ASSET PURCHASE AGREEMENT
EXECUTION VERSION
by and among
CRESTLINE PACKAGING SOLUTIONS LLC, as Buyer,
LAKEWOOD REGIONAL HEALTH PARTNERS, LLC, as Seller,
and
DR. RAYMOND ALCOTT and DR. NADIA PETROSIAN, as Seller Principals
Dated as of June 16, 2025
PREAMBLE
This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of June 16, 2025, by and among:
CRESTLINE PACKAGING SOLUTIONS LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware, with its principal offices located at 8400 Scioto Darby Road, Suite 300, Columbus, OH 43228 ("Buyer");
LAKEWOOD REGIONAL HEALTH PARTNERS, LLC, a limited liability company duly organized and validly existing under the laws of the State of New York, with its principal offices located at 450 East Ridge Road, Rochester, NY 14621 ("Seller");
DR. RAYMOND ALCOTT, an individual residing at 14 Tobey Trail, Pittsford, NY 14534, in his capacity as Co-Managing Member of Seller, holding a sixty percent (60%) membership interest in Seller (together with Dr. Nadia Petrosian, a "Seller Principal" and collectively, the "Seller Principals"); and
DR. NADIA PETROSIAN, an individual residing at 2801 Elmwood Avenue, Brighton, NY 14618, in her capacity as Co-Managing Member and Medical Director of Seller, holding a forty percent (40%) membership interest in Seller (together with Dr. Raymond Alcott, a "Seller Principal" and collectively, the "Seller Principals").
Buyer, Seller, and the Seller Principals are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Seller operates a multi-site physician practice and outpatient healthcare services business across eleven (11) clinic locations in the States of New York and Pennsylvania (the "Business");
WHEREAS, Seller holds eight (8) New York Article 28 Operating Certificates (D&TC-4821 through D&TC-4828) and three (3) Pennsylvania facility licenses (OPC-20140892, OPC-20140893, OPC-20140894), together with eleven (11) CMS Certification Numbers (33-7021 through 33-7028 and 39-6011 through 39-6013), in each case as required for the lawful operation of the Business;
WHEREAS, Seller employs approximately four hundred ten (410) full-time equivalent employees, including thirty-eight (38) physicians and twenty-four (24) nurse practitioners and physician assistants, and provides comprehensive outpatient medical services to patients across the communities served by its clinic network;
WHEREAS, Buyer desires to purchase, and Seller desires to sell, substantially all of the assets used in or relating to the Business, on the terms and conditions set forth herein;
WHEREAS, Buyer is a portfolio company of Pinnacle River Capital Partners, LP ("Sponsor"), a Delaware limited partnership, and is a wholly owned subsidiary of CPS Holdings, Inc., a Delaware corporation;
WHEREAS, Buyer's acquisition of the Purchased Assets will be financed in part through an eighty-four million dollar ($84,000,000) incremental term loan from Ironclad National Bank, as Administrative Agent (the "Incremental Term Loan"), and equity contributions from the Sponsor;
WHEREAS, the Seller Principals are the sole members of Seller, collectively hold one hundred percent (100%) of the membership interests in Seller, and have agreed to execute this Agreement to, among other things, bind themselves to certain restrictive covenants and indemnification obligations set forth herein;
WHEREAS, the Parties executed a Letter of Intent dated April 14, 2025 (the "LOI"), and now desire to set forth their definitive agreement with respect to the transactions contemplated hereby; and
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Buyer's willingness to enter into this Agreement, each Seller Principal has agreed to enter into certain ancillary agreements as described herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms have the meanings set forth below:
"Accounting Firm" means an independent nationally recognized accounting firm mutually selected by Buyer and Seller within ten (10) Business Days following the expiration of the negotiation period described in Section 3.3(c), or, if Buyer and Seller are unable to agree upon such a firm within such ten (10) Business Day period, a firm appointed by the American Arbitration Association upon the application of either Buyer or Seller. The Accounting Firm shall not have served as the primary auditor or accounting advisor of either Buyer or Seller at any time during the twenty-four (24) month period preceding its engagement.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. For purposes of this definition, "Control" (including the terms "Controlled by" and "under common Control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. Without limiting the generality of the foregoing, the Affiliates of Buyer include CPS Holdings, Inc., a Delaware corporation, and Pinnacle River Capital Partners, LP, a Delaware limited partnership.
"Aggregate Annual Base Rent" means Two Million Seven Hundred Forty Thousand Dollars ($2,740,000), being the aggregate annual base rent payable by Seller under the Assumed Leases as of the date of this Agreement.
"Ancillary Agreements" means, collectively, the Bill of Sale, the Assignment and Assumption Agreements, the Escrow Agreement, the Transition Services Agreement, the Consulting Agreements, the Non-Competition Agreements, the Special Warranty Deeds, the FIRPTA Certificate, and all other agreements, documents, instruments, and certificates executed and delivered in connection with the transactions contemplated by this Agreement.
"Anti-Kickback Statute" means Section 1128B(b) of the Social Security Act, 42 U.S.C. § 1320a-7b(b), as amended, and all regulations promulgated thereunder.
"Assigned Contracts" means all Contracts to which Seller is a party that are included in the Purchased Assets, as set forth on Schedule 2.1(d), including the Assumed Leases, the Clearpath License Agreement, the Redstone Lab Agreement, the Imaging Equipment Leases, and all managed care payor agreements.
