5 of 6 Initialed for Identification

KOCH00645
 Successors and Assigns. This Note and all provisions hereof shall be binding upon each Maker and all
persons claiming under or through any Maker, and shall inure to the benefit of Lender together with its successors
and assigns, including each owner and holder from time to time of this Note.

Final Agreement. THIS NOTE AND ALL OTHER LOAN DOCUMENTS (AS DEFINED IN THE
LOAN AGREEMENT) EMBODY THE FINAL, ENTIRE AGREEMENT OF MAKERS AND LENDER AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE S MA 1 ER HEREOF
AND THEREOF AND MAY NOT BE CONTRADRAID OR VARIED B, EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR D IONS OF MAKER AND
LENDER. THERE ARE NO ORAL AGREEMENTS BETWEEN ANY t R AND LENDER. The
provisions of this Note and the Loan Documents may be amended or revisg*,only by an instrument in writing
signed by all Makers and Payee.

IN WITNESS WHEREOF, the undersigned Maker has duly~a ited this Note as of the day and year
above first written.

APEX KATY PgYSICIANS, LLC.,
a Texas limite4iiability company

Page 6 of 6 Initialed for Identification

KOC H00646
 IXASE AGREEMEN/

AGREEMENT OF LEASE (this 'Lease") made and entered into as of the et day of
January 2007, by and between APFA KATY PHYSICIANS, 110 or Assigns, a Texas corporation
("Landlord") and APEX LONG TERM ACME CARE-KA.IY, X P, a Telma limited panne:eh;
"
("Tenant' or "Hospita

NVIDIVSSt/Rz

WEEREAS, Tenant desires to lease and landlnof desires to mat the property,
Schedule A,
Upon and subject to the terms and conditions hereinafter set forth, leases to
Tenant and namt mate front Landlord an of landlord's riitm and interest in and to the
following real property (oblicetively, the 'Premises"):
(a) the real property more particularly described on Schectut Moiled hereto
together with all covenants, licenses, privileges end berreilts thereto g any and all
easements, rights-of-way, rights of ingress and egress as other landlord in, on or to
any land, highway, -shed, road or avenue, open or proposed, in, on, ss, in front og allotting
or adjoining such real property including, all strips and gores a,di4trtmt to or lying between such
real property and any a4 real property (the fla:od");

(b) an buildings, structures, Extures (es herer defined) and othcrimprovernents
et every kind including all alleyways and nninals, anw-walks,
landscaping, psrkhrg lots and structures and appurtenant to such bOildings and
snitch= presently or hereafter situated upon the and Capital Additions financed by
Landlord (but specialcally excluding Capital Addi6ans framed by Tenant); drainage and all
above-ground and underground utity structges(' ectively, the 'Leased Improvements";
r"."

(c) all permanently affixed cm machinery, fixtures and other items of real
and/or personal property, inelnding ally thereoC now and hereafter located in, on or
used in conneotio ' rt -with, and p ly affixed to or Incorporated into the Leased
Improvements, including all crs, heaters, electrical equipment, heating, phut:thing,
lighting. ventilating, refilgermin teen, air and water pollution control, waste disposal,
air-cooling and air candid and apparatus, sprinkler systems and frre and theft
protection equipment, %cable or imnaNeable walls or partitions and built-la oxygen
and remora systems, all ich are hereby deemed by the parties hereto to constitute real
estate, tower with glit =merits, ramifications, alterations and 'additions thereto, but
specifically exclang included within. the category of Personal Property (collecfrvery,
the Tbdures"); an .`e„.,

EXH BIT

SCAR00148
 (4 to the extent permitted by lave, all permits, approvals and other intangible
propesty or any interest therein now or hereafter owned at held by Landlcod in connection with
the Leased Property or any business or businesses now or hereafter conducted by Tenant or otith
tho use thereof, including all contract rights, agreements, trade names, water rights and
reservations, zoning rights, business licenses and warranties (including those Wang to ,
construction or fabrication) related to the Leased Property or any part thereof; but specifically
excluding the general corporate trademarks, service marks, logos or insignia or books
records of tenant and J
all site plans, surveys, soil and substrata studies, architecural drawings, plans and specifi
engineering plans and studies, floor plane, landscape plans, and other plans And
relate-tote land or the Leased Improvements and are in Tenant's possession or

THEREKIRE, it is mutually agreed by and between Landlord and

1. IERMORIYASE

Landlord, in exchange for the payment of rent and the
promises made by Tenant in this leases to tenant, and Tenant
' es ha-a period oftwenty (20) years and four (4) months
the Posims
Commencement Date (hereafter defined) of the Lease The
shag be the date that the Premises' shall bo deemed substantigy complete of the thanes,
incerficatices, and upgrades needed to be performed on the .• ffthis anticipated lobe no
a to.
Iacr tharthlarch 9,2007 Mompletion Date) The OM* • 15" shall bete date won which
the Landlord has (i) delivered to Tenant the Landlord's "ourtigeate of Nag Ccielattion;
(ii) obtained a Certificate clOccuparmy from the City of a• "•• (di) received approval from the
State Architect of tire Texas Department of Health, Ideal f Tallies licensing- and ComparOis
Division Not withatancgog the above, the outside • e ra that Net will commence under the
hospital lease will be no later than four (4) ., after the Certificate of Occupancy is
received As aeon as possible after the executi..szi this Team, the latent and Landlord shall
prepare a list of the changes, naoftficagorts •• t, • *es needed in the Premises in order to
obtain licensing from the Texas Depenmso t. Neagh Rages Licensing and eon/Mame
Division

Z. LEASE RENEWAL

As set forth in this Article Tenant hall have two (2) consecutive five (5) year
renewal options under this Lease optical may be exercised by Tenant's wine/notice
to Landlord, not teas tbanone twenty (120) days prior to espiratimt ofthe then current Initial
Tenn a- Renewal Tenn, of s exercise cif its option to occupy the Premises for a Renewal
term. Except as h 'ded in this Mae 2, 'Tenant's occupancy of the Premises for any
Renewal Term Rhin be the teens and conditions of this lease, except that the Tenant shall
accept the Premises ' "AS IS" conditioo, after the completion and acceptance of the
improvements to by landlord under this Ling Agreement and these improvements to be
4r7s13rgranrxission 2

SCAR00149
 made by Landlord as stipulated in the Memorandum of Understanding between Landlord and IMG
dated July 2.$, 2006, a copy of whichis attached hereto as Exhibit" " kith Lea= Agreement mid
except for the asbestos =Mom which are present onthe Punars ' es

In the event Tenant and Landlord agree to renew-this Lease at the end of the aid Term or
any Renewal Term of thisbi--Pe; and if 1 errant chooses to bercpresented by a Real Estate Agent in
the lease renewal negotiations, Tenant agrees that such representation shall be at its sole COst man
a point ohm:gaged onintheLease renewal process

a AMOUNT OFRENT

In exchange for landlord Biting Tenant.the right to use and occupy the
promises lo pay rent to Landlord which shall be payable as set forth in the Luse A
hereto and made a part hereof for all purposes Lease Rental Payments shall he
Within five (5) days after-dm excouion of this Tease by both landlOrti and Tema
Landlord One Thousand Dollars (SLOW) which ' shall be applied to the first
Rent shall commence oa the Commencement Date and shalt be prorated ark
Commencement Date is lathe got day ofa month for the ramie ' dm cif&
payable without notice, set-off or ahMement, except as Ann te.mplated by
landlord may from time to time notify Tenant of in twitliig. N
I eve., the Tmant shall have the fast four (4) months of the Lerna
minimum rental cost to-load
•
Thisleaseis what is commonly called a 'Net lease," it thatisodlord
' e the Rent set forthin Artieto 3 flee of any Real
recent Insurance Premiums, Utilities,
Repairs, Common Area Maintenance and all other 9 all as Eel forth in Tenant
shall beresponsible to pay anyand all oporafing Prw.imes. Imam aba also pay far
all of the fisted opera* expenses during the period of (4) months offree base ca minimum
Irnt

4. lifiNDING OVEg.

If I ItrictIord allows Tenant to coati mow the Premises after the expiration of the
Initial Term or any Renewal Term, Zvi express agreement as to such occupancy, then =is
holding over shall be considered as s mar& tenancy subject to all terra and cons of
this Lease, as long as Tenant pay runt on or before the first day of each month in
advance and in an amonat equal to and fifty pcicart (150%) of the last monthly 13ase
Rent paid for the Lease year Iran prior tope holding over However, none of the tams in
this Mole oribe fact that T owed to hold over shad be coonid mud an =swoon to Tenant
ducat maycentioue occupan Premises der the expiration of the term ofthisi~,-, or as to,
- extension of the lean of Ilk:kens by Landlord on any basis, nor es a waiver of any of Landlord's
rights to termblate rilisLeatondre-enter thaPremiscs

S. komfgri NOTrCE TO 'TIMM:MATE
4177613 3

SCAR00150
 No payment of inco.ey by Tenant to Landlord under this Lease for any reason, or after the
giving of any notice (other than a demand far payment of money) by Landlord b Tenant, shall
reinstate, tontiu
Thre or-emend the terms adds Lease or effect at/notice given to remelt prior to the
payment of such money Lan:fiord shall love-the sight to receive and collect any SCIO ofrent or other
sums due modes the teams of this has- without waiving, changing or affecting in any manner the;..
effect ofa mice previonsfy given, anypertaas snit orjudgmentprevicosty entered

6. SECEIRIWFOR LEASE

Upon execution of this Lease, Tenant shall guarantee one yearling: payment
chart expire at the end ofthe sixteenth (164) month cite Lease

General Partners of Apex Xaty Physicians, LW grail have authority to call on Linn't from
Apcx Bospitalaty, should the ]rase payment goes in default This option tnited to 16
months from Tammy 4" 2007

Tenant shall pledge all of the accounts receivable cif the Hospital as
the rent due under the Lease This accounts receivable pledge shall
I Lease and any rexiewaisthereof

7. LAMPAY7ifiiT C1TAROE AN1MTERISSI

In the event of say-payment of Beat that is not paid `txt (10) business days of the due
dates reliant shall pay to landlord as edditicaal Rent a lam fee of two percent (4%) of the
arucamt of stieh late paymeat To acirfrtion to such mall amnia at the Terser of (i) the
maximum non-nsurieus rats of inmrest orr(8) eighteen (18%) per annum calculated from
thirty (30) days after the due date until paid The of such late charge shall sot =cm or
cure any default by 3 enantlanderthis Lease I. The not charge la to compensge aedforid for
the additional cogs incurred in coiiecting theltent notapenalty

Any ameonts due nnerroils ',ono ord to remain la bear interest at the lesser of
(r)theraaximum non-usurious rate of dghteen percent (]8%)per annum Lou the due
date-until paid

immovramrs AND T1ONS
81 Except as pro Article 12 hereof miming to certain Tenant Improvements, the
responsibility for which is th getion of Landlord, Tenant shalt accept the Premises in 'as is.
Condition Any consauct teretimis, renovations. aticitions or repairs to the Premises (the
Improvements') errata, except for those Tenant Improvements,provided for within
Ankle 12 which are the an of thelarldiercl, shall bemade attire sole cost of Tenant Tenant
shall submit for d approval, tomplete and appropriate plans, drawings and specifications
regartring any and eve:Meats width Tenant desires for-the PremiSes In the event Landlord
4177611)5l,8379641t 1#407 4

SCAROOI 6i
 by Iowan or Tenant's agents ar contractors who shag be approved by Landlord ptior to
commencement of work on the Improvements. Landlord's approval of plans, drawings and
specifications or performance of work in accordance with such plans, timings and specificatioas
shall mate no responsibility cc liability on the part of Landlord for their completeness, design,
sufficiency, or compliance with any laws, mks, orders, ordinances, &auctions, regulations, or
regrirernents deny federal, state, county, ormtancipal authorities

82 With the written consent of landlord first being obtained, which consent shall
unreasonably withheld. Tenant may remove any mescal trade fixture and fiXed equip .. -4 ...
purchased or acquired by Tenant and installed in the Premises, the cost of which removal -....
paid by Tenant Tonal shall fully.separr damage °fatly tind or character occasioned by th .0 .t.l. • ,
of any such fixtures OC egtipment and dal! hays the Wen:fins in wed, cloan, sauitaty . 4 . ,-.....: •le
conolion, reasonable wear and seer mended The forming notwithstanding, all ix ..,- -1).,,.: enant
remaining within the inunises mare than sixty (b0) days beyond the teratinati Lease,
whethmr by lapse of time or otherwise, shall be deemed abandoned by Tenant ..r .„4:,... removed
and sold or cEsposed of by Landlord Any reasonable costs and damage ...,i. - ip ... . , by the
Landlord caused or made necessary by =son of removal Cr disposal of :".. pa:Tatty shall be
paid by Tenardwithin thirty (30) days ofreceipt of invoice from landlord
,Ctir
8 3 Withinfive (5) days atter ratifying landlord of the of any planned
erection, construction, alteration, Tual0Val. addition, repair °rather ha ems, Tenairt shell post
and keep posted untE completion of such work, in a eonspiencos and shall penronntr serve
upon all c.conactors or subcontractors per/toning such work or permitted notice
advising them titatlandlorr?s interests in Mehl:tits' es shall jest to any lion fat such-work

ACCRTANCg Or THE PREMISES

9.1 The taking possession of the Preraisekinant shaft be concitnnw . s evidence as
against Tenant that the Premises, as to tose=paterd
e and not latent, were in good and
eadsfactoty =Mon when possession ss was for the asbestos ma'am theNemises
for which Landlord shall remain responal ° to the taking of possession, the Tenant and
Landlord vall mare a punch Est of completed or connoted and such. work shall be
completed (1) at the expense &landlord, eh Est items are part ofthe Tenantlinprovements
for which landlord shall pay pursuant to le 12 hereof, a (2) at the expense of 1'0=4, if such
punch list items are in addition to the improvements for which Landlords/a pay purulent to
Article 12 The Tenant's taking of an shall not relieve Landlord from any obligation to
complete any work to be performed , I 'under the tams °figs Lease

92 landlord actor ges that Tenant must be licensed by the applicable government
and protesonat entities to conduct its business upon the piengsea. a he and Tenant is
initially prevented from any necessary ficensing ca accredhation becom of a =Edon or
issue ndating to the • enant wall not aka possession of the PreraiSes until the Premises are
modified so that T obtain the requisite liceros certificatiOn or =meditation In the event.
pea delay in On by Tenant, tin Commencement Date of this Lease Agreement
417751 3 ASIT-MINIVPZ 5

SCAR001 52
 shall be adjusted to reflect any delay in the commencement of hospital activities on the Premises
Landlord and Tenant =template that the 'Tenant Improvements will allow for such licensing or
accretakat Once licensing-or aiereclitation is obtained, Tenant is responsible to sustain such
license and at-ma-tame

93 Except for Tenant hp-averments pursuant to Article 12 to be made by Landlord pricar
to Tentras occupancy of the Premises, any other Improvements within the Premises necessary
obtain the require:likens; certification or acmeclitation shall be at Tenant's expense

94 To landlord's best Icnowledge which knowledge is based solely
ea-vireo:nen:al report prepared by • , the Premises her „...4'.N
used rort'e tz MarntradM; zafiu =Volt tea, store, handle. dispose, tanarer.,.,c.,t" ;,,, any
regulatory quantities of bazudous substances For Imposes hereat "Eizardons S means
kit,
any substance, waste, osetatuinant, pollutant or material that has been determined by -..t ocal, state
or federal goverment authority to be capable of peeing a risk of iririey or dtenageiRs‘„bealth, safety,
AP?,
propeaty, a- the environment, and includes, varlet limitation, all substance; • •.,..
,,, '..- contaminants,
pollutants and taaherials dunned a designed as bazardouss extremely or !•,, a'.ently hazardous,
dangerous or toxic puma= to (I) any applicable steno, sod; onclinanc; '44, golarront, ' or policy
4:-.
(Tally linal ca. mi,grwernmetrta/ authority within the state of /an t''' 307 and 311 of the
Clean Water Act, as amended, 33 US C Section 1314 1324 (iii) T 1004 of the Resource
Conservation and Recovery Act, as amended, 42 US C Semi • • *4; ay) Section 101 of the
Comprehensive Environmental Response and Ibiza, Act, as ta.,t:4211S C, Section 9601; (v)
Section 112 of the Clean Air Act, as emended, 42 US.0 S1%11..14.'7:- 2; (vi) Section 7 of fhe Toxic
Substances Control Act, as anarlyr-ii, 15 11 5 C Section r* A',„ , ,) co.ution 103 and 104 of the
Hazardous Materials Trarevottation Act, as unleaded, 4 %•C Section 1302, 1803; or (Viii)
naiad= pronuilgated pursuant to any of the for as well as all substances, waste;
contaminant; pollutants and materials defined, dertaor identified as, or containing
polyclilcdnated bipherayls CAMS% , or petroleum, rili which as carremly cedes or may be
amended from time to time shall be defined as . 4.44....., , Taws. ' except for the enclosure of
asbestos on thePtemises as setfortitunder Para 13 •
1.7.
9 5 Landlord represents and Tame that to lanellexes best lmowledge, which
knowledge is based solely upon tha, anal report prepared by Associated Testing
labontecies, Inc , them are no Sr4ziances located upon the Preudises dice the date ofthis
Lease in violation ofEnvinanmental except fix ashestesin the Premises Which has atready been
cEsclosed to Tenant by the Landl. tip ..i. • represents that all asbestos locations have been
remethate and comply with ail-.t.-.., state, and Ica health. safety and cavimannentat laws,
regulations, and ordinances • i ...-...Jons in which asbestos is present on the Premises have been
1
disclosed in writing to TI , 114,6k. • • titsfreding anything to the contrary in this Lease Agreement,
Landlord and its suceresso interest shall retrain folly responsible for the remecliation or any
tie/tired removal of ed on the premises dating the terra of this Lease Agreement and
shall hold Tenant hand N.•,•, any claims made by arty third petty Ashman of the existence of
asbestos on the shall upon demand from Tenant do all things rketossasy SD bring the
Premises into „,„i,*) with any health, safety, or environmental law, resulaticla, or ordnance
``,;.. -
6

SCAR00153
 during the term of this T PA4. AgreEfnent

96 At all times during the term of this Lease, Tenant covenants and agrees that, at
Tenant's sole cost, expense and liabnity, Tenant shall caulk with all laws, mks, orders, court
decrees, ozinancte; directions, regulations and requirements of IX federal, state, county, nal:dr:SW
and other autbaiges Peterluirig to the Preartirs, Tenant's use of the Premises and Tenant's business
conducted in or from the Premises, and with al/ recorded covenants, concUtions and restri
affecting or miming to the Pianism the Boiling or the Project regardless of when they la
effective, including, without limitation, all applicable federal, state and fecal laws, regula6
ordinances pertaining to air and water quality, Eitaardotts Materials (as herein defined),
coedit:al waste disposal, air emissions and other enviroamental matters, ail zottiog and
mamma, nfilily availably ' and with any &realm of an3rpublic officer or officers, o To law,
which shall impose any duty upon Landlord or lenantraith respect to use a se;
except that landlord shall remain Snide for the condition caused by the existence on the
Premises, as provided otherwise under this Lease.

9 6 1 gnarl:loos Materials,. At all times during the term 1
14as; imam
covenants madames that Tenant shall not cense or pm:nit ark4azudous Material to
be htcught upon, kept or used in or about the Precise 'Tenant's agents,
employees, customer clients, invitees, Emus= • except for such
Hazardous Materiels as are necessary or =fill to and will be used,
kept and stored in a manner that complies witt laws stealing any such
Hazardous Material so bran& upon amused or or about tho Piaui= Upon
=vest and at least annually, Tenant writ and =nun ;0-anal:licit at
Tenant is in =Pince with the peevish:cat

9 62 Di of shall, at its sole cast, expense, risk
and liability, remove or cause to be from the homises, thblEbniding and the
Project all infectious waste malmia10.clutfing. bat 'without runitation, all sydnges,
needles and any materials ....,...., :At with ' bodily fluids of any type, character or
descripeon of whatsoever van/ all applicable kw Talent shall
' N:
not inspore of any such 11'......11 waste matPrigq In any receptacles provided by
rupdiarl for disposal / ,: .1". i refuse. and Tenant specifics/1y recognizes and
acknowledges that the jail _ service provided by laccilord, if any, shall not be
responsible forrem,ovalAirAisposel of artyauch infectious waste match&
...--`----1-.").
10 USE OIRITIMES'ES

101 Thant agree rajicupy the Premises for purposes of pmvicring services as a twenty-
four (24) hour per day 8.3. jcbabilitatiou care os long term acute care inpatient hospital MAC
&sprite) sea • v. . .14 7. dental to said use and Tenant agrees to use its best &hist° occupy
the Premises in a ear - s,•••=ff e and prow manner Tenant further agrees that it use the Premises
far purposes accordance with applicable law; rules, orders, alnances, directions,
regulations, requirements of any federal, state, county or municipal authorities.
4t7761315PSIMMO •L

SCAR001 54
 102 'lease sales not to commit or allow to be committed any nuisance or other act
against public policy, deface or damage the Premises in any manner or overload the floors of the
Premises

103 Tenant moat not to knowingly use ar keep any substance ar material in or about the
Premises which may impair the Insurance of 0)0Po:raises or increase-dm hazard of the insurance ra
or' which is elusive or annoying in tin:reasonable judgment ofLandlool

10.4 It is contemplated that Temert will install radiological andtor other
hazardous arachinety or equipment related to a LIAC Hospital on the Premises lee
Landlord of Tenant's microto install such machinery err equipment prior to such ' and
Landlord causenta to such installation provided that the installation and main such
machinery ancVar equipment must comply with the minimum protective safe as
prescribed. by the Board of Health of the State of rocas and all expenses for suck coattail
be paidby Daum

105 Imam, at Tenant'sevens; shall comply with all laws, rulA Nirders, onlinances,
directions, regulations, and requirements of federal, State, county, an 'jape authatities now
in force or which may hereinafter be in farce, which Rbaq material sla' upon
Landlord or Tenant with respect to Tenant's use, occupancy at or Ianems • to the Premises
in excess of the duties of Landlord under this awe

10.6 Tenant, at Tenant's sole cost and expense and maintain in and about the
Premises, including art the evertor of the Indicting in the and at elevators, signs clearly
identifying Tenant and its business landlord shall neat to siguage la and about the
Premises without the prier consent of Tenant which be unreasonably withheld, except as
expressly provided In Article 14 Upon. the 0414 (0 artier termination Of this Ply; Tenant
short remove all signs and repair or provide for
dr 4, repair of any damage to the Premises or
appurtenant ores caused bytheetection, z • .r.c ..• ••:„.• =rival °film sign
_
10 7 Landlord, pursuant to Ocomt.fttal Safety and Health Administration regulations,
hereby discloses that the Premises ...Ari;)isbestris Cautalning Materials ("Ai:Ms, and has
rtisclosed to Truant the location of each area in which asbestos is present and the nature of
=Iodation ofsaid asbestos performed Landlord

10)3 Atits own cost and • Tenant shall employ ar enter into servioes contracts with
such clinical, clerical and • 110 1 ve personae! as may be reviled for proper operation of the
LTACHeapital (for the p this suchpaisermel and contractors shall be referralto
as the `Teaarit e • • a • • crDant thall supervise, control and direct all AZCIBEIt Employees and
ensure that Tenant Empl ply with Landlord's polies and procedures regarding employee
conduct in Landlord'I ••• 'atual. Tenant shall be sdefy responsibie for all employment or
,earpleynient with respect to Tenant Employees mad such persons shall not for any
purpose be, berl 4-414e •••••• •
or be =Wend to beempluyees of Lard Ord
••••
417761 3 -TSPBX379,41)1 8

SCAR00155
 10 9 Tenant shall be solely responsible for the satisfaction of any and all obligations it
assumes with respect to Tenant Employees, inclurfmg without liantat ' ion, mama of wages and
saTarim,„ rodthhokfmg cif federal, state and local taxes, employee beams wage and hour obligations
(=ludas overtime), workers' cccapensation, Social Sectaltyand unemployment insurance. Tema
shall comply with all federal, slate and local laws, rules and regulations respecting the =ph)
and the prmision of equal employment opportunities to Tenant Employees working in the LTA
Hospital and those respecting occupational health and safety of hospital wot±ers

IL IMPAIRS

11 At its expose, /mat shall make elf repairs and replacement; neceKstny esiable
to keep ingocd order, repair and appearancethe exterior tithe Premises. Tenant imInPflY
not Landlord ofthe necessity for any repairs of which te!nant may haveknowl forwhich
Tenant may be responsible under the pnwisions of this Article

112 Ianant agrees to keep the Premises in as good catiec d repair as when
the Tenarrt entered possession, onfmary wear esmected. All darnageorinj • he Premises end to
its fadmes glass appurtenances and equipment censer! by Tenant an. in or out ofthe
Premises, or by installation or removal of furniture, fixtures or exty„ or =el =MSS,
ornis.sion, neglect or Improper conduct of Tenant its agents, empl. • —ZS 4,, ems, guests, invrthes,
licensees shall be repaired, restored or replaced PiornPllY by TennOlth sole cost and expense to
the reasonable satisfaction arLandlord each repairs rests and replacements shall bc of a
quality and class equal, ortothe went said -restoration or .
N.1
not sesta:able, comparable
to the original workor installation and shall be done in a ""'• warkmaniUte manner

12 TENANTETPROIXAMT1

121 landlord agrees that subsequent to
(75
) on of this lease landlord' sherl =Pend for
Tenant Improvements (hereinafter defined) gin' as may bo necessary to -complete the
improvements to the Premises as speed' s and Landlord's err-Wades-drawings, plans
and specifications as referenced in this 2 and those improvements as stipulated in the
Memorandum of Understanding and WIG dated July 28, 2006, a copy ofwhich is
attached hereto as &Wit " andin herein by reference as though quoted verbatim, said
Naar* to include the renovations to th • lobby and famUy waiting areas, patient mots and rest
rooms to the satisfaction of Tenant • inoluctng all measures necessary ta bats mid facilities
into compliance-with the Ant •.7 itiesAetandwith all federal, state, andlocal health.
safety sod environmental

