1006-00008 · Crestline Packaging Solutions LLC · Diligence

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 425 Lexington Avenue, 31st Floor New York, NY 10017

I. PURPOSE AND SCOPE

This memorandum summarizes the results of Calderwood & Harkness LLP's ("C&H") review of the material contracts of Lakewood Regional Health Partners, LLC ("LRHP" or the "Company") proposed for assumption by Crestline Packaging Solutions LLC ("CPS" or "Buyer") in connection with the proposed acquisition of substantially all of the assets of the Company (the "Transaction"). The Transaction is structured as an asset purchase with a fixed Purchase Price of $140,000,000, subject to customary working capital adjustments, and an estimated Closing Date of August 15, 2025. This review was conducted on behalf of Buyer and its parent entity, CPS Holdings, Inc. ("Parent"), and Parent's financial sponsor, Pinnacle River Capital Partners, LP ("Sponsor").

This memorandum covers the following categories of material contracts proposed for assumption by Buyer under the Asset Purchase Agreement (the "APA"):

(a) Fourteen (14) managed care and commercial insurance contracts, representing the substantial majority of the Company's trailing twelve-month ("TTM") net revenue;

(b) Three (3) imaging equipment capital leases with Marlowe Asset Management Medical Equipment Finance, LLC ("Marlowe Asset Management MEF"), with an aggregate remaining balance of approximately $2,870,000;

(c) One (1) enterprise electronic health record ("EHR") software license agreement with Clearpath Health Systems, Inc. ("Clearpath"), with an annual license fee of $840,000;

(d) One (1) laboratory services agreement with Redstone Diagnostics, Inc. ("Redstone"), with an annual spend of approximately $1,600,000; and

(e) Nine (9) real property leases for clinic locations in New York and Pennsylvania, with aggregate annual base rent of $2,740,000.

Each contract has been analyzed for change-of-control provisions, consent and notice requirements, assignability restrictions, termination rights (both for cause and for convenience), and other material terms and risk factors that may affect the Transaction or post-closing operations. The APA is targeted for execution on June 16, 2025. Seller's counsel in the Transaction is Whitfield, Ames & Greer LLP, led by Catherine Greer.

Documents Reviewed. Our review encompassed the universe of documents made available in the Thackeray Solutions virtual data room maintained by Seller (Project Lakeshore, Room ID LS-2025-LRHP), specifically folders 3.1 through 3.9 (Material Contracts), 4.1 through 4.4 (Real Property), and 6.1 through 6.3 (Insurance and Regulatory), as well as supplemental documents provided by Seller's counsel on May 22, 2025 and June 2, 2025 in response to C&H's first and second supplemental diligence request lists. In total, we reviewed approximately 340 documents and document sets. Where noted herein, we have also relied upon representations made by members of Seller's management team — including Dr. Raymond Alcott (Managing Member and Chief Medical Officer), Dr. Nadia Petrosian (Member and Chief Operating Officer), and Gretchen Unger (Chief Financial Officer) — during management presentations held on May 14, 2025 and May 28, 2025.

Disclaimer. This memorandum is prepared for the internal use of the deal team and does not constitute a legal opinion on the enforceability of any contract reviewed herein. Our analysis is based solely on the documents and information made available to us and described above. We have not independently verified the accuracy or completeness of any financial data, revenue figures, or other information provided by Seller or its representatives. To the extent that additional contracts or amendments are identified subsequent to the date hereof, supplemental analysis may be required.

II. EXECUTIVE SUMMARY AND KEY FINDINGS

A. Overview of Material Contracts

The following table provides a summary overview of the approximately 28 material contracts reviewed, organized by category. Each contract is identified by counterparty, annual economic value (or remaining balance, as applicable), expiration date, and a risk-rating flag for change-of-control or assignability issues. Detailed analysis of each contract follows in Sections III through VII below.

B. Critical Issues Requiring Resolution Prior to Closing

Based on our review, the following four issues present the highest risk to the Transaction and require priority attention and resolution prior to or as a condition of Closing:

1. Meridian Shield Health Plans, Inc. Managed Care Agreement — HIGH Risk.

The Managed Care Participation Agreement with Meridian Shield Health Plans, Inc. ("Meridian Shield") represents the single largest revenue relationship of the Company, accounting for approximately 22% of Lakewood's TTM net revenue, or approximately $17,248,000 per annum. Section 12.4 of the Meridian Shield agreement contains an express change-of-control consent requirement, providing that the agreement may not be assigned, and that any direct or indirect change of control of the provider entity shall require Meridian Shield's prior written consent. In addition, Section 12.4(b) provides a broad anti-assignment clause that is triggered by an asset sale in which substantially all of the assets of the provider entity are transferred to a third party. Of critical concern, Section 14.2(d) of the agreement grants Meridian Shield a 90-day termination-for-convenience right following any change of control, exercisable regardless of whether consent has been obtained. We strongly recommend that obtaining Meridian Shield's written consent be designated as a condition precedent to Closing under the APA, or, at minimum, that Seller obtain such consent prior to APA execution on June 16, 2025. The loss of this contract would reduce EBITDA by an estimated $4,800,000 to $5,200,000 (based on the Company's estimated margin on managed care revenue), which would almost certainly constitute a Material Adverse Effect under the APA as currently drafted.

2. Clearpath Health Systems, Inc. EHR License — HIGH Risk.

The enterprise EHR license agreement with Clearpath Health Systems, Inc. (Agreement No. CP-ENT-2022-0487) contains an express anti-assignment provision at Section 15.1, which prohibits assignment of the license without Clearpath's prior written consent. Critically, such consent may be withheld in Clearpath's "sole discretion," unlike other contracts reviewed herein that apply a reasonableness standard. The EHR system is deployed across all 11 Lakewood clinic locations and is deeply embedded in the Company's clinical, billing, scheduling, and patient portal operations. The license fee is subject to potential adjustment upon assignment, and the license term expires December 31, 2027, with no automatic renewal. If Clearpath withholds consent or conditions it upon materially unfavorable terms, Buyer would face a forced migration to a replacement EHR platform — an undertaking that, based on industry benchmarks and consultation with Buyer's IT team, would likely require 12 to 18 months and cost between $2,500,000 and $4,000,000, in addition to significant operational disruption. We recommend early engagement with Clearpath and designation of Clearpath consent as a Closing condition or, at a minimum, inclusion of a specific indemnity from Sellers.

3. Marlowe Asset Management Medical Equipment Finance, LLC Capital Leases — MEDIUM Risk.

The three capital lease schedules with Marlowe Asset Management MEF (aggregate remaining balance: $2,870,000) each contain a prohibition on assignment without Marlowe Asset Management MEF's prior written consent. Of particular concern, the Master Lease Agreement (MLA No. VML-MLA-2023-0088) contains a cross-default provision at Section 9.1(c), pursuant to which a default under any one schedule constitutes a default under all three schedules. An unapproved assignment would constitute an event of default, entitling Marlowe Asset Management MEF to accelerate all remaining payments under all three schedules, totaling $2,870,000 in the aggregate. While the aggregate value is manageable relative to the $140,000,000 Purchase Price, the cross-default amplifies risk and the acceleration could create an unplanned cash outflow shortly after Closing. We recommend obtaining Marlowe Asset Management MEF's consent prior to Closing and, as a fallback, negotiating replacement leases or obtaining payoff quotes to fund a cash buyout from the equity commitment.

4. OIG Inquiry Impact on Managed Care Contracts — HIGH Risk (Contingent).

As identified in the regulatory diligence workstream, the Company is subject to a pending inquiry by the Office of Inspector General ("OIG") of the U.S. Department of Health and Human Services regarding potential CPT 99214 upcoding practices at the Syracuse facility. The estimated exposure range, as assessed by Marchand Healthcare Regulatory Advisors, LLC, is $350,000 to $900,000 in potential overpayment liability. This inquiry has not yet resulted in a formal finding, but we note that several managed care agreements — including the Meridian Shield agreement (Section 14.1(c)), the Empire CrossBridge agreement (Section 11.2(b)), and the Allegheny Valley agreement (Section 13.1(d)) — contain termination-for-cause provisions triggered by a finding of billing fraud, material compliance violation, or exclusion from federal healthcare programs. If the OIG inquiry results in an adverse finding, these provisions could be triggered, potentially giving the affected payors a right to terminate. Moreover, an adverse OIG finding could complicate or delay the consent process for the Meridian Shield agreement. We cross-reference the regulatory diligence memorandum prepared by Tiffany Rosenthal (dated June 4, 2025) for a comprehensive analysis of the OIG inquiry and recommend that the APA include a specific indemnity from Sellers for any losses arising from the OIG inquiry, including contract termination by managed care payors.

C. Consent and Notice Matrix

The following table consolidates all consent and notice requirements across the 28 material contracts reviewed:

"NUBW" = Not to be Unreasonably Withheld, Conditioned, or Delayed.

As reflected above, approximately 17 contracts require affirmative consent from the applicable counterparty, 9 contracts require notice only, and 1 contract (Cascade Dental & Vision Network) is silent on assignment and appears freely assignable. Of the 17 consent-required contracts, 4 present elevated risk profiles due to the absence of a reasonableness standard, the economic significance of the contract, or both. The aggregate estimated timeline for obtaining all required consents is 45 to 60 days from commencement of outreach, which underscores the importance of initiating consent solicitation promptly following APA execution on June 16, 2025, in order to achieve completion by the estimated Closing Date of August 15, 2025.

III. MANAGED CARE AND COMMERCIAL INSURANCE CONTRACTS

A. Overview. Lakewood maintains 14 managed care and commercial insurance contracts that collectively govern the Company's participation in commercial and government-sponsored payor networks. These contracts cover the eight New York facilities operating under CMS Certification Numbers 33-7021 through 33-7028 and holding New York Article 28 certificates D&TC-4821 through D&TC-4828, as well as three Pennsylvania facilities operating under CMS Certification Numbers 39-6011, 39-6012, and 39-6013 and holding Pennsylvania Department of Health licenses OPC-20140892, OPC-20140893, and OPC-20140894.

Aggregate managed care revenue under these 14 contracts represents the substantial majority of the Company's TTM net revenue of $78,400,000. Based on data provided by the Company's management and verified against the Company's revenue cycle reports (Data Room Folder 2.3), managed care and commercial insurance reimbursement accounted for approximately $72,400,000, or 92.3%, of the Company's TTM net revenue, with the balance derived from patient self-pay, workers' compensation, and miscellaneous ancillary revenue.

We have coordinated our review of the managed care contracts with Marchand Healthcare Regulatory Advisors, LLC ("Marchand"), which serves as the healthcare regulatory advisor to Buyer in connection with the Transaction, regarding payor credentialing requirements, re-enrollment timelines, and regulatory implications of the change of ownership. As discussed in greater detail below and in Section VIII.A, many of the managed care contracts will require not only contractual consent to assignment but also completion of credentialing and network enrollment for the post-closing entity, which may entail separate application processes, site visits, and compliance reviews by each payor. Marchand has estimated that credentialing timelines for the post-closing entity will range from 30 to 120 days depending on the payor, with certain payors (most notably Meridian Shield and Seneca Valley Medicare Advantage) requiring extended review periods.

B. Meridian Shield Health Plans, Inc.

Meridian Shield Health Plans, Inc. ("Meridian Shield") is the Company's single largest managed care payor, accounting for approximately 22% of TTM net revenue, or approximately $17,248,000 per annum. The Managed Care Participation Agreement between LRHP and Meridian Shield (the "Meridian Agreement"), dated March 1, 2021 (as amended by First Amendment dated July 15, 2022 and Second Amendment dated January 10, 2024), governs LRHP's participation in the Meridian Shield commercial HMO and PPO networks across all 11 clinic locations. A copy of the Meridian Agreement and amendments was reviewed in Data Room Folder 3.1.04.

1. Term and Renewal.

The initial term of the Meridian Agreement commenced on March 1, 2021 and expires on December 31, 2026 (the "Initial Term"). The agreement provides for automatic renewal for successive one-year periods thereafter, unless either party provides written notice of non-renewal at least 180 days prior to the expiration of the then-current term. Based on the estimated Closing Date of August 15, 2025, approximately 16 months remain in the Initial Term. The Second Amendment did not modify the term provisions. Non-renewal notice for the Initial Term would need to be delivered by approximately July 4, 2026, and we note that neither party has given notice of non-renewal as of the date hereof.