"Assumed Leases" means the nine (9) Real Property Leases set forth on Schedule 2.1(c).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Benefit Plans" means all employee benefit plans (as defined in Section 3(3) of ERISA), and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance, change in control, or other benefit plans, programs, policies, or arrangements, and all employment, termination, severance, or other contracts or agreements to which Seller is a party, with respect to which Seller has any obligation, or which are maintained, contributed to, or sponsored by Seller for the benefit of any current or former employee, officer, director, or independent contractor of the Business.
"Bill of Sale" means the Bill of Sale and Assignment in substantially the form attached hereto as Exhibit A.
"Business" means the multi-site physician practice and outpatient healthcare services business conducted by Seller through its eleven (11) clinic facilities located in the States of New York and Pennsylvania, including all clinical, administrative, billing, and ancillary operations related thereto.
"Business Day" means any day other than a Saturday, Sunday, or any day on which commercial banks located in New York, New York are authorized or required by Law to close.
"Buyer Indemnified Parties" has the meaning set forth in Section 10.2.
"Claim Notice" has the meaning set forth in Section 10.6(a).
"Clearpath License Agreement" means that certain Enterprise Software License Agreement, No. CP-ENT-2022-0487, dated March 1, 2022, by and between Seller and Clearpath Health Systems, Inc., a Delaware corporation, pursuant to which Clearpath Health Systems, Inc. provides electronic health record and related software services to Seller, with an annual license fee of Eight Hundred Forty Thousand Dollars ($840,000) and a term expiring December 31, 2027.
"Closing" has the meaning set forth in Section 4.1.
"Closing Cash Consideration" means One Hundred One Million Five Hundred Thousand Dollars ($101,500,000), being the Purchase Price minus the Indemnification Escrow Amount minus the Purchase Price Adjustment Escrow Amount.
"Closing Date" has the meaning set forth in Section 4.1. The Closing is estimated to occur on or about August 15, 2025.
"Closing Statement" has the meaning set forth in Section 3.3(c).
"CMS" means the Centers for Medicare & Medicaid Services, a division of the United States Department of Health and Human Services.
"Code" means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder.
"Competing Transaction" means any transaction or series of related transactions involving: (a) any merger, consolidation, share exchange, business combination, recapitalization, or similar transaction involving Seller or the Business; (b) any sale, lease, exchange, transfer, or other disposition of all or substantially all of the assets of the Business (other than the transactions contemplated by this Agreement); or (c) any sale, exchange, transfer, or other disposition of any membership interests of Seller.
"Consulting Agreements" means the consulting agreements to be entered into at Closing between Buyer and each of Dr. Raymond Alcott and Dr. Nadia Petrosian, substantially in the forms attached hereto as Exhibit E-1 and Exhibit E-2, respectively.
"Contract" means any written or oral contract, agreement, lease, sublease, license, sublicense, purchase order, work order, commitment, arrangement, or understanding.
"De Minimis Threshold" means Seventy-Five Thousand Dollars ($75,000) per individual Loss or series of related Losses.
"Disclosure Schedules" means the disclosure schedules delivered by Seller to Buyer concurrently with the execution and delivery of this Agreement, as the same may be supplemented or amended in accordance with Section 7.11.
"Effective Time" has the meaning set forth in Section 4.1.
"Enforceability Exceptions" means: (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or similar Laws affecting the enforcement of creditors' rights generally; and (b) general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
"Environmental Laws" means all applicable federal, state, and local Laws relating to pollution, protection of the environment, or human health and safety as it relates to exposure to Hazardous Materials, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA"), the Resource Conservation and Recovery Act, as amended ("RCRA"), the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the Safe Drinking Water Act, the Oil Pollution Act, the Emergency Planning and Community Right-to-Know Act, and all state and local counterparts thereof, together with all healthcare-specific waste regulations applicable to the Business, including regulations governing the handling, storage, transportation, and disposal of medical waste.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
"Escrow Agent" means Apex Title & Escrow Services, LLC, a New York limited liability company, with offices at 1 Penn Plaza, Suite 4210, New York, NY 10119.
"Escrow Agreement" means the escrow agreement to be entered into at Closing among Buyer, Seller, and the Escrow Agent, substantially in the form attached hereto as Exhibit B.
"Estimated Closing Date" means August 15, 2025.
"Estimated Closing Statement" has the meaning set forth in Section 3.3(b).
"Estimated Net Working Capital" has the meaning set forth in Section 3.3(b).
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.4.
"False Claims Act" means the federal False Claims Act, 31 U.S.C. §§ 3729–3733, as amended, and all applicable state false claims act statutes.
"FIRPTA Certificate" means the certificate described in Section 4.2(i) and substantially in the form attached hereto as Exhibit I.
"Fraud" means common law fraud under the laws of the State of New York, requiring: (a) a representation of a material existing fact; (b) the falsity of such representation; (c) scienter (actual knowledge that such representation is false, or reckless disregard for the truth or falsity thereof); (d) reasonable reliance by the party asserting the fraud; and (e) resulting damages. "Fraud" does not include equitable fraud, promissory fraud, negligent misrepresentation, or any constructive or quasi-fraud.
"Fundamental Representations" means: (a) with respect to Seller, the representations and warranties of Seller set forth in Sections 5.1 (Organization and Good Standing), 5.2 (Authority; Binding Effect), 5.3 (No Conflicts; Consents), 5.6 (Title to Purchased Assets), 5.20 (Brokers), and 5.21 (Full Disclosure); and (b) with respect to Buyer, the representations and warranties of Buyer set forth in Sections 6.1 (Organization