122 Within rid 6-0 •idays diet the execution °filth izase, Landlord shall &Hymn;
Tenant for approval. its ••••• plans and specifications for medfication of the Premises C`Tenant
Improvements') All e. shall be performed by 1-241110r d, its agents, or approved contractors
Landlord shall i, • the Tenant kaprovuments so that the cost will not exceed the Allowance
without the prier!, ::, consent of the Tenant Tenant shall be responsible to pay for any Tenant
417167 31SFRIVISt 9

SCAR00156
 allowancewhich is greater dran -the Atiouraneo

12 3 The changes. anyfuleations and upgrades teemed to in Paragraph 1 and 121 herein
shall be at the sore cost oflandierd,- A- r -

a OTTE T EMMEN' OF PREM1SFS
landlord agrees that, as tong as Iertant keeps and performs each and every promise
obligation requiled of it under the terms of this lease, Landlord will warrant and defend
right to quietly enjoy the Premises without hindrance or molestation by Landlord or by
person lawfully claiming the Premises, subject to the premises, agreements, tams, pro and
conditions of this tease and of all rnortgage loan security irnatattents anti underlyi ng1e which
this Lease may be or mayhem= subject End n.thordinate in the future

14. Lintallts.Ag

Landlord and its representatives shall have the right to eater the at all reasonable
times to luspeathesarat and ifeolice has been =alio Tenant to make "eh havenot been
made, to make repairs and to maintain lite ?remises, to post such ma as landlord may
desire to re-lease the Premises timing the one hundred twenty (120) a a prior to the expiration of
thelitial Termer anyRenewal Term

LrcpsnyvANDACCREDIYATION
Tenant has, and shalt =Warn in good aim&renal, state and local flcenses and
certificates _required by law and Khali maintain by the Toird Commisaitxt an
AccrecTurrtice of Healthcare Organizations el (or as equivalent or ton) and
certiEcatien as a Medicare provider throughout the of this Lease Upon Tenant's request,
Landlord shall assist Tenant in the prepay tiara of a required so that the LTAC Hasping is
able-to obtain and maintain state lieensins .4 _•l ~" by the lux) anif =lib
•
Y. til
o ' catiOn aS a hog
tarn acute care hospital
' madertiteMedicare 5,,,,,%.,. eidertnes

16 tiTILIIIIN AND TAXES
Tenant shall pay for all service to the Premises and AO be responsible for any
additional services acquired by r lag the Terra of this Lease Tenant shall pay all ad
valorem taxes and assessments I the Pr ,cry Mos the Tenn of this Lease The
provist mu of this section sb thetemination date-of dislease
17, )7.1modmICAIION
171 Tenant,. tA that it will not hold or attempt to hold Landlord or its agents
employees liable f 11110 mast until lectern*
" and hold hared= Landlord, its agents, employees,
partners, inerair , fiern and against any and all costs acnially incurred for deremads,
1277611 BreltilVde
10

SCAR00157
 I

claims, causes of action, fines, Penalties and damages (inclucEng consequential damages), liabllities„
and jullgivents including, without limitation, except far the continuing rezpoasibility of landlord fot
the presence of asbestos on the Premises, reasonable attorneys fees to the extents/Is/lig foam:

(a) the use a- occupancy or manner of use or occupancy of the Premises by tenant or
arty pelt= claiming under Tenant

(b) any activity, wcuic or thing done, permitted or suffered by Ienant in or about eC
Premise

(C) ' share a- negligence of Tenant or any pawn claiming under
any acts, ants
the agents, employees, patients, guests, invitees or licensees of lenarit or any such persox

(d) any breach, violation or nal-pezromance by rens& or any person • n8 under
Tenant or the agents, employees, patients, guests, invitees or licensees of I or • any such
person of any term, obligation or promise under this lease or any law, orclinano
requirement ofany kind; a-

(e) any injury or damage to the persoo prcperty or bu etti Imam its agents,
employees, patients, Breeds, invitees or licensees or any other person Premises under the
express or implied invitation of Tenant, except for injury cc damage or property to the
extent covered bylandlcacIV insolence 0
172 1H INDELINII1ES IN IffiS ARTICLE tiS ENFORCED TO TEE
RILL/3Si Emma PERMEITED BY APPLICAIIIE ,t•voR TB BENEFIT OP ms
APPLICABLE BENEFICIARY THEREOF, EVEN IF '"I/7. .1' " • ;•4 CLAIM IS CAUSED
BY TIM ACM. E OA_ PASSIVE NEGLIGENCE e SOLE, JOINT, CONCURRENT OR
COMPARATIVE 1,43GILIGENCE OP SUCH CHARY, AND REGARDLESS OF
WECRIPIER LIABILITY WTIEDUI FAULT OR t LIAM= IS IMPOSED UPON OR.
ALLEGED AGAINST SIX* EIMPICIARY, :TO' WILL NOT BE ENFORCED TO TEE
EXTENT MAI A CLAIM IS CAUb.uo WERE MISCONDUCT OR GROSS
NEGLIGENCE OF SUCH BENEFICIARY

173 If any action orproceanit4iought agains ' tLandltrd or its agents or employees by
reason of any mach claim for whidi l':t.
*n4 has lademntEed Landlord. Tenn*, ulletn-nthica from
Laridlonl, defend the mac,-ltinant's expense, with counsel reasonably satisfactory to
Landlord

IS rR`IfRA

is 1 rennet Tenant's expense, obtain and keep in force at ail times the foilowkg
insurance and, upon of Lanclicat Tenant shall perlooleally provide landlord with
certificates of .4sclencing compliance with the requirements of lids Arliclo 1S Tenania
insurance shall in waiver or submsgion favesing Landlord on the Promiseslasurance policy
41716111514118379FJ01
11

SCAROOI 58
 required below and shall provide or cause its insurer to provide Landlord notice at least thirty 00)
days in advance of any terininatim reduction or other material change in Tames or landlords
0o/sea-gem the followingpolicies:

181 1 Promises Insurance A cause of loss special form (all risks) policy insuring
the Premises and all improvements thereon, business interruption insurance and. Tenant's
contents and equipment, for the full replacemem cost thereat with deductilles andthe fo
and endorsements of such coverage as reasonably selected by :Tenant and reasonably
approved by Landlord Such property insurance policy shallbe the initial property immau
policy and shall name landlord as the primary insured as to the improvements_ 0 14
coverage will provide coverage for debris removal and an ordinance or law
endorsement, Tenant also may carry such other insurance as Tama may real
prudent or advisable 0 d,

1812 liabilk y and Professional Liability Insurance A. •'policy of
commercial - general public liability insurance including broad fouT. •rehersive
commercial
' liability and professional liability insurance Mlle arnoune.l• less than Oac
Million Dollars ($1,000,000 00) per occurrence and Three MIlion * • ($3,0oo004 act)
aggregate The insurance required by this aebseetion shall be on a 3 made'basis and
Tenant shall maintain coverage for events occarring during ....4=• • 'of this Lease without
regard to when the claim Is asserted Tenant shall provide or 157- its insurer to provide
Laudlad notice at least thirty (30) days in advance of any on, reduction or other
material change in Tenanfs coverage Landlord will be •,• as an arkfational insured on
5 "."

saldpafray.

1813 Worker's Comperoalion Insuratt5e. tiler's compensation imuraace
insuring against and satisfying Tenant's obit:Mer and liabilities under the tvorlanen's
compensation laws of the State of Texas 0

IS-14 Umbrella Iiahility Policy 14mbrella liability policy providing imamate
coverage ofnot less than Three Mien 34.1 M000,000 00)

182 Tenant acknowledges that .41 • • • uriandlord's mortgagees/ay reasonably recpre
increases in 1=43 above-described • time to time in which event Tenant shall obtain
the same and pay the costs thereof T a Insurance shall be issued by an insurance company of
recognized standing authorized to d ens in the State of Texas with a Best's rating of A or
beta. arida Best's Financial She Oa of VIA or better
19 LENS

Tenant shall pr pay all debts incurred and satisfy all liens in respect to any
Improvements made b in and on the Premises and shall indemnify
' and hold Landlord
harmless against s and chafes, inch:Who reasonable attorneys fees, incurred by
Landlord in twill: Tenant shall have no authority to create liens for labor or
41770 sneer 799+01
12

SCAR001 59
 material on or against landlord's irterr,sr in the Premises 'extant shall no* any mataialmen,
supplier, contractor or labara involved with work performed for Tenant in or around the
Premises that they most took only to Tenant for payment and that Tenant has no authority
whatsoever to obligatelandlord, create liability on landlord's behalf or create alien against any
interest in tbelhomises

20. DAMAGE BY FIRE OR (YTBZR CASUALTY

201 If the Premises shall be damaged by rue or other casualty, and if such damage
be so great that a competent architect, in good standing in the Houston Metropolitan acery
selected by landlord, shalt certify in writing to Landlord and Tenant that thePremmes ,
exercise ofmascuable chligeue; cannot be made fit for oonaecy for the porposes 143 ef
this Lease eeitltha
' one lunched fifty (150) days front the date of the occurrence of the then,
at the option of Tenant =rise ' d within ten (10) business days from the notice 44, 4.4 1.1.4r

aslant shall cease and terminate as of the date of occenence of the damage.
of TPA of Iinant shall pay all delinquent featsor other payments (exclu• plaints for
unamorti2ed leasehold ituptervenmets) owned by Tenant to landlord In the*-.if n. Lease is so
terminated and there are no other dent:quad reins or aberpayments owing. •, t"•••• ofd at the time
of such terminatier, the unused portion of the saanity deposit, If arty, :I. 1 ..e roomed and no
further %balky shall exist between landlord and Tenant In the fa, termination, Tenant
shall surreader possessico of the Premises to Ismdlord. and may reenter and take
possession ofthe Premises and remove 'I errant there ficea

202 Landlord shall give written notice to lizard of thy of the architect sdected
by Landlord pursuant to this Ankle 20 which notice maces approval of landlord's
selection Tenant's failure to monad iu writing within g days shall be deemed
Tenant's approval of thearchne
' a selected bylarsdleni

203 If the damage to thePremisos shall be suck a degree that the amlitteet so selected
shall certify that the Premises cart befit for ocettpa*within one hundred fitly (ISO) days frau the
date of the occurrence of the damage by fire ethe < ty or Taint does not elect to terminate
this Lew° as provided above, the Landlord the ciamagewithall reasonable speed lathe
event the insurance Foceeds are not suffi arose the Premises, landlord shall be responsible
top-raided/a access fitedsrequired

20.4 If the Premises shall ‘ - by fire or other casualty but, not sufficiently to
render the same unfit for OCCL3 if . 10 • after receiving notice of the ocoterenee thereo shall
....
repair the damage within ten (10) The date of written police to landlord of such damage. If
Landlord does not repair the within ten (10) days ofthe date ofveritten notice to Lenard of
such damage, the rent shall the proportion ofthe amount of unusable space of the 'Premises
because ofthe &mug?. to space ofthe Premises

13

SCAR00160
 if any part of the Premises shall be taken fora public or quasi-public use bpi& of eminent
domain, or transferred by agreement in connection with such pudic or quasi public use, with or
without any condemnation action or proccafmg behq 'Avid:nal arch that Tenant cannot, in Tenant's
reasonable win ' n, °minuet" operate aLTAC liobirZtal iallteremaio ' kgPrernizes. this Lease shall
terminate aa ofthe date title shall vest in the condemner. In the event cf ELY condemned-al ortalcing
as aforesaid, whether in whole or in part, Tenant shall not be celitled to any part of the award paid
for such condemnation, and landlord shall receive the full amount of such award, Tenant hisreby
acmes* wgiving' wry right or deka to any put thereat accept for say claiin for, all damages as
compensation for tranhartion in value of the leasehold, reversion, and let Tenant shall have
right to claim and recover from the eondeumin ' g authority, but not we Landlord,*
compensation, if any, as may be separately awarded to Tenant in Tenants awn right, in a
proems:frog oct account of any and all damage to Tc..auLV business by reason of the coed,
and for or on aortic= of any cost or loss which Tenant might incur in azoovirtg Ten
fixtures, and equip:nag

22 RDINATION NO/1-11157171113A.NCE AND ATTORNMEAT

22.1 Landlord shall have the right to sett, Pledge. assign or (herein called
"Transfer') this Least upon the con on thatin such event this Lease shall 'tinfoil force and
errP'to subject to thepecibormaace by Tenant of e/1 the tarns, ses which Tenant
is obligated to perform Upon 'lova* sale. assignment or transfer, racreiy as a seanity,
Tenant agrees to look to the transferee with =pest to all mattaar =don With this Lease
provided that the tanalhoset adnowledges and accepts in venting obligations ofLandlord
murex this Leaser Thereafter, Landlord shall be released film] aRr Hability- or obligation under
this Lease

22 2 This Lem is and shalt he subject and
agreement or other (=merits, and (b) the lien of any
enclutzber the real property ofwhidlihe Pied= is a
thereog all advances made. andmayonewais,

223 tionvithatamfmg the plonk' de 292, if thisLeaseis ft& force and effect
Tartarrfs right of possession to the .1 •-• %,, 4f I-a-rights rising our attar; Lease shall not be
affeetexl or &garbed by "my mortgagee kr excise of any ofits rights under any deed of trust of
the note secured thereby •

22 4 In the evert drat an r,*`.. shall a,grac to Ole sale of the real property of which
the Premises is apart pursuant of any rights And remedies under any deed oftrost. or
otherwise, such sate shall be.jest to this Lease and the rights of Tenant bensundet Tenant
agrees to Mom to the • :-- L- Merl pew Who may aCquito title as its new Landlord. and the
Lasso she mothlt/8 la thil 4,• ,and effect as a Tweet lease betweenTenant
between and mortgagee or such
(
otherperson wan all the 41" covenants and agmitnents set for in this Lease
_})
22.5 Lang Agrees that Tenant may mold a Monomer= of Lease in a form
arnara arnahr9SmE> 14

t
i

SCAR00161
 1

acceptable to landlord, in the real property records of Reads ecstasy, rem

226 If Landlord defaults in maldng payment under any mortene loan or any installment
of taxes or assmsments affecting the Premised, or if Landlord is In breach or in default of any
mortgage bows or deeds of in any respect reliant shall have the right ballot the duty, to make
all such payments thereafter becaning due or take other steps to cure cep:event default byLandlordi_
Any payments, to the extent so made, shall discharge the obligations of Tenanthereundernaspecon‘
the payment axe:at Should Landlord, in coneecthan withthe mortgaging areal property of
the Premises is apart, execute a conditional assignment arentals, tenant will Prfertte au accept=
of such assignment, provided the assign:neat recognises Tenant's rights 1==de/ tenant
execute an agreement of subanfin,ation, nco-castarbamze and attommeat in form
mortgagee and reasonably satisfactory to tem:tin connection with any suchinorrgage

ASSIGIVVIENT AND 817131.EMNG

Tenant shall not assign this Lease, nor sublet all or any pardon of the: permit
or the
use of al/ or any part of thel'zernis es by the persons other than Testan4 or its t*,. • araffor joint
venturer:min:4 with writer!. consent ofLandlord learnt shall , to sublease
portions of the Premises to customary provides of services within a . •=1,77 . such as by my of
example, pharmacy, physical therapy, and food a cafeteriaservice • Affiliates ancitorjoint
venture partners of Tenant Shall use the Premises for onlythoss fotthin Atide 9 lo the
event tenant desires to assign, or sublease the Premises, Tenant sii41-1- o noti5, landlord ia writing
and thereafter Landlord shall provide Tenant with written ", .— ..`•.. or airy prohibited or limited
uses of the Premise' a to the assignee or sublessee Except r,I' . VI VI 4 i 4-rl or sublease to teases
afliftes or joint treater partners, tenant ALS,. such assignment of sublease
without Lando* comet shall be void and, at the o*,, 77' -- d, shell termInn'te this Lease
Landlord will not unreasonably withhold its consent orilktassignment or sublease provided, as a
condition precedent to suds oansent, the assignee cc sub* establishestel andlotser complete and
sole satisfaction its ftnancial ability tooNttly,%.: .w the terms, obrvations and promises a
this fear-which
Enmieill abEtty should at least . ,.. "41 to Tenant and Guarantor's financial *tray
II tell° date hereof la the event of the • 1141.4:: — or sublease of the ?remises, Tenant shill be
relieved of its obligations under this Lease .-..„.. Landlord releases Tenant dant& obligations in
Writing For the purposes of this Leaser HT wire, 'affiliates" shall include any entity in which. the
Tenant or the general partner are:ant ..,. =.,' or min 0147 fillY Pau= OM) of such oditY

24. INSOLVENCY OR

24 1 Any asst for the benefit of creditors or operation of law shall not be
effective to transfer any this Lease to the assignee, without the prior written consent of
Tandhard

24 2 Teat arci**ftrin ' g the terra of this Lease, there shall be filed by or against Tenant
in any mum pursuant 03irlY statute either of the United States or arty slate a petition ha bankruptcy
or insolvency or folViganization or for the appointment eta receiver ortrustee of all or epos-doe
*rim vientraiLian rant 35

SCAR00162
 of Duds property, or if Tenant makes an assignment for the bra:read cretfi ter; Ten= shall have
breached this Lease in such an event, Leaded shall have the option to cancel and terminate this
Lease with or Without notice if Landlord exercises
' its option to cancel and terminate this TPIV'y
neither Tenant nor any person eta lining through or nuclei Tenant by virtue of any statute or of any
order of anYcont shall her:added to possession or to remain in possession of *Premises, hut shalt
forthwith quit and surrenderThe Premises

IntiaillIATION Mg TO DEFAULT OR 13REA(E1

251 If Tenant shall fall to pay aay part of* rent or any other in required to b
Landlord pursuant to the mons of this Lease, or if Tenant breaks airy or its PromisCs
perform any +Sits clarmadans required under this Leese, Landlord shall =velment '
malice specifying the nature ofthe default and giving Tenant ten (10) business days
time as may be necessary in order to protect the health and welfare of patents, and
invitees or other people present on thePremises) is which to correct or remedy t, °elf the
default or =laical complained of is of a nature which cannot be completely, or remedied
within ten (10) business days (or the above desired shoats time period), tea (10)
business days to mune:nor curing such default and staying termination as Tenant shall
diligently pursue the curing of' the default and shall ant the default le period of
lime In the event Tenant lien not cured the default within the ten dnyperi
od (or the
above described shorter time period) or diligently =mewed ac h4." remedy such default,
Landlord may mud this Lease by marling a written notice of to Tenant, and this Lease
and the tams he shall earl raid expires-1mi the datefixed • lice oftenninationtitenme
as ifthe date ottesnahudionwere the day definitely fixed by thia !bribe =Oration oftheizase
and term thereof Tenant shall vacate mad surrender the to Landlord on or before the
terntioation date, without fertinr =dee or demand I remain liable after termination for
the payment nf any past due rent many amounts whi be due or become due parsuant to the
term of this Lease

23 2 If limant fails to vacate the pre ' after receiving notice of cane Nation, and
m(*)
conticares to be delinquent in * payment or other sums due under the terms of this
Lease, perm= seaman or attachment to upon it or any of its property wheseopon the
Premises shall be taken or occupied or to be occupied or taken by someone other than
rem* or if Tenant shall, abandon or Po:anises before expiration ate then cornet term
of this Tense, then landiord, upon the ee of any of them events, shall have the right tore-
enter and repossess itself tithe flintier ratios at demand and with or withoot legal
proceedings using such action or may be necessary to secure possession and to remove
therefrom any personal prope0,_ g to Tenant, all without Fein:Nos to any claim for rent
and/or other sums doe and gas en account afthe breath ofilds/Pasn by Tenant and without
being gray of any mane s or forcible entry or detailed or incurring any other liability
remut hereby waives the to service of notice of landlord's internions to re-enter or to Institute
legal proceedings to forLandlord

25 3 In r of termite of this Leasebased upon default by Tenant and re-entry of
417761 JAIPILIMVOI
16

SCAR00163
 the Premises by Landlord through summary proceedings oc otherwise, Ramat shall remain liable for
damages equal to all mot and other suns due tinder the terms of this Lease plus the reasonable cost
of obtaining possession and °fuddling the Premises and °tarry repairs and revsiiable almratiorta
necessary to prepare the Premises for nieting, less the mats teethed front such Riede if any
Landlord shall make reasonable efforts to relet the Premises it Landlord does mitt the Prernises,
Tenant nfilvii =dale to be liable and shall pay Landlord as liquidated damages for the fame of
Iaomtt to observer and perform Tenant's promises and obligations tuidei this Lease, the rEfiviescer
between all rents and other sums due from Tenant wrier thislease Arid the net amount if any,
resits collected as a result of the resetting of the Premises fat-each month of the period which
othenvise have constihrted the balance of the tem of this Lease rhe Niue off.tudicsal to
Remises or say part or parts thereof shall not release or affect Ienanfs liability for
such damage shall be paid in moultly installments by Tenant and any suit tacugle to
amount of the delielmicy for any mouth or months shall not polutice in any
landlord to collect the deficiency fa any subsequent month or months by any
Rentals received by Landlord front such Wetting shall be applied first to • of any
indebtedness, Other Ism rent, due hetenader.fiom Tenant to landlord, secnnd 4.-• • ent of any
costs await relating, third to the payment of the cost of any alterations and . daaPreraises,
and &tufa to the payment of Tenant's rent due and unpaid heretmder.• • , taking of
possession, alteration or repair of the Premises by landlord shall not rz, •••• or operate to
retitle Tenant from flab-Ilya set HA heesin

254 hi the event of a breech by lenant ref any of its ligation sir promises under
this lease, Landlord shall have the right to seek injunctive relief right to Invoke any et.
allowed bylaw or amity as itze.erty, somtbaryproceerlings reuterlies were not provided
for in this Lease The provision in this lease of any etly shall not preclude Jenard
from any mixt rowdy available to it, eases in law win Tho 43egoing Ternectes and rightS
of Landlord em cumulative. Weber parry to ibis require any attorney to enfotoe its
lights or obligations heretaldec the Prevaithe3ParlY entitled to receive from the otherparty
l the reasonable attorney's fees metered in enfcicing hoc hereunder
- -, ,
253 lemeat hereby expressly wad •-• r., and all rights of redemption (=opt those
25,6 utncsold
granted by statute) it maysiva havehei:::st..
is the .event ' ••.:. • is evicted by reason of the breach by Tenant of
any °fits terms, oblignions or promises.„.''t of it, obligationg
,rint.
•.___-- 119 Lcase g 14ncitord
under shall fait to
observe or perform any term, cov ......‘ condition of this Item on its part to be performed, and
such failure shall ecatinue for a ...1 --14i
1...1 • 1ten (10) lan-4.....-
.......-....
-. days after written notice thereof from
Tenant (or each shwa- time necessity in order to protect the health or welfare dairy
patient or other resident of r• • r • 'sea), unless such luiore cannot be cured with due diligence
within a period often (10) •-'." : days (or the above &sallied shorter time period), in which case,
such failure shall not be .-• to contralti/Landlord, within such ten (la) business clay time
period, (or the above , t ,.- 1. 6 :shatter time period), promptly commences its attempt to care the
failure and &di '
,,,,,,, • ... to complete the curing thereof If Landlord figs to cure any snob
default as pmvid can, Tenant, upon written notice to Landlord, may cute such default, and so
ono 3 41"1371325611 17

SCAM'S 64
 long as lenzat =thanes to pay rent, reliant shall be entitled to reimbursement for the actual and
reasonable oat-of-pocket costs thereof to Tenant

25 7 If landlord fails to cure or fails to diligently attempt to cure any Landlord default
which results in the intenursion of Tenses business use of all or any portico cif the Premises,
Tenant, upon three (3) business dap written novice to landlord may puranotenure new& defaul
and so long as Tenant emirates to pay rent, Tenant shall be entitled to reimbursement for thee
and ressouable catofiaocket costs thereof to Tema. Thereatkt, if tandloni fells to '
Tenant vAileitt ten (1 baqiuesq days ether written notice thereof which notice itemizes the
and seasonable ert of-pncket costs to Tenant, Tenant shall have the sight to deduct and set oat
rent the unpaid tamest However, this sight of set-nfl shall apply only to circumstances
Landlord's uncured default results in an intenuption of Tenant's business use of or of
the Premises mad not to any other default of Landlord. As far reimbutsratlent of -Outs to
Tenant in connection with any other landlonl default, Tenant must first obtain kW: against
Landlord for such amounts due and only then shalt Tenant have the right to &Ind set-off the
unpaid mond oft:judgment front rent due tender thislease
oQ

26. NO BOOM &IMMTDIM OR WAIVER
r7),
No act cr thing done by Landlord or its agents or =pi the teams of this lease
shall be deemed an acceptance of a surrender of the Premise% agreement to accept a
surrender of the Premises shall be valid =less made in writing and , • bylzdort. The reteipt
bylmadlerd cited tete payment by Tenant of rent with Of a breach of this Lease *all
not be deemed waiver of seat breach The Inn* by , 'Or a* rent fiun are assignee;
=dwelled or occupant of the Premises shall not be of the provision in this Lease
prohibiting assignment or subletting by Tenant, at an o of the attilgace, undertesztat or
occupant es Tenant No provision ofthislesse shall be t, ed to have beat -waived by Imegord or
Tenant, unless such waiver is in writing and signed by Part)!
27. suRR6NnuRoF POBSESSION
Tenant agrees to vacate and r -.Cs, • Landlord possession of the Remises at the
' Tease, by :4110. time or o herwisaa in as gaol a comiticai when
expiration or termination of this
Tenant occupied the same at the Data, excepting may ordinary Wear and deeztY,
casualty whiCh is covered by ins=maintained by Tenant a which should be covered by
insurance required to be fluidal* diced pursuant to the terms harec‘ or damage by the
elements @catering without the moot or other persons permitted by Tenant to occupy or
enter the Premises of any by acts of God, insorsection, riot, invasion as conanotit'an,
or military or usurpeiprever