2. Reimbursement Rates.

The Meridian Agreement utilizes a hybrid reimbursement structure consisting of: (i) fee-for-service reimbursement for professional services (office visits, procedures, and diagnostic services), calculated at a percentage of the then-current Medicare Physician Fee Schedule ("MPFS"), as published by CMS and updated annually; and (ii) a per-member-per-month ("PMPM") capitation payment for primary care management services, adjusted quarterly based on attributed patient panel size. Pursuant to the Second Amendment, the fee-for-service reimbursement rate was set at 128% of the MPFS, effective January 1, 2024, representing a 4% increase from the prior rate of 123% of the MPFS. The capitation PMPM rate was set at $14.25, effective January 1, 2024, with an annual escalator tied to the Consumer Price Index for Medical Care Services ("CPI-M"), capped at 3.5% per annum.

We note that the linkage of fee-for-service rates to the MPFS introduces annual variability based on CMS rate-setting. The capitation component introduces risk-bearing obligations, including a risk-sharing corridor under which LRHP is responsible for medical costs in excess of 105% of the capitation revenue for the attributed population (Section 7.3(b) of the Meridian Agreement). Based on the Company's management representations during the May 28, 2025 management presentation, the risk corridor has not been triggered in the most recent two contract years, but we recommend that the APA address allocation of any risk-sharing settlement obligations that straddle the Closing Date.

3. Change-of-Control Provision.

Section 12.4(a) of the Meridian Agreement provides:

"This Agreement may not be assigned by Provider, and no change of control of Provider shall be effective for purposes of this Agreement, without the prior written consent of Plan. For purposes of this Section, 'change of control' means (i) any merger, consolidation, or reorganization of Provider; (ii) the sale, transfer, or other disposition of all or substantially all of the assets of Provider; (iii) any change in the direct or indirect ownership or control of fifty percent (50%) or more of the equity interests of Provider; or (iv) any other transaction or series of related transactions that results in a change in the identity of the person or entity that controls Provider. Consent to any such assignment or change of control shall not be unreasonably withheld by Plan, provided that the assignee or successor entity satisfies Plan's credentialing requirements, network adequacy standards, and compliance review."

This provision is broadly drafted and clearly captures an asset purchase transaction in which substantially all of the Company's assets, including the Meridian Agreement, are transferred to Buyer. The asset purchase structure of the Transaction falls squarely within clause (ii) of the definition. We further note that the consent standard, while incorporating a "not unreasonably withheld" qualification, conditions consent on the satisfaction of credentialing, network adequacy, and compliance review requirements — each of which introduces subjectivity and potential for delay. Meridian Shield's credentialing process, as described by Marchand, typically requires 60 to 90 days and involves submission of practitioner credentials, facility inspections, and compliance attestations.

4. Anti-Assignment Clause.

In addition to the change-of-control provision described above, Section 12.4(b) provides a standalone anti-assignment clause:

"Provider shall not assign, transfer, delegate, or subcontract any of its rights or obligations under this Agreement without the prior written consent of Plan. Any purported assignment in violation of this Section shall be null and void."

This anti-assignment clause operates independently of the change-of-control provision and would be triggered by any attempted assignment of the Meridian Agreement in connection with the Transaction. Because the Transaction is structured as an asset purchase (rather than a membership interest purchase), the assignment of the Meridian Agreement is a necessary step for Buyer to assume the contract, and this clause is therefore directly implicated.

5. Termination Provisions.

Section 14.1 of the Meridian Agreement sets forth the termination-for-cause provisions, which include:

(a) Material breach by either party that remains uncured for 30 days following written notice;

(b) Loss of licensure by Provider to operate any facility covered by the Agreement;

(c) Exclusion or debarment of Provider, or any practitioner employed by Provider, from participation in any federal or state healthcare program, including Medicare and Medicaid;

(d) A finding by any governmental authority of billing fraud, material compliance violation, or pattern of upcoding with respect to services provided under the Agreement; and

(e) Provider's insolvency, bankruptcy, or assignment for the benefit of creditors.

Section 14.2 sets forth termination-for-convenience provisions. Of particular concern, Section 14.2(d) provides:

"Notwithstanding any other provision of this Agreement, in the event of any change of control of Provider (as defined in Section 12.4(a)), Plan shall have the right, exercisable in its sole discretion, to terminate this Agreement upon ninety (90) days' prior written notice to Provider, delivered at any time within one hundred eighty (180) days following the effective date of such change of control."

This provision is particularly significant because it grants Meridian Shield an independent termination right triggered solely by a change of control, irrespective of whether consent to the change of control has been obtained. In other words, even if Meridian Shield consents to the assignment of the Meridian Agreement to Buyer, Meridian Shield retains the right to terminate the agreement on 90 days' notice for up to 180 days following Closing. This creates a period of contractual uncertainty extending potentially to February 2026. We recommend that, in connection with the consent solicitation, Buyer seek a written waiver from Meridian Shield of the Section 14.2(d) termination right, or at minimum, a written confirmation that Meridian Shield does not intend to exercise such right.

6. Most-Favored-Nation / Exclusivity.

Section 8.2 of the Meridian Agreement contains a most-favored-nation ("MFN") pricing obligation, requiring that the reimbursement rates offered to Meridian Shield be no less favorable than the rates offered to any other commercial payor with comparable volume and product type. We note that this MFN provision may affect Buyer's ability to negotiate preferential rates with other payors post-closing without triggering an obligation to offer equivalent terms to Meridian Shield. Section 8.5 contains a limited exclusivity provision requiring that LRHP participate exclusively in Meridian Shield's HMO network (as opposed to competing HMO networks) for the Company's Rochester Main and Syracuse facilities. This exclusivity provision does not extend to the Company's PPO participation or to facilities outside of Rochester and Syracuse.

7. Risk Assessment.

We rate the Meridian Shield contract as HIGH risk. The combination of the change-of-control consent requirement, the broad anti-assignment clause, the 90-day post-closing termination right, and the contract's significance as 22% of net revenue makes this the single most critical contract in the Transaction. We strongly recommend the following:

(i) Obtaining Meridian Shield's written consent to the assignment and change of control be designated as a condition precedent to Closing under the APA;

(ii) As a fallback, if consent is delayed, the parties negotiate a specific indemnity from Sellers and/or an escrow mechanism (we suggest an escrow of not less than $5,000,000, representing approximately 30% of one year's revenue from the contract) to protect Buyer against the risk of post-closing termination;

(iii) Buyer seek a waiver of the Section 14.2(d) termination right as part of the consent process;

(iv) If Meridian Shield consent cannot be obtained prior to Closing, Buyer evaluate whether the Transaction economics remain viable absent this contract, noting that loss of the Meridian Shield revenue would reduce EBITDA by an estimated $4,800,000 to $5,200,000 and may trigger the Material Adverse Effect definition under the APA; and

(v) The consent solicitation be initiated immediately and not deferred until after APA execution, given the 60- to 90-day credentialing timeline.

C. Remaining Managed Care Contracts (13 Contracts)

The following table summarizes the 13 remaining managed care and commercial insurance contracts:

A brief narrative summary of each contract follows:

2. Empire CrossBridge Insurance Co. ($9,408,000; 12.0% of TTM net revenue). This is the Company's second-largest payor relationship. The Participating Provider Agreement, dated July 1, 2021 (as amended February 15, 2023), requires consent to assignment, subject to a "not unreasonably withheld, conditioned, or delayed" standard. The agreement does not contain an independent post-change-of-control termination right comparable to the Meridian Shield provision. Termination for convenience requires 120 days' written notice. The agreement contains quality metrics tied to reimbursement: LRHP must maintain a minimum HEDIS quality score of 3.5 (out of 5.0) for covered services, with reimbursement subject to a 2% withhold and year-end quality bonus. We note that the agreement's anti-assignment provision at Section 10.2 is triggered by a change of ownership of the provider entity, including asset sales. Rated Medium risk due to size and consent requirement. The pending OIG inquiry may complicate the consent process, as Empire CrossBridge's termination-for-cause provision (Section 11.2(b)) includes billing irregularities as a triggering event.

3. Allegheny Valley Health Plan ($7,056,000; 9.0% of TTM net revenue). The Provider Participation Agreement, dated October 1, 2022, governs LRHP's participation in the Allegheny Valley commercial and Medicaid managed care networks, primarily for the three Pennsylvania clinic locations. Assignment requires Allegheny Valley's prior written consent, not to be unreasonably withheld. The agreement contains a geographic network adequacy requirement mandating that LRHP maintain at least three participating clinic locations within a 50-mile radius of Scranton, Pennsylvania. This may require Buyer to commit to continued operation of the Scranton, Wilkes-Barre, and Allentown clinics post-closing. Termination for convenience requires 90 days' notice. The termination-for-cause provision at Section 13.1(d) is triggered by a finding of billing fraud or material compliance violation, which is implicated by the OIG inquiry. Rated Medium risk.

4. Great Northern Benefit Administrators ($5,880,000; 7.5% of TTM net revenue). The Provider Services Agreement, dated April 1, 2023, is a third-party administrator arrangement covering self-funded employer group plans. The agreement requires notice only — 60 days' written notice of any change of ownership — and does not require consent to assignment. Termination for convenience requires 90 days' notice by either party. Reimbursement is fee-for-service at 135% of the MPFS, with an annual true-up. No MFN or exclusivity provisions. Rated Low risk.

5. Keystone Select Health Network ($5,488,000; 7.0% of TTM net revenue). The Network Participation Agreement, dated January 1, 2022, covers Keystone Select's commercial PPO and POS products across all 11 clinic locations. The agreement requires consent to assignment, with consent not to be unreasonably withheld. The agreement contains a 180-day non-compete radius restriction prohibiting LRHP from contracting with competing PPO networks within 25 miles of any participating facility, which could limit Buyer's post-closing flexibility in payor negotiations. Termination for convenience requires 120 days' notice. Rated Medium risk due to consent requirement and non-compete provision.

6. Finger Lakes Community Health Plan ($4,704,000; 6.0% of TTM net revenue). The Provider Agreement, dated September 1, 2021, is a Medicaid managed care contract covering the Rochester and surrounding New York facilities. The agreement requires 90 days' notice of any change of ownership but does not require affirmative consent. However, the New York State Department of Health may require separate notification and approval in connection with a change of ownership of a Medicaid-participating provider. Reimbursement is based on the New York Medicaid Fee Schedule. Rated Low risk from a contractual perspective, though regulatory re-enrollment may require additional time.

7. TriState Premier PPO, Inc. ($4,312,000; 5.5% of TTM net revenue). The Provider Participation Agreement, dated December 1, 2022, expires November 30, 2025, and does not contain an automatic renewal provision. Consent to assignment is required, not to be unreasonably withheld. Given the contract's near-term expiration (approximately 3.5 months after the estimated Closing Date), the primary risk is that TriState Premier may decline to consent and instead negotiate a new agreement with the post-closing entity at different terms. Rated Medium risk; recommend concurrent negotiation of a new agreement with TriState Premier in the event consent is not obtained.

8. Commonwealth Physicians Alliance ($3,920,000; 5.0% of TTM net revenue). The Physician Services Agreement, dated July 1, 2024, is a relatively new contract that requires only 30 days' written notice of a change of ownership. No consent is required. The agreement contains a service line carve-out, excluding behavioral health and substance abuse services from the scope of covered services. Termination for convenience requires 60 days' notice. Rated Low risk.

9. Seneca Valley Medicare Advantage, Inc. ($3,528,000; 4.5% of TTM net revenue). The Medicare Advantage Participating Provider Agreement, dated January 1, 2023, covers LRHP's participation in Seneca Valley's Medicare Advantage network for the Rochester and Syracuse markets. The agreement requires consent to assignment, not to be unreasonably withheld, and also references CMS requirements for change of ownership of Medicare-participating providers, including submission of CMS-855A/855B change of information forms. We note that CMS change-of-ownership processes can take 60 to 120 days and must be coordinated with the NY DOH and PA DOH regulatory approval process. Rated Medium risk due to the dual-track consent/CMS process.

10. Hudson Gateway HMO, LLC ($3,136,000; 4.0% of TTM net revenue). The HMO Participation Agreement, dated May 1, 2022, requires 60 days' notice of any change of ownership but does not require consent. Termination for convenience requires 90 days' notice. No notable restrictive provisions. Rated Low risk.

11. Pinnacle First Workers' Compensation Trust ($2,744,000; 3.5% of TTM net revenue). The Workers' Compensation Provider Agreement, dated January 1, 2024, requires 30 days' notice of any change of ownership. The agreement is governed by the applicable workers' compensation fee schedules in New York and Pennsylvania and does not contain a separate anti-assignment clause. Rated Low risk.