SCAR00165
 sa NOTICES

Ali notices, deuroasis or other 'writing required to be gill= by this Lease, Oa be deemed to
have been fully gVela, when served personally by delivering the same to an employee of Tenant or
Landlord directly Any notice shall also be deemed duly served by either party if (1) personally —
served; or® three (3) day following depositin the United States carded mak return recelp0
segue* with proper postage prepaid, or (Hi) delivery by Federal Express or other sellable ovenif
cornier . The address to which any notice. demand or other writing may be evert made or Sent
either party may be clogged by written notice given by such party-pusaant to this Article QU

Address of Inridtord: ApexKety Physicians, Ltd
6161 Savoy, Suite 1214. Houston, IX
Attn: Partner, Adeel Zaick erns P

Address of Tenant APEXLONO TEEM -1CA1Y, LP

,Attm

29. SEVERABILITY

If uncles present erratum laws effective during of Ibis Lease any clause or provision
ou this Lease la invalid or unenfetneable, it is their:Mix e parties that the remaining provisions
&this Lease shall not he affected thereby

3a CAPTIONS

The captions of the Articles are ;is a matter of eotromienee only and shall not be
considered in construing any provision The word 'Tenant" and the words'? or bite
used with reference to 7e ant, shall a3Vy to locrniduals, partnerships. assorts
' /ions, 'corporations,
and any other entity, whichever-1s

$1. AMENDMENT OR 11011T 'TION
ItJI
Tenant aelmowied aidagrees that it has not =Earl upon any statement, representation or
agreement made by any otits agents or employees except as are expressed in this Lease
and that no ameadm cation or extension of this Lease shall be valid or binding unless
exwessed in writintkre. enecuted by the parties hereto

.1J 7761 3ISF4110295,
11
1.9

SCAR00166
 31 SUCCESSORS

All taros, obligations or promises to be kept and performed by the parties hereto shall be
appficable to and binding upon their respective successors and assigns, as such assignment may be
',unlined 'hereunder

33 I RAM COVENANIS

33.1 During the-rain delis Lease, Landlord and its effiltoPs shall not, incEvidually
jointly vvitir others, direct/ or indirectly, whether £mils own account or for that of any other
or entity, own or hold any ownership or ,inting Intenst in or act as landlord to any person
engaged in a keg tom acute care bospitai the same as or substantially similar to 'I ass
which is located or intended to be located anywhere within a niers of Three (3) of the
Premises

33.2 Except inthe perfommace cilia dulies hereunder, at oath= term of this
Lease or at any time thereafter shalt landlord, in:Top/dually orjoktly with o the benefit of
Landlord or anythird party, publish, rV‘rclose. nse or mitten= anyone else to disclose or use,
any secret or con5denrial material or inforroation relating to-airy aspect of or °parttime
&the Tenant or any information regarding the business 111(42/14 policies, procedures,
techuiques, cc-made secrets, or other knowledge crprocesses of or d by lens* including,
Without Runlet/on, any wart rs cnnfnieutti4 infamy:don lba business, customers,
&oda/ position, trade or industrial practices, iradesectets, .4. or know-how of the Tenant
Nothing in this section shall prohibit the Landlord infoanetion to kitten,
acCramtan4 attorneys or others that agree to be hound bythis provision

333 During the tem of this Agreement period of one (1) year hereafter
earamerming upon tecpiratica or termination ofthe Lease, aeithet party nor any ether
affiliates or any of their respective taws, &recto; -Ociyemr, or age, Ffralf intEvithraily Or
jointly other;, &Day or limitedly, whether air own account or for that of any other
palms or entity, 'Marmot the express written the other party„ &snub, hire, entice awry or
in any ocher manner persuade any employee• 7re: party to altar, modify acuminate his ocher
reladorshipsvhir such party v% ..**

334 The patties hereto and ackapniedge that the geographical and time
limitations contained herein (her 'Restrictive Covenants') are reamaable and properly
regrind for the adequate protecti parties respective interests, kis agreed by the parties
hereto that if any portion of theA `'ens contained in the Restrictive Covenants are held to be
unreasoaable, arbitrary or w policy, then the restrictions shall be considered divisible,
both as to the time and to cal area, nab each month of the specified period being
dewed a separate period c and each rears mile of the restricted territory being deemed a
separate geographical that the lesser period of time or geographical area shall remain
effective so tong as Is not unreasonable, arbitrary cr against pale poky. Ma parties
hereto agree that ' t any court of compete nt jur stlicticat determines the specified period or
20

SCAR00167
 the specified geographical area of the restricted territory to be unreasonable, arbitrary or against
public policy, a lesser time period Or geographical area Weir is determined to be reasonable,
nonarbitrary and not againstpublic policy may be enforced against Lardad

34. (Deleted Infentionally)

35, SURVIVAL OF OBLIGATIONS

Norrvithcrgmting any terra:Marion of this Lease, the indemnity previsions and the
covenants of Section 33 hereof shalt continue in fill force and effect subsespent to tetminatiork :...—

36. RELATIONSHIP 01? nib, PAR i.ttN

Landlord and Tenant are independent entities and nothing in this Lease ed
or be deemed to create a partnership, joint venture or other relationship that of
indepwdeart parties contracting with each other solely for the purposes of .10
out the terms
and condition of this Lease

37. CONITHIMIALILUF 11E1E&I

Landlord and Tenant agree to keep the tams and (*Widens this Lease confidential,
and to not disclose such items and conditions to any other patty, than itaparent and of
organiartricsts, lawyers, accountant; and other representatives —..,.F.. &close in connection with
, may be required by statute,
any litigation, without written consent of the other,
'4%
regulation, or court order to disclose such matters :IN • • ng the foregoing, either may
disclose the existence ofthis Lease

38. EXCHANGE OF INFORMATION

lo the extent pernimed by law, each p veto shall provide to the other on a timely
basis, at its own cost, such information to such information as is vette-nary or
appropriate to perform each respective s obligations hereunder, frictucfing without
(i) federal and state necrecrar
—Off results and (d).hespital disaster and safety
plans

The validity of this — Ikr. o reinterpretation of the rights and duties of the parties
hereunder and the construed • • i ,F terms hereotaball be governed in accordance with the laws
of Texas The parties to .5 IFgreconent consent to personal jurisdiction in the courts of Harris
County in the State of I he parties agree that venue shall tin in Ilanis County
c.,
4s rImm

21

SCAR00168
 lime is of the essence with respect to the performaace of cvay obligation of either party
hereto under this Lease in which time ofperfonnance is areal:Ir.

41. Du= AGREEMNI
All prior tbad=staadings and agreements between the parties are merged into this T ease
and the Development Agreement which this /ease and Development Agreement sets forth th
entire understanding of the parties with respect to the subject matter hereof This Lease may
bar amended or modified in any manner except by a writing signed by the party against
enforcement is sought The covenants and agreements herein contained AWE bind and i
the benefit of the parties hereto and their respective successors and assigns

42. • Omitted

43 SECTION 93
3012 OF THE DUCAR PROMRTY C011.3 WAVER

Landlord and Tenant agree that the provisions of this Lease for ring charges,
amounts and rents payable by Tenant (inchicRus without limitation of operating
expenses, taxes, utilities and insurance) are commerciallyreas•nnelge MI though such
methods may not state a specific amount or a precise mathematical for &mng such
charges. ACCORDINUM TENANT VOLUNTARILY AND MY WAIVES ALL
MOMS AND EtENEFITS OF TENANT UNDER. SECT 012 OP IBE TEXAS
PROPERTY CODE (AS ENACTED BYACIS 2001, 771E TOE, 011391, SEC I)

(the Remainder of the Page yLeft Blank)

22

SCAR00169
 IN WITNESS WHEREOF, the parties hereto have executed thisT f%v- the day and year first
above mitt=

2

23

SCAR00170
•

LEASE ADDEMLIM
A2RTINIUMVATSCRIEGIT1X

This p-,J,ibit designates the Mogen= Rant per Net Rentable Square foot of space within
the 7 r-isAd inaprovements fix each Lease Year of the l alTr v.,. Term
Rental Increases Based upon CPI — for purpose of the schedule Increases have been assumed at
3%1Year after leyear, NotrAllutindiug the hereinafter listed Manta/ Rental Schedule, the first
fom-(4) months of the Lease Term shall' be at no base °embalm= rental rcFrt to Tenant

Year RENT P.S.F., Eq. Ft,
$7.0 A4 101,105
2 $20.50 101,105
3 $22 DI Rant
4 #23 50 10/,105 Wi II
5 V530 101405
6 $25 27 101,105
7 $27.05 1.01A5
a $27.86 101,105
9 $2570 101,105
10 $2956 101..275
commence ill= the earlier of four (4) monthOer (i) the Completion Date or (iill)
ninety (90) days after receipt of the CestifiAte of Occupaney
,--rW

cN
lapaapii4W 24

SCAR0011
 1 20.00
2 20.50
3 22 00
4 23.50
5 25.50
6 26.27
7 27 05
8 27.06
9 28 70
10 20 56
11 30.4.4
12 31 35
13 32 29
14 33.25
16 34.24
16 3526
17 36 31
18 37.39
19 3B 51
20 39 06

C

SCAR00172
 SLEEKDBLE A

DESCRIMION OE PROPERLY

METES AND BOUNDS DESCRIPTION

25

SCAR00173
 SCEEKILE B

RENEWAL TERMS

This Sc do dmisnalcsthe anannil roata/ raw for each ycar of tho two C2) optional Ittnewal Isms
EarlfRmowa1 faro nItall begin Dodo itapracablo molvasary of lb* initial Tam

C

27

SCAR00174
 Exhibit C FILED
In the Office of the
CERTIFICATE OF FORMATION
Secretary of gtat.e of TexaS
OF JAN 10 20N
APEX KATY PHYSICIANS, LLC. Corpoa'ns Section
1, the undersigned natural person of the age of eighteen (f8 years or more who is

a citizen of the State of Texas, acting as Organizer of a Liability Company

(hereinafter referred to as "The Company') under the T Business Organizations

Code, do hereby adopt the following Certificate of Formation the Company.
ARTICLE i. 0

The filing entity being formed is a limited Iiabjllb company.

The name of the entity is APEX KATY PIQICIANS„ LLC.
ARTIE IL

SECTION 1, PURPOSES: The limited4ebility company is organized for the purposes of
`—
transacting any lawful business whicb,ay be conducted by a limited liability company and
to do anything necessary arid indOnt to the employment of the powers and privileges

herein granted and to do any** necessary, proper, useful and incidental to carry on its
business and the transactio0;iy and all lawful business for which the Company may be
formed under the Texas Organizations Code.
SECTION 2. POW,, To have and exercise all powers necessary or convenient to
further any and *purposes for which The Company is organized and in furtherance
thereof, The C any shall have and exercise all the powers specified in The Act and in
any other a We laws of the State of Texas.
ARTICLE III.
e period of duration of the limited liability company shall be perpetual

E•d 6ZGi4-- 495-5 It. eAn:cn In r,r

KOCH00660
 ARTICLE IV.

Registered Office: The address of the principal place of business limited liability.
company is 6161 Savoy, Suite 1214, Houston, Texas 77036.

Registered Agent: The name of the initial registered agent o limited liability company

at the above address is ADEEL ZAIDI.
ARTICLE V.

Management: The property, business and affairs e limited liability company shall be

governed by its managers.

Names and addresses: The names and 'nese addresses of the initial managers of

the limited liability company are:
Name usiness address

ADEEL ZAIDI 6161 Savoy, Suite 1214, Houston, Texas 77036
0
Dr, P.K. SHAH, M.D. 6161 Savoy, Suite 1214, Houston, Texas 77036
ARTICLE VI.

Effectiveness of Filing' is document becomes effective when the document is filed
with the Secretary of _
The and signs this document subject to the penalties imposed by law for
the submissiopo a materially false or fraudulent
Date: , 2007.

ADEEL ZA iI, Organizer

2

-d
62 ,-1759-Etc
e8D:En in or wer

KOCH100661
 'C'orporations Section Roger Williams
P.0,13ox 13697 Secretary of State
Al.)stin. Texas 7571 1.3697

Office of the Secretary of State

CERTIFICATE OF FILING
OF

APEX KATY PHYSICIANS, Lic.,p
File Number: 800757875

The undersiped, as Seeretruy of State of Texas, hereby certifi a Certificate of Formation for the
above named Domestic Limited Liability Company (LLC) haste n received in this office and has been
0‹.
found to conform to- the applicable provisions of law.

ACCORDINGLY, the undersigned, as Secretary of S '‘?_?ltd by virtue of the authority vested in the
secretary by law. hereby issues this certificate evidencm ing effective on the date shown below.
CE-2
The issuance of this certificate does not authorize e of a name in this state in violation of the rights
of another under the fedeyal Trademark Act o the Texas trademark law, the Assumed Business or
Professional Name Act, or the common law.

Dated: 01/1 0/2007

Effective: 01/10/2007

Roger Williams
Secretary of State

Coate visit tit on the thternet at http://www.sns.cate.tx.us/
nem:1512/ 463-5555 Fax: (532) 463-570 TTY: 7.1-1
Prepared by: Deltves Moore Document: 15699292000

•c4 easi7—ass-Elt eLO:SO LO Al uer
K0CH00662
a1/ 31/2007 WED u4:45.1 ris rte 0*.1

Date: 01/31/07
ARM
Number of pages including cover sheet 3
BANK

To; Advil Azaldf —TUG From; Scott M. Ste lee President
Texas Stet,
Riverwayikanking Center
5
Phone: Tens 77058
Fax phone; 713-795-6969 Phone: 1 ) = 61-0653
CC: Fax -713-B81-D753
SMaitzt4, latasualothk.om

REMARKS: 0 Urgent ED For your rekni) 0 Reply ASAP ❑ Pima comment
Adeel: O
Attached is our Commitment Letter. Plec4toreview and call to discuss any issues.1 look forward
to working with you in getting the loak
Thanks. Scott

-71
-
Q N'
This message (including a attachments) contains confidential information intended for a
specific individual and p1,4-.... .se, and is protected by law. If you are not the intended recipient,
you should delete this er„, , ge and are hereby notified that any disclosure, copying, or
distribution of this ,A: ,t, ge, or the taking of any action based on it, is strictly prohiblted.
• -•

Ely

014
 TEXAS
STATE
IBANK
January 31, 2007

Mr, Adeel Zaidi
APEX Katy Physicians, Ltd.
cio TurnAtuttad Management GTO up
6161 Savoy, Suite 1214
Houston, Texas 77036

RE: New Real Estate Term Loan for.S8,800,000--
To acquire an N bed Long-Term- Acute Care Fatility and Medtail
Office Building
in Katy, Tern.

Dear Mr. Zaidi:
O
Texas Stale verway is very pleased with the opp provide financing to APEX
Katy Physicians, Le The new real estate loan was approv Bank's Loan Committee
meeting on January 31, 2007. The proposed terms of vas am as follows:

Borrower APEX Katy Physicians, Ltd.

Purpose: To acquire an 80 bed LTAC fac.(t_nd Medical Office Building in Katy, Texas.

Amount: $8,800,000 (65% advance rata total project cost of $13,500,000
Borrower's equity connib of 35% =-- $4,700,000 contributed at closing).

Rate: 90 day LIBOR 4- 220 bpts. Adjusted 1' business day every 90 days.

Term: 3 years.

Repayment Monthly ' - i linty for hilt 12 months then converts to Principal and Interest
payments ed on a 20 year amortization with a balloon at maturity. Annual
recast okinincipal payment to maintain a 20 year amortization schedule.

Fee: Vt9•444,000.

Collateral: ;9) lien deed of trust on 20.76 acres of land and (2) buildings totaling 140,006
gross s.f. Assignment. of Rents and Leases. (*) Assignment oftener of Credit in
the amount of $2,000,000 tolexas State Bank (issuing bank subject to Team
State Bank acceptance) or pledge a Texas Stair Bank interest bearing deposit
account of $2,000,000.

(C) Release Clause: Release of the Letter of Credit or Texas State Bank interest bearing account
Will be conditioned on APEX Long-Term Acute Care-Katy (Lessor) meets

015
U.L. ..1./ 4%, haw «

January 31, 2007
Mr. Adeel Zahn
Continued-Page 2

specific net income performance benchmarks in year 2. (To be mutually agreed
upon before loan closing). ,

Guarantors: Dr. Pankoj Shah, Dr. Randeep Suneja, Mr. Upendra Vora, jointly and severally.

Loan Agreement—
Financial Reporting Covenant=
• Quarterly Opera:kg aigarle/1121 on the borrower.
a MIMI financial statement on the borrower due within 30 days.
• Armlet tax serum on the borrower due within 60 der of filing.
• Annual financial =moss and tax returns on the paarantors.
• Quarterly operating memento on the hospital and MOB due within 30
Closing requirtatentc Subject to the Bank obtaining:
• Current Appraisal "M Stabilized" market value with a minimum value 13,500,000.
• Title Policy
• Clean Phase I Environmental report
• Survey
• Entity doeusnents on borrower.
• Closing Fees to be paid by the Samovar.
• Open and maintain a Texas State Bonk Depositary ARelt.
• Copy of executed Lease Agraansentt on Hospital and:Medical Office Building.

This commitment will remain valid until Febn 4, 2007. The loan must close by February
_z, below and return prior to February 14, 2007.
28, 2007. If these tams arc agecable, pleastign

Sincerely, Agreed and Accepted by:

Oteckftelt )44XCIA•40
Scott M. Stevens APEX Katy Physicians, Ltd.
Senior Vice President
By: Adoel Zaidi Date
Title:

Guarantors:

Punkttj Date

Dr. Randeep Suneja Date

Mr. Upendra Vora Date

2

016
 METROBANK/NA
•

COMMITMENT LETTER

February 1, 2007

Dr. Pankaj K. Shah
Apex Katy Physicians, LLC
5602 Medical Center Drive
Katy, Texas 77494

RE: $9,000,000 Term Loan

Dear Dr. Shah:

Based on our review of your loan application packs ii/e are pleased to issue this
commitment letter to you. The terms and conditions of t14-..ommilmetit are as follows:
ocv
A. Basic Credit Terms,

Borrower(s): Apex Katy Physicians,

Guarantor(s): Dr. Pankaj K. Shah Auaranty limit of $7,320,000)
Dr Rendeep Sunejk- (guaranty limit of $840,000)
Mr. Upends N. V4 (guaranty limit of U40,000)

Loan Amount: $9,000,000*Cp

Loan Purpose: $8,800, ILLAn finance the purchase of land and improvements located
at 5602".77: 'eal Center Drive, LA
" ay, Texas 77494 and $200,000 for
clos*;cc,ists and four months interest payments. Project cost:
$ 0 (including purchase price of $13,500,000 and closing and
Months interest cost of $200,000). MetroBank finances:
,000,000 (65.59%): Borrower's injection: $4,700,000 (34.31%).
Fees: $45,000, plus migi-ellaneous closing costs.
Terms: five (5) years and four (4) months.

intere rkii)te: At Borrower's option, one of the following:
EXHIBIT

1 E 1) Floating at Wall Street Journal Prime rate minus 1% on a 360-day
accrual basis. in no event shall the interest rate be less than 7.0%
or higher than 7,75%.
2) Fixed rate of 7,25% on a 360-day accrual basis.

AJnortization: The Ion will be amortized over twenty (20) years.
I TAC0001 13

9600 Bellaire, Suite #252 • P.O. Box 4760, Houston. Texas 772119E060141713) 776-3876

rntrn 718
VNVICO 656SS6/EIL n:10 L80Z/80g0
 Apex Katy Physiciara, C
Repayment: 4m
METROBANK,NA
ayrnents of interest only; then 59 monthly payment of
principa and interest, plus a final 60 th payment of the remaining
principal and interest.
Loan to Value: 80% maximum.

Collateral: A first and prior deed of trust lien on that certain real property,
approximately 17.86 acres of land improved with a hospital building
and a professional building, located at 5602 Medical Cen.t5 ?rive,
Katy, Texas 77494, together with any and all improvement tunes,
equipment, furniture, furnishings and other appurtenance,reto (the
"Real Property-).
U

B. Additional Terms and Covenants of Borrower

Finarteial.Report:

From the Borrower(s), Apex Kat. PlOsicians, LLC:
1) Quarterly financial statements u (atl 45 days from period end.
2) Annual Consolidated and "A-reviewed financial statements
within 120 days from year
3) Annual tax return by Sept caber 30 of the following Ydat•

From the Guarantar(sVr. Partkal IC Shah, Dr. Rendoep Suneja,
and Mr. Upendra N.n:
1) Annual firianci'
rb statement
. with cash flow on an approved
MetroBank fo ithin 120 days from year-end.
2) Annual tax ante by August 15 of the following year.
.,-- -l-i
No Additional
Liens: Borrowe 1 greernent not to grant or allow any security interest.
p1edge,1 Mr other encumbrance on any of its assets that constitute a
portion the Property, except those in favor of Lender.
Subordination: r's agreement that all present and future indebtedness and
(ah gations owing by Florrowar to any of its shareholders, officers,
irectors, employees or affiliates would be subordinate in right of
0,1a.yment and claim to all indebtedness and obligations from time to
time owing by Borrower to Lender.
Cross-D ukti The facility outlined herein would be cross-defaulted with all other
indebtedness and obligations from time to time owing to Lender by
Borrower.

Cross-Collateral: The Property securing the financing outlined herein would also be
collateral for and secure any and all other indebtedness and obligations
frorn time to time owing to Lender by Borrower.

Governing Law; All legal aspects of the facility outlined herein would be governed by
and construed in accordance with the laws of the State of Texas.

Page 2 of 4 Borrower's Initial I TAC000114
719

sofze 3SVd kiNti1413 GSESS6LE IL 9Z : te Le124Z/80/ZO
 Apc2c. leaty Physir inns, LLC

Adverse Changes: Bon
M KNA
greement that t ere as been no unremedied adverse
change in any material matter concerning the Borrower and l or
guarantor since the date of the loan application that would warrant not
making this credit facility.
Legal Opinions: Lender, at Lender's option, would have to receive a legal opinion from
counscl for Borrower (i) tts to the duo authorization and delivery of all
loan documentation executed by Borrower, (ii) as to the vali ity and
binding effect of such documentation on Borrower, (iii)'19) the
enforceability of such loan documentation, and (iv) such o alters
as Lender and its counsel may request

Investigations: Lender, or independent contractors and appraisers re ed by Lender,
would have to complete a comprehensive envi ntal audit and
appraisal report of Borrower's operating faoilitia =e results of which
must be satisfactory to Lender in its sole and a ute discretion.

Mortgagee's Title
Insurance: Lender would have to receive caturtut4its from mortgagee's title
insurance policies from one or more -nationally recognized title
insurers ensuring that the Lender' ed of trust lien en the Real
Property is of first priority, an' t to no exceptions other than as
may be agreed upon by Lender,
Lich Property; Lender would have to reeeiv G 'denee of its filed security interest in
the Persona! Property an first lien priority therein, in form and
substance satisfactory. t er and its.counsel.

Insurance: Lender would hay o receive evidence of insurance covering
Botiowet's tnisines sets, including the Properly, in amounts and in
form and substai satisfactory to Lender, plus evidence of following:
1) Generat, lity insurance in the total aggregate amount of
$3,0 per occurrence ($1,000,000 per occurrence) with
Met :Basile as additional insured.
2) H. el insurance in the amount of $9,000,000 with MetroBank as
=r yee
fi
Financial
Covenant: Borrower shall maintain a minimum dent service coverage ratio of
1.30x throughout the tenn of the loan. Debt service coverage ratio is
0 to be determined by IBITDA (Earnings Before Interest, Taxes,
Depreciation and Amortization) over the principal and interest
payments.
Othe The following condition will be applied to the subject loan:
1) Title Policy and survey are required.
IUD-306115
2) Lease Agreement and Assignment from the subject hospital.
3) MetroBank shall hold a letter of tacdit daiu $1,300,000 as a
guarantee of 12 months of payment on the loan, first 4 months of
interest payments and the next A months of principal and interest
payments. The letter of credit shall be issued by Bank of America.
4) Prior to closing, Borrower shalt inject $4,700,000.

Page 5 of 4 BM-rower's Initial
720

CA IAA 39Vd vt•Viftlfil 6S69G6L£ LL 9Z : TO Le6Z/BeIrCI
 lGty Physicians, LLC

0METROBANK
Apcx

NA
C. Documentation.

The Facility outlined herein would be evidenced by a loan agreement.
promissory notes, security agreements, deeds of trust, guarantees, and
such other agreements, instruments and documents as Lender and its
counsel may require in their sole and absolute discretion. All such
documentation would have to be satisfactory in form and s tance to
Lender and its counsel.
Z7V
D. Fees and Reimbursement Expenses
•
-1:,--2
-.
Borrower would be required to pay to Lender a riundahle
commitment fee of $45,000. The proposed tennsAdconditions
outlined in this letter will expire by February ' # I-67 if the letter has
not been executed. In addition, Borrower • ITC • required to
reimburse Lender for Ail out-or-pocket c st v tared by Lender in
connection with the financing outline he p
,...-..-
This commitment letter represents the terms and cond ki..,vris as approved by MetroBank.
The tcrms and conditions have previously being ' d and agreed to, and itot subject
to any modification.
1a-N
3,
We at IVietroBank appreciate the opportunity t111 business with you and wish you much
continued success. If you have questions ttlentS on the above, please do not hesitate
to call.

neerely,,

Mohammad Tariq 0 Terrance Tang
Area Business Manager/5 1 ----) Chief Credit 0 een'EVP

ACCEPTED AND- 4- 4En ON THIS 81 k DAY OF -•-( , 2007

Borrower(s);°_,4:

,
Ape ysicians, LLC

Dr. Rendcep &neje.

Mr. Upends N. Vora
1 TAC960116
Page 4 of 4 Borrnweee In itial
721

CP/60 -4L-11-1,4 vNywnl 6965GSLE
tic SZ :TO L09Z/8121/ZE1
Amount: $56,000,00 Sequence Number: 1092201666
Account: 5781917967 Capture Date: 02/12/2007
Bank Number: 11300002 Check Number: 1004

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Electronic Endoements
Date Sequence Bank # BOFD Bank Name
02/12/2007 6310964430 111000038 N FEDERAL RESERVE SANK
02/12/2007 001092201666 111012822 N BANK OF AMERICA, NA
02/12/2007 6310860137 111000038 N FEDERAL RESERVE BANK
02/09/2007 000010006010607 113017346 Y METROBANK, NA

EXHIBIT

938 I TRC000318
 Fig

CAUSE NO. 2009-02578

APEX KATY PHYSICIANS, L.L.C. IN THE DISTRICT COURT OF
Plaintiff,

v. HARRIS COUNTY, TEXAS

ADEEL ZAIDI, APEX LONG TERM ACUTE
CARE-KATY, L.P., APEX KATY
PHYSICIANS — TMG, L.L.C., and
US TMG, L.L.C.,
Defendants. 61ST alp AL DISTRICT

CAUSE NO, 2009-03055

STEPHEN M. KOCH, M.D., Individually, § E DISTRICT COURT OF
VICTOR ANKOMA-SEY, M.D., Individually, §
TERRY SCARBOROUGH, M.D., FILED
Individually, HATEM SAQR, Individually, Loren Jackson
District Clerk
and each as MEMBERS on behalf of APEX
KATY PHYSICIANS, L.L.C., and ADEEL JUN 3 0 2 09
ZAIDI, CO-MANAGER, APEX KATY § Time: r) 4 0
PHYSICIANS, L.L.C., § Hama ()gory, SR
By
Plaintiffs, §

V. HARRIS COUNTY, TEXAS

PANKAJ K. SHAH, M.D., BH TI P.
SHAH, and INDUS ASSOC! S, L.L.C.,
Defendants. 1 1 TH JUDICIAL DISTRICT

FOURTH AMENDED ORIGINAL PETITION OF PLAINTIFFS,
KO" , ANKOMA-SEY, ANKOMA-SEY PPSC, LTD.,
SCA ROUGH, SAQR, PERACHA, WILSON, AND KEITH

TO THE HON BLE COURT:

Plaits, Stephen M. Koch, M.D., Victor Ankoma-Sey, M.D., Ankoma-Sey

PPSC, Ltd., Terry Scarborough, M.D., Hatem Saqr, Waseem Peracha, M.D., Erik B.

Wilson, M.D., and G. Thomas Keith, M.D., file this Fourth Amended Original Petition,

complaining of Defendants, Pankaj K. Shah, M.D., Bharati P. Shah, Indus Associates,

FACasesUWIi\KOCH.973 \SHAH.002PleadingsWTHPOP063009.doc
LLC, Apex Katy Physicians, LLC, Randeep Suneja, M.D., Upendra N. Vora, and Katy

Project, LLC, and would respectfully show the court as follows:

Discovery Control Plan

1. Plaintiffs intend to conduct discovery under Level 3 of Texas Rule of Civil

Procedure 190.

II.
Parties

2. Plaintiff, Stephen M. Koch, M.D., is an dual residing in Houston,

Harris County, Texas.

3. Plaintiff, Victor Ankoma-Sey, M.D n individual residing in Houston,

Harris County, Texas. o (t)

4. Plaintiff, Ankoma-Sey PP is a Texas limited partnership whose

principal office is located in Houston, Iris County, Texas.

5. Plaintiff, Terry Sc ugh, M.D., is an individual residing in Houston,
0
Harris County, Texas.

6. Plaintiff, Hatd aqr, is an individual residing in Houston, Harris County,

Texas.

7 Plain Waseem Peracha, M.D., is an individual residing in Houston,

Harris County, as.

8. laintiff, Erik B. Wilson, M.D is an individual residing in Houston, Harris

County, Texas.

9. Plaintiff, G. Thomas Keith, M.D., is an individual residing in Houston,

Harris County, Texas.

2

FACases1JVVh1KOCH.9731SHAH.OD2 Pleadings14THPOP063009.doc
 10. Defendant, Pankaj K. Shah, is an individual residing in Sugar Land, Fort

Bend County, Texas, and has previously been served with citation and appeared in this

action.

11. Defendant, Bharati P. Shah, is an individual residing in Sugar Land, Fort

Bend County, Texas, and has previously been served with citation a as appeared in

this action.

12. Defendant, Indus Associates, LLC, is a Texa Vnited liability company

which has its principal place of business in Sugar Land Bend County, Texas, and

has previously been served with citation and has aped in this action.

13. Defendant, Apex Katy Physicians. LC, is a Texas limited liability

company which has its principal place of by es sin Houston, Harris County, Texas,

and has previously been served with cita nd has appeared in this action.

14. Randeep N. Suneja is ardividual residing in Katy, Harris County, Texas,

and has previously been served witm-Citation and has appeared in this action.

15. Upendra N. Vor ) an individual residing in Dallas, Dallas County, Texas,

and has previously been sqy4:1 with citation and has appeared in this action.

16. Katy P ojedt, LLC is a Texas limited liability company which has its

principal place of leness in Dallas, Dallas County, Texas, and has previously been

served with cit, and has appeared in this action.

111.
Venue

17. Pursuant to Section 15.002 of the Texas Civil Practice and Remedies

Code, venue is proper in Harris County, Texas because all or a substantial part of the

3

FACasesIJWH4KOCH.9734SHAH.0021PIeadings14THPOP063009.doc
events or omissions giving rise to Plaintiffs' claims occurred in Harris County.

IV.
Background Facts

18. Plaintiffs, Stephen M. Koch, M.D. ("Dr. Koch"), Victor Ankoma-Sey, M.D.

("Dr. Ankoma-Sey"), Ankoma-Sey PPSC, Ltd. ("Ankoma-Sey PPSC"), Terry

Scarborough, M,D. ("Dr. Scarborough"), Hatem Saqr ("Saqr"), VV1aenn Peracha, M.D.

("Dr. Peracha"), Erik B. Wilson, M.D. ("Dr. Wilson"), and G. ias Keith, M.D. ("Dr.

Keith") (collectively, the "Plaintiffs") are part of a group of roximately 24 physicians

and others who invested in Defendant, Apex Katy Phys, LLC. ("Apex"). Apex was
„e
formed for the purpose of purchasing tracts of restate situated in Katy, Texas and

the improvements located thereon (the "Proper, and leasing those improvements to
o
what is now Apex Hospital — Katy. The imp vements consist of a 100,000 square foot

hospital with 103 patient beds and a pro sional building. Defendant, Pankaj K. Shah,

M.D. ("Shah"), through his owners and/or control of Defendant, Indus Associates,

LLC ("Indus"), is also an investcCil'Apex. Shah was an Initial Manager of Apex and at

all times relevant remained tanager, and now purports to be a Manager of Apex.
y the second Friday following this date, the case will be
reset.

Dated:
MAR 1 ..&2012 , 2012.
O
_5\
F Ch~aniet
t Clerk Hon. Alfred
Presiding Judge
J.,
R 0 2 2012
lime:
Hartlidaiinty. Tiro,
MI IDocs $2023 2 1 I 860.1
ciepirry
 Filed
09 April 6 Al 1:21
Loren Jackson
District Clerk
Harris County
ED101J015380644
CAUSE NO 2009-02578 Accepted by:
Furshilla Brantley

APEX KATY PHYSICIANS, L L C , IN THF. DISTRICT COURT OF
Plaintiff,

v„
HARRIS COUNT YAEXAS
ADEEL ZAIDI, APEX LONG TERM ACUTE
CARE-KATY, L P , APEX KATY
PHYSICIANS — TMG, L L C.., and
US TMG, L L C.,
Defendants 6_181 JUDI:0.E DISTRICT

CAUSE NO, 2009-03-055

S TEPHEN M KOCH, M.D , Individually, IN THE DISTRICT COURT OF
VICTOR ANKOMA-SEY, M D
TERRY SCARBOROUGH, M.D
Individually, HATEM SAQR,
and each as MEMBERS on behalf of APEX §
KATY PHYSICIANS, L.L C , and ADEEL CD §
ZAIDI, CO-MANAGER, APEX KATY co §
PHYSICIANS, LL C , HARRIS COUNTY, TEXAS
Plaintiffs,

PANKAJ K SHAH, M D , TIP„
SHAH, and INDUS ASSK -TES, L L C ,
Defendants.. 0467 11 1H JUDICIAL DISTRICT
C.4

jiNNOPPOSED MOTION TO CONSOLIDATE AND
MFG RANDUM IN SUPPORT OF MOTION TO CONSOLIDATE

COMES NOW, Apex Katy Physicians, L L.0 ("Katy Physicians") by and through its

undersigned attorney, and requests that this Court consolidate the two pending cases between

these same and affiliated patties, consisting of Cause No.. 2009-02578; Apex Katy Physicians,

L L.0 v Adeel Zaidi, et al.; in the 61st Judicial District Court, Harris County, Texas; and Cause

0700607 1
 No. 2009-03055; Stephen M Koch, MD, et al v Pankaj K Shah, MD, et al ; in the 11th

Judicial District Court, Harris County, Texas, into this first filed case involving both similar and

identical parties, and relating to the same series of transactions.

I.
ARGUMENT AND AUTHORITIES

I. Texas Rule of Civil Procedure 174(a) provides for the 1,11.clatron and joint

hearing or trial of actions "involving a common question of law or fact' 'X R. CIV. P. 174(a).

The trial judge is given broad discretion to consolidate c d Cherokee Water Co. v,

Forderhause, 641 S W.2d 522, 525 (Tex.1982); SW, Prc.o rust v Dallas County Flood

Control Dist No. 1, 136 S.W..3d 1, 12 (Tex.App -Dallas , no pet.); Excel Corp v Valdez,

921 S W 2d 444, 448 (Tex App -Corpus Christi orig. proceeding); In re Al Cardenas

Masonry, Inc , 2006 WL 949974, (Tex.App.-Cops hristi, 2006., no pet..)..

2 In the case of consolidation fe al the actions should relate to substantially the
CO'
same transaction, occurrence, subjec I, or question, and they should be so related that

evidence presented will be material evant, and admissible in each case. Excel Corp. v Valdez,

supra, 921 S W 3d at 448

3.. These two lawsuits involve the parties' investment, purchase, lease, and

improvements to re perty in Fort Bend County, Texas consisting of the former Memorial

Hermann H'ospiy and a related professional office building (the "Property"), alleged

breaches of contact and fiduciary duty regarding a January 4, 2007, Apex Long 1 erm Acute

Care-Katy, L P ("Apex Hospital") lease for a portion of the Property from Katy Physicians (the

"Lease Agreement"), a F ebruary 9, 2007 Company Agreement of Apex Katy Physicians, L L C

0700607 2
 (the "Company Agreement"), the MetroBank, N.A. purchase loan for the Property, and claims of

fraudulent use and transfer of Rinds

4.. The Plaintiff in this first filed case, Cause No 2009-02578, is Apex Katy

Physicians, L L C , and the Defendants are Adeel Zaidi, Apex Long Term Acute Care-Katy, L P ,

Apex Katy Physicians — TMG, L L C., and US TMG, L L C ("Defendants" •ty Physicians

has sued Defendants for breaches of contract and fiduciary duty ards to the Lease

Agreement, the Company Agreement, and for misappropriation an Nth' transfers of Katy

Physicians' tands from several Katy Physicians' bank accounts ding MetroBank, N.A. (See

Plaintiff's Original Petition, attached and incorporated hereir all purposes as Exhibit "1").

5 In the second filed Cause No, 2009-0.3 the Plaintiffs, a group of investors in
C.2
both Katy Physicians and Apex Hospital are s both their individual capacities and "on

behalf of Apex Physicians," have sued Defeo s, Pankaj K. Shah, M.D., the Co-Manager of
C.C)
Katy Physicians, and other investors of Ky Physicians for alleged breaches of fiduciary duty,
C.
fraud, conspiracy, and breach of regarding the Company Agreement, the MetroBank,

N.A. purchase loan, and inves and improvements regarding the Property. (See Plaintiff's

Third Amended Original Pin attached and incorporated herein for all purposes as Exhibit

6.. The es in the First and Second filed cases are identical or affiliated and
(()
"
possess hafor Yrr substantially related to the subject matters raised in both the First filed case,

Cause No.. 2009-02578, and the Second filed case, Cause No., 2009-03055.. Discovery in the

cases is overlapping and inextricably intertwined, the issues to be submitted to the trier of fact

regard common questions of fact, the witnesses and testimony at the trial of the two cases will be

substantially identical, and any judgment in any one of the two separate cases will likely be

0700607 3
 subject to offsets and credits from the other. The central and primary requirement for

consolidation of actions as directed by Rule 174 is that there must exist common issues of law or

fact in both cases (See TEX. R. CIV P 174(a)). Such common issues of law and fact exist in

both of these cases. The same evidence is material, relevant and admissible. Judicial economy

and convenience will be gained by consolidation There is no likelihood judice or jury

confusion from consolidation

8.. Therefore, Apex Katy Physicians, L.L C requ at this Court order

consolidation of the two lawsuits pursuant to Rule 174(a) un First filed case, Cause No

2009-025 78, because no party is opposed to the con idation, consolidation will avoid

unnecessary costs or delay, conserve judicial resource d greatly reduce time and expense of

trying the actions separately

cor46,U SION
9.. WHEREFORE, PRE141' CONSIDERED, Apex Katy Physicians, L.L.G.

respectfully requests this Court to o the unopposed consolidation of Cause Nos 2009-02578

and 2009-03055, and to orde Clerk of the Court to merge the cases into one lawsuit under

Cause No. 2009-02578 p g in this Court

Respectfully submitted,
O
KAISER & CONRAD, L.L..P.

Jeffery B. aiser
IBA No. 11079300
1911 Bagby, Suite 200
Houston, Texas 77002
Telephone: 713-571-8000

0700607 4
 Facsimile: 713-571-8002
jkaiser @kaiser comad corn

Attorneys for Plaintiff,
Apex Katy Physicians, L L C.

CERTIFICATE OF CONFERENCE

The undersigned, pursuant to Section 3.3.5(d)(1) and (2), of the L Mules of the Hauls
County District Courts, conferred in good faith with opposing cour* regarding the above
motion.. The responses of the attorneys to Apex Katy Physicians, Unopposed Motion to
Consolidate are as follows:

o.
1. Jerry C. von Sternberger: opposes/does tlift4ippose

Attorneys for Defendants,
Apex Long Term Acute Care-Katy, L
Apex Katy Physicians-FMG, L LC0
and US IMG, L.L.C.

2 Robert D. Remy: poses/does not oppose

Attorneys for Defendant co.4
Adeel Zaidi.

3. John W. Havint opposes/does not oppose

Stephen MJc.4ch, M.D., Victor Ankoma-Sey, M.D
Terry Sc rough, M D , Hatern Sagr,
Wasee racha, M.D , Erik B. Wilson, MD.,
Syet nain, M D , and Asif Akhtar, M.D.
C.5)
4,. F. Coleman: opposes/does not oppose

Attorneys for Defendants,
Pankaj K. Shah, M D , Bhar ati P Shah,
and Indus Associates, L L C..,

0700607 5
 CERTIFICATE OF SERVICE

I hereby certify that a true and correct of the foregoing was sent to the parties listed below
on the 6th day of April, 2009, as follows:

Jerry C von Sternberg, Esq Via Facsimile. 713-856-7268
Heather S von Steinberg
The von Steinberg Law Firm
820 Gessner, Suite 1720
Houston, Texas 77024

Attorneys for Defendants,
Apex Long Term Acute Care-Katy, L.P
Apex Katy Physicians-IMO, L
and US TMG, L.L.C.

Robert D Remy, Esq. Via Facs 713-465-8018
Robert D. Remy Law Offices
Two Memorial City Plaza
820 Gessner, Suite 1'720
Houston, Texas 77024

Attorneys for Defendant,
Adeel Zaidi.

John W. Havins, Esq. Via Facsimile 713-650-3301
Havins & Associates, -1
2211 Norfolk, Suite:3i
Houston, Texas 77.09B

Attorneys fo.
f-.-1-Arntiffs,
Stephen M,D., Victor Ankoma-Sey, M D.,
Terry drough, MD , Hatem Saqr,
Was eraeha, M.D.., Erik B Wilson, M D..,
Syed Hasnain, M..D ., and AsifAkhtar, M D.

Tom F . Coleman, Esq. Via Facsimile 713-225-0264
The Law Offices of Tom F . Coleman
817 Westheimer
Houston, Texas 77006

0700607 6
 Attorneys for Defendants,
Pankaj K. Shah, M D.., Bharati P. Shah,
and Indus Associates, L L C.,

0700607 7
 1.

r
CAUSE NO. 2009-03055
eqp
STEPHEN M. KOCH, M.D., Individually, § IN THE DISTRICT COURT Rt., g-c4‘0
VICTOR ANKOMA-SEY, M.D.
Individually, TERRY SCARBOROUGH, §
er
`et
ultimately hijack t,he ospital Project, he burdened all of the other investors' units,

including those .owed by Plaintiffs, by causing Apex to secure the $9,000,000 loan with

a first mortg lien covering the Property.

27. Shah did not attempt to obtain the required written consent because doing

so would have alerted Plaintiffs and the other members to the deal that he was cutting

for himself and Suneja and Vora. Having been alerted to this material change in the

FACases\JINFAKOCH.9731SHAH.0021Pleadings43RDP0P022309.doc
terms of the investment, Plaintiffs would have either insisted on being afforded the

same deal, which would have permitted them to purchase more units, or, more likely,

would have insisted that Indus and Katy Project pay $40,000 cash per unit for each and

every unit they were purchasing. Shah could not allow this to happen because he knew

he needed majority control of Apex in order to perpetrate his hijack se e, but he was

unwilling or unable to pay the $9,760,000 that would be requirekif Plaintiffs and the
,
other investors learned of his self-dealing, At a certain poinktring the time units in

Apex were being offered to investors, Shah instructed t further units were to be

sold. He did so to ensure that he would be majority ow . Doing so prevented units in

Apex from being sold to investors who, unlike Sh h ould have paid $40,000 cash per
N
unit.

28. Shah went to great lengths t_ _} p Plaintiffs and the other Apex investors

in the dark, including taking at least thCliollowing actions to avoid having his scheme
0
detected: cec,
• Taking from Ape sJeffices not only the certificates for Indus's units, but

also the rece for those certificates so as to avoid the possibility of

another *k member seeing the handwritten reference to Shah's

personal guarantee that Shah caused to be placed on the receipt for

Certificate No. 24.

• When advised that he would have to forego 6 of the 250 Apex units he

"purchased" because the deal was °oversold," Shah represented that he

had paid for 250 units and insisted on being paid $240,000 for the 6 units

to be surrendered, not $30,980.34, which is the collective amount of cash

8

FACasesIMIHNKOCI-1.9731SHAH.002\Pfeadings13RDPOP022309.dac
 that he actually paid for the 6 units. This dropped his cash in the deal

from $1,500,000 to $1,260,000.

• Shah immediately seized control of Apex's finances and refused to share

the financial information, including failing to provide copies of bank loan

closing documents to the accountants who were questing the
X`
documents so that Apex's federal income tax return &Wild be prepared.

• After June 2008, Shah stopping providing Ape' ii_.-''Countants with copies

of Apex's bank records.

• Shah repeatedly avoided calling mese of the Apex members to

passed:

(a) Shah was elected to continue serving ,asja Manager of Apex, which he
had done from the inception of Apex;

(b) Dr. Krishnaswamy was elected to aas a Manager of Apex; and
o

(c) The law firm of Kaiser & Cop , LLP was authorized to take action to
enforce the Lease.

30. Indus had no authority tot
*tice the January 19th Meeting because it does

not own the 244 Apex units it claims own. As detailed above, those 244 units were

acquired by means of Shah's f a. d and as a result of Shah's breach of fiduciary duties

and breach of the Compa Agreement Consequently, Indus did not acquire viable or

enforceable title to the( 4 Apex units and therefore had no standing to notice the
cg,
January 19th Meeji. Therefore, all resolutions passed and actions taken during the

January 19th Me*ing are of no force or effect, and all actions taken or to be taken after

the January4h Meeting based on those resolutions or at the direction of either Shah

or Krishnaswamy, as purported Managers of Apex, are unauthorized and constitute or

will constitute ultra vires acts.

31. The January 19th Meeting was not properly noticed because the Notice

10

FACases1JWHIKOCH.973\SHAH.0021Pleadings13RDPOP022309.doc
 ;ON

did not adequately describe the agenda of the meeting. Because the January 19th

Meeting was not properly noticed, all resolutions purportedly passed and any other

actions purportedly taken during the January 19th Meeting were ineffective, and all

actions taken or to be taken after the January 19th Meeting based on those resolutions

are unauthorized and constitute or will constitute ultra vires acts.

32. The January 19th Meeting and all resolutions purl edly passed and

actions purportedly taken during the meeting are also ineff e because the Apex

units that Indus and Katy Project claim to own, and ° were voted during the

January le Meeting, were acquired by means of ofr and as a result of Shah's

breach of fiduciary duties and breach of the Mpany Agreement. Consequently,

Indus did not acquire legal or equitable title rite 244 Apex units it purportedly voted

during the January 19th Meeting. Becaus.1% votes attributable to the 244 units are

invalid and those 244 units represent*proximately 54% of the Apex membership

units, no resolution, action, or ot.hetmeasure taken during the January 19th Meeting

received a majority of the App; members' votes as required by Article 3.08 of the

Company Agreement.

32. On Mo February 1, 2009, only 13 days after being elected, Dr.

Krishnaswamy resign as a Manager of Apex. Dr. Krishnaswamy did so after learning

of Shah's fraudtand deceit, and his plan to evict the Hospital. Article 3.01 of the

Company dement requires that Apex be managed at all times by at least 2

Managers. Therefore, because the required number of Managers does not exist, any

actions that Apex has taken or takes at the direction of Shah from February 1, 2009

onward are void and of no effect.

11

FACasesUWEAKOCH.9731SHAH.0021Pleadings13RDP015022309.doc
 34. Shah, purported Manager of Apex since the inception of Apex and

purportedly re-elected at the January 19th Meeting, caused Apex to file a lawsuit to evict

Apex LTAC from the Property. That lawsuit is numbered and styled Cause No. 09-

CV31-04395; Apex Katy Physicians, L.L.C. v. Apex Long Term Acute Cana—Katy, L.P.,

and is pending in the Justice of the Peace Court, Precinct 3, Fort Be ounty, Texas
( S,
°
(the 'Eviction Lawsuit). Shah is aware that Plaintiffs do not su. . it the decision to

pursue eviction against Apex LTAC. More importantly, tW-action has not been

properly authorized by a legally constituted Board o alters or by the Apex

members because the votes attributable to the 244 that Indus claims to own are

invalid because, as explained above, Indus did no ully acquire title to those units.

35. Upon information and belief, Shals causing Apex to pursue the eviction

proceeding because he is under financial sure from MetroBank and Medistar. In

fact, Medistar has sued Shah, claiming owes millions of dollars to Medistar as result

of the side agreement that Shah "Ad d into without Plaintiffs' knowledge. That lawsuit

is numbered and styled No. 2 4 -73728; Medistar Corporation v. P.K. Shah, and is

pending in the 165th District (ot.urt of Harris County, Texas.
. AUs
re
V.
.
4e Causes Of Action

A. Breach of ciary Duty

36. :4)*Itiffs repeat and adopt all of the allegations and averments set forth in

paragraphs 19 through 35 above.

37. Shah, as a Manager of Apex, owed fiduciary duties to Plaintiffs. Those

duties include the duty of full disclosure, the duty of loyalty and utmost good faith, the

i2

FACasestiWE-RKOCH.9731SHAH.0021Pleadings13RDPOP022309.doc
duty of candor, the duty to refrain from self-dealing, and the duty to act with integrity of

the strictest kind.

38. Shah has breached one or more of the fiduciary duties he owed to

Plaintiffs and those breaches are a proximate cause of the actual damages Plaintiffs

have suffered. The amount of actual damages that Plaintiffs have suff d is within the

jurisdictional limits of this court.

39. As an alternative to money damages, an appro4•,t= e remedy for Shah's

breach of fiduciary duty, and one that Plaintiffs seek, eiture of the Apex units

which Shah purports to own. This equitable is appropriate under the

circumstances.

40. Shah's breach of the fiduciary du, was intentional because he intended

to gain an additional, unwarranted benef himself at the expense of Plaintiffs and

the other investors in Apex. Plaintifferefore are entitled to exemplary damages

under Texas Civil Practice & Retpedies Code section 41.003(a). Plaintiffs seek

, that in the opinion of the jury is necessary to punish
exemplary damages in an amdri

Shah and deter similar cond n the future by him and others.

B. Fraud
0
41. PleadiVin the alternative, and without waiving any of the foregoing,

Plaintiffs repeat_Od adopt all of the allegations and averments set forth in paragraphs

19 through above.

42. By concealing or failing to disclose to Plaintiffs that he, Suneja, and Vora

were not purchasing units in Apex on the same terms as Plaintiffs, Shah defrauded

Plaintiffs. Defendant, Bharati P. Shah, was aware of Shah's fraudulent conduct,

13

FACases1.11MA0OCH.973ISHAH.0021Preadings‘3RDP0P022309.doc
assisted and supported Shah's fraud, and benefited from that fraud. The information

that Shah withheld or failed to disclose materially impacted the financial structure of

Plaintiffs' investments. Shah knew that Plaintiffs were unaware of his self-dealing

actions and did not have an equal opportunity to discover the truth. In fact, Shah took

actions intended to prevent Plaintiffs from discovering his self-d9(7 g. Plaintiffs,

unaware of Shah's self-dealing, relied on Shah's deliberate siler as indicating that

Apex's financial structure was as had been represented t4 =teem when they were

making their investment decision. Shah intended for Plai lo make this assumption.

43. Shah's fraud is a proximate cause of the:pctual damages that Plaintiffs

have suffered. Plaintiffs' actual damages are within jurisdictional limits of this court.

44. The damages that Plaintiffs hayuffered resulted from Shah's actual

fraud or malice, which entitles Plaintiff exemplary damages under Texas Civil

Practice & Remedies Code section 41.1N3(a). Plaintiffs seek exemplary damages in an
0
amount that in the opinion of thejuray is necessary to punish Shah and deter similar
conduct in the future by him an tiers.

C. Conspiracy

45. Pleading 4tihe alternative, and without waiving any of the foregoing,

Plaintiffs repeat art opt all of the allegations and averments set forth in paragraphs

19 through 44 adive.