12. Eastern Ridge Behavioral Health, Inc. ($2,352,000; 3.0% of TTM net revenue). The Behavioral Health Provider Agreement, dated October 1, 2023, requires 60 days' notice of any change of ownership. Reimbursement is fee-for-service. The agreement contains a credential-specific carve-out, limiting participation to licensed clinical social workers, psychologists, and psychiatrists employed by LRHP. Buyer should confirm that relevant practitioners will continue employment post-closing. Rated Low risk.

13. Cascade Dental & Vision Network ($1,568,000; 2.0% of TTM net revenue). The Ancillary Services Agreement, dated April 1, 2022, is silent on assignment and does not contain a change-of-control provision. Based on our review of the agreement and applicable New York law, the agreement appears freely assignable. Rated Low risk.

14. Sterling Point Indemnity Group ($1,056,000; 1.3% of TTM net revenue). The Indemnity Provider Agreement, dated January 1, 2024, requires 30 days' notice of any change of ownership. The agreement is a straightforward fee-for-service arrangement with no restrictive covenants. Rated Low risk.

We note that the substantial majority of managed care contracts contain some form of anti-assignment clause or change-of-ownership notification requirement that is triggered by a change of ownership of the provider entity. Even where contractual consent is not required, virtually all payors will require re-credentialing and network enrollment of the post-closing entity, which may result in a gap in coverage or reimbursement during the transition period. Based on Marchand's analysis, the re-credentialing process for the 14 managed care payors is expected to take between 30 and 120 days, depending on the payor. We recommend that the APA include a mechanism (such as an interim services agreement or management agreement) to ensure continuity of payor reimbursement during the re-credentialing period, to the extent permitted by applicable law and the terms of the relevant contracts.

D. Managed Care Contracts — Aggregate Risk Analysis

The managed care portfolio presents meaningful concentration risk. As noted above, Meridian Shield alone accounts for 22% of TTM net revenue ($17,248,000). Empire CrossBridge accounts for an additional 12% ($9,408,000), and Allegheny Valley accounts for 9% ($7,056,000). Together, these three payors represent 43% of the Company's TTM net revenue, or approximately $33,712,000. This level of concentration means that the loss or material renegotiation of any one of these three contracts could have a significant adverse impact on the Company's financial performance.

No other individual payor exceeds the 10% threshold, although Great Northern (7.5%) and Keystone Select (7.0%) each approach that level. We note that Ridgepoint Advisory Group's financial diligence report (dated May 30, 2025) identified similar concentration risk and recommended that the APA include appropriate protections.

In light of the concentration risk and the number of contracts requiring consent, we recommend that the APA include a Closing condition providing that consents (or, where applicable, re-credentialing confirmations) from payors representing no less than 80% of aggregate managed care revenue shall have been obtained as a condition to Buyer's obligation to close. At the current revenue levels, this threshold would require consents from payors representing at least $57,920,000 of the $72,400,000 in aggregate managed care revenue — which effectively means that, at minimum, the Meridian Shield, Empire CrossBridge, and Allegheny Valley consents must be obtained.

We further recommend that the APA include a specific indemnity from Sellers for any revenue loss attributable to the failure to obtain required payor consents or the loss of any managed care contract within the first 12 months following Closing as a result of the change of control. The indemnity should be backed by an escrow or holdback mechanism to ensure recoverability. We cross-reference Ridgepoint Advisory Group's financial diligence findings regarding payor mix and revenue sustainability for additional analysis of the revenue concentration risk and its implications for the Transaction valuation.

IV. IMAGING EQUIPMENT CAPITAL LEASES — Marlowe Asset Management MEDICAL EQUIPMENT FINANCE, LLC

A. Overview. Lakewood maintains three capital leases with Marlowe Asset Management Medical Equipment Finance, LLC ("Marlowe Asset Management MEF"), a Delaware limited liability company headquartered in Stamford, Connecticut, for diagnostic imaging equipment deployed at three of the Company's clinic locations. The leases were entered into pursuant to a Master Lease Agreement dated April 15, 2023 (the "MLA," MLA No. VML-MLA-2023-0088), with individual equipment schedules executed thereunder. The aggregate remaining balance under the three lease schedules, as of June 1, 2025, is approximately $2,870,000, broken down as follows:

The MRI and CT lease schedules were executed concurrently with the MLA on April 15, 2023, while the ultrasound lease schedule was added on February 1, 2024. Lease expirations range from March 2026 (ultrasound) through November 2027 (CT scanner). All three lease schedules are classified as capital leases under ASC 842, consistent with the Company's financial reporting.

B. Key Lease Terms

1. VML-2023-1140 — MRI Unit (Rochester Main).

Monthly payment: $39,444.44 (for a remaining term of 36 months as of the date hereof, yielding a total remaining obligation of approximately $1,420,000). The lease schedule provides for a fixed-price purchase option at end of term equal to 10% of the original equipment cost ($420,000 original cost, yielding a $42,000 buyout), exercisable by written notice not less than 90 days prior to lease expiration. The lessee is responsible for all maintenance, including an annual service contract with the equipment manufacturer (currently maintained with Calderon Industries at an annual cost of approximately $92,000), as well as comprehensive property and casualty insurance with coverage limits of not less than the full replacement value of the equipment. At end of term, if the purchase option is not exercised, the lessee must deinstall the equipment at its expense, return the equipment in good working condition (reasonable wear and tear excepted) to a location designated by Marlowe Asset Management MEF within the continental United States, and restore the leased premises to their pre-installation condition, including removal of any structural modifications made to accommodate the MRI unit.

2. VML-2023-1141 — CT Scanner (Syracuse).

Monthly payment: $27,222.22 (for a remaining term of approximately 36 months, yielding a total remaining obligation of approximately $980,000). The lease schedule provides for a fair-market-value ("FMV") purchase option at end of term, determined by mutual agreement or, failing agreement, by an independent appraiser selected by the lessor. Maintenance and insurance obligations are substantially similar to Schedule VML-2023-1140. The lessee is responsible for maintaining the manufacturer's service contract (currently with Pemberton Partners LLC at an annual cost of approximately $68,000). Equipment return conditions are substantially similar, including deinstallation, shipping, and premises restoration.

3. VML-2024-0219 — Ultrasound System (Albany).

Monthly payment: $23,500.00 (for a remaining term of approximately 20 months, yielding a total remaining obligation of approximately $470,000). The lease schedule provides for a $1.00 bargain purchase option at end of term. Given the nominal purchase option price and the relatively short remaining term, this schedule presents the lowest individual risk. Maintenance obligations are less onerous than the imaging schedules, limited to routine calibration and manufacturer-recommended servicing. Equipment return is not anticipated given the bargain purchase option.

C. Assignment and Change-of-Control Provisions

Each of the three lease schedules incorporates by reference the terms of the MLA, including the anti-assignment provision at Section 11.1, which states:

"Lessee shall not assign, transfer, pledge, hypothecate, or otherwise dispose of this Lease or any Equipment Schedule, or any interest therein, or sublease any Equipment, without the prior written consent of Lessor, which consent may be granted or withheld in Lessor's sole discretion. Any purported assignment or transfer in violation of this Section shall be null and void and shall constitute an Event of Default hereunder."

We note that, unlike several of the managed care contracts, the consent standard here does not incorporate a "not unreasonably withheld" qualification — consent is in Marlowe Asset Management MEF's "sole discretion." This gives Marlowe Asset Management MEF significant leverage in the consent process.

Of critical concern is the cross-default provision at Section 9.1(c) of the MLA:

"The occurrence of any Event of Default under any Equipment Schedule executed pursuant to this Master Lease Agreement shall constitute an Event of Default under each and every other Equipment Schedule then in effect."

This means that an unapproved assignment of any single lease schedule would trigger a default under all three schedules. Upon the occurrence of an Event of Default, Section 9.2 provides that Marlowe Asset Management MEF may, at its option, (a) declare all remaining payments under all outstanding Equipment Schedules immediately due and payable (i.e., accelerate the full $2,870,000 aggregate remaining balance), (b) repossess the equipment, and/or (c) pursue any other remedies available at law or in equity. The acceleration provision, combined with the cross-default, means that a failure to obtain consent for any one schedule could trigger a $2,870,000 liability.

We further note that the Incremental Term Loan from Ironclad National Bank may require that assumed capital leases be disclosed and permitted under the credit facility's negative covenants. The credit agreement's basket for permitted capital lease obligations should be confirmed with Kenneth Boateng at Ironclad to ensure that assumption of these leases does not trigger a covenant violation.

D. Risk Assessment

We rate the overall risk for the Marlowe Asset Management MEF capital leases as MEDIUM. While the aggregate remaining balance of $2,870,000 represents a modest amount relative to the $140,000,000 Purchase Price and the $84,000,000 Term Loan, the cross-default provision amplifies the risk by converting a single schedule default into a portfolio-wide default with full acceleration. The "sole discretion" consent standard further limits Buyer's ability to compel consent.

We recommend the following approach:

(i) Early outreach to Marlowe Asset Management MEF (contact: Derek Callahan, Senior Vice President, Portfolio Management, Marlowe Asset Management MEF) to initiate the consent process, including submission of Buyer's and Sponsor's financial information for credit review;

(ii) As a fallback, obtain payoff quotes from Marlowe Asset Management MEF for all three schedules to determine the cost of a cash buyout, which could be funded from the equity commitment and would eliminate the ongoing lease obligations and associated consent risk;

(iii) If consent is obtained, negotiate amendment of the MLA to remove or narrow the cross-default provision, or at minimum, obtain Marlowe Asset Management MEF's acknowledgment that the assignment with consent does not constitute a default;

(iv) Confirm with Ironclad National Bank that assumption of the Marlowe Asset Management MEF leases is permitted under the credit facility; and

(v) Consider negotiation of replacement leases directly between Buyer and Marlowe Asset Management MEF (or an alternative equipment lessor) as an additional fallback, which would have the benefit of allowing Buyer to negotiate more favorable terms, including removal of the cross-default provision.

V. EHR LICENSE AGREEMENT — CLEARPATH HEALTH SYSTEMS, INC.

A. Overview. Lakewood is party to an enterprise Electronic Health Record ("EHR") software license agreement with Clearpath Health Systems, Inc. ("Clearpath"), a Wisconsin corporation headquartered in Madison, Wisconsin (Agreement No. CP-ENT-2022-0487, dated September 1, 2022) (the "Clearpath Agreement"). The annual license fee is $840,000, payable in equal quarterly installments of $210,000. The Clearpath EHR platform is deployed across all 11 Lakewood clinic locations and is the sole system of record for clinical documentation, billing and revenue cycle management, appointment scheduling, patient portal access, clinical decision support, and regulatory reporting (including MIPS quality reporting and Meaningful Use attestation). The Clearpath Agreement has a remaining term of approximately 29 months from the estimated Closing Date, expiring December 31, 2027. A copy of the Clearpath Agreement, together with the associated Business Associate Agreement and service level addendum, was reviewed in Data Room Folder 3.5.02.

B. Key Agreement Terms

1. License Scope.

The license granted under Section 2.1 of the Clearpath Agreement is entity-specific, granted to "Lakewood Regional Health Partners, LLC, and its wholly owned subsidiaries and affiliates" (as defined in the Agreement). The license covers up to 350 authorized named users across six modules: (i) Clinical Documentation, (ii) Billing and Revenue Cycle Management, (iii) Scheduling, (iv) Patient Portal, (v) Clinical Decision Support, and (vi) Regulatory Reporting. Section 2.3 expressly restricts use of the software to the "licensed facilities," defined as the 11 clinic locations identified in Exhibit A to the Clearpath Agreement. The license does not extend to affiliates, parent entities, or successor entities of the licensee unless such entities are specifically added by written amendment. This entity-specific and facility-specific scope means that a successor entity (i.e., Buyer) would fall outside the scope of the existing license unless Clearpath consents to the assignment or executes a new license with Buyer.

2. Annual Fee and Escalation.

The annual license fee is $840,000, as set forth in Exhibit B to the Clearpath Agreement. The fee is subject to an annual escalation of 3.0% per annum, effective on each anniversary of the agreement's effective date (September 1 of each year). The fee is also subject to a volume-based true-up if the number of authorized users exceeds 350 by more than 10%, with additional users charged at $3,600 per user per annum. Based on the Company's current user count of approximately 310 (as represented by Gretchen Unger during the May 28 management presentation), the volume true-up has not been triggered. However, we note that Buyer's post-closing staffing plans may increase the user count, and the per-user incremental fee should be factored into post-closing cost projections.