46. eil'ineja and Vora conspired with Shah and thereby participated in his

fraud and breach of fiduciary duty. Suneja, Vora, and Shah knew the agreed acts

would result in harm to Plaintiffs.

47. This conspiracy is a proximate cause of the actual damages that Plaintiffs

14

F:tCasesLIWHAKOC11.9731SHAH.0021Pleadingsl3RDPOP022309.doc
have suffered. Plaintiffs' actual damages are within the jurisdictional limits of this court.

48. As an alternative to money damages, an appropriate remedy for Shah,

Suneja's, and Vora's conspiracy, and one that Plaintiffs seek, is forfeiture of the Apex

units which Shah, Suneja, and Vora purport to own. This equitable relief is appropriate

under the circumstances.
7,, 0
49. The damages Plaintiffs have suffered as a resuiC4f the conspiracy

perpetrated by Shah, Suneja, and Vora resulted from Sha -Suneja's and Vora's

actual fraud or malice, which entitles Plaintiffs to exempla4 :Mages under Texas Civil

Practice & Remedies Code section 41.003(a). Plaintiffs,t>- k exemplary damages in an

amount that in the opinion of the jury is necess ary, punish Shah and deter similar
;.)
conduct in the future by him and others.

D. Breach of Contract

50. Pleading in the alternativand without waiving any of the foregoing,

Plaintiffs repeat and adopt all of t4e,r(allegations and averments set forth in paragraphs

19 through 49 above. 0
51. Defendants 171 'breached the Company Agreement and are continuing

to breach the Compan Contract by taking actions on behalf of Apex that are
O

unauthorized and in,41pct contravention of the Company Agreement.

52. DefOdants' breach of the Company Agreement is a proximate cause of

the actual da'eniiges that Plaintiffs have suffered. Plaintiffs' actual damages are within

the jurisdictional limits of this court.

53. Plaintiffs have fully performed the obligations required of them by the

Company Agreement and all conditions precedent to Plaintiffs' claim for relief have

15

FACases‘JWHIKOCH,973‘,SHAH.002Tleadings13RDPOP022309.doc
 ,411106.1

been performed or have occurred.

54. As a direct result of the breaches, Plaintiffs have been required to employ

John W. Havins and the law firm of Havins & Associates, PC as their attorneys, and

have agreed to pay the attorneys a reasonable attorney's fee for their services rendered

and to be rendered in this cause. Plaintiffs will present their claims tii`Uefendants in
.\.>
cj
accordance with Section 38.001 et seq. of the Texas Civil Prai4l6e and Remedies
..
Code. Pursuant to Section 38.001 et seq. of the Texas CivilPractice and Remedies

Code, Plaintiffs are entitled to and do request an award of asonable and necessary

attorneys fees for services rendered and to be rendere4 this case, which include the

following:

(a) Preparation and trial of this lawsui
t nd

(b) Post-trial, pre-appeal legal se,rvOs; and

(c) An appeal to the court of - als; and

Making or respondirl,t tp an petition for review to the Supreme Court of
(d) Texas; and

(e) An appeal to th upreme Court of Texas in the event petition for review
is granted; and ,

(f) Postjudg41e discovery and collection in the event execution on the
judgment necessary.

E. Request Fki.
1/4
19eclaratory Relief

55. ,ding in the alternative, and without waiving any of the foregoing,

Plaintiffs repeat and adopt all of the allegations and averments set forth in paragraphs

19 through 54 above.

56. Pursuant to the Uniform Declaratory Judgments Act, Chapter 37 of the

16

F:ICasesAJWHIKOCI-1.9731SHAH.0021Pleadings13RDPOP022309.doc
Civil Practice and Remedies Code of Texas, Plaintiffs seeks a declaration that neither

Shah, Bharati P. Shah, nor Indus has equitable or legal title to the 244 Apex units they

purport to own and/or control. Plaintiffs also seek a declaration that neither Suneja,

Vora, nor Katy Project has equitable or legal title to the 90 Apex units they purport to

own and/or control.

57. Plaintiffs are entitled to recover reasonable and nece(s* attorney's fees

that are equitable and just under Texas Civil Practice & Reme• -)Code section 37.009

because this is a suit for declaratory relief. Plaintiffs re an award of reasonable

and necessary attorney's fees for services rendered,ar to be rendered in this case,

which include the following:

(a) Preparation and trial of this tc

(b) Post-trial, pre-appeal legal s s; and

(c) An appeal to the court ofGals; and

(d) Making or responding tp an petition for review to the Supreme Court of
Texas; and

(e) An appeal to the__\\Supreme Court of Texas in the event petition for review
is granted; and'j

(f) discovery and collection in the event execution on the
judgment? necessary.

58. Plaice are entitled to recover, and do request, awards of pre-judgment

and post judg t interest at the highest rates permitted by law.

WHEREFORE, Plaintiffs, Stephen M. Koch, M.D., Victor Ankoma-Sey, M.D.,

Terry Scarborough, M.D., Hatem Saqr, Waseem Peracha, M.D., Nilesh Patel, M.D.,

Erik B. Wilson, M.D., Syed Hasnain, M.D., and Asif Akhtar, M.D., respectfully request

17

PlCaseskJWHIKOC11.9731SHAH.0021Pleaclingsl3RDPOP022309.doc
 /ON

that Defendants, Pankaj K. Shah, Bharati P. Shah, Indus Associates, LLC, Apex Katy

Physicians, LLC, Randeep Suneja, M.D., Upendra N. Vora, and Katy Project, LLC be

cited to appear and answer and, on final trial, the court declare that (i) neither Shah,

Bharati P. Shah, nor Indus has equitable or legal title to the 244 Apex units they purport

to own and/or control, and (ii) neither Suneja, Vora, nor Katy ProjectAft equitable or

legal title to the 90 Apex units they purport to own and/or control. n),'addition, Plaintiffs

ask for judgment, jointly and severally, against Defendants for:

A. Actual damages;

B. Exemplary damages;

C Reasonable attorney's fees;

D. Costs of suit;

E. Prejudgment and postjudgm nt interest at the highest rates permitted by
law; and
0
F. All other relief, in law an , equity, to which Plaintiffs may be entitled.

Respectfully submitted,

HAVINS & ASSOCIATES, PC

W. Havi
e Bar No. 09239800
ery J. Davis
ate Bar No. 24028276
2211 Norfolk, Suite 525
Houston, Texas 77098
T: (713) 650-3600
F: (713) 650-3301

ATTORNEYS FOR PLAINTIFFS

18

FACasestJWHX0C1-1.973ISHAfi.0021Pleadingsl3RDPOP022309.doe
 CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true copy of the foregoing document was
served on the attorneys listed below in the manner indicated on February 24, 2009.

VIA FAX (713) 671-8002
Jeffery B. Kaiser
Kaiser & Conrad, LLP
1911 Bagby
Second Floor
Houston TX 77002

VIA FAX (713) 523-2804
Thomas F. Coleman
Law Office of Tom F. Coleman
817 Westheimer
First Floor
Houston TX 77006

VIA FAX (713) 465-8018
Robert Remy
Two Memorial City Plaza
820 Gessner Suite 1720
Houston TX 77024

19

F:CasesUW1-11KOCH.9731SHAH.0021PleadingsL3RDPOP022309.doc
Y. AIN

CAUSE NO, 2009413055

STEPHEN M. KOCH, M.D., Individually, IN THE DISTRICTOOVRT
VICTOR ANKOMA-SEY, M.D. c r7
Individually, TERRY SCARBOROUGH,
Lri ,
M.D., Individually, HATEM SAQR,
Individually, and each as MEMBERS
oc~sc r
.--; 12"
Le)
on behalf of APEX KATY PHYSICIANS,
LLC, and ADEEL ZAIDI, CO-MANAGER, HARRIS COUI hp.xAs
APEX KATY PHYSICIANS, LLC, crt

7 7.
Plaintiffs, 6

V.

PANKAJ K. SHAH, M.D.,
BHARATI P. SHAH, and
INDUS ASSOCIATES, LLC,

Defendants. 11TH JUDICIAL DISTRICT

SECOND AMENDED ORIGIN ETITION OF PLAINTIFFS,
KOCH, ANKOMA-SEY ARBOROUGH, SAQR,
PERACHA, PATEL, WILSO HASNAIN. AND AKHTAR
0)
TO THE HONORABLE COURT: o
Plaintiffs, Stephen M. K .D., Victor Ankoma-Sey, M.D., Terry Scarborough,

M.D., Hatem Saqr, Waseer Peracha, M.D., Nilesh Patel, M.D., Erik B. Wilson, M.D.,

Syed Hasnain, M.D., atI*I''D-Asif Akhtar, M.D., Individually and each as a member on

behalf of Apex Kay ihysicians, LLC, file their Second Amended Original Petition,

complaining of ndants, Pankaj K. Shah, M.D., Bharati P. Shah, Indus Associates,
Q
LLC, Apex ( Physicians, LLC, Randeep Suneja, M.D., Upendra N. Vora, and Katy

Project, LLC, and would respectfully show the court as follows:

BECOME* tualoWni
insturriesiVoipoor qua!
at theta of imp

FACasesVWFINKOCH.DMSHA1-1.0021Pleadings‘2NDPOP0205.doc
 I.
Discovery Control Plan

1. Plaintiffs intend to conduct discovery under Level 3 of Texas Rule of Civil

Procedure 190.

II.
Parties

2. Plaintiff, Stephen M. Koch, M.D., is an individual caSiding in Houston,

Harris County, Texas.
o
3. Plaintiff, Victor Ankoma-Sey, M.D., is an Vidual residing in Houston,

Harris County, Texas.

4. Plaintiff, Terry Scarborough, M.D. An individual residing in Houston,
Harris County, Texas.

5. Plaintiff, Hatem Sagr, is an idual residing in Houston, Harris County,

Texas.
,q5)
6 Plaintiff, Waseem P*acha, M.D., is an individual residing in Houston,

Harris County, Texas. 0
7. Plaintiff, Nile ate!, M.D., is an individual residing in Houston, Harris

County, Texas.

8. PlaiRtift Erik B. Wilson, M.D is an individual residing in Houston, Harris

County, Texas

9. Plaintiff, Syed Hasnain, M.D, is an individual residing in Houston, Harris

County, Texas.

10. Plaintiff, Asif Akhtar, M.D., is an individual residing in Houston, Harris

County, Texas.

2 F:1Cases4.1WHIKOCH.973\SHA11.0021Pleadingsk2NDPOP0205.doc
 11. Defendant, Pankaj K. Shah, is an individual residing in Sugar Land, Fort

Bend County, Texas, and has previously been served with citation in this action.

12. Defendant, Bharati P. Shah, is an individual residing in Sugar Land, Fort

Bend County, Texas, and has previously been served with citation in this action.

13. Defendant, Indus Associates, LLC, is a Texas limited 'bility company
D J
which has its principal place of business in Sugar Land, Fort Bent-county, Texas, and

has previously been served with citation in this action.

14. Defendant, Apex Katy Physicians, LLC Texas limited liability

company which has its principal place of business in uston, Harris County, Texas.

Defendant, Apex Katy Physicians, LLC, may be by serving citation, together with

a copy of this petition, on its registered age 0'.K. Shah, M.D., at 1601 Main Street,

Suite 102, Richmond, Texas 77469. P.K {Siah, M.D. may also be served with citation,

together with a copy of this petition, a&403 Rolling Brook Drive, Sugar Land, Texas

77479.
(K
15. Randeep N. Sun is an individual residing in Katy, Harris County, Texas,

and may be served with cit oh, along with a copy of this petition, at 2606 Sara Ridge

Lane, Katy, Texas 77kt

16. Upendtt N. Vora is an individual residing in Dallas, Dallas County, Texas,

and may be sa d with citation, along with a copy of this petition, at 18333 Preston

Road, Suite'5, Dallas, Texas 75252.

17. Katy Project, LLC is a Texas limited liability company which has its

principal place of business in Dallas, Dallas County, Texas. Defendant, Katy Project,

LLC, may be served by serving citation, together with a copy of this petition, on its

3 FACasest/WHIKOCI-1.9731SHAH.00271eacfingsi2NDPOP0205.doc
registered agent, Upendra N. Vora, at 18333 Preston Road, Suite 545, Dallas, Texas

75252.

In.
Venue

18. Pursuant to Section 15.002 of the Texas Civil Practicand Remedies

Code, venue is proper in Harris County, Texas because all or a antial part of the

events or omissions giving rise to Plaintiffs' claims occurred in tas County.

IV,
Background Facts

19. Plaintiffs, Stephen M. Koch, M.D. ("Dr..Kth"), Victor Ankoma-Sey, M.D.

("Dr. Ankoma-Sey"), Terry Scarborough, M. Q Dr. Scarborough"), Hatem Sagr

("Sage), Waseem Peracha, M.D. ("Dr. Pere , Nilesh Patel, M.D. ("Dr. Patel"), Erik

B. Wilson, M.D. ("Dr. Wilson") Syed Ha84, M.D. ("Dr. Hasnain), and Asif Akhtar,

("Dr. Akhtar") (collectively, the "Pftln iffs") are part of a group of approximately 24

physicians and other investors w 'Invested in Defendant, Apex Katy Physicians, LLC.

("Apex"). Apex was formed forltie purpose of purchasing tracts of real estate situated

in Katy, Texas and the i 1411*ovements located thereon (the "Property"), and leasing
1/4
ch),
those improvements to at is now Apex Hospital — Katy. The improvements consist of

a 100,000 sguarejgot hospital with 103 patient beds and a professional building.

Defendant, Pari aj K Shah, M.D. ("Shah"), through his ownership and/or control of

Defendant, in us Associates, LLC ("Indus"), is also an investor in Apex. Shah was an

initial Manager of Apex and at all times relevant remained a Manager, and now purports

to be a Manager of Apex.

20. In conjunction with their investment in Apex, Plaintiffs, along with

4 FACasesUWKKOCH.9731SHAH.002\Pleadingsl2NDPOP0205.doc
 AioN

substantially all of the other investors, also invested in Apex Long Term Acute Care-

Katy, L.P. ("Apex LTAC"). For example, Dr. Koch invested $103,500 in Apex LTAC and

guaranteed $75,000 in bank debt, Dr. Ankoma-Sey invested $2,500 and guaranteed

$65,000 in bank debt, and Dr. Scarborough invested $500.00 and guaranteed $20,000

in bank debt. Almost every person or entity who invested in Apex isp1,O an investor in

Apex LTAC. Defendants are aware of this. For purposes this petition, the

investments made in Apex and Apex LTAC will be refetigio collectively as the

"Hospital Project".

21. Apex LTAC was formed to start, own AO* perate Apex Hospital — Katy

(the "Hospital"), which is now operating as a term acute care facility on the

Property. The Hospital specializes in provid' comprehensive services to medically

complex patients, including those require intensive care, pulmonary management,

and cardiac monitoring. Apex LTAC des the Property from Apex pursuant to that

certain Lease Agreement, dated ary 4, 2007 (the 'Lease").

22. Prior to Apex wiring the Property, it was owned by Medistar

Corporation ("Medistar"). irig the initial conversations regarding the Property being

purchased as part of #h` -)Overall investment plan, Plaintiffs were told that the Property

could be purchased r approximately $13,000,000. In fact, on or about January 2,

2007, Apex entOed into that certain Agreement for Purchase and Sale of Real Property

and Improvents with Medistar, which specifies a purchase price of $13,500,000 for

the Property (the "Purchase Agreement").

23. When Plaintiffs were first approached about making their investments, it

was represented, and Plaintiffs relied on the representation, that all investors in Apex

5 MasesUWHWOCI-1.9731SHAH.0021Pleadings12NDPOP0205.doc
would be paying $40,000 cash per investment unit, and that Apex would have a total of

450 units. A form of Binding Letter of Intent establishing the cost at $40,000 per unit

was provided to all potential investors, including Plaintiffs. In conformity with their

understanding of the investment, Plaintiffs paid $40,000 per unit for their membership

interests in Apex, with Dr. Koch paying $240,000 for 6 units, Dr. Anpna-Sey paying

$240,000 for 6 units, Dr. Scarborough paying $40,000 for 1 Ula.11), Mr. Saqr paying

$80,000 for 2 units, Dr. Peracha paying $400,000 for 10 unit Patel paying $40,000

for 1 unit, Dr. Wilson paying $40,000 for 1 unit, Dr. Has aying $80,000 for 2 units,

and Dr. Akhtar paying $40,000 for 1 unit. This featurei he investment, that everyone

investing in Apex would be paying cash, was terial inducement for Plaintiffs to

invest because they rightfully believed that Ap.would be purchasing the Property free

and clear of debt, which would mean theirl 4festments in Apex would not be burdened

by debt service.

24. Only recently have- _ Plaintiffs discovered that their investment in the

Hospital Project was not as it t represented to them. First, Plaintiffs have learned

that the purchase price Property may have been $17,500,000, not the
9
$13,500,000 set forth,i0Ife Purchase Agreement. Without Plaintiffs' knowledge, Shah
.0„0
entered into a side-lagreement with Medistar that provided for $4,000,000 of seller

financing. As ,d6Seribed below, that side agreement is now the subject of a pending

lawsuit.

25. Also, Plaintiffs have learned that the 244 units in Apex that Indus claims to

own were not acquired for $40,000 cash per unit. Initially, Shah signed a Binding Letter

of Intent to purchase 125 Apex units, and paid $1,500,000, which he represented as

6 FACaseskJWHWOCI-1.9731SHAH.0021Pleadingsl2NDPOP0205.doc
being 30% of the $5,000,000 he would be paying. However, as detailed below, Shah,

acting through Indus, which is owned and/or controlled by Shah and/or Defendant,

Bharati Shah, eventually parted with only $1,260,000 for 244 Apex units, for an average

of $5,163.93 per unit.

26. Plaintiffs have also learned that the 90 units in Apex t Katy Project,

LLC ("Katy Project") claims to own were not acquired for $4t000 cash per unit.

Initially, Defendant, Randeep Suneja ("Suneja") signed a BOing Letter of Intent to

purchase 40 Apex units at a cost of $40,000 per unit. kikptirse, Defendant, Upendra

Vora ("Vora") signed a Binding Letter of Intent to purchase 30 Apex units at a cost of

$40,000 per unit. However, acting in concert wi h*ah, Katy Project, which is owned

and/or controlled by Suneja and Vora, who is (liab's relative, parted with only $720,000

for 90 Apex units, for an average of $8,Q • er unit. These collective failures to pay

$40,000 cash per unit resulted in an -80,000 shortfall in the funding of Apex.

27. Without notice to o consent of Plaintiffs and the other investors who

paid in full for their Apex 44, Shah, acting in concert with Suneja and Vora,

substituted Apex debt for sh that would have been available if they had paid all

cash as did Plaintiffs an all the other investors in Apex. Shah, with assistance from

Suneja and Vora,. aused Apex to borrow $9,000,000 from MetroBank, N.A.

("MetroBank"). he Loan Agreement, dated March 22, 2007, names Apex as

"Borrower," `tlah, Suneja and Vora as "Guarantors," and MetroBank as "Lender." In

connection with the loan, Shah delivered a Guaranty Agreement for $6,120,000 to

MetroBank, Suneja delivered a Guaranty Agreement for $2,040,000, and Vora

delivered a Guaranty Agreement for $840,000. Of course, as known and intended by

7 FACases\JWI-1KOCH.9731SHAH.0021PleadingsUNDP0130205.doc
 •

Shah, Suneja, and Vora, none of these guarantees has ever been substantially at risk

because the Property is worth far more than the amount borrowed.

28. By causing Apex to borrow the $9,000,000, Shah, a Manager of Apex,

violated, and caused Apex to violate, Section 3.05 of the Company Agreement of Apex

(the "Company Agreement") because this provision of the Comply Agreement

prohibits Apex Managers from causing Apex to incur any liability it,.
#4kcess of $500,000
&r
without the written consent of all Members. Neither Plaint*, nor any of the other

investors in Apex, were approached about giving such cphSent. Moreover, not only did

Shah knowingly violate the Company Agreement to der his scheme to control and

ultimately hijack the Hospital Project, he burd all of the other investors' units,

including those owned by Plaintiffs, by causin ' ex to secure the $9,000,000 loan with

a first mortgage lien covering the Property

29. Shah did not attempt to otbin the required written consent because doing

so would have alerted Plaintiffs and the other members to the deal that he was cutting

for himself and Suneja and VOW Having been alerted to this material change in the

terms of the investment, iffs would have either insisted on being afforded the

same deal, which would'1Yave permitted them to purchase more units, or, more likely,

would have insiste#1 at Indus and Katy Project pay $40,000 cash per unit for each and

every unit they ere purchasing. Shah could not allow this to happen because he knew

he needed rnajbrity control of Apex in order to perpetrate his hijack scheme, but he was

unwilling or unable to pay the $9,760,000 that would be required if Plaintiffs and the

other investors learned of his self-dealing. At a certain point during the time units in

Apex were being offered to investors, Shah instructed that no further units were to be

8 FACaseM.MHIXOCH.9731SHAH.002\Pleadings12NDPOP0205.doc
sold. He did so to ensure that he would be majority owner. Doing so prevented units in

Apex from being sold to investors who, unlike Shah, would have paid $40,000 cash per

unit.

30. Shah went to great lengths to keep Plaintiffs and the other Apex investors

in the dark, including taking at least the following actions to avoid ikpig his scheme

detected:

• Taking from Apex's offices not only the certificatefor Indus's units, but

also the receipts for those certificates so.‘,,Ao avoid the possibility of

another Apex member seeing the written reference to Shah's

personal guarantee that Shah ca to be placed on the receipt for

Certificate No. 24.

• When advised that he would ve to forego 6 of the 250 Apex units he

"purchased" because the*al was "oversold," Shah represented that he

had paid for 250 unjts:(4.hd insisted on being paid $240,000 for the 6 units

to be surrendere
dr:-
40t $30,980.34, which is the collective amount of cash

that he actu aid for the 6 units. This dropped his cash in the deal

from $1,Wi00 to $1,260,000.

• Shah: mlnediately seized control of Apex's finances and refused to share

t .financial information, including failing to provide copies of bank loan

losing documents to the accountants who were requesting the

documents so that Apex's federal income tax return could be prepared.

• After June 2008, Shah stopping providing Apex's accountants with copies

of Apex's bank records.

9 FACases1JWHIKOCI-1.9731SHAH.0021PleadingsL2NDPOP0205.doe
 • Shah repeatedly avoided calling meetings of the Apex members to

discuss the status of Apex and the Hospital Project.

• When it was requested that he provide the members with Apex's financial

information and documents, Shah agreed to do so, but never produced

the promised information and documents.
:22;
• Shah repeatedly complained about Apex's 2007 feii income tax return

because it showed Indus's capital account as$a260,000, not a much
`c-'
larger amount including his guaranty amain which would have been

income tax fraud. Shah delayed signing; ex's 2007 federal income tax

return and did not do so until the Irt4iossible day, that being January 5,

2009. h,-)

31. During early January, 2009, Shah began implementing the next phase of

his scheme to hijack the Hospital Prole& On January 10, 2009, Shah, as Manager of

Indus, gave notice of a special meatmig of the members of Apex to be held on Monday,

January 19, 2009, beginning eta:. 0 am. (the "Notice"). Shah noticed the meeting for a

weekday and for 9:00 a.m ItCause he knew it would be very difficult for the investors
• -
who are doctors, which the majority of Apex investors, to attend. As noticed,

the meeting was d)on January 19, 2009 (the "January 19th Meeting"). The January

19th Meeting w ttended by only Shah, Suneja, Vora, and Kannappan Krishnaswamy

("Krishnaswa ), another Apex member, who had been recruited to attend by Shah.

During the January 19th Meeting, those attending purportedly authorized efforts to

"enforce" the Lease, and the following resolutions were purportedly passed:

(a) Shah was elected to continue serving as a Manager of Apex, which he
had done from the inception of Apex;

10 PICasesUINFI1KOCH.973\SI-1M-1.0021Pleadings12NDPOP0205_doc
 (b) Krishnaswamy was elected to serve as a Manager of Apex; and

(c) The law firm of Kaiser & Conrad, LLP was authorized to take action to
enforce the Lease.

32. Indus had no authority to notice the January 19th Meeting because it does

not own the 244 Apex units it claims to own. As detailed above, thos`144 units were
A70
acquired by means of Shah's fraud and as a result of Shah's bred of fiduciary duties

and breach of the Company Agreement. Consequently, Indui4til not acquire viable or

enforceable title to the 244 Apex units and therefore h io standing to notice the

January 19th Meeting. Therefore, all resolutions paw and actions taken during the

January 19th Meeting are of no force or effect, ancl4factions taken or to be taken after

the January 19th Meeting based on those resions or at the direction of either Shah

or Krishnaswamy, as purported Manager Apex, are unauthorized and constitute or

will constitute ultra vires acts.

33. The January 19t ng was not properly noticed because the Notice

did not adequately describe tl agenda of the meeting. Because the January 19th

Meeting was not properly all resolutions purportedly passed and any other

actions purportedly t during the January 19th Meeting were ineffective, and all
04 (?oz'
actions taken or to be taken after the January 19th Meeting based on those resolutions

are unauthorize4nd constitute or will constitute ultra vires acts.

34. he January 19th Meeting and all resolutions purportedly passed and

actions purportedly taken during the meeting are also ineffective because the Apex

units that Indus and Katy Project claim to own, and which were voted during the

January 19th Meeting, were acquired by means of fraud and as a result of Shah's

11 FACases\JWHIKOCH.973k.SHAH.0021p1eadings12NDPOP0205.doc
breach of fiduciary duties and breach of the Company Agreement. Consequently,

Indus did not acquire legal or equitable title to the 244 Apex units it purportedly voted

during the January 19th Meeting. Because the votes attributable to the 244 units are

invalid and those 244 units represent approximately 54% of the Apex membership
rL
units, no resolution, action, or other measure taken during the Jang 19th Meeting

received a majority of the Apex members' votes as required b -Article 3.08 of the

Company Agreement.