3. Term and Renewal.

The Clearpath Agreement has an initial term commencing September 1, 2022 and expiring December 31, 2027 (a term of approximately five years and four months). Section 3.2 provides that the agreement does not contain an automatic renewal provision. Instead, renewal of the license is "subject to mutual written agreement of the parties, including renegotiation of license fees, scope, and other terms as the parties may agree." This absence of an automatic renewal provision is a significant risk factor, as it means that Buyer cannot rely on the continued availability of the Clearpath platform beyond December 31, 2027, without affirmatively negotiating a renewal. If Clearpath declines to renew or demands significantly higher fees, Buyer would be forced to identify, procure, implement, and validate a replacement EHR system within the remaining license term — a process that, based on industry benchmarks and C&H's experience in healthcare M&A transactions, typically requires 12 to 18 months for a multi-location deployment.

4. Service Level Agreements.

The service level addendum (Addendum A, dated September 1, 2022) establishes the following performance commitments: (i) system uptime of not less than 99.5% measured on a monthly basis, excluding scheduled maintenance windows; (ii) critical issue (Priority 1) response time of four hours; (iii) major issue (Priority 2) response time of eight business hours; (iv) data backup performed at minimum every 24 hours, with off-site replication to a geographically separate data center; and (v) disaster recovery — full system restoration within 72 hours following a qualifying disaster event. The SLA provides for service credits (applied against the quarterly license fee) if Clearpath fails to meet the uptime commitment in any given month, calculated at 1% of the monthly fee for each 0.1% below the 99.5% threshold, capped at 10% of the monthly fee.

5. Data Ownership and Portability.

Section 8.1 of the Clearpath Agreement provides that all patient data, clinical records, financial data, and other data entered into or generated by the Clearpath system remains the sole property of the licensee and is not owned, licensed to, or otherwise controlled by Clearpath, except as necessary for Clearpath to perform its obligations under the agreement. Section 8.3 addresses data portability, providing that upon termination or non-renewal of the agreement, Clearpath shall provide the licensee with a complete export of all data in a "commercially standard, machine-readable format" (specifically, HL7 FHIR and C-CDA formats for clinical data, and CSV for financial and administrative data) within 90 days of termination. Clearpath shall provide reasonable data migration assistance at its then-current professional services rates. We note that the data migration assistance is at Clearpath's "then-current" rates, which are not fixed, and may represent an additional cost if migration is required post-closing.

6. HIPAA Business Associate Agreement.

A Business Associate Agreement ("BAA") between LRHP and Clearpath, dated September 1, 2022, was included in the data room materials and has been reviewed. The BAA appears compliant with the requirements of 45 C.F.R. § 164.314 and § 164.504(e) and addresses the required elements, including permitted uses and disclosures, safeguards, breach notification, and subcontractor obligations. However, we note that the BAA is between LRHP and Clearpath specifically, and a new or amended BAA will be required for the post-closing entity if the Clearpath Agreement is assigned to Buyer. We recommend that the new BAA be negotiated concurrently with the consent process.

C. Assignment and Change-of-Control Provisions

Section 15.1 of the Clearpath Agreement provides:

"This Agreement, and the license granted hereunder, may not be assigned, transferred, or sublicensed by Licensee without the prior written consent of Clearpath, which consent may be withheld in Clearpath's sole discretion. Any purported assignment in violation of this Section shall be null and void. For purposes of this Section, 'assignment' includes any merger, consolidation, reorganization, or sale of substantially all of the assets of Licensee, or any change of control of Licensee (including any transaction resulting in a change in the person or entity that controls fifty percent (50%) or more of the voting interests of Licensee)."

This provision is among the most restrictive anti-assignment clauses in the reviewed contracts. The "sole discretion" standard affords Clearpath maximum leverage in the consent process, as Clearpath has no obligation to consent, even on commercially reasonable terms. The definition of "assignment" is broadly drafted and clearly encompasses the asset purchase structure of the Transaction. We further note that Section 15.2 provides:

"In the event that Clearpath consents to an assignment of this Agreement, Clearpath reserves the right to adjust the license fees and other financial terms of this Agreement to reflect the assignee's creditworthiness, scope of operations, and other relevant factors, as determined by Clearpath in its reasonable judgment."

This fee adjustment provision creates the risk that, even if Clearpath consents to the assignment, it may condition consent on a material increase in license fees. Given the annual fee of $840,000 and the 29-month remaining term, a significant fee increase could have a meaningful impact on the post-closing economics of the Transaction.

The absence of an automatic renewal provision heightens the transition risk further. If Clearpath withholds consent or demands unfavorable terms, the Buyer would need to identify and implement a replacement EHR system across 11 clinic locations before December 31, 2027. Even if consent is obtained, the non-renewal risk means Buyer should begin evaluating alternative EHR platforms well in advance of the December 31, 2027 expiration date.

D. Risk Assessment

We rate the overall risk for the Clearpath EHR license as HIGH. The EHR system is deeply embedded in all clinical and billing operations across all 11 Lakewood clinic locations, and the Company's entire revenue cycle, clinical documentation, regulatory reporting, and patient engagement infrastructure depends on it. A forced migration to a replacement EHR platform would be costly (estimated $2,500,000 to $4,000,000, inclusive of software licensing, data migration, implementation services, training, and parallel run costs), time-consuming (estimated 12 to 18 months), and operationally disruptive (including potential reimbursement delays, clinical workflow disruptions, and regulatory reporting gaps during the transition period).

We recommend the following:

(i) Initiate outreach to Clearpath immediately to discuss consent to assignment and, if possible, negotiate a license extension or renewal commitment concurrent with the consent process;

(ii) Designate Clearpath's consent to the assignment of the Clearpath Agreement as a Closing condition in the APA, or, at minimum, negotiate a specific indemnity from Sellers for any losses arising from Clearpath's failure or refusal to consent, including the costs of migrating to a replacement EHR system;

(iii) Request that Sellers represent and warrant in the APA that they have not received any indication from Clearpath that consent would be withheld, and that the Clearpath relationship is in good standing with no outstanding disputes or unresolved service issues;

(iv) Engage Buyer's IT team and, if appropriate, an independent healthcare IT consultant to evaluate replacement EHR systems as a contingency measure, including preliminary scoping and cost estimation for a migration to alternative platforms (e.g., Tidewater Systems, Ashford Solutions, or Quillon Software); and

(v) Negotiate a new or amended BAA with Clearpath covering the post-closing entity as part of the consent process.

VI. LABORATORY SERVICES AGREEMENT — REDSTONE DIAGNOSTICS, INC.

A. Overview. Lakewood is party to a Reference Laboratory Services Agreement with Redstone Diagnostics, Inc. ("Redstone"), a Pennsylvania corporation headquartered in Pittsburgh, Pennsylvania (the "Redstone Agreement"), dated March 1, 2023. Under the Redstone Agreement, Redstone serves as the primary reference laboratory for all send-out specimen testing across all 11 Lakewood clinic locations. The Company's annual spend under the Redstone Agreement is approximately $1,600,000, representing the Company's largest vendor relationship outside of the managed care, equipment leasing, and EHR categories. The Redstone Agreement, together with the fee schedule and compliance addendum, was reviewed in Data Room Folder 3.6.01.

B. Key Agreement Terms

1. Term and Renewal.

The initial term of the Redstone Agreement commenced on March 1, 2023 and expires on February 28, 2027, a four-year term. The agreement provides for automatic renewal for successive one-year periods thereafter, unless either party provides written notice of non-renewal at least 90 days prior to the expiration of the then-current term. Approximately 19 months remain in the initial term following the estimated Closing Date. Termination for convenience by either party requires 120 days' prior written notice and may be exercised at any time following the first anniversary of the initial term.

2. Pricing.

The Redstone Agreement utilizes a tiered fee schedule based on test category and volume. Base pricing is set at a discount to the Medicare Clinical Laboratory Fee Schedule (CLFS), with the discount percentage varying by test category: routine chemistry and hematology at 55% of CLFS; microbiology and pathology at 65% of CLFS; molecular and genetic testing at 72% of CLFS. Volume-based discounts of an additional 5% are available if total annual send-out volume exceeds 120,000 specimens. Based on the Company's management representations, LRHP's annual send-out volume has consistently exceeded this threshold, and the additional discount has been applied in each of the last two contract years. The fee schedule is subject to annual adjustment on each anniversary of the agreement, tied to the CPI-M, with a cap of 4.0% per annum.

3. Service Levels and Turnaround Times.

Section 5 of the Redstone Agreement establishes contractual turnaround-time commitments for key test categories: routine chemistry results within 24 hours of specimen receipt; microbiology cultures within 48 to 72 hours; STAT orders within four hours of specimen receipt; molecular/genetic testing within five to seven business days. Section 5.3 provides that persistent failure to meet turnaround-time commitments (defined as a failure rate exceeding 5% of total orders in any calendar month for three consecutive months) constitutes a material breach, entitling the Company to terminate the agreement on 30 days' notice.

4. Exclusivity.

Section 9.1 of the Redstone Agreement contains a limited exclusivity provision, under which LRHP agrees to utilize Redstone as its "primary reference laboratory" for not less than 80% of total send-out specimen volume. The remaining 20% may be directed to alternative reference laboratories for specialty tests not offered by Redstone or for tests where Redstone's turnaround times do not meet clinical needs. This exclusivity provision may limit Buyer's ability to rationalize its reference lab vendor relationships post-closing, particularly if Buyer or Sponsor has an existing relationship with an alternative reference laboratory provider. We recommend that Buyer evaluate whether the 80% volume commitment is acceptable within the context of its broader vendor strategy.

5. Compliance and Regulatory.

Section 10 of the Redstone Agreement contains representations from Redstone that it maintains all required Clinical Laboratory Improvement Amendments ("CLIA") certifications for each testing location (Redstone's current CLIA Certificate No. 39D2047824 has been verified through the CMS CLIA database), that it is in compliance with all applicable federal and state laboratory regulations, and that the arrangement is structured to comply with the Stark Law (42 U.S.C. § 1395nn) and the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), including reliance on the personal services and management contracts safe harbor (42 C.F.R. § 1001.952(d)). The compliance addendum includes representations that the pricing under the agreement reflects fair market value and is not based on the volume or value of referrals. We note that the Stark Law and AKS compliance representations are standard for reference laboratory arrangements and should be verified by Buyer's healthcare regulatory counsel.

C. Assignment and Change-of-Control Provisions

Section 14.1 of the Redstone Agreement provides:

"Neither party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld, conditioned, or delayed; provided, however, that either party may assign this Agreement without the other party's consent to an affiliate or in connection with a merger, acquisition, or sale of substantially all of the assigning party's assets, upon written notice to the other party."

This provision is materially more favorable than the anti-assignment clauses in the Meridian Shield and Clearpath agreements. The carve-out for assignments in connection with a sale of substantially all assets means that the Transaction, structured as an asset purchase, may qualify for the consent exception. However, the carve-out is framed as an assignment by the "assigning party" (i.e., LRHP) in connection with a sale of "the assigning party's assets." We recommend confirming with Seller's counsel that LRHP intends to assign (rather than simply permit Buyer to assume) the Redstone Agreement in connection with the Closing, and that the assignment is effected in a manner consistent with the carve-out language. As a best practice, we recommend providing written notice to Redstone prior to Closing, consistent with the notice provision, and obtaining Redstone's written acknowledgment or consent as an additional protective measure.

D. Risk Assessment

We rate the overall risk for the Redstone Agreement as LOW to MEDIUM. The reference laboratory relationship, while significant in dollar terms ($1,600,000 per annum), is generally replaceable with alternative providers (such as Kestrel & Co., Crestline Holdings, or BioReference Laboratories) without extended transition periods, as the logistics of specimen transport and results delivery are relatively standardized. The favorable assignment carve-out further reduces the risk. However, we flag the following considerations:

(i) The 80% exclusivity provision may limit Buyer's post-closing flexibility and should be evaluated in the context of Buyer's broader vendor strategy;

(ii) Any transition to an alternative reference laboratory would require updated requisition forms, specimen handling protocols, interface adjustments to the Clearpath EHR system (for electronic order entry and results delivery), and staff training, which could take four to eight weeks; and

(iii) The Stark Law and AKS compliance representations should be indepe

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 425 Lexington Avenue, 31st Floor New York, NY 10017
I. PURPOSE AND SCOPE
This memorandum summarizes the results of Calderwood & Harkness LLP's ("C&H") review of the material contracts of Lakewood Regional Health Partners, LLC ("LRHP" or the "Company") proposed for assumption by Crestline Packaging Solutions LLC ("CPS" or "Buyer") in connection with the proposed acquisition of substantially all of the assets of the Company (the "Transaction"). The Transaction is structured as an asset purchase with a fixed Purchase Price of $140,000,000, subject to customary working capital adjustments, and an estimated Closing Date of August 15, 2025. This review was conducted on behalf of Buyer and its parent entity, CPS Holdings, Inc. ("Parent"), and Parent's financial sponsor, Pinnacle River Capital Partners, LP ("Sponsor").
This memorandum covers the following categories of material contracts proposed for assumption by Buyer under the Asset Purchase Agreement (the "APA"):
(a) Fourteen (14) managed care and commercial insurance contracts, representing the substantial majority of the Company's trailing twelve-month ("TTM") net revenue;
(b) Three (3) imaging equipment capital leases with Marlowe Asset Management Medical Equipment Finance, LLC ("Marlowe Asset Management MEF"), with an aggregate remaining balance of approximately $2,870,000;
(c) One (1) enterprise electronic health record ("EHR") software license agreement with Clearpath Health Systems, Inc. ("Clearpath"), with an annual license fee of $840,000;
(d) One (1) laboratory services agreement with Redstone Diagnostics, Inc. ("Redstone"), with an annual spend of approximately $1,600,000; and
(e) Nine (9) real property leases for clinic locations in New York and Pennsylvania, with aggregate annual base rent of $2,740,000.
Each contract has been analyzed for change-of-control provisions, consent and notice requirements, assignability restrictions, termination rights (both for cause and for convenience), and other material terms and risk factors that may affect the Transaction or post-closing operations. The APA is targeted for execution on June 16, 2025. Seller's counsel in the Transaction is Whitfield, Ames & Greer LLP, led by Catherine Greer.
Documents Reviewed. Our review encompassed the universe of documents made available in the Thackeray Solutions virtual data room maintained by Seller (Project Lakeshore, Room ID LS-2025-LRHP), specifically folders 3.1 through 3.9 (Material Contracts), 4.1 through 4.4 (Real Property), and 6.1 through 6.3 (Insurance and Regulatory), as well as supplemental documents provided by Seller's counsel on May 22, 2025 and June 2, 2025 in response to C&H's first and second supplemental diligence request lists. In total, we reviewed approximately 340 documents and document sets. Where noted herein, we have also relied upon representations made by members of Seller's management team — including Dr. Raymond Alcott (Managing Member and Chief Medical Officer), Dr. Nadia Petrosian (Member and Chief Operating Officer), and Gretchen Unger (Chief Financial Officer) — during management presentations held on May 14, 2025 and May 28, 2025.
Disclaimer. This memorandum is prepared for the internal use of the deal team and does not constitute a legal opinion on the enforceability of any contract reviewed herein. Our analysis is based solely on the documents and information made available to us and described above. We have not independently verified the accuracy or completeness of any financial data, revenue figures, or other information provided by Seller or its representatives. To the extent that additional contracts or amendments are identified subsequent to the date hereof, supplemental analysis may be required.
II. EXECUTIVE SUMMARY AND KEY FINDINGS
A. Overview of Material Contracts
The following table provides a summary overview of the approximately 28 material contracts reviewed, organized by category. Each contract is identified by counterparty, annual economic value (or remaining balance, as applicable), expiration date, and a risk-rating flag for change-of-control or assignability issues. Detailed analysis of each contract follows in Sections III through VII below.
B. Critical Issues Requiring Resolution Prior to Closing
Based on our review, the following four issues present the highest risk to the Transaction and require priority attention and resolution prior to or as a condition of Closing:
1. Meridian Shield Health Plans, Inc. Managed Care Agreement — HIGH Risk.
The Managed Care Participation Agreement with Meridian Shield Health Plans, Inc. ("Meridian Shield") represents the single largest revenue relationship of the Company, accounting for approximately 22% of Lakewood's TTM net revenue, or approximately $17,248,000 per annum. Section 12.4 of the Meridian Shield agreement contains an express change-of-control consent requirement, providing that the agreement may not be assigned, and that any direct or indirect change of control of the provider entity shall require Meridian Shield's prior written consent. In addition, Section 12.4(b) provides a broad anti-assignment clause that is triggered by an asset sale in which substantially all of the assets of the provider entity are transferred to a third party. Of critical concern, Section 14.2(d) of the agreement grants Meridian Shield a 90-day termination-for-convenience right following any change of control, exercisable regardless of whether consent has been obtained. We strongly recommend that obtaining Meridian Shield's written consent be designated as a condition precedent to Closing under the APA, or, at minimum, that Seller obtain such consent prior to APA execution on June 16, 2025. The loss of this contract would reduce EBITDA by an estimated $4,800,000 to $5,200,000 (based on the Company's estimated margin on managed care revenue), which would almost certainly constitute a Material Adverse Effect under the APA as currently drafted.
2. Clearpath Health Systems, Inc. EHR License — HIGH Risk.
The enterprise EHR license agreement with Clearpath Health Systems, Inc. (Agreement No. CP-ENT-2022-0487) contains an express anti-assignment provision at Section 15.1, which prohibits assignment of the license without Clearpath's prior written consent. Critically, such consent may be withheld in Clearpath's "sole discretion," unlike other contracts reviewed herein that apply a reasonableness standard. The EHR system is deployed across all 11 Lakewood clinic locations and is deeply embedded in the Company's clinical, billing, scheduling, and patient portal operations. The license fee is subject to potential adjustment upon assignment, and the license term expires December 31, 2027, with no automatic renewal. If Clearpath withholds consent or conditions it upon materially unfavorable terms, Buyer would face a forced migration to a replacement EHR platform — an undertaking that, based on industry benchmarks and consultation with Buyer's IT team, would likely require 12 to 18 months and cost between $2,500,000 and $4,000,000, in addition to significant operational disruption. We recommend early engagement with Clearpath and designation of Clearpath consent as a Closing condition or, at a minimum, inclusion of a specific indemnity from Sellers.
3. Marlowe Asset Management Medical Equipment Finance, LLC Capital Leases — MEDIUM Risk.
The three capital lease schedules with Marlowe Asset Management MEF (aggregate remaining balance: $2,870,000) each contain a prohibition on assignment without Marlowe Asset Management MEF's prior written consent. Of particular concern, the Master Lease Agreement (MLA No. VML-MLA-2023-0088) contains a cross-default provision at Section 9.1(c), pursuant to which a default under any one schedule constitutes a default under all three schedules. An unapproved assignment would constitute an event of default, entitling Marlowe Asset Management MEF to accelerate all remaining payments under all three schedules, totaling $2,870,000 in the aggregate. While the aggregate value is manageable relative to the $140,000,000 Purchase Price, the cross-default amplifies risk and the acceleration could create an unplanned cash outflow shortly after Closing. We recommend obtaining Marlowe Asset Management MEF's consent prior to Closing and, as a fallback, negotiating replacement leases or obtaining payoff quotes to fund a cash buyout from the equity commitment.
4. OIG Inquiry Impact on Managed Care Contracts — HIGH Risk (Contingent).
As identified in the regulatory diligence workstream, the Company is subject to a pending inquiry by the Office of Inspector General ("OIG") of the U.S. Department of Health and Human Services regarding potential CPT 99214 upcoding practices at the Syracuse facility. The estimated exposure range, as assessed by Marchand Healthcare Regulatory Advisors, LLC, is $350,000 to $900,000 in potential overpayment liability. This inquiry has not yet resulted in a formal finding, but we note that several managed care agreements — including the Meridian Shield agreement (Section 14.1(c)), the Empire CrossBridge agreement (Section 11.2(b)), and the Allegheny Valley agreement (Section 13.1(d)) — contain termination-for-cause provisions triggered by a finding of billing fraud, material compliance violation, or exclusion from federal healthcare programs. If the OIG inquiry results in an adverse finding, these provisions could be triggered, potentially giving the affected payors a right to terminate. Moreover, an adverse OIG finding could complicate or delay the consent process for the Meridian Shield agreement. We cross-reference the regulatory diligence memorandum prepared by Tiffany Rosenthal (dated June 4, 2025) for a comprehensive analysis of the OIG inquiry and recommend that the APA include a specific indemnity from Sellers for any losses arising from the OIG inquiry, including contract termination by managed care payors.
C. Consent and Notice Matrix
The following table consolidates all consent and notice requirements across the 28 material contracts reviewed:
"NUBW" = Not to be Unreasonably Withheld, Conditioned, or Delayed.
As reflected above, approximately 17 contracts require affirmative consent from the applicable counterparty, 9 contracts require notice only, and 1 contract (Cascade Dental & Vision Network) is silent on assignment and appears freely assignable. Of the 17 consent-required contracts, 4 present elevated risk profiles due to the absence of a reasonableness standard, the economic significance of the contract, or both. The aggregate estimated timeline for obtaining all required consents is 45 to 60 days from commencement of outreach, which underscores the importance of initiating consent solicitation promptly following APA execution on June 16, 2025, in order to achieve completion by the estimated Closing Date of August 15, 2025.
III. MANAGED CARE AND COMMERCIAL INSURANCE CONTRACTS
A. Overview. Lakewood maintains 14 managed care and commercial insurance contracts that collectively govern the Company's participation in commercial and government-sponsored payor networks. These contracts cover the eight New York facilities operating under CMS Certification Numbers 33-7021 through 33-7028 and holding New York Article 28 certificates D&TC-4821 through D&TC-4828, as well as three Pennsylvania facilities operating under CMS Certification Numbers 39-6011, 39-6012, and 39-6013 and holding Pennsylvania Department of Health licenses OPC-20140892, OPC-20140893, and OPC-20140894.
Aggregate managed care revenue under these 14 contracts represents the substantial majority of the Company's TTM net revenue of $78,400,000. Based on data provided by the Company's management and verified against the Company's revenue cycle reports (Data Room Folder 2.3), managed care and commercial insurance reimbursement accounted for approximately $72,400,000, or 92.3%, of the Company's TTM net revenue, with the balance derived from patient self-pay, workers' compensation, and miscellaneous ancillary revenue.
We have coordinated our review of the managed care contracts with Marchand Healthcare Regulatory Advisors, LLC ("Marchand"), which serves as the healthcare regulatory advisor to Buyer in connection with the Transaction, regarding payor credentialing requirements, re-enrollment timelines, and regulatory implications of the change of ownership. As discussed in greater detail below and in Section VIII.A, many of the managed care contracts will require not only contractual consent to assignment but also completion of credentialing and network enrollment for the post-closing entity, which may entail separate application processes, site visits, and compliance reviews by each payor. Marchand has estimated that credentialing timelines for the post-closing entity will range from 30 to 120 days depending on the payor, with certain payors (most notably Meridian Shield and Seneca Valley Medicare Advantage) requiring extended review periods.
B. Meridian Shield Health Plans, Inc.
Meridian Shield Health Plans, Inc. ("Meridian Shield") is the Company's single largest managed care payor, accounting for approximately 22% of TTM net revenue, or approximately $17,248,000 per annum. The Managed Care Participation Agreement between LRHP and Meridian Shield (the "Meridian Agreement"), dated March 1, 2021 (as amended by First Amendment dated July 15, 2022 and Second Amendment dated January 10, 2024), governs LRHP's participation in the Meridian Shield commercial HMO and PPO networks across all 11 clinic locations. A copy of the Meridian Agreement and amendments was reviewed in Data Room Folder 3.1.04.
1. Term and Renewal.
The initial term of the Meridian Agreement commenced on March 1, 2021 and expires on December 31, 2026 (the "Initial Term"). The agreement provides for automatic renewal for successive one-year periods thereafter, unless either party provides written notice of non-renewal at least 180 days prior to the expiration of the then-current term. Based on the estimated Closing Date of August 15, 2025, approximately 16 months remain in the Initial Term. The Second Amendment did not modify the term provisions. Non-renewal notice for the Initial Term would need to be delivered by approximately July 4, 2026, and we note that neither party has given notice of non-renewal as of the date hereof.