35. On Monday, February 1, 2009, only 1 ys after being elected,

Krishnaswamy resigned as a Manager of Apex. Krish amy did so after learning of

Shah's fraud and deceit, and his plan to evict the Oat. Article 3.01 of the Company

Agreement requires that Apex be managed 4 all times by at least 2 Managers.

Therefore, because the required number Managers does not exist, any actions that

Apex has taken or takes at the direction Shah from February 1, 2009 onward are

void and of no effect.
cz
36. Shah, purported nager of Apex since the inception of Apex and

purportedly re-elected at th huary 19th Meeting, caused Apex to file a lawsuit to evict

Apex LTAC from the jerty. That lawsuit is numbered and styled Cause No. 09-
,,?
CV31-04395; Ape.,,K Physicians, L.L.C. v. Apex Long Term Acute Care—Katy, L.P.,

and is pending Sri he Justice of the Peace Court, Precinct 3, Fort Bend County, Texas

(the "Evictiorsuit"). Shah is aware that Plaintiffs do not support the decision to

pursue eviction against Apex LTAC. More importantly, this action has not been

properly authorized by a legally constituted Board of Managers or by the Apex

members because the votes attributable to the 244 units that Indus claims to own are

12 F:ICasesUWHAK0CH.9731SKAH.0021Pleadings12NDPOP0205.doc
invalid because, as explained above, Indus did not rightfully acquire title to those units.

37. Upon information and belief, Shah is causing Apex to pursue the eviction

proceeding because he is under financial pressure from MetroBank and Medistar. In

fact, Medistar has sued Shah, claiming he owes millions of dollars to Medistar as result

of the side agreement that Shah entered into without Plaintiffs' knowledgeThat lawsuit

is numbered and styled No. 2008-73728; Medistar Corporation .K. Shah, and is

pending in the 165th District Court of Harris County, Texas.

V.
Causes Of Action

A. Breach of Fiduciary Duty

38. Plaintiffs repeat and adopt all of thi'atlegations and averments set forth in

paragraphs 19 through 37 above.

39, Shah, as a Manager of A xowed fiduciary duties to Plaintiffs. Those
CI);
duties include the duty of full discloses, the duty of loyalty and utmost good faith, the

duty of candor, the duty to refra om self-dealing, and the duty to act with integrity of

the strictest kind.

40. Shah has E'r) ched one or more of the fiduciary duties he owed to

Plaintiffs and those breaches are a proximate cause of the actual damages Plaintiffs
(P
have suffered. The of actual damages that Plaintiffs have suffered is within the
`C-Y
jurisdictional~linits of this court.

41. As an alternative to money damages, an appropriate remedy for Shah's

breach of fiduciary duty, and one that Plaintiffs seek, is forfeiture of the Apex units

which Shah purports to own. This equitable relief is appropriate under the

circumstances.

13 PICases1JWHIKOCH.9731SHAI-10021P1eadingsUNDPOP0205.doc
 Oft\ #'11ki

42. Shah's breach of the fiduciary duties was intentional because he intended

to gain an additional, unwarranted benefit for himself at the expense of Plaintiffs and

the other investors in Apex. Plaintiffs therefore are entitled to exemplary damages

under Texas Civil Practice & Remedies Code section 41.003(a). Plaintiffs seek

exemplary damages in an amount that in the opinion of the jury is ne ary to punish

Shah and deter similar conduct in the future by him and others.

B. Fraud

43. Pleading in the alternative, and without aiving any of the foregoing,

Plaintiffs repeat and adopt all of the allegations and aVekenents set forth in paragraphs

19 through 42 above. 'fb)
44. By concealing or failing to discio o Plaintiffs that he, Suneja, and Vora

were not purchasing units in Apex on th(s me terms as Plaintiffs, Shah defrauded

Plaintiffs. Defendant, Bharati P. Shat
i was aware of Shah's fraudulent conduct,

assisted and supported Shah's frak. and benefited from that fraud. The information

that Shah withheld or failed toAlSclose materially impacted the financial structure of

Plaintiffs' investments. Strah
knew that Plaintiffs were unaware of his self-dealing

actions and did not have n equal opportunity to discover the truth. In fact, Shah took

actions intended to pevent Plaintiffs from discovering his self-dealing. Plaintiffs,

unaware of Shalit_IS' self-dealing, relied on Shah's deliberate silence as indicating that

Apex's finarciNd l structure was as had been represented to them when they were

making their investment decision, Shah intended for Plaintiffs to make this assumption.

45. Shah's fraud is a proximate cause of the actual damages that Plaintiffs

have suffered. Plaintiffs' actual damages are within the jurisdictional limits of this court.

14 FACasesUVVHWOCH.973VSHAH.0021PleadingsUNDPOP0205.doc
 46. The damages that Plaintiffs have suffered resulted from Shah's actual

fraud or malice, which entitles Plaintiffs to exemplary damages under Texas Civil

Practice & Remedies Code section 41.003(a). Plaintiffs seek exemplary damages in an

amount that in the opinion of the jury is necessary to punish Shah and deter similar

conduct in the future by him and others.

C. Conspiracy 0

47. Pleading in the alternative, and without waivinCany of the foregoing,
L-...5)
Plaintiffs repeat and adopt all of the allegations and aver is set forth in paragraphs

19 through 46 above.

48. Suneja and Vora conspired with and thereby participated in his

fraud and breach of fiduciary duty. Suneja,- ra, and Shah knew the agreed acts

would result in harm to Plaintiffs.

49. This conspiracy is a proxinf4te cause of the actual damages that Plaintiffs

have suffered. Plaintiffs' actual darn! es are within the jurisdictional limits of this court.

50. As an alternative 'Cnoney damages, an appropriate remedy for Shah,

Suneja's, and Vora's cons and one that Plaintiffs seek, is forfeiture of the Apex

units which Shah, Sunt • C and Vora purport to own. This equitable relief is appropriate

under the circumstan

51. ThCtiamages Plaintiffs have suffered as a result of the conspiracy

perpetrated Shah, Suneja, and Vora resulted from Shah's, Suneja's and Vora's

actual fraud or malice, which entitles Plaintiffs to exemplary damages under Texas Civil

Practice & Remedies Code section 41.003(a). Plaintiffs seek exemplary damages in an

15 FACaseslJWHIKOCH.973\511A1-1.002Tieadings12NDPOP0205.doc
amount that in the opinion of the jury is necessary to punish Shah and deter similar

conduct in the future by him and others.

D. Breach of Contract

52. Pleading in the alternative, and without waiving any of the foregoing,

Plaintiffs repeat and adopt all of the allegations and averments set fo in paragraphs

19 through 51 above.

53. Defendants have breached the Company Agre nt and are continuing

to breach the Company Contract by taking actions ehalf of Apex that are

unauthorized and in direct contravention of the Comp greement.

54. Defendants' breach of the Company-,teement is a proximate cause of

the actual damages that Plaintiffs have suffer Plaintiffs' actual damages are within

the jurisdictional limits of this court.

55. Plaintiffs have fully perfo6ed the obligations required of them by the

Company Agreement and all condOons precedent to Plaintiffs' claim for relief have
‘"
been performed or have occurreao

56. As a direct reiof the breaches, Plaintiffs have been required to employ

John W. Havins and the =lfirm of Havins & Associates, PC as their attorneys, and
( V'
have agreed to pay,,ttle attorneys a reasonable attorney's fee for their services rendered

and to be rende(e)d in this cause. Plaintiffs will present their claims to Defendants in

accordance kh Section 38.001 et seq. of the Texas Civil Practice and Remedies

Code. Pursuant to Section 38.001 et seq. of the Texas Civil Practice and Remedies

Code, Plaintiffs are entitled to and do request an award of reasonable and necessary

attorney's fees for services rendered and to be rendered in this case, which include the

16 FACases\JWHIKOCH.973\SHAH.002PleadIngs12NDPOP0205.doc
 -

following:

(a) Preparation and trial of this lawsuit; and

(b) Post-trial, pre-appeal legal services; and

An appeal to the court of appeals; and

Making or responding to an petition for review to the reme Court of
Texas; and

An appeal to the Supreme Court of Texas in the t petition for review
is granted; and
o
Postjudgment discovery and collection in - ‘ent execution on the
judgment is necessary.

E. Request For Declaratory Relief
7_5?•
6?
57. Pleading in the alternative, and without waiving any of the foregoing,

Plaintiffs repeat and adopt all of the allegati, and averments set forth in paragraphs

19 through 56 above.

58. Pursuant to the UniforrQ/ Declaratory Judgments Act, Chapter 37 of the

Civil Practice and Remedies C9,44011 Texas, Plaintiffs seeks a declaration that neither

Shah, Bharati P. Shah, nor IndA.rs has equitable or legal title to the 244 Apex units they

purport to own and/or I. Plaintiffs also seek a declaration that neither Suneja,

Vora, nor Katy Projec s equitable or legal title to the 90 Apex units they purport to

own and/or contr

59. r miffs are entitled to recover reasonable and necessary attorney's fees

that are equitable and just under Texas Civil Practice & Remedies Code section 37.009

because this is a suit for declaratory relief. Plaintiffs request an award of reasonable

and necessary attorney's fees for services rendered and to be rendered in this case,

which include the following:

17 FACases‘JWIl1KOCH.9731SHAH.0021Pleadings12NDPOP0205.doc
 A

(a) Preparation and trial of this lawsuit; and

(b) Post-trial, pre-appeal legal services; and

(c) An appeal to the court of appeals; and

(d) Making or responding to an petition for review to the Supreme Court of
Texas; and

(e) An appeal to the Supreme Court of Texas in the eve ` ( ~tition for review
is granted; and

(f) Postjudgment discovery and collection in theM`"-nt execution on the
judgment is necessary.

60. Plaintiffs are entitled to recover, and do reque t, awards of pre-judgment

and post-judgment interest at the highest rates permittedby law.

WHEREFORE, Plaintiffs, Stephen M. K , M.D., Victor Ankoma-Sey, M.D.,

Terry Scarborough, M.D., Hatem Saqr, W)ri Peracha, M.D., Nilesh Patel, M.D.,

Erik B. Wilson, M.D., Syed Hasnain, M. Snd Asif Akhtar, M.D., respectfully request
Ov
that Defendants, Pankaj K. Shah, Bhgati P. Shah, Indus Associates, LLC, Apex Katy

Physicians, LLC, Randeep Sunp M.D., Upendra N. Vora, and Katy Project, LLC be

cited to appear and answer and, on final trial, the court declare that (i) neither Shah,

Bharati P. Shah, nor Ind s equitable or legal title to the 244 Apex units they purport

to own and/or control d (ii) neither Suneja, Vora, nor Katy Project has equitable or
,0
legal title to the 9(k/Apex units they purport to own and/or control. In addition, Plaintiffs

ask for judgm jointly and severally, against Defendants for:

A. Actual damages;

B. Exemplary damages;

C Reasonable attorney's fees;

D. Costs of suit;

18 FACasesUWHIKOCH.9731SHAH.0021Pleadings2NDPOP0205.dot
 1. •

E. Prejudgment and postjudgment interest at the highest rates permitted by
law; and

F. All other relief, in law and in equity, to which Plaintiffs may be entitled.

Respectfully submitted, t

HAVINS & ASSOC! , PC

Havins
ar No. 09239800
ry J. Davis
to Bar No. 24028276
01 McKinney, Suite 500
Houston, Texas 77002
T: (713) 650-3600
F: (713) 650-3301

ATTORNEYS FOR PLAINTIFFS
0

19 FACaseAJW1-1kKOCH.9734SHAH.0021Pleadings12NOPOP0205.doc
 CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true copy of the foregoing document was
served on the attorneys listed below in the manner indicated on February 5, 2009.

VIA FAX
Jeffery B. Kaiser
Kaiser & Conrad, LLP
1911 Bagby
Second Floor
Houston TX 77002

VIA FAX
Thomas F. Coleman
Law Office of Tom F. Coleman
817 Westheimer
First Floor
Houston TX 77006

VIA FAX
Robert Remy
Two Memorial City Plaza
820 Gessner Suite 1720
Houston TX 77024

20 FACasestJWHIKOCH.973\SHAH.0021Pleadings12NDPOP0205.doc
 CAUSE NO. 2009-03055

STEPHEN M. KOCH, M.D., Individually, 6 IN THE DISTRICT COURT OF
VICTOR ANKOMA-SEY, M.D. 6
Individually, TERRY SCARBOROUGH, 6
M.D., Individually, HATEM SAQR, 6
Individually, and each as MEMBERS 6
on behalf of APEX KATY PHYSICIANS, 6
LLC; and ADEEL ZAIDI, CO-MANAGER, 6 HARRIS COUN'TEXAS
APEX KATY PHYSICIANS, LLC, §
6 ce)
Plaintiffs, 6
6 coLup--
v. 6
.zt ;
6
PANKAJ K. SHAH, M.D., 6
BHARATI P. SHAI-Vand 6 0 Ct
INDUS ASSOCIATES, LLC, arld:Cr
cC
§
Defendants. § 11TH JUDICIAL DISTRICT

FIRST AMENDED ORIGINAL PETITION APPLICATION FOR TEMPORARY
RESTRAINING ORDER AND TEMPO AND PERMANENT INJUNCTIONS
OF PLAINTIFFS, KOCH, ANK -SEY, SCARBOROUGH, SAQR,
PERACHA, PATEL, WILSOOIASNAIN, KHOURY AND AHTAR
e,,`off;
TO THE HONORABLE COURT: ,q.)'

Plaintiffs, Stephen M. Kdurr; M.D., Victor Ankoma-Sey, M.D., Terry Scarborough,

M.D., Hatem Saqr, Wasee, qt„ eracha, M.D., Nilesh Patel, M.D., Erik B. Wilson, M.D.,

Syed Hasnain, M.D., Sammy Khoury, M.D., and Asif Ahktar, M.D., Individually and each

as a member on WO of Apex Katy Physicians, LLC, complain of Defendants, Pankaj

K. Shah, M.D. , arati P. Shah, Indus Associates, LLC, and Apex Katy Physicians,

LLC, and wouldJrespectfully
would show the court as follows:

I.
Discovery Control Plan

1. Plaintiffs intend to conduct discovery under Level 3 of Texas Rule of Civil

Procedure 190.
uraoRANDIUM
iscoRDEFes ot pecxquaM
ThisInsirumerti% agIns MasesVNIAKOCH.9731SHAH.0021Pleadings‘PORdoc
rithetimeofim
 Parties

2. Plaintiff, Stephen M. Koch, M.D., is an individual residing in Houston,

Harris County, Texas.

3. Plaintiff, Victor Ankoma-Sey, M.D., is an individual resig in Houston,

Harris County, Texas. (0
4. Plaintiff, Terry Scarborough, M.D., is an individual residing in Houston,

Harris County, Texas.

5. Plaintiff, Terry Scarborough, M.D., is andindt.idual residing in Houston,

Harris County, Texas.

6. Plaintiff, Hatem Sagr, is an individr iesiding in Houston, Harris County,

Texas.

7 Plaintiff, Waseem Perach .D., is an individual residing in Houston,

Harris County, Texas.

8. Plaintiff, Nilesh Paf >M.D., is an individual residing in Houston, Harris
County, Texas.

9. Plaintiff, E ilson, M.D is an individual residing in Houston, Harris

County, Texas.
(C,5)
10. Plai , Syed Hasnain, M.D, is an individual residing in Houston, Harris

County, Texask

11. Plaintiff, Sammy Khoury, M.D, is an individual residing in Houston, Harris

County, Texas.

12, Plaintiff, Asif Ahktar, M.D., is an individual residing in Houston, Harris

County, Texas.

2 FACasesUWIIIKOCI-1.973tSHAJ-1.0021Pleadings1PORdoc
 13. Defendant, Pankaj K. Shah, is an individual residing in Sugar Land, Fort

Bend County, Texas, and has previously been served with citation in this action.

14. Defendant, Bharati P. Shah, is an individual residing in Sugar Land, Fort

Bend County, Texas, and has previously been served with citation in this action.

15. Defendant, Indus Associates, LLC, is a Texas limited 14ility company

which has its principal place of business in Sugar Land, Fort Ben‘C%unty, Texas, and
iy
has previously been served with citation in this action.
0
16. Defendant, Apex Katy Physicians, LLC Texas limited liability

company which has its principal place of business irk inton, Harris County, Texas.

Defendant, Apex Katy Physicians, LLC, may be s by serving citation, together with

a copy of this petition, on its registered agenttM)K. Shah, M.D., at 1601 Main Street,

Suite 102, Richmond, Texas 77469. P.K. M.D. may also be served with citation,

together with a copy of this petition, at t03 Rolling Brook Drive, Sugar Land, Texas

77479.

Ill.
Venue

17. Pursuant to- ion 15.002 of the Texas Civil Practice and Remedies

Code, venue is prop in Harris County, Texas because the principal office of

Defendant, Apex Physician, LLC, is located in Harris County and because all or a
0
substantial pa the events or omissions giving rise to the claim occurred in Harris

County.

IV.
Background Facts

18. Plaintiffs, Stephen M. Koch, M.D. ("Dr. Koch"), Victor Ankoma-Sey, M.D.

3 FACases1.1WHIKOCH.9731SHAH.0021Pisadings1POP.doc
("Dr. Ankoma-Sey"), Terry Scarborough, M.D. ("Dr. Scarborough"), Hatem Saqr

("Saga Waseem Peracha, M.D. ("Dr. Peracha"), Nilesh Patel, M.D. ("Dr. Patel"), Erik

B. Wilson, M.D. ("Dr. Wilson") Syed Hasnain, M.D. ("Dr. Hasnain), Sammy Khoury,

M.D. ("Dr. Khoury"), and Asif Ahktar, M.D. ("Dr. Ahtar") (collectively, the "Plaintiffs") are

part of a group of approximately 18 physicians and other investors_ o invested in

Defendant, Apex Katy Physicians, LLC. ("Apex"), Apex was form‘k4Cr the purpose of
'C$
purchasing tracts of real estate situated in Katy, Texas and provements located
A)
thereon (the "Property") and leasing those improvements 'Mat is now Apex Hospital

— Katy. The improvements consist of a 100,000 square foot hospital with 103 patient

beds and a professional building. Defendant, P X. Shah, M.D. ("Shah") is also an

investor in Apex. Shah was an Initial Manag,f Apex and at all times relevant has

remained a Manager or purported Manag'eer of Apex. As explained below, Shah and

Kannappan Krishnaswamy ("Krishnasw#y") are now the purported Managers of Apex.

19. in conjunction witb.,ctheir investment in Apex, Plaintiffs, along with

substantially all of the other in ors, also invested in Apex Long Term Acute Care-

Katy, L.P. ("Apex LTAC"). xample, Dr. Koch invested $98,500.00 in Apex LTAC

and guaranteed $72,50. 4
0 in bank debt, Dr. Ankoma-Sey invested $2,500.00 and

guaranteed $72,50.0 Q0 in bank debt, and Dr. Scarborough invested $500.00 and

guaranteed $14490.00 in bank debt. Almost every person or entity who invested in

Apex is also investor in Apex LTAC. Shah, Krishnaswamy, and Apex are aware of

this. For purposes of this petition, the investments made in Apex and Apex LTAC will

be referred to collectively as the "Hospital Project".

20. Apex LTAC was formed to start, own and operate Apex Hospital — Katy

4 FACaseENWHIKOCH.9731SHAH.002\Pleadings1POP.dac
 !ON

(the "Hospital"), which is now operating as a long term acute care facility on the

Property. The Hospital specializes in providing comprehensive services to medically

complex patients, including those requiring intensive care, pulmonary management,

and cardiac monitoring. Apex LTAC leases the Property from Apex pursuant to that

certain Lease Agreement, dated January 4, 2007 (the "Lease").

21. Prior to Apex acquiring the Property, it was led by Medistar

Corporation ("Medistar"). During the initial conversations re g the Property being

purchased as part of the overall investment plan, Plainti re told that the Property

could be purchased for approximately $13,000,000. oeact, on or about January 2,

2007, Apex entered into that certain Agreement fo `rchase and Sale of Real Property

and Improvements with Medistar, which specifi a purchase price of $13,500,000.00

for the Property (the "Purchase Agreemerrk true copy of the Purchase Agreement

is attached hereto as Exhibit A and inco#4ated herein for all purposes.

22. When Plaintiffs wereefr approached about making their investments, it

was represented, and Plaintiffs`(relied on the representation, that all investors in Apex

would be paying $40,000.0 eieh per investment unit, with a total of 450 units being
O
available for purchase ached hereto as Exhibit B, and incorporated herein for all

purposes, is a trueqq:py of the Binding Letter of Intent that was provided to Plaintiffs

and the other investors. In conformity with their understanding of the investment,

Plaintiffs paid440,000.00 per unit for their membership interests in Apex, with Dr. Koch

paying $240,000.00 for 6 units, Dr. Ankoma-Sey paying $240,000.00 for 6 units, Dr.

Scarborough paying $40,000.00 for 1 unit, Mr. Saqr paying $80,000.00 for 2 units, Dr.

The affidavit of Stephen M. Koch M.D, is attached hereto as Exhibit H and incorporated herein for all
purposes.

5 FACasesiNIKKOCH.9731SHAROO2\Pleadings1POP.doc
Peracha paying $800,000.00 for 20 units, Dr. Patel paying $40,000.00 for 1 unit, Dr.

Wilson paying $40,000.00 for 1 unit, Dr. Hasnain paying $80,000.00 for 2 units, Dr.

Khoury paying $40,000,00 for 1 unit, and Dr. Ahktar paying $40,000.00 for 1 unit. This

feature of the investment, that everyone investing in Apex would be paying cash, was a

material inducement for Plaintiffs to invest because they rightfully bpfieVed that Apex

would be purchasing the Property free and clear of debt, whirl 'would mean their

investments in Apex would not be burdened by debt service.
o 'may
Q
23. Only recently have Plaintiffs discovered their investment in the

Hospital Project was not as it was represented to the* First, Plaintiffs have learned

that the purchase price of the Property was $17,500; .00.00, not the $13,500,000.00 set

forth in the Loan Agreement. Without PlaintifWicnowledge, Shah entered into a side

agreement with Medistar that provided ,000,000 of seller financing. Also,

Plaintiffs have learned that the 244 units)in Apex that Indus Associates, LLC claims to
`c73)
own were not acquired for $40,0QQ, cash per unit. Instead, Indus, which is owned

and/or controlled by Shah /or Defendant, Bharati Shah, parted with only

$1,260,000.00 for the 244 leals,, for an average of $5,163.93 per unit. Plaintiffs have
7, 0
also learned that the 90 uits in Apex that Katy Project, LLC ("Katy Project") claims to

own were not acqur for $40,000.00 cash per unit. Instead, Katy Project, which is

owned and/or controlled by Randeep Suneja ("Suneja") and Upendra N. Vora ("Vora"),

who is Shah-Telative, parted with only $720,000.00 for the 90 units, for an average of

$8,000.00 per unit. These collective failures to pay $40,000.00 cash per unit resulted in

an $11,380,000.00 shortfall in the funding of Apex.

24. Without notice to or the consent of Plaintiffs and the other investors who

8 FACasesIJWWKOCH.9731SHAH.0021Pleadings1POP.doc
paid in full for their Apex units, Shah, acting in concert with Suneja and Vora,

substituted Apex debt for the cash that would have been available if they had paid all

cash as did Plaintiffs and all the other investors in Apex. Shah, with assistance from

Suneja and Vora, caused Apex to borrow $9,000,000.00 from MetroBank, N.A.

("MetroBank"). A true copy of the Loan Agreement, dated March 2.2.,,2007, by and

among Apex as "Borrower," Shah, Suneja and Vora as "Guarantorsiind MetroBank as

"Lender", is attached hereto as Exhibit C and incorporated h, for all purposes. In
o sz=,
connection with the loan, Shah delivered a Guaranty Agent for $6,120,000.00 to

MetroBank, Suneja delivered a Guaranty Agreement r $2,040,000.00, and Vora

delivered a Guaranty Agreement for $840,000/7. True copies of the Guaranty

Agreements are attached hereto as Exhibit D "t incorporated herein for all purposes.

Of course, as known and intended by Suneja, and Vora, none of these

guarantees has ever been substantially4 risk because the Property is worth far more

than the amount borrowed.

25. By causing Apex tOorrow the $9,000,000.00, Shah, a Manager of Apex,

violated, and caused Apex iblate, Article 3.05 of the Company Agreement of Apex

(the "Company Agreern t") because this provision of the Company Agreement

prohibits Apex MpnVers from causing Apex to incur any liability in excess of

$500,000.00 without the written consent of all Members. A true copy of the

Company Agreement is attached hereto as Exhibit E and incorporated herein for all

purposes. Neither Plaintiffs, nor any of the other investors in Apex, were approached

about giving such consent. Moreover, not only did Shah knowingly violate the

Company Agreement to further his scheme to control and ultimately hijack the Hospital

7 FACaseskJWFWOCH.9731SHAH.0021Readings1PORdoc
Project, he burdened all of the other investors' units, including those owned by

Plaintiffs, by causing Apex to secure the $9,000,000.00 loan with a first mortgage lien

covering the Property.

26. Shah did not attempt to obtain the required written consent because doing

so would have alerted Plaintiffs and the other members to the deal thhe was cutting
(_
for himself and Suneja and Vora. Having been alerted to this millt6rial change in the

terms of the investment, Plaintiffs would have either insiste being afforded the

same deal, which would have permitted them to purchaF ore units, or, more likely,

would have insisted that Indus and Katy Project pay $41)000.00 cash per unit for each

and every unit they were purchasing. Shah couk Oallow this to happen because he

knew he needed majority control of Apex in o‘tiAr to perpetrate his hijack scheme, but

he was unwilling or unable to pay the $9,7 00.00 that would be required if Plaintiffs

and the other investors learned of his e-dealing. At a certain point during the time

units in Apex were being offered to,i&estors, Shah instructed that no further units were

to be sold. He did so to ensure at he would be majority owner. Doing so prevented

units in Apex from beingto investors who, unlike Shah, would have paid

$40,000.00 cash per urk

27. Shah. lit to great lengths to keep Plaintiffs and the other Apex investors

in the dark, including taking at least the following actions to avoid having his scheme

detected:

• Taking from Apex's offices not only the certificates for Indus's units, but

also the receipts for those certificates so as to avoid the possibility of

another Apex member seeing the handwritten reference to Shah's

8 FACasesUWERKOCH.97USHAH.0021Pleadings1PORdoc
 personal guarantee that Shah caused to be placed on the receipt for

Certificate No. 24.