2. Reimbursement Rates.
The Meridian Agreement utilizes a hybrid reimbursement structure consisting of: (i) fee-for-service reimbursement for professional services (office visits, procedures, and diagnostic services), calculated at a percentage of the then-current Medicare Physician Fee Schedule ("MPFS"), as published by CMS and updated annually; and (ii) a per-member-per-month ("PMPM") capitation payment for primary care management services, adjusted quarterly based on attributed patient panel size. Pursuant to the Second Amendment, the fee-for-service reimbursement rate was set at 128% of the MPFS, effective January 1, 2024, representing a 4% increase from the prior rate of 123% of the MPFS. The capitation PMPM rate was set at $14.25, effective January 1, 2024, with an annual escalator tied to the Consumer Price Index for Medical Care Services ("CPI-M"), capped at 3.5% per annum.
We note that the linkage of fee-for-service rates to the MPFS introduces annual variability based on CMS rate-setting. The capitation component introduces risk-bearing obligations, including a risk-sharing corridor under which LRHP is responsible for medical costs in excess of 105% of the capitation revenue for the attributed population (Section 7.3(b) of the Meridian Agreement). Based on the Company's management representations during the May 28, 2025 management presentation, the risk corridor has not been triggered in the most recent two contract years, but we recommend that the APA address allocation of any risk-sharing settlement obligations that straddle the Closing Date.
3. Change-of-Control Provision.
Section 12.4(a) of the Meridian Agreement provides:
"This Agreement may not be assigned by Provider, and no change of control of Provider shall be effective for purposes of this Agreement, without the prior written consent of Plan. For purposes of this Section, 'change of control' means (i) any merger, consolidation, or reorganization of Provider; (ii) the sale, transfer, or other disposition of all or substantially all of the assets of Provider; (iii) any change in the direct or indirect ownership or control of fifty percent (50%) or more of the equity interests of Provider; or (iv) any other transaction or series of related transactions that results in a change in the identity of the person or entity that controls Provider. Consent to any such assignment or change of control shall not be unreasonably withheld by Plan, provided that the assignee or successor entity satisfies Plan's credentialing requirements, network adequacy standards, and compliance review."
This provision is broadly drafted and clearly captures an asset purchase transaction in which substantially all of the Company's assets, including the Meridian Agreement, are transferred to Buyer. The asset purchase structure of the Transaction falls squarely within clause (ii) of the definition. We further note that the consent standard, while incorporating a "not unreasonably withheld" qualification, conditions consent on the satisfaction of credentialing, network adequacy, and compliance review requirements — each of which introduces subjectivity and potential for delay. Meridian Shield's credentialing process, as described by Marchand, typically requires 60 to 90 days and involves submission of practitioner credentials, facility inspections, and compliance attestations.
4. Anti-Assignment Clause.
In addition to the change-of-control provision described above, Section 12.4(b) provides a standalone anti-assignment clause:
"Provider shall not assign, transfer, delegate, or subcontract any of its rights or obligations under this Agreement without the prior written consent of Plan. Any purported assignment in violation of this Section shall be null and void."
This anti-assignment clause operates independently of the change-of-control provision and would be triggered by any attempted assignment of the Meridian Agreement in connection with the Transaction. Because the Transaction is structured as an asset purchase (rather than a membership interest purchase), the assignment of the Meridian Agreement is a necessary step for Buyer to assume the contract, and this clause is therefore directly implicated.
5. Termination Provisions.
Section 14.1 of the Meridian Agreement sets forth the termination-for-cause provisions, which include:
(a) Material breach by either party that remains uncured for 30 days following written notice;
(b) Loss of licensure by Provider to operate any facility covered by the Agreement;
(c) Exclusion or debarment of Provider, or any practitioner employed by Provider, from participation in any federal or state healthcare program, including Medicare and Medicaid;
(d) A finding by any governmental authority of billing fraud, material compliance violation, or pattern of upcoding with respect to services provided under the Agreement; and
(e) Provider's insolvency, bankruptcy, or assignment for the benefit of creditors.
Section 14.2 sets forth termination-for-convenience provisions. Of particular concern, Section 14.2(d) provides:
"Notwithstanding any other provision of this Agreement, in the event of any change of control of Provider (as defined in Section 12.4(a)), Plan shall have the right, exercisable in its sole discretion, to terminate this Agreement upon ninety (90) days' prior written notice to Provider, delivered at any time within one hundred eighty (180) days following the effective date of such change of control."
This provision is particularly significant because it grants Meridian Shield an independent termination right triggered solely by a change of control, irrespective of whether consent to the change of control has been obtained. In other words, even if Meridian Shield consents to the assignment of the Meridian Agreement to Buyer, Meridian Shield retains the right to terminate the agreement on 90 days' notice for up to 180 days following Closing. This creates a period of contractual uncertainty extending potentially to February 2026. We recommend that, in connection with the consent solicitation, Buyer seek a written waiver from Meridian Shield of the Section 14.2(d) termination right, or at minimum, a written confirmation that Meridian Shield does not intend to exercise such right.
6. Most-Favored-Nation / Exclusivity.
Section 8.2 of the Meridian Agreement contains a most-favored-nation ("MFN") pricing obligation, requiring that the reimbursement rates offered to Meridian Shield be no less favorable than the rates offered to any other commercial payor with comparable volume and product type. We note that this MFN provision may affect Buyer's ability to negotiate preferential rates with other payors post-closing without triggering an obligation to offer equivalent terms to Meridian Shield. Section 8.5 contains a limited exclusivity provision requiring that LRHP participate exclusively in Meridian Shield's HMO network (as opposed to competing HMO networks) for the Company's Rochester Main and Syracuse facilities. This exclusivity provision does not extend to the Company's PPO participation or to facilities outside of Rochester and Syracuse.
7. Risk Assessment.
We rate the Meridian Shield contract as HIGH risk. The combination of the change-of-control consent requirement, the broad anti-assignment clause, the 90-day post-closing termination right, and the contract's significance as 22% of net revenue makes this the single most critical contract in the Transaction. We strongly recommend the following:
(i) Obtaining Meridian Shield's written consent to the assignment and change of control be designated as a condition precedent to Closing under the APA;
(ii) As a fallback, if consent is delayed, the parties negotiate a specific indemnity from Sellers and/or an escrow mechanism (we suggest an escrow of not less than $5,000,000, representing approximately 30% of one year's revenue from the contract) to protect Buyer against the risk of post-closing termination;
(iii) Buyer seek a waiver of the Section 14.2(d) termination right as part of the consent process;
(iv) If Meridian Shield consent cannot be obtained prior to Closing, Buyer evaluate whether the Transaction economics remain viable absent this contract, noting that loss of the Meridian Shield revenue would reduce EBITDA by an estimated $4,800,000 to $5,200,000 and may trigger the Material Adverse Effect definition under the APA; and
(v) The consent solicitation be initiated immediately and not deferred until after APA execution, given the 60- to 90-day credentialing timeline.
C. Remaining Managed Care Contracts (13 Contracts)
The following table summarizes the 13 remaining managed care and commercial insurance contracts:
A brief narrative summary of each contract follows:
2. Empire CrossBridge Insurance Co. ($9,408,000; 12.0% of TTM net revenue). This is the Company's second-largest payor relationship. The Participating Provider Agreement, dated July 1, 2021 (as amended February 15, 2023), requires consent to assignment, subject to a "not unreasonably withheld, conditioned, or delayed" standard. The agreement does not contain an independent post-change-of-control termination right comparable to the Meridian Shield provision. Termination for convenience requires 120 days' written notice. The agreement contains quality metrics tied to reimbursement: LRHP must maintain a minimum HEDIS quality score of 3.5 (out of 5.0) for covered services, with reimbursement subject to a 2% withhold and year-end quality bonus. We note that the agreement's anti-assignment provision at Section 10.2 is triggered by a change of ownership of the provider entity, including asset sales. Rated Medium risk due to size and consent requirement. The pending OIG inquiry may complicate the consent process, as Empire CrossBridge's termination-for-cause provision (Section 11.2(b)) includes billing irregularities as a triggering event.
3. Allegheny Valley Health Plan ($7,056,000; 9.0% of TTM net revenue). The Provider Participation Agreement, dated October 1, 2022, governs LRHP's participation in the Allegheny Valley commercial and Medicaid managed care networks, primarily for the three Pennsylvania clinic locations. Assignment requires Allegheny Valley's prior written consent, not to be unreasonably withheld. The agreement contains a geographic network adequacy requirement mandating that LRHP maintain at least three participating clinic locations within a 50-mile radius of Scranton, Pennsylvania. This may require Buyer to commit to continued operation of the Scranton, Wilkes-Barre, and Allentown clinics post-closing. Termination for convenience requires 90 days' notice. The termination-for-cause provision at Section 13.1(d) is triggered by a finding of billing fraud or material compliance violation, which is implicated by the OIG inquiry. Rated Medium risk.
4. Great Northern Benefit Administrators ($5,880,000; 7.5% of TTM net revenue). The Provider Services Agreement, dated April 1, 2023, is a third-party administrator arrangement covering self-funded employer group plans. The agreement requires notice only — 60 days' written notice of any change of ownership — and does not require consent to assignment. Termination for convenience requires 90 days' notice by either party. Reimbursement is fee-for-service at 135% of the MPFS, with an annual true-up. No MFN or exclusivity provisions. Rated Low risk.
5. Keystone Select Health Network ($5,488,000; 7.0% of TTM net revenue). The Network Participation Agreement, dated January 1, 2022, covers Keystone Select's commercial PPO and POS products across all 11 clinic locations. The agreement requires consent to assignment, with consent not to be unreasonably withheld. The agreement contains a 180-day non-compete radius restriction prohibiting LRHP from contracting with competing PPO networks within 25 miles of any participating facility, which could limit Buyer's post-closing flexibility in payor negotiations. Termination for convenience requires 120 days' notice. Rated Medium risk due to consent requirement and non-compete provision.
6. Finger Lakes Community Health Plan ($4,704,000; 6.0% of TTM net revenue). The Provider Agreement, dated September 1, 2021, is a Medicaid managed care contract covering the Rochester and surrounding New York facilities. The agreement requires 90 days' notice of any change of ownership but does not require affirmative consent. However, the New York State Department of Health may require separate notification and approval in connection with a change of ownership of a Medicaid-participating provider. Reimbursement is based on the New York Medicaid Fee Schedule. Rated Low risk from a contractual perspective, though regulatory re-enrollment may require additional time.
7. TriState Premier PPO, Inc. ($4,312,000; 5.5% of TTM net revenue). The Provider Participation Agreement, dated December 1, 2022, expires November 30, 2025, and does not contain an automatic renewal provision. Consent to assignment is required, not to be unreasonably withheld. Given the contract's near-term expiration (approximately 3.5 months after the estimated Closing Date), the primary risk is that TriState Premier may decline to consent and instead negotiate a new agreement with the post-closing entity at different terms. Rated Medium risk; recommend concurrent negotiation of a new agreement with TriState Premier in the event consent is not obtained.
8. Commonwealth Physicians Alliance ($3,920,000; 5.0% of TTM net revenue). The Physician Services Agreement, dated July 1, 2024, is a relatively new contract that requires only 30 days' written notice of a change of ownership. No consent is required. The agreement contains a service line carve-out, excluding behavioral health and substance abuse services from the scope of covered services. Termination for convenience requires 60 days' notice. Rated Low risk.
9. Seneca Valley Medicare Advantage, Inc. ($3,528,000; 4.5% of TTM net revenue). The Medicare Advantage Participating Provider Agreement, dated January 1, 2023, covers LRHP's participation in Seneca Valley's Medicare Advantage network for the Rochester and Syracuse markets. The agreement requires consent to assignment, not to be unreasonably withheld, and also references CMS requirements for change of ownership of Medicare-participating providers, including submission of CMS-855A/855B change of information forms. We note that CMS change-of-ownership processes can take 60 to 120 days and must be coordinated with the NY DOH and PA DOH regulatory approval process. Rated Medium risk due to the dual-track consent/CMS process.
10. Hudson Gateway HMO, LLC ($3,136,000; 4.0% of TTM net revenue). The HMO Participation Agreement, dated May 1, 2022, requires 60 days' notice of any change of ownership but does not require consent. Termination for convenience requires 90 days' notice. No notable restrictive provisions. Rated Low risk.
11. Pinnacle First Workers' Compensation Trust ($2,744,000; 3.5% of TTM net revenue). The Workers' Compensation Provider Agreement, dated January 1, 2024, requires 30 days' notice of any change of ownership. The agreement is governed by the applicable workers' compensation fee schedules in New York and Pennsylvania and does not contain a separate anti-assignment clause. Rated Low risk.
12. Eastern Ridge Behavioral Health, Inc. ($2,352,000; 3.0% of TTM net revenue). The Behavioral Health Provider Agreement, dated October 1, 2023, requires 60 days' notice of any change of ownership. Reimbursement is fee-for-service. The agreement contains a credential-specific carve-out, limiting participation to licensed clinical social workers, psychologists, and psychiatrists employed by LRHP. Buyer should confirm that relevant practitioners will continue employment post-closing. Rated Low risk.
13. Cascade Dental & Vision Network ($1,568,000; 2.0% of TTM net revenue). The Ancillary Services Agreement, dated April 1, 2022, is silent on assignment and does not contain a change-of-control provision. Based on our review of the agreement and applicable New York law, the agreement appears freely assignable. Rated Low risk.
14. Sterling Point Indemnity Group ($1,056,000; 1.3% of TTM net revenue). The Indemnity Provider Agreement, dated January 1, 2024, requires 30 days' notice of any change of ownership. The agreement is a straightforward fee-for-service arrangement with no restrictive covenants. Rated Low risk.
We note that the substantial majority of managed care contracts contain some form of anti-assignment clause or change-of-ownership notification requirement that is triggered by a change of ownership of the provider entity. Even where contractual consent is not required, virtually all payors will require re-credentialing and network enrollment of the post-closing entity, which may result in a gap in coverage or reimbursement during the transition period. Based on Marchand's analysis, the re-credentialing process for the 14 managed care payors is expected to take between 30 and 120 days, depending on the payor. We recommend that the APA include a mechanism (such as an interim services agreement or management agreement) to ensure continuity of payor reimbursement during the re-credentialing period, to the extent permitted by applicable law and the terms of the relevant contracts.
D. Managed Care Contracts — Aggregate Risk Analysis
The managed care portfolio presents meaningful concentration risk. As noted above, Meridian Shield alone accounts for 22% of TTM net revenue ($17,248,000). Empire CrossBridge accounts for an additional 12% ($9,408,000), and Allegheny Valley accounts for 9% ($7,056,000). Together, these three payors represent 43% of the Company's TTM net revenue, or approximately $33,712,000. This level of concentration means that the loss or material renegotiation of any one of these three contracts could have a significant adverse impact on the Company's financial performance.
No other individual payor exceeds the 10% threshold, although Great Northern (7.5%) and Keystone Select (7.0%) each approach that level. We note that Ridgepoint Advisory Group's financial diligence report (dated May 30, 2025) identified similar concentration risk and recommended that the APA include appropriate protections.
In light of the concentration risk and the number of contracts requiring consent, we recommend that the APA include a Closing condition providing that consents (or, where applicable, re-credentialing confirmations) from payors representing no less than 80% of aggregate managed care revenue shall have been obtained as a condition to Buyer's obligation to close. At the current revenue levels, this threshold would require consents from payors representing at least $57,920,000 of the $72,400,000 in aggregate managed care revenue — which effectively means that, at minimum, the Meridian Shield, Empire CrossBridge, and Allegheny Valley consents must be obtained.
We further recommend that the APA include a specific indemnity from Sellers for any revenue loss attributable to the failure to obtain required payor consents or the loss of any managed care contract within the first 12 months following Closing as a result of the change of control. The indemnity should be backed by an escrow or holdback mechanism to ensure recoverability. We cross-reference Ridgepoint Advisory Group's financial diligence findings regarding payor mix and revenue sustainability for additional analysis of the revenue concentration risk and its implications for the Transaction valuation.
IV. IMAGING EQUIPMENT CAPITAL LEASES — Marlowe Asset Management MEDICAL EQUIPMENT FINANCE, LLC
A. Overview. Lakewood maintains three capital leases with Marlowe Asset Management Medical Equipment Finance, LLC ("Marlowe Asset Management MEF"), a Delaware limited liability company headquartered in Stamford, Connecticut, for diagnostic imaging equipment deployed at three of the Company's clinic locations. The leases were entered into pursuant to a Master Lease Agreement dated April 15, 2023 (the "MLA," MLA No. VML-MLA-2023-0088), with individual equipment schedules executed thereunder. The aggregate remaining balance under the three lease schedules, as of June 1, 2025, is approximately $2,870,000, broken down as follows:
The MRI and CT lease schedules were executed concurrently with the MLA on April 15, 2023, while the ultrasound lease schedule was added on February 1, 2024. Lease expirations range from March 2026 (ultrasound) through November 2027 (CT scanner). All three lease schedules are classified as capital leases under ASC 842, consistent with the Company's financial reporting.
B. Key Lease Terms
1. VML-2023-1140 — MRI Unit (Rochester Main).
Monthly payment: $39,444.44 (for a remaining term of 36 months as of the date hereof, yielding a total remaining obligation of approximately $1,420,000). The lease schedule provides for a fixed-price purchase option at end of term equal to 10% of the original equipment cost ($420,000 original cost, yielding a $42,000 buyout), exercisable by written notice not less than 90 days prior to lease expiration. The lessee is responsible for all maintenance, including an annual service contract with the equipment manufacturer (currently maintained with Calderon Industries at an annual cost of approximately $92,000), as well as comprehensive property and casualty insurance with coverage limits of not less than the full replacement value of the equipment. At end of term, if the purchase option is not exercised, the lessee must deinstall the equipment at its expense, return the equipment in good working condition (reasonable wear and tear excepted) to a location designated by Marlowe Asset Management MEF within the continental United States, and restore the leased premises to their pre-installation condition, including removal of any structural modifications made to accommodate the MRI unit.
2. VML-2023-1141 — CT Scanner (Syracuse).
Monthly payment: $27,222.22 (for a remaining term of approximately 36 months, yielding a total remaining obligation of approximately $980,000). The lease schedule provides for a fair-market-value ("FMV") purchase option at end of term, determined by mutual agreement or, failing agreement, by an independent appraiser selected by the lessor. Maintenance and insurance obligations are substantially similar to Schedule VML-2023-1140. The lessee is responsible for maintaining the manufacturer's service contract (currently with Pemberton Partners LLC at an annual cost of approximately $68,000). Equipment return conditions are substantially similar, including deinstallation, shipping, and premises restoration.
3. VML-2024-0219 — Ultrasound System (Albany).
Monthly payment: $23,500.00 (for a remaining term of approximately 20 months, yielding a total remaining obligation of approximately $470,000). The lease schedule provides for a $1.00 bargain purchase option at end of term. Given the nominal purchase option price and the relatively short remaining term, this schedule presents the lowest individual risk. Maintenance obligations are less onerous than the imaging schedules, limited to routine calibration and manufacturer-recommended servicing. Equipment return is not anticipated given the bargain purchase option.
C. Assignment and Change-of-Control Provisions
Each of the three lease schedules incorporates by reference the terms of the MLA, including the anti-assignment provision at Section 11.1, which states:
"Lessee shall not assign, transfer, pledge, hypothecate, or otherwise dispose of this Lease or any Equipment Schedule, or any interest therein, or sublease any Equipment, without the prior written consent of Lessor, which consent may be granted or withheld in Lessor's sole discretion. Any purported assignment or transfer in violation of this Section shall be null and void and shall constitute an Event of Default hereunder."
We note that, unlike several of the managed care contracts, the consent standard here does not incorporate a "not unreasonably withheld" qualification — consent is in Marlowe Asset Management MEF's "sole discretion." This gives Marlowe Asset Management MEF significant leverage in the consent process.
Of critical concern is the cross-default provision at Section 9.1(c) of the MLA:
"The occurrence of any Event of Default under any Equipment Schedule executed pursuant to this Master Lease Agreement shall constitute an Event of Default under each and every other Equipment Schedule then in effect."
This means that an unapproved assignment of any single lease schedule would trigger a default under all three schedules. Upon the occurrence of an Event of Default, Section 9.2 provides that Marlowe Asset Management MEF may, at its option, (a) declare all remaining payments under all outstanding Equipment Schedules immediately due and payable (i.e., accelerate the full $2,870,000 aggregate remaining balance), (b) repossess the equipment, and/or (c) pursue any other remedies available at law or in equity. The acceleration provision, combined with the cross-default, means that a failure to obtain consent for any one schedule could trigger a $2,870,000 liability.
We further note that the Incremental Term Loan from Ironclad National Bank may require that assumed capital leases be disclosed and permitted under the credit facility's negative covenants. The credit agreement's basket for permitted capital lease obligations should be confirmed with Kenneth Boateng at Ironclad to ensure that assumption of these leases does not trigger a covenant violation.
D. Risk Assessment
We rate the overall risk for the Marlowe Asset Management MEF capital leases as MEDIUM. While the aggregate remaining balance of $2,870,000 represents a modest amount relative to the $140,000,000 Purchase Price and the $84,000,000 Term Loan, the cross-default provision amplifies the risk by converting a single schedule default into a portfolio-wide default with full acceleration. The "sole discretion" consent standard further limits Buyer's ability to compel consent.
We recommend the following approach:
(i) Early outreach to Marlowe Asset Management MEF (contact: Derek Callahan, Senior Vice President, Portfolio Management, Marlowe Asset Management MEF) to initiate the consent process, including submission of Buyer's and Sponsor's financial information for credit review;
(ii) As a fallback, obtain payoff quotes from Marlowe Asset Management MEF for all three schedules to determine the cost of a cash buyout, which could be funded from the equity commitment and would eliminate the ongoing lease obligations and associated consent risk;
(iii) If consent is obtained, negotiate amendment of the MLA to remove or narrow the cross-default provision, or at minimum, obtain Marlowe Asset Management MEF's acknowledgment that the assignment with consent does not constitute a default;
(iv) Confirm with Ironclad National Bank that assumption of the Marlowe Asset Management MEF leases is permitted under the credit facility; and
(v) Consider negotiation of replacement leases directly between Buyer and Marlowe Asset Management MEF (or an alternative equipment lessor) as an additional fallback, which would have the benefit of allowing Buyer to negotiate more favorable terms, including removal of the cross-default provision.
V. EHR LICENSE AGREEMENT — CLEARPATH HEALTH SYSTEMS, INC.
A. Overview. Lakewood is party to an enterprise Electronic Health Record ("EHR") software license agreement with Clearpath Health Systems, Inc. ("Clearpath"), a Wisconsin corporation headquartered in Madison, Wisconsin (Agreement No. CP-ENT-2022-0487, dated September 1, 2022) (the "Clearpath Agreement"). The annual license fee is $840,000, payable in equal quarterly installments of $210,000. The Clearpath EHR platform is deployed across all 11 Lakewood clinic locations and is the sole system of record for clinical documentation, billing and revenue cycle management, appointment scheduling, patient portal access, clinical decision support, and regulatory reporting (including MIPS quality reporting and Meaningful Use attestation). The Clearpath Agreement has a remaining term of approximately 29 months from the estimated Closing Date, expiring December 31, 2027. A copy of the Clearpath Agreement, together with the associated Business Associate Agreement and service level addendum, was reviewed in Data Room Folder 3.5.02.
B. Key Agreement Terms
1. License Scope.
The license granted under Section 2.1 of the Clearpath Agreement is entity-specific, granted to "Lakewood Regional Health Partners, LLC, and its wholly owned subsidiaries and affiliates" (as defined in the Agreement). The license covers up to 350 authorized named users across six modules: (i) Clinical Documentation, (ii) Billing and Revenue Cycle Management, (iii) Scheduling, (iv) Patient Portal, (v) Clinical Decision Support, and (vi) Regulatory Reporting. Section 2.3 expressly restricts use of the software to the "licensed facilities," defined as the 11 clinic locations identified in Exhibit A to the Clearpath Agreement. The license does not extend to affiliates, parent entities, or successor entities of the licensee unless such entities are specifically added by written amendment. This entity-specific and facility-specific scope means that a successor entity (i.e., Buyer) would fall outside the scope of the existing license unless Clearpath consents to the assignment or executes a new license with Buyer.
2. Annual Fee and Escalation.
The annual license fee is $840,000, as set forth in Exhibit B to the Clearpath Agreement. The fee is subject to an annual escalation of 3.0% per annum, effective on each anniversary of the agreement's effective date (September 1 of each year). The fee is also subject to a volume-based true-up if the number of authorized users exceeds 350 by more than 10%, with additional users charged at $3,600 per user per annum. Based on the Company's current user count of approximately 310 (as represented by Gretchen Unger during the May 28 management presentation), the volume true-up has not been triggered. However, we note that Buyer's post-closing staffing plans may increase the user count, and the per-user incremental fee should be factored into post-closing cost projections.
3. Term and Renewal.