• When advised that he would have to forego 6 of the 250 Apex units he

"purchased" because the deal was "oversold," Shah represented that he

had paid for 250 units and insisted on being paid $240 V00 for the 6

units to be surrendered, not $30,980.34, which is the collective amount of

cash that he actually paid for the 6 units.

• Shah immediately seized control of Apex's fih, ces and refused to share

the financial information, including failing provide copies of bank loan

closing documents to the acco rr nts who were requesting the

documents so that Apex's federa ome tax return could be prepared.

• After June 2008, Shah stoppingNizsroviding Apex's accountants with copies
k
of Apex's bank records. 0
'(*
• Shah repeatedly ,t -'d calling meetings of the Apex members to

discuss the statu Apex and the Hospital Project.

• When it was rested that he provide the members with Apex's financial

informatiCn and documents, Shah agreed to do so, but never produced
o

the pr ised information and documents.
• S } repeatedly complained about Apex's 2007 federal income tax return

because it showed Indus's capital account as $1,260,000.00, not a much

larger amount including his guaranty amount, which would have been

income tax fraud. Shah delayed signing Apex's 2007 federal income tax

return and did not do so until the last possible day, that being January 5,

9 F:1Casesi..1WHNKOCH.9731SHAH.0021Pleadings\POP.d0c
 2009.

28. During early January, 2009, Shah began implementing the next phase of

his scheme to hijack the Hospital Project. On January 10, 2009, Shah, as Manager of

Indus, gave notice of a special meeting of the members of Apex to be held on Monday,

January 19, 2009, beginning at 9:00 a.m. (the "Notice"). A true copy the Notice is

attached hereto as Exhibit F and incorporated herein for all purpos sl Shah noticed the

meeting for a weekday and for 9:00 a.m. because he knew id be very difficult for
°
the investors who are doctors, which is the majority of investors, to attend. As

noticed, the meeting was held on January 19, 20092 he "January 19th Meeting").

During the January 19th Meeting, which was atte by only Shah, Suneja, Vora, and
`N;/
Krishnaswamy, the following resolutions were ortedly passed:

(a) Shah was elected to contin rving as a Manager of Apex, which he
had done from the inception pex;

(b) Krishnaswamy was elect to serve as a Manager of Apex; and
, -
(c) The law firm of Kpisgt & Conrad, UP was authorized to take action to
enforce the Leasej

A true copy of the resoluti adopted during the January 19th Meeting is attached

hereto as Exhibit G a/14,in 6rporated herein for all purposes.
„ sZ
29. Indu, no authority to notice the January 19th Meeting because it does

not own the 244 *ex units it claims to own. As detailed in paragraphs 20 through 25

above, those 44 units were acquired by means of Shah's fraud and as a result of

Shah's breach of fiduciary duties and breach of the Company Agreement.

Consequently, Indus did not acquire viable or enforceable title to the 244 Apex units

and therefore had no standing to notice the January 19th Meeting. Therefore, all

10 FACasest.IWFAKOCH.9731SHAH.0021Pleadings1POP.doc
resolutions passed and actions taken during the January 19th Meeting are of no force or

effect, and all actions taken or to be taken after the January 19th Meeting based on

those resolutions or at the direction of either Shah or Krishnaswamy, as purported

Managers of Apex, are unauthorized and constitute or will constitute ultra vires acts.

30. The January 19th Meeting was not properly noticedcgi)
be se the Notice

did not adequately describe the agenda of the meeting. Becaus the January 19th

Meeting was not properly noticed, all resolutions purportectjy-passed and any other

actions purportedly taken during the January 19th Metierwere ineffective, and all

actions taken or to be taken after the January 19th M g based on those resolutions

are unauthorized and constitute or will constitute 4,vires acts.

31. The January 1991 Meeting and,. resolutions purportedly passed and

actions purportedly taken during the -ting are also ineffective because the

membership units in Apex that Indus Katy Project claim to own, and which were

voted during the January 19th , were acquired by means of fraud and as a result

of Shah's breach of fiduciaduties and breach of the Company Agreement.

Consequently, Indus did no &wire viable or enforceable title to the 244 Apex units it

purportedly voted duringe January 19th Meeting. Because the votes attributable to

the 244 units are Inc!and those 244 units represent approximately 54% of the Apex

membership unit )i o resolution, action, or other measure taken during the January 19th

Meeting rec d a majority of the Apex members' votes-as required by Article 3.08 of

the Company Agreement.

32. Shah, purported Manager of Apex since the inception of Apex and

purportedly re-elected at the January 19th Meeting, has caused Apex to file a lawsuit to

11 F:CasesNJWFAKOCH,9731SHAI-1,0021Preadings\POP.doc
evict Apex LTAC from the Property. That lawsuit is numbered and styled Cause No.

09-CV31-04395; Apex Katy Physicians, L.L.C. v. Apex Long Term Acute Care—Katy,

LP., and is pending in the Justice of the Peace Court, Precinct 3, Fort Bend County,

Texas (the "Eviction Lawsuit"). The trial in the Eviction Lawsuit is scheduled to begin on

Tuesday, February 5, 2009, beginning at 2:00 p.m. Upon information belief, Shah

is causing Apex to pursue the eviction proceeding because ‘As under financial

pressure being brought by MetroBank and Medistar. in fact istar has sued Shah,

claiming he owes millions of dollars to Medistar as res the side agreement that
c.

Shah entered into without Plaintiffs' knowledge. That wsuit is numbered and styled
(F.
No. 2008-73728; Medistar Corporation v. P.K. S ahand is pending in the 165th District

Court of Harris County, Texas. As for Metro 4*, upon information and belief, the final

chapter of Shah's scheme to hijack the spital Project is that Shah intends to

participate in a "friendly foreclosure" (1* will result in Shah, with Suneja and Vora

possibly participating, purchasing It*Property and thereby ridding himself of Plaintiffs

and the other minority Apex me

33. Shah is aware ai Plaintiffs do not support the decision to pursue eviction

against Apex LTAC. goi4i,important, this action has not been properly authorized by a
(-(P
)
legally constituted,BOrd of Managers or by the Apex members because the votes

attributable to t,t0.- 244 units that Indus claims are invalid because, as explained above,

Indus did no htfully acquire title to those units.

V.
Causes Of Action

A. Application for Restraining Order and injunctive Relief

34. Plaintiffs repeat and adopt all of the allegations and averments set forth in

12 F:CasesIJINEKKOCH.9731SHAH.0021Pleadings1POP.doc
paragraphs 18 through 33 above.

35. Plaintiffs ask the court to prevent Defendants and their agents from

pursuing the Eviction Lawsuit or taking any other action that interferes with Apex

LTAC's occupation and use of the Property during the pendency of this action, or taking

any other action that interferes with or disrupts the business of LTAC or the

Hospital.

36. It is probable that Plaintiffs will recover from Def nts after a trial on the

merits because it is undeniable that Shah, as a Ma of Apex, breached the

Company Agreement when he caused Apex to incur d of $9,000,000.00 without the

written consent of Plaintiffs and all other membersa- Apex. Further, it is probable that

Plaintiffs will prevail at trial because it is undeniable that neither Shah nor Indus fully

paid for the 244 Apex units that Indus cl to own and that Shah failed to disclose

this material "change in the deal" to ntiffs and the other Apex investors, except

Suneja and Vora, who were in oh,i(he scheme with Shah. Finally, it is probable that

Plaintiffs will prevail at trial belieDefendants are taking actions to the detriment of

Plaintiffs that they have no, liority to take, and those actions will result in damage to

Plaintiffs.
„ s.b?
37. If Plaintiffs' application is not granted, harm is imminent because Apex will

attempt to evict Apex LTAC from the Property, the Hospital will fail, which will not only

cause Plain iffy to lose their investments in Apex LTAC, but will also disrupt their

workplace and their relationships with patients.

38. The harm that will result if the temporary order is not issued is irreparable.

If Apex LTAC is evicted, its business operations will be totally disrupted and the

13 FACasesUWHIKOCH.9731SHAH.002lPieadIngs\PORdoc
Hospital will cease to exist. Plaintiffs' relationships with patients will be severely

disrupted and some possibly lost. Plaintiffs will lose not only their investment in Apex

LTAC, but also their rights in and the use of the Hospital, which is a unique asset

because of its specialized nature. Further, the failure of the Hospital will harm Plaintiffs'

reputations in the local medical and business communities. The failiONOf the Hospital

will also leave the Property without a viable tenant, which ii
4lf) make it virtually

impossible in the current market conditions to re-finance thietroBank debt. That

being so, it is very likely that MetroBank, which would n eve a lien on the Property
)

but for Shah's fraud, deceit, and self-dealing, will forec . e its lien. When that occurs,

Plaintiffs' investments in Apex will be worthies '10fong with those of all the other

investors. Plaintiffs have no adequate renr! at law because the damages that

Plaintiffs would suffer, particularly fromcc- mess and professional disruption and

damage to perional and professional J cannot be readily calculated or
es
measured by any certain pecuniaryjciandard. Additionally, Plaintiffs have no adequate

remedy at law because, basedWinformation and belief, Defendants will not be able to

satisfy the judgments that 19111aIntiffs and other investors anticipate receiving against
_ ON'
them.

39. PlaqtiffS-ere willing to post a bond.

40. Pl*itts ask the court to set their application for temporary injunction for a

hearing anderer the hearing, issue a temporary injunction against Defendants.

41. Plaintiffs have joined all indispensable parties under Texas Rule of Civil

Procedure 39.

14 FACasesWINFAKOCH.9731SHAH.0021P1eadings\POP.doC
 42. Plaintiffs ask the court to set their request for a permanent injunction for a

full trial on the merits and, after the trial, issue a permanent injunction against

Defendants.

B. Breach of Fiduciary Duty

43. Pleading in the alternative, and without waiving any 4Ahe foregoing,

Plaintiffs repeat and adopt all of the allegations and averments s‘-forth in paragraphs

18 through 42 above.

44. Shah, as a Manager of Apex, owed fiduci Aiities to Plaintiffs. Those

duties include the duty of full disclosure, the duty of loyAty and utmost good faith, the

duty of candor, the duty to refrain from self-dealing,rCend the duty to act with integrity of

the strictest kind.

45. Shah has breached one oCiore of the fiduciary duties he owed to

Plaintiffs and those breaches are a praimate cause of the actual damages Plaintiffs

have suffered. The amount of actuaLtiamages that Plaintiffs have suffered is within the

jurisdictional limits of this court.0

46. As an altema o money damages, an appropriate remedy for Shah's

breach of fiduciary du nd one that Plaintiffs seek, is forfeiture of the Apex units for
'Z?
which Shah did (z., fully pay. This equitable relief is appropriate under the

circumstance 0

47. Shah's breach of the fiduciary duties was intentional because he intended

to gain an additional, unwarranted benefit for himself at the expense of Plaintiffs and

the other investors in Apex. Plaintiffs therefore are entitled to exemplary damages

under Texas Civil Practice & Remedies Code section 41.003(a). Plaintiffs seek

15 FACasesVNI-IIKOCH.9731SHAH.0021Pleadings1POP.doc
exemplary damages in an amount that in the opinion of the jury is necessary to punish

Shah and deter similar conduct in the future by him and others.

C. Fraud

48. Pleading in the alternative, and without waiving any of the foregoing,

Plaintiffs repeat and adopt all of the allegations and averments set fo,sa in paragraphs

18 through 47 above.

49. By concealing or failing to disclose to Plaintiffs tie, Suneja, and Vora

were not purchasing units in Apex on the same terms plaintiffs, Shah defrauded

Plaintiffs. Defendant, Bharati P. Shah, was aware:. Shah's fraudulent conduct,

assisted and supported Shah's fraud, and bene from that fraud. The information

that Shah withheld or failed to disclose mate
er ly impacted the financial structure of

Plaintiffs' investments. Shah knew thatT intiffs were unaware of his self-dealing

actions and did not have an equal opp nity to discover the truth. In fact, Shah took

actions intended to prevent Plaintiffs from discovering his self-dealing. Plaintiffs,

unaware of Shah's self-dealinlied on Shah's deliberate silence as indicating that

Apex's financial structure s as had been represented to them when they were
, CD)
making their investment. eision, Shah intended for Plaintiffs to make this assumption.

50. Shah* ud is a proximate cause of the actual damages that Plaintiffs

have suffered ntiffs' actual damages are within the jurisdictional limits of this court.

51. e damages that Plaintiffs have suffered resulted from Shah's actual

fraud or malice, which entitles Plaintiffs to under Texas Civil Practice & Remedies Code

section 41.003(a). Plaintiffs seek exemplary damages in an amount that in the opinion

16 F:tCasesUiMilKOCH.973tSHAH.0021PleadingstPOP.doc
of the jury is necessary to punish Shah and deter similar conduct in the future by him

and others.

D. Breach of Contract

52. Pleading in the alternative, and without waiving any of the foregoing,

Plaintiffs repeat and adopt all of the allegations and averments set f in paragraphs

18 through 51 above.

53. Defendants have breached the Company Agra ''t and are continuing

to breach the Company Contract by taking actions ''t ehalf of Apex that are

unauthorized and in direct contravention of the Company greement.

54. Defendants' breach of the Compa7 reement is a proximate cause of

the actual damages that Plaintiffs have suffer4) Plaintiffs' actual damages are within

the jurisdictional limits of this court. 0,

55. Plaintiffs have fully perfoei d the obligations required of them by the

Company Agreement and all co dns precedent to Plaintiffs' claim for relief have

been performed or have occurr

56. As a direct reef the breaches, Plaintiffs have been required to employ

John W. Havins and th aw firm of Havins & Associates, PC as their attorneys, and

have agreed to pay attorneys a reasonable attorney's fee for their services rendered

and to be rendeMd in this cause, Plaintiffs will present their claims to Defendants in

accordance with Section 38.001 et seq. of the Texas Civil Practice and Remedies

Code. Pursuant to Section 38.001 et seq. of the Texas Civil Practice and Remedies

Code, Plaintiffs are entitled to and do request an award of reasonable and necessary

attorney's fees for services rendered and to be rendered in this case, which include the

17 F:NeasesVIWHIKOCI-1.973\SHA14.0021Pleadings\POP.tioc
following:

(a) Preparation and trial of this lawsuit; and

(b) Post-trial, pre-appeal legal services; and

(c) An appeal to the court of appeals; and

(d) Making or responding to an application for review to the Ir~ reme Court of
Texas; and ql
2

An appeal to the Supreme Court of Texas in tl-kevent application for
review is granted; and

(f) Postjudgment discovery and collection inevent execution on the
judgment is necessary.
°
46. Plaintiffs are entitled to recover, and daTaquest, awards of pre-judgment

and post judgmentinterest at the highest rates pFitted by law.

WHEREFORE, Plaintiffs, Stephen Koch, M.D., Victor Ankoma-Sey, M.D.,

Terry Scarborough, M.D., Hatem Saq aseem Peracha, M.D., Nilesh Patel, M.D.,
rq
Erik B. Wilson, M.D., Syed Hasnakrv:_M.D., Sammy Khoury, M.D., and Asif Ahktar, M.D.,

respectfully request that De( ants, Pankaj K. Shah, Bharati P. Shah, Indus

Associates, LLC, and Apex:kliubl
i Physicians, LLC, be cited to appear and answer and,

on final trial, Plaintiffs havesjudgment, jointly and severally, against Defendants for:

A. Temper restraining order;

B. Temporary injunction;

C. rmanent injunction;

D. Actual damages;

E. Exemplary damages;

F. Reasonable attorney's fees;

18 FACases1.)WHKOCI-1.973iSHAH.0021Pleadings1POP.doc
G. Costs of suit;

H. Prejudgment and postjudgment interest at the highest rates permitted by
law.

I. All other relief, in law and in equity, to which Plaintiffs may be entitled.

Respectfully submi t
HAVINS & ASSObIATES, PC

W. Havins
Bar No.: 09239800
ery J. Davis
to Bar No. 24028276
01 McKinney, Suite 500
ouston, Texas 77002
T: (713) 650-3600
F: (713) 650-3301
0
ATTORNEYS FOR PLAINTIFFS

19 FACaseENWI-1KOCH.9731SliA1-1.0021Plearlings‘POP.doc
 CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true copy of the foregoing document was
served on the attorneys listed below in the manner indicated on February 2, 2009.

VIA MESSENGER
Jeffery B. Kaiser
Kaiser & Conrad, LLP
1911 Bagby
Second Floor
Houston TX 77002

VIA MESSENGER
Thomas F. Coleman
Law Office of Tom F. Coleman
817 Westheimer
First Floor
Houston TX 77006

VIA MESSNGER
Robert Remy
Two Memorial City Plaza
820 Gessner Suite 1720
Houston TX 77024 0
VIA MESSENGER
Karen M. Zuckerman
Law Office of Karen M. Zuckerika))
7202 Buffalo Speedway
Houston TX 77025

20 F:1CasesUWHIKOCI-1.9731SHAH.002neadingsTOP.doc
 Filed
09 Jan ary 18 Al2.18
Loren Jackson
District Clerk
Harris District
cAAPAP 0 3 0 5

STEPHEN M. KOCH, M.D., Individually, IN THE DISTRICT COURT OF
VICTOR ANKOMA-SEY,
Individually, TERRY SCARBOROUGH,
M.D., Individually, HATEM SAQR,
Individually, and each as MEMBERS
on behalf of APEX KATY PHYSICIANS,
LLC; and ADEEL ZAIDI, CO-MANAGER,
APEX KATY PHYSICIANS, LLC

Plaintiffs,

v.
JUDICIAL DISTRICT
PANKAJ K. SHAH, M.D., BHARATI P. SHAH,
INDUS ASSOCIATES, LLC,

Defendants.

PLAINTIFFS' ORIGINAL PETIT AND APPLICATION FOR
TEMPORARY RESTRAINING R AND INJUNCTIVE RELIEF

COMES NOW, Stephen M. Ko .D., individually, Victor Ankoma-Sey, M.D.,

individually, Terry Scarborough, individually, Hatem Sager, individually, and each

as Members on behalf of Ap ysicians, LLC, and Adeel Zaidi, Co-Manager of Apex

Katy Physicians, LLC, an grounds therefor shows the following:
oN"
I. PARTIES

1. Plaintiff 4ien M. Koch, M.D. is an individual and a resident of the State of

Texas. Dr. is a licensed Texas physician and maintains a medical practice in the
O
Houston . He has fully paid for and owns 6 membership units of Apex Katy

Physicians, LLC, a Texas limited liability company ("Apex LLC" or, the "Company").

Dr. Koch has owned these units at all times during which the acts or omissions

complained of took place. Dr. Koch is one of 18 Members of Apex LLC and brings this

action both individually and derivatively on behalf of the Company and, to that extent,

RECORDER'S MEMORAMUM
This instrument is of poor quality
at the time of imaging
Apex LLC is nominally named as a party plaintiff so that the benefits of this litigation

will be shared by the Members who are similarly situated.

2. Plaintiff Victor Ankoma-Sey, M.D. is an individual and a resident of the State of

Texas. He is a licensed Texas physician and maintains a medical practice Houston,

Texas. Dr. Ankoma-Sey has fully paid for and owns 6 membership unf Apex LLC.

Dr. Ankoma-Sey has owned these units at all times during which acts or omissions

complained of took place. He is one of 18 Members of Apex Chid brings this action

both individually and derivatively on behalf of the Comp d, to that extent, Apex

LLC is nominally named as a party plaintiff so that the,t!?.; efits of this litigation will be

shared by the Members who are similarly situated. - LP;

3. Plaintiff Terry Scarborough, M.D. is alividual and a resident of the State of

Texas. He is a licensed Texas physician maintains a surgical medical practice in

Houston, Texas. Dr. Scarborough has AM!! paid for and owns 1 membership unit of Apex
1_72))
LLC. Dr. Scarborough has ownerts unit at all times during which the acts or omissions

complained of took place. H its ne of 18 Members of Apex LLC and brings this action

both individually and de‘ely on behalf of the Company and, to that extent, Apex

LLC is nominally nativisi as a party plaintiff so that the benefits of this litigation will be

shared by the Mrs who are similarly situated.

4. Plain . --latem Saqr is an individual and a resident of the State of Texas. He is a

busines Sessional with specialized expertise in analyzing the financial impact of

Medicare reimbursement rules and regulatory changes as they concern long term acute

care hospitals. Mr. Saqr has fully paid for and owns 2 membership units of Apex LLC.

He has owned these units at all times during which the acts or omissions complained of

2
took place. Mr. Saqr is one of 18 Members of Apex LLC and brings this action both

individually and derivatively on behalf of the Company and, to that extent, Apex LLC is

nominally named as a party plaintiff so that the benefits of this litigation will be shared

by the Members who are similarly situated.

5. Plaintiff Adeel Zaidi is an individual residing in Sugar Land, Fort Bend

County. He is the registered agent for Apex LLC and the Co-Maneger of the Company.

Mr. Zaidi has served as Co-Manager since the Company was fottFa and he was selected
0
as an initial Co-Manager in or about February 2007. He is ember of the Company

and does not own any membership units of Apex LLC.

6. Defendant Pankaj K. Shah, M.D. is an m residing in Sugar Land, Texas.

Defendant Pankaj K. Shah, M.D. can be sere' his residence address: 17403 Rolling

Brook Drive, Sugar Land, Texas 77479(1 ted in Fort Bend County. Dr. Shah is a

Member of Apex LLC and its other C0.4anager. The number of membership units for

which he fully paid and is entitled tio vote, if any, has not been established and is being

challenged by Plaintiffs. Lik e, the existence, extent and validity of any ownership

interest he claims mpany is presently uncertain and being challenged by

Plaintiffs.

7. Defendant harati P. Shah is an individual residing in Sugar Land, Texas,

Defendant IL..tati P. Shah is the wife of Defendant Pankaj K. Shah, M.D. and can be

served e same residence address: 17403 Rolling Brook Drive, Sugar Land, Texas

77479, Fort Bend County. Upon information and belief, Ms. Shah is a Member and

manager of Defendant Indus Associates, LLC.

3
8. Upon information and belief, Defendant Indus Associates, LLC ("Indus") is a

Texas limited liability company formed by Defendants Pankaj K. Shah and Bharati P.

Shah (the "Shah Defendants") and may be served through service made upon its agent,

Bharati P. Shah, at the following address: 17403 Rolling Brook Drive, Sugar Land, Texas

77479, Fort Bend County. Defendant Indus is believed to beneficially, and manage

certain investment and business interests of one or both Shah Defend Sj. The number of
rcj
membership units of Apex LLC which Defendant Indus paid:,',* in full (directly or

through its principals) is uncertain and being challengePlaintiffs. Likewise, the
O
existence, extent and validity of any ownership inter* tiaimed by Defendant Indus in

the Company is uncertain and being challenged b)t'‘itiffs.

II. DISCOVE EVEL
R
9. Plaintiffs intend that discovery nducted under Level 2 pursuant to Rule

190.3 of the Texas Rules of Civil Proct6re.
`ca
HI, DICTION AND VENUE

10. This Court has juriscGn pursuant to Texas Civil Practice & Remedies Code

§65,021 because this pros ing involves hearing and determination of an application for

injunctive relief. F , the Court has jurisdiction because the Defendants are either

individuals resi4i in Texas or entities conducting business within and under the laws of

Texas. 0
11.e tue is proper in Harris County, Texas because all or part of the causes of action

occurred Harris County, Texas. See Tex. Civ. Prac, & Rem. Code § 15,002,

4
 IV. FACTUAL BACKGROUND

12. Apex LLC was formed by a group of approximately 18 physicians and other

investors with the primary purpose of owning a tract of real estate and improvements

located in Katy, Texas (the "Property"). The improvements include a 100,000 square foot

hospital building with 103 patient beds as well as a separate profession %I ding which,

since Apex LLC was formed in February 2007, has been nearly vacTit for one tenant
Q
who was occupying a small portion of this building when it vir ,quired by Apex LLC
°
and continues to do so.

13. The operations of Apex LLC are to be conduct -?t1 provided for in its Company

Agreement agreed to and adopted by the MembeV4tebruary 9, 2007. Pursuant to the

Company Agreement, the Company is to be ed by at least two managers. Upon its

formation, the Members selected as the
itial managers Plaintiff Adeel Zaidi and

Defendant P.K. Shah. These Co-Manars have the exclusive authority, acting together
,„ 0
in consultation and agreement wjtk--One another, to carry out and perform their duties in

managing the business oper s of the Company consistent with the regulations and

terms of the Company A - ent. These regulations and terms place certain restrictions

on the authority of hangers to act without the written consent of all Members of the

Company. Spe ally, the Managers are prohibited from performing any act in

contraventi,f the Company Agreement, and they are not authorized to incur any

Comps yl
ilaability in excess of $500,000 without first obtaining the unanimous approval

of the Members. In fact, Dr. Shah caused the Company to borrow $9,000,000 and

allowed liens to be placed on all of the Company's real estate assets, without informing

all Members or obtaining their required consent. The Company Agreement also provides

5
that differences between the Managers shall be decided by a vote of 65% in interest (not

in number) of the Members.

14. Further, Defendant P.K. Shah did not pay for the number of membership units in

Apex LLC to which he subscribed and is claiming to own in order to control decision-

making of the Company by voting an alleged majority percentage own interest that

he is not entitled to and may not legally possess. He has and co44ues to violate the

Company Agreement as well as the fiduciary duties he owes th414embers as a Manager,

including the duty to disclose to Members all material finial and other information

concerning Apex LLC and acting to protect and furth lie Members' interests and not

his own personal interests. As made clear by the &ivit testimony of Plaintiff Stephen

M. Koch, M.D. attached hereto and incorpo herein for all purposes as Exhibit A,

unless Dr. Shah is immediately restrainedc unilateral actions he is taking and intends

to take in less than 48 hours will causelinminent harm to the other Members and leave

them with no adequate remedy '. This is because their interest in the Property and

their investment in Apex C is being jeopardized, diminished and seriously

compromised by Dr. Sh Unilateral decision-making. Dr. Shah is attempting to seize
0
personal control of A. LLC to further his personal interests in direct contravention of

the Company Ag ent and his fiduciary obligations owed to Members.
•> .
15. Dr. Is also attempting to derail and/or pre-empt this Monday's January 19,

2009 meting of all LLC Members to be held at 6:30 p,xn. A meeting notice was

distributed to the Members on January 6th by Adeel Zaidi, Co-Manager of Apex LLC

(after discussion with Dr. Shah). Several days tater, Dr. Shah sent out his own special

meeting notice, attached hereto and incorporated herein as Exhibit B calling for a

6
membership meeting to be held at 9:00 a.m. on Monday, January 19, 2009, the exact

same date as the previously noticed 6:30 p.m. meeting. Dr. Shah's meeting notice set

forth a list of actions he wants considered and acted on at his meeting. Among the items

he is seeking is the removal of his Co-Manager, Mr. Zaidi. Dr. Shah, once again, is acting

in his own interests and engaging in self-dealing to the neglect and of the LLC

Members. The Shah personal agenda meeting notice also prom to amend the

Company Agreement but dmiwtcUelosethenatireorif such amendments,

which in and of itself renders the meeting notice defe Ind invalid. Again, this

demonstrates the purposeful secrecy Dr. Shah has been4in!g to exploit the Members to

achieve his own objectives and not the membershi jectives.

16. Dr. Shah and the other Defendants . t be restrained from attempting to

manipulate the outcome of membershi 'sion-making by voting interests in the

Company that they do not own because did not pay for them. Should he be permitted

to vote membership units whichq tiffs will prove he does not own, and therefore can

not vote, Dr. Shah will irrep y injure Apex LLC and its Members. Moreover, Dr.

Shah's transparent attemMitp re-empt the later meeting by attempting to hold, conduct

and control the agenWand actions to be taken at his own meeting of the Members

demonstrates that' -is acting in bad faith to serve his own interests and not those he was

entrusted by LLC Members to serve. Dr. Shah's Co-Manager has tried to schedule

Membershipmeetings on multiple occasions for over a year, yet no meetings were held

because Dr. Shah would either cancel the meeting(s) or not be available to attend them

and/or would request the meeting be postponed (and not provide any alternate dates).

This has resulted in no Membership meetings having been held and has allowed Dr. Shah

7
to avoid sharing and disclosing to the Membership important financial, investment and

other highly relevant information concerning transactions and other matters in which the

Members have an interest and are entitled to be informed, Such information has been

requested repeatedly and as recently as this past week but Dr. Shah controls access to

these important financial and banking records and Dr. Shah has not res nor made

the material available to the Members.

17. Dr. Shah has failed to inform the Members of any busi financial or banking
o

related to Apex LLC since its inception. He has
matters related f to disclose the financial

affairs of Apex LLC and his misuse of the cash proegikiS of Apex LLC for his own

benefit. He has canceled or otherwise thwarted ey ffort to conduct a regular or any

other type of meeting of the company's Met,s, and thereby positioned himself to

exploit and take undue advantage of their f knowledge about actions he took which

adversely affected their ownership rightsand interests in the Company. For example,

almost all of the Members h 149 knowledge that Dr. Shah had encumbered the

Company's real estate with conveyed to MetroBank to secure the non-disclosed

and non-approved $9,000„Naloan. This hen reduces the value and transferability of the
O
Property and thus, das the Company's and Members' interests.

18. Pursuant gqhe terms of the Apex LLC Company Agreement, the named

Defendants V& 'violated their commitments to the Company as well as adversely

affecte vestment interests of the other Members who paid for their interests in cash

and in full when they became Members.

8
19. Dr. Shah and the other Defendants must be restrained from attempting to

manipulate the outcome of membership decisions by voting interests in the company that

they do not own because they did not pay for them.

V. INJUNCTIVE RELIEF

Irreparable Harm/Inadequate Remedy at Law
cic-‘
r)
20. Plaintiffs re-allege paragraphs I through 19 as if fully set fortl em.

21. If Defendants are not immediately restrained from: (a) c0001- cting the defectively

noticed and bad faith Members' meeting called by Dr. Sh4 which otherwise will take

place on Monday, January 19, 2009 at 9:00 a.m.; or (h), g membership units they do

not own because they have not paid for them, Ae Plaintiffs and the other LLC

Members will be irreparably harmed and will.krefjp no adequate remedy at law once Dr.

Shah and those acting in concert with him interests that they may not legally possess

and which the other Members believe 11 be voted by them in a manner not in the

Company's best interests.

fg Order
(1) Temporary Restraining
ti
22. Plaintiffs re-alleg r graphs 1 through 21 as if fully set forth herein. For each of

the reasons stated ab and the facts set forth herein, Plaintiffs request the entry of a

temporary restrat'0 \ 11. order enjoining Defendants and those acting on their behalf or in

concert with tin from engaging in the activities Plaintiffs seek to restrain as set forth in

the abo e agraph.

(2) Temporary Injunction

23. Plaintiffs re-allege paragraphs 1 through 22 as if fully set forth herein. For each of

the reasons stated above, Plaintiffs request the entry of a temporary restraining order and,

9
upon hearing, a temporary injunction enjoining Defendants and those acting on their

behalf or in concert with them from voting any membership unit or taking any action on

behalf of the Company that has not been consented to by the other Members until such

time as Defendants' interest in the Company has been fully and accurately determined at

a trial on the merits of this case.

(3) Permanent Injunction

24, Plaintiffs re-allege paragraphs 1 through 23 as if fully rth herein. Plaintiffs

ask the Court to set their application for permanent injuncti a full trial, and after the

trial, issue a permanent injunction against Defendants. efi

BQn d cref
25. Plaintiffs are willing to post bond in thc,unt determined by the Court.

VI. CAUS04' ACTION

A. BREACH OF FIDUCIARY DU RAUD AND
NEGLIGENT MISREPRESENV.TION

26. Plaintiffs re-allege paratiV 1 through 25 as if fully set forth herein.

27. A fiduciary relationshipd a relationship of trust and confidence exist between

the Member Plaintiff i r. Shah arising out of his responsibilities as a Manager of

Apex LLC. These s require Dr. Shah to act at all times with absolute candor, honesty
.(2;
and fairness ing with the Members and their interests. Dr. Shah is required to place

those interes above his own and to not act for his own self-interest by initiating or

engaging ii any act that only furthers and benefits his own. personal gain. Further, Dr.

Shah must disclose all transactions and information that are pertinent to Members'

interests and cannot maintain a cloak of secrecy or conceal such matters from the

10
Members or prevent them from learning about financial or any other transactions

affecting their membership interests and the affairs of the Company.

28. Dr. Shah has engaged in a pattern of self-dealing, secrecy, and unilateral actions

which constitute a breach of his fiduciary duties to the Members. He has ,,violated the

Company Agreement and is causing the value of the other Mem interests to

deteriorate through improperly exercising unilateral control over- decisions affecting
__>
Members' interests without their knowledge, consent or ap " Val, and without the

agreement of his Co-Manager, thereby jeopardizing the inbers' investment in the

Company.

28. Dr. Shah conveyed a lien on the Property ure his own personal liabilities to

MetroBank without disclosing such transaction e other Members. This was not just a

breach of his fiduciary duties but consti d. Dr. Shah and those acting in concert

with him intended to cause substantia TM to Plaintiffs and other Members similarly

situated to them and acted wit z, cious disregard for their' rights and best interests.

They did so despite their acturljwareness of the extreme degree of risk to Plaintiffs' and

the other Members rightd welfare. Dr. Shah's failure to disclose the lien he gave
O
MetroBank and his to share financial and other important information affecting

the Members' i'iiie4ests constitutes negligent misrepresentation by omission. The
O
Plaintiffs er Members similarly situated relied on Dr. Shah's carrying out his

fiduciaries consistent with their best interests and his failure to disclose that he was

acting contrary to their interests constitutes a negligent misrepresentation by omission.

29. Plaintiffs and the other similarly situated Members of Apex LLC have been

injured by these breaches of fiduciary duties, fraud and negligent misrepresentation by

11
Dr. Shah and those acting in concert with him. These actions have resulted in injury to

the Plaintiffs and the other Members similarly situated to them and in conferring an

undue benefit to the Defendants who were unjustly enriched at the expense of the

Plaintiffs and other similarly situated members of Apex LLC in an amount in excess of

the minimum jurisdictional limits of this court.

B. BREACH OF CONTRACT

31. Plaintiffs re-allege paragraphs 1 through 30 as if fully sett herein.
o

32. Dr. Shah executed a valid and enforceable writt''ascription agreement in or

about January 2007 committing to purchase and pay fat Membership units in Apex LLC.

He failed to pay for the membership units to hi he subscribed and has not done

through the present. Demand has been made u Dr. Shah and the other Defendants to

pay the outstanding obligations owed to iompany, but none of the Defendants has

responded to the demand nor have an& the Defendants paid the outstanding amount

owed.
)
33. Further, Dr. Shah has.Q1tChed his obligations under the Company Agreement by

his incurring a Company y in excess of $500,000 in contravention of the restriction

on his authority a Manger to incur an obligation exceeding $500,000 without the

written consent 0° the Members which he did not obtain nor disclose to the Members.

34. The eioing actions taken by Dr. Shah constitute a breach of contract and have

causedi laintiffs and the other LLC Members similarly situated to suffer damages in

an amount that is in excess of the minimum jurisdictional limits of the court.

12
35. Plaintiffs and the other Members similarly situated to them should be awarded

actual damages, consequential damages and attorney's fees for the breach of each

contract identified above.

CONDITIONS PRECEDENT

36, Plaintiffs re-allege paragraphs 1 through 35 as if fully set forth hp(*.

35. All conditions precedent to Plaintiffs' claims for relief havie -ten performed or

have occurred.

PRAYER

WHEREFORE, Plaintiffs pray that:

A. A temporary restraining order be without notice to Defendants,
restraining Defendants from (a nducting the Special Meeting of
Members noticed by Dr. S and Indus Associates, LLC, a copy of
which notice is attached he hd incorporated herein as Exhibit B to
take place Monday, Jan rx 19, 2009 at 9:00 a.m.; and (b) voting
membership units in A x LLC until the ownership and voting rights
thereof are finally detertOted at trial.

B. Defendants be eit ppear and show cause and that upon conclusion of
such hearing, a orary injunction be issued, enjoining Defendants and
those acting o ir behalf or in concert with them, directly or indirectly,
from voting:Vernbership units in Apex LLC until the ownership and
voting righWhereof are finally determined at trial.

C. On. finWrial hereof, Plaintiffs have judgment against Defendants, jointly
and erally, as follows:
'%°
Judgment against Defendants, jointly and severally, which
permanently enjoins them from owning or voting membership
units determined not to be owned by them;

(2) Judgment against Defendants, jointly and severally, for monetary
damages in excess of the minimal jurisdictional limits of this of
of this Court, including all actual, consequential, general or
or special damages, as allowed by law;

(3) Reasonable and necessary attorney's fees incurred in prosecuting
this action as allowed under Chapter 38 of the Tex. Civ. Prae. &

13
 Rem. Code, and pursuant to any and all other applicable statutes
and/or common law;

(4) An accounting;

(5) Imposition of a constructive trust upon all assets and financial, tax,
accounting and other records pertaining or affecting, directly or
indirectly, the investment and interests of the Membi4 Apex
LLC that are in the custody, possession or contra or any of
the Defendants; Ci
(6) Prejudgment and post-judgment interest at Onaximum lawful
rates and from the earliest date permitted plicable law on all
sums awarded to Plaintiffs by the Court;

(7) All costs of Court; and

(8) Such other and further relief4t law and in equity to which
Plaintiffs and the other MI6 similarly situated may be justly
entitled.

Respectfully submitted,

/s/Karen M. Zuckerman

Karen M. Zuckerman, J.D.
SBOT No. 22290800
7202 Buffalo Speedway 0
Houston, Texas 77025
713-302-5666 (Telephon
713-432-0286 (Facsit*10
ATTORNEY FOR PWNTIFFS
qoy

14
TAB 6
 2/24/2014 12:16:06 PM
Chris Daniel - District Clerk Harris County
Envelope No. 546762
By: TERESA KIRBY

NO. 2009-02578

APEX KATY PHYSICIANS, L.L.C., IN THE DISTRICT COURT OF

Plaintiff,

VS.
HARRIS COTY, TEXAS
ADEEL ZAIDI, APEX LONG TERM
ACUTE CARE — KATY, L.P., APEX
KATY PHYSICIANS — TMG, L.L.C.,
and US TMG, L.L.C.,

Defendants. t JUDICIAL DISTRICT

SUPPLEMENT TO DEFEND 64 A. K.
CHAGLA'S MOTION TO QUAS't UBPOENA

TO THE HONORABLE AL BENNETT, DISTRI DGE:

Defendant A. K. Chagla moved to qu e Trial Subpoena served upon counsel by email

on February 11, 2014, pursuant to the T Rules. The following and the attachment hereto

supplement the factual record.

1. As stated, Mr. C 1a is and has been in Pakistan for an extended period of time

undergoing lengthy rnedicaJ t eats for numerous maladies, and will not, and cannot, be back in

Houston by March 17

2. A to Mr. Chagla's Motion as Exhibits 1 and 2 were two status letters from

Mr. Chagla's ding physician in Karachi, Pakistan, that outlined his condition as of January 20,

2013, and September 18, 2013. Attached hereto as Exhibit 3 is a status report as of February 20,

2014, that was received today. It concludes that Mr. Chagla is not in a condition to travel from

Pakistan to Texas by March 17.
 3. Two points should be made:

• During the five-plus years that this case has been pending, Plaintiff never

attempted to take or requested Mr. Chagla's deposition.

• Mr. Chagla will already be at a disadvantage at trial if he cannot appear to

testify and offer his own story to the jury. He should not be further disadvant_ MI by a negative

ruling from this Court under all the circumstances.

4. Defendant Chagla requests that Plaintiffs' subpoena shed.

DATED: February 24, 2014 Respectful

LAW ES OF DOUGLAS R. LITTLE

dualas. A. Zit&
tate Bar No. 12416600
Wedge International Tower
1415 Louisiana, 37th Floor
Houston, Texas 77002
01 713.275.2069
713.843.7901 (Fax)
doug@douglasrlittle.com

U ATTORNEY FOR DEFENDANTS ZAIDI,
CHAGLA, PRESTIGE, APEX TMG, and
USTMG

-2- ZAIDI/Chagla SUPP to Mtn lo Quash/2/24/14
 CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing has been served upon all

counsel listed below via: hand delivery; certified mail, return receipt requested;

telefax transmission; express mail; ✓ electronic mail; or first class

United States mail, on the 24th day of February, 2014:

Andrew K. Meade Fred Wahrlich
Hawash Meade Gaston Neese Munsch, Hardt, K Harr, PC
& Cicack LLP 700 Louisiana, 'it 4600
2118 Smith Street Houston, Ted "102
Houston, Texas 77002

-3- ZAID1/Chagla SLIPP to Mtn to Quash/2/24/14
 2/14/2014 1:18:27 PM
Chris Daniel - District Clerk Harris County
Envelope No. 476468
By: BRADLEY DARNELL

NO. 2009-02578

APEX KATY PHYSICIANS, L.L.C., IN THE DISTRICT COURT OF

Plaintiff,

VS.
HARRIS CO TY,TEXAS
ADEEL ZAIDI, APEX LONG TERM 12e
ACUTE CARE — KATY, L.P., APEX
KATY PHYSICIANS — TMG, L.L.C.,
and US TMG, L.L.C.,

Defendants. '`161st JUDICIAL DISTRICT

AMENDED ANSWER OF DEFEND ADEEL ZAIDI,
A. K. CHAGLA, PRESTIGE C 8 LTING, INC.,
APEX KATY PHYSICIANS — TMG, .5. ., AND US TMG, L.L.C.
(*'
TO THE HONORABLE AL BENNETT, DISK T JUDGE:

Defendants Adeel Zaidi, A. K. a gla, Prestige Consulting, Inc., Apex Katy Physicians

TMG, L.L.C. ("Apex TMG"), an MG, L.L.C. ("USTMG"), answer Plaintiff Apex Katy
0
Physicians, L.L.C.'s ("Apex LL 7-Third Amended Original Petition of July 29, 2011, as follows:
) 6

1. ALL DEFE 1UNTS: Pursuant to Rule 92 of the Texas Rules of Civil Procedure,

all Defendants generalj. y the material allegations of Plaintiffs Third Amended Original Petition
CCD
and demand strict thereof.

•ATENDANTS CHAGLA AND USTMG: Defendant Chagla affi 'natively denies

(a) that he had any meaningful financial interest in or profited in any way from any of the actions or

omissions of Plaintiff or any other Defendant in connection with any transactions involving Apex

LLC and Apex Long Term Acute Care — Katy, L.P. ("Apex LP"), whether or not as described in

Plaintiffs Third Amended Original Petition, and (b) that he took any actions or omitted to take any
required actions in connection with any transactions involving Apex LLC and Apex LP, Defendant

Chagla did not cause, proximately or in fact, any damage to Apex LLC. Defendant USTMG

affirmatively denies (a) that it had any financial interest in or profited in any way from any of the

actions or omissions of Plaintiff or any other Defendant in connection with any transactions

involving Apex LLC and Apex LP, whether or not as described in Plaint" N .i.rd Amended

Original Petition, and (b) that it took any actions or omitted to take a equired actions in

connection with any transactions involving Apex LLC and Apex efendant USTMG was

involved in a nephrology clinic and was not involved in any way transaction involving Apex

LLC and Apex LP. Defendant USTMG did not cause, proxitily or in fact, any damage to Apex

LLC.

3. DEFENDANTS ZAIDI, PRESTIGItONSULTING, INC., AND APEX TMG:

These Defendants affirmatively deny that they mitted any wrongful acts, or omitted to take any

required actions, in connection with any tr_ fictions involving Apex LLC and Apex LP, of which

Apex LLC complains in Plaintiffs ?Amended Original Petition. These Defendants did not

cause, proximately or in fact, a,r .8-a.mage to Apex LLC. Nevertheless, Apex LLC, principally

through P. K. Shah, its c n ger in title but its only actual manager in fact, had actual or

constructive notice ofations that these Defendants did take in connection with any transactions
O
involving Apex and Apex LP Some of these actions produced benefits to Apex LLC.

Accordingly, his full actual or constructive knowledge, and acceptance of these benefits, Apex

LLC ratified each such action or is estopped to complain about or assert it.

4. DEFENDANTS CHAGLA, PRESTIGE, AND APEX TMG: These Defendants were

sued by Plaintiffs Second Amended Original Petition of December 30, 2010. Consequently, any

claim against them that has a limitations period of two years that arises out of facts that occurred

-2- ZAIDI/Amended Answer-2-14-14
prior to December 30, 2008, is barred by that statute of limitations.

5. ALL DEFENDANTS: Recovery for all of Apex LLC's "tort" claims is barred

because Apex LLC's percentage of responsibility for any resultant damage of which it complains

exceeds 50% under Tex. Civ. Prac. & Rem. Code § 33.001.

6. ALL DEFENDANTS: In the unlikely event that Apex LLC is ed entitled to

recover on any such tort claim, then its claims are subject to a determinati f the percentages of

responsibility assigned to all required entities under TEX. Civ. PRACM. CODE § 33.003, and

any recovery is to be limited under TEx. Civ. PRAC. & REM. CO 3.012.

7. ALL DEFENDANTS: Apex LLC is not d to recover from any of these

Defendants because it submitted its claims to the Unit. tes Bankruptcy Court in the case filed

by Apex LP, and its claims were adjudicated in tha

As authorized by the Texas Rules d wil Procedure, Defendants reserve the right to

amend and supplement this pleading befoc7 e trial of this cause on its merits.
.e)
WHEREFORE, PREM1S NS1DERED, these Defendants pray that Plaintiff take

nothing, that they recover all them costs, and for such other and further relief, general or special,

either at law or in equity, tit they may be justly entitled.

DATED: Fetry 14, 2014 Respectfully submitted,

LAW OFFICES OF DOUGLAS R. LITTLE

By Dallas cR„ Little
State Bar No. 12416600
Wedge International Tower
1415 Louisiana, 37th Floor
Houston, Texas 77002
713.275.2069
713.843.7901 (Fax)
doug@douglasrlittle.com

-3 ZAI DI/Amended Answer-2-14-14
 ATTORNEY FOR DEFENDANTS ZAIDI,
CHAGLA, PRESTIGE, APEX TMG, and
USTMG

CERTIFICATE OF SE CE

I hereby certify that a true and correct cop the foregoing has been served upon all
oQ

counsel listed below via: hand delive certified mail, return receipt requested;

telefax transmission; expres 1; V electronic mail; or ✓ first class

United States mail, on the 14th day of F ary, 2014:

Andrew K. Meade i1 Fred Wahrlich
Hawash Meade Gasto eese Munsch, Hardt, Kopf & Han, PC
& Cicack LLP 700 Louisiana, Suite 4600
2118 Smith Ste Houston, Texas 77002
Houston, Texas 02

Earl S. NFt
Nesbitt N:*sar & McCown LLP
15851Nilas Parkway
Ad , Texas 75001

Dorlias Lltie
Douglas R. Little

-4- ZAIDI/Amended Answer-2-14-14
 2/14/2014 2:22:13 PM
Chris Daniel - District Clerk Harris County
Envelope No. 477907
By: BRADLEY DARNELL

NO. 2009-02578

APEX KATY PHYSICIANS, L.L.C., IN THE DISTRICT COURT OF

Plaintiff;

VS.
HARRIS COIJr, TEXAS
ADEEL ZAIDI, APEX LONG PERM
ACUTE CARE — KATY, L.P., APEX
KATY PHYSICIANS — TMG, L.L.C.,
and US TMG, L.L.C.,

Defendants. t JUDICIAL DISTRICT

DEFENDANT A. K. CHAGLA'S MOTION t iI UASH SUBPOENA
u(by

TO THE HONORABLE AL BENNETT, DISTRICK DGE:

Defendant A. K. Chagla, pursuant to xas Rules, moves to quash the Trial Subpoena

served upon counsel by email on February 16014, as follows:

1. Plaintiffs's counsel se, e referenced trial subpoena for March 17, 2014. As

Plaintiff's counsel has been inforinver a period of many months, Mr. Chagla is and has been in

Pakistan for an extended pe of time undergoing lengthy medical treatments for numerous

maladies, and will not, cannot, be back in Houston by March 17. The undersigned is candidly

unaware when Mr ear la will be able to return.

2. #a'ched as Exhibits 1 and 2 are two letters from Mr. Chagla's attending physician

in Karachi, Pakistan that outline his condition as of the last date upon which the undersigned was

able to communicate with him. The undersigned is now attempting to obtain an updated evaluation

and will submit it immediately upon receiving it.
 3. Defendant Chagla requests that Plaintiffs' notice be quashed.

DATED: February 14, 2014 Respectfully submitted,

LAW OFFICES OF DOUGLAS R. LITTLE

By al ias .tittle
State Bar No. 12416600,
Wedge International 0:
1415 Louisiana, 37 oor
Houston, Texas, 2
713.275.2069
713.843.790'1, )
doug@d* rlittle.com

ATTO FOR DEFENDANTS ZAIDI,
CHA PRESTIGE, APEX TMG, and
U

CERTIFICAt SERVICE
I hereby certify that a true and CO t copy of the foregoing has been served upon all

counsel listed below via: tVery; certified mail, return receipt requested;

telefax transmission; ress mail; ✓ electronic mail; or ✓ first class

United States mail, on the 14t of February, 2014:

Andrew K. MWe9 Fred Wahrlich
Hawash Mea aston Neese Munsch, Hardt, Kopf & Harr, PC
& Cicacicc_ 700 Louisiana, Suite 4600
2118 S treet Houston, Texas 77002
Houstd exas 77002

Earl. Nesbitt
Nesbitt Vassar & McCown LLP
15851 Dallas Parkway
Addison, Texas 75001

afie
Douglas R. Little

-2- ZAIDUChagla Mtn to Quash/2114/14
 FATIMIYAH HOSPITAL 31;:r‘
Owned & Managed by KPSIAJ •

Dated: 29-01-2013

TO WHOM IT MAY CONCERN
C

Mr, A.K. Chagla continues to suffer from severe R apnea which has in
fact becoMe more intense since the time..our last report dated
XX-XXXXXXX. He is on regular BIPAP suppor(Ar this. His overall general
condition has not changed much overv period, Moreover he also
continues to complain of back prob , has started having migraine
headaches and recently recoveredi a bout of diarrhoea/ dysentery.

As he has also had caxdia roblem in the past (Underwent. coronary
quadrupule by-pass surg nd keeping in view his advanced age, he is
advised to avoid any.:., ess situations. He is again advised not to
undertake any loj sir journeys ..until such time as there is an
improvement in h Condition. This .could take some more months.
- -,-,vaea.z=vvAnawAes.kgsiloo.iwozoNmAt

Mi4-itsain Kann
M `a.1 Superintendent

V2/2-3, Britt Road, Saidia Bazar No.3, Karachi - Pakistan.
TO: 92-21-32252321, 32259511, 3225234g Fax: 92-21-32237634 E-maik inio@th,org.pk wwwth.orok

EXH1BiT 1
 FATIMIYAH HOSPITAL jt:1
Owned & Managed by KPSIAJ

Dated :18.09.2013

TO WHOM IT MAY CONCERN

Re: Mr. Abdul Klialig Chagla

Ref previous assessment dated 29-01-2013, the mai condition of Mr. A. K.
Chagla has not sufficiently improved to alio to undertake any lone air
journeys. He is therefore advised not to und e any such air journeys at least
for the new couple of months after which h edition could be re-evaluated.

Dr. Husain Kanani
Chest Physician &
Medical Superinte

272/2-3, Britt.° Road, Soldier Bazar No. 3, Karachi - Pakistan.
Tel: 92-21-32252321. 32259511, 32252349 Fax: 92-21-32237634 E-mail: irifo@fh.org.ok Web: www.fh.org.pk EXHIBIT 2