The Clearpath Agreement has an initial term commencing September 1, 2022 and expiring December 31, 2027 (a term of approximately five years and four months). Section 3.2 provides that the agreement does not contain an automatic renewal provision. Instead, renewal of the license is "subject to mutual written agreement of the parties, including renegotiation of license fees, scope, and other terms as the parties may agree." This absence of an automatic renewal provision is a significant risk factor, as it means that Buyer cannot rely on the continued availability of the Clearpath platform beyond December 31, 2027, without affirmatively negotiating a renewal. If Clearpath declines to renew or demands significantly higher fees, Buyer would be forced to identify, procure, implement, and validate a replacement EHR system within the remaining license term — a process that, based on industry benchmarks and C&H's experience in healthcare M&A transactions, typically requires 12 to 18 months for a multi-location deployment.
4. Service Level Agreements.
The service level addendum (Addendum A, dated September 1, 2022) establishes the following performance commitments: (i) system uptime of not less than 99.5% measured on a monthly basis, excluding scheduled maintenance windows; (ii) critical issue (Priority 1) response time of four hours; (iii) major issue (Priority 2) response time of eight business hours; (iv) data backup performed at minimum every 24 hours, with off-site replication to a geographically separate data center; and (v) disaster recovery — full system restoration within 72 hours following a qualifying disaster event. The SLA provides for service credits (applied against the quarterly license fee) if Clearpath fails to meet the uptime commitment in any given month, calculated at 1% of the monthly fee for each 0.1% below the 99.5% threshold, capped at 10% of the monthly fee.
5. Data Ownership and Portability.
Section 8.1 of the Clearpath Agreement provides that all patient data, clinical records, financial data, and other data entered into or generated by the Clearpath system remains the sole property of the licensee and is not owned, licensed to, or otherwise controlled by Clearpath, except as necessary for Clearpath to perform its obligations under the agreement. Section 8.3 addresses data portability, providing that upon termination or non-renewal of the agreement, Clearpath shall provide the licensee with a complete export of all data in a "commercially standard, machine-readable format" (specifically, HL7 FHIR and C-CDA formats for clinical data, and CSV for financial and administrative data) within 90 days of termination. Clearpath shall provide reasonable data migration assistance at its then-current professional services rates. We note that the data migration assistance is at Clearpath's "then-current" rates, which are not fixed, and may represent an additional cost if migration is required post-closing.
6. HIPAA Business Associate Agreement.
A Business Associate Agreement ("BAA") between LRHP and Clearpath, dated September 1, 2022, was included in the data room materials and has been reviewed. The BAA appears compliant with the requirements of 45 C.F.R. § 164.314 and § 164.504(e) and addresses the required elements, including permitted uses and disclosures, safeguards, breach notification, and subcontractor obligations. However, we note that the BAA is between LRHP and Clearpath specifically, and a new or amended BAA will be required for the post-closing entity if the Clearpath Agreement is assigned to Buyer. We recommend that the new BAA be negotiated concurrently with the consent process.
C. Assignment and Change-of-Control Provisions
Section 15.1 of the Clearpath Agreement provides:
"This Agreement, and the license granted hereunder, may not be assigned, transferred, or sublicensed by Licensee without the prior written consent of Clearpath, which consent may be withheld in Clearpath's sole discretion. Any purported assignment in violation of this Section shall be null and void. For purposes of this Section, 'assignment' includes any merger, consolidation, reorganization, or sale of substantially all of the assets of Licensee, or any change of control of Licensee (including any transaction resulting in a change in the person or entity that controls fifty percent (50%) or more of the voting interests of Licensee)."
This provision is among the most restrictive anti-assignment clauses in the reviewed contracts. The "sole discretion" standard affords Clearpath maximum leverage in the consent process, as Clearpath has no obligation to consent, even on commercially reasonable terms. The definition of "assignment" is broadly drafted and clearly encompasses the asset purchase structure of the Transaction. We further note that Section 15.2 provides:
"In the event that Clearpath consents to an assignment of this Agreement, Clearpath reserves the right to adjust the license fees and other financial terms of this Agreement to reflect the assignee's creditworthiness, scope of operations, and other relevant factors, as determined by Clearpath in its reasonable judgment."
This fee adjustment provision creates the risk that, even if Clearpath consents to the assignment, it may condition consent on a material increase in license fees. Given the annual fee of $840,000 and the 29-month remaining term, a significant fee increase could have a meaningful impact on the post-closing economics of the Transaction.
The absence of an automatic renewal provision heightens the transition risk further. If Clearpath withholds consent or demands unfavorable terms, the Buyer would need to identify and implement a replacement EHR system across 11 clinic locations before December 31, 2027. Even if consent is obtained, the non-renewal risk means Buyer should begin evaluating alternative EHR platforms well in advance of the December 31, 2027 expiration date.
D. Risk Assessment
We rate the overall risk for the Clearpath EHR license as HIGH. The EHR system is deeply embedded in all clinical and billing operations across all 11 Lakewood clinic locations, and the Company's entire revenue cycle, clinical documentation, regulatory reporting, and patient engagement infrastructure depends on it. A forced migration to a replacement EHR platform would be costly (estimated $2,500,000 to $4,000,000, inclusive of software licensing, data migration, implementation services, training, and parallel run costs), time-consuming (estimated 12 to 18 months), and operationally disruptive (including potential reimbursement delays, clinical workflow disruptions, and regulatory reporting gaps during the transition period).
We recommend the following:
(i) Initiate outreach to Clearpath immediately to discuss consent to assignment and, if possible, negotiate a license extension or renewal commitment concurrent with the consent process;
(ii) Designate Clearpath's consent to the assignment of the Clearpath Agreement as a Closing condition in the APA, or, at minimum, negotiate a specific indemnity from Sellers for any losses arising from Clearpath's failure or refusal to consent, including the costs of migrating to a replacement EHR system;
(iii) Request that Sellers represent and warrant in the APA that they have not received any indication from Clearpath that consent would be withheld, and that the Clearpath relationship is in good standing with no outstanding disputes or unresolved service issues;
(iv) Engage Buyer's IT team and, if appropriate, an independent healthcare IT consultant to evaluate replacement EHR systems as a contingency measure, including preliminary scoping and cost estimation for a migration to alternative platforms (e.g., Tidewater Systems, Ashford Solutions, or Quillon Software); and
(v) Negotiate a new or amended BAA with Clearpath covering the post-closing entity as part of the consent process.
VI. LABORATORY SERVICES AGREEMENT — REDSTONE DIAGNOSTICS, INC.
A. Overview. Lakewood is party to a Reference Laboratory Services Agreement with Redstone Diagnostics, Inc. ("Redstone"), a Pennsylvania corporation headquartered in Pittsburgh, Pennsylvania (the "Redstone Agreement"), dated March 1, 2023. Under the Redstone Agreement, Redstone serves as the primary reference laboratory for all send-out specimen testing across all 11 Lakewood clinic locations. The Company's annual spend under the Redstone Agreement is approximately $1,600,000, representing the Company's largest vendor relationship outside of the managed care, equipment leasing, and EHR categories. The Redstone Agreement, together with the fee schedule and compliance addendum, was reviewed in Data Room Folder 3.6.01.
B. Key Agreement Terms
1. Term and Renewal.
The initial term of the Redstone Agreement commenced on March 1, 2023 and expires on February 28, 2027, a four-year term. The agreement provides for automatic renewal for successive one-year periods thereafter, unless either party provides written notice of non-renewal at least 90 days prior to the expiration of the then-current term. Approximately 19 months remain in the initial term following the estimated Closing Date. Termination for convenience by either party requires 120 days' prior written notice and may be exercised at any time following the first anniversary of the initial term.
2. Pricing.
The Redstone Agreement utilizes a tiered fee schedule based on test category and volume. Base pricing is set at a discount to the Medicare Clinical Laboratory Fee Schedule (CLFS), with the discount percentage varying by test category: routine chemistry and hematology at 55% of CLFS; microbiology and pathology at 65% of CLFS; molecular and genetic testing at 72% of CLFS. Volume-based discounts of an additional 5% are available if total annual send-out volume exceeds 120,000 specimens. Based on the Company's management representations, LRHP's annual send-out volume has consistently exceeded this threshold, and the additional discount has been applied in each of the last two contract years. The fee schedule is subject to annual adjustment on each anniversary of the agreement, tied to the CPI-M, with a cap of 4.0% per annum.
3. Service Levels and Turnaround Times.
Section 5 of the Redstone Agreement establishes contractual turnaround-time commitments for key test categories: routine chemistry results within 24 hours of specimen receipt; microbiology cultures within 48 to 72 hours; STAT orders within four hours of specimen receipt; molecular/genetic testing within five to seven business days. Section 5.3 provides that persistent failure to meet turnaround-time commitments (defined as a failure rate exceeding 5% of total orders in any calendar month for three consecutive months) constitutes a material breach, entitling the Company to terminate the agreement on 30 days' notice.
4. Exclusivity.
Section 9.1 of the Redstone Agreement contains a limited exclusivity provision, under which LRHP agrees to utilize Redstone as its "primary reference laboratory" for not less than 80% of total send-out specimen volume. The remaining 20% may be directed to alternative reference laboratories for specialty tests not offered by Redstone or for tests where Redstone's turnaround times do not meet clinical needs. This exclusivity provision may limit Buyer's ability to rationalize its reference lab vendor relationships post-closing, particularly if Buyer or Sponsor has an existing relationship with an alternative reference laboratory provider. We recommend that Buyer evaluate whether the 80% volume commitment is acceptable within the context of its broader vendor strategy.
5. Compliance and Regulatory.
Section 10 of the Redstone Agreement contains representations from Redstone that it maintains all required Clinical Laboratory Improvement Amendments ("CLIA") certifications for each testing location (Redstone's current CLIA Certificate No. 39D2047824 has been verified through the CMS CLIA database), that it is in compliance with all applicable federal and state laboratory regulations, and that the arrangement is structured to comply with the Stark Law (42 U.S.C. § 1395nn) and the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), including reliance on the personal services and management contracts safe harbor (42 C.F.R. § 1001.952(d)). The compliance addendum includes representations that the pricing under the agreement reflects fair market value and is not based on the volume or value of referrals. We note that the Stark Law and AKS compliance representations are standard for reference laboratory arrangements and should be verified by Buyer's healthcare regulatory counsel.
C. Assignment and Change-of-Control Provisions
Section 14.1 of the Redstone Agreement provides:
"Neither party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld, conditioned, or delayed; provided, however, that either party may assign this Agreement without the other party's consent to an affiliate or in connection with a merger, acquisition, or sale of substantially all of the assigning party's assets, upon written notice to the other party."
This provision is materially more favorable than the anti-assignment clauses in the Meridian Shield and Clearpath agreements. The carve-out for assignments in connection with a sale of substantially all assets means that the Transaction, structured as an asset purchase, may qualify for the consent exception. However, the carve-out is framed as an assignment by the "assigning party" (i.e., LRHP) in connection with a sale of "the assigning party's assets." We recommend confirming with Seller's counsel that LRHP intends to assign (rather than simply permit Buyer to assume) the Redstone Agreement in connection with the Closing, and that the assignment is effected in a manner consistent with the carve-out language. As a best practice, we recommend providing written notice to Redstone prior to Closing, consistent with the notice provision, and obtaining Redstone's written acknowledgment or consent as an additional protective measure.
D. Risk Assessment
We rate the overall risk for the Redstone Agreement as LOW to MEDIUM. The reference laboratory relationship, while significant in dollar terms ($1,600,000 per annum), is generally replaceable with alternative providers (such as Kestrel & Co., Crestline Holdings, or BioReference Laboratories) without extended transition periods, as the logistics of specimen transport and results delivery are relatively standardized. The favorable assignment carve-out further reduces the risk. However, we flag the following considerations:
(i) The 80% exclusivity provision may limit Buyer's post-closing flexibility and should be evaluated in the context of Buyer's broader vendor strategy;
(ii) Any transition to an alternative reference laboratory would require updated requisition forms, specimen handling protocols, interface adjustments to the Clearpath EHR system (for electronic order entry and results delivery), and staff training, which could take four to eight weeks; and
(iii) The Stark Law and AKS compliance representations should be indepe

MEMORANDUM

I. PURPOSE AND SCOPE

II. EXECUTIVE SUMMARY AND KEY FINDINGS

III. MANAGED CARE AND COMMERCIAL INSURANCE CONTRACTS

Record

Parties

Dates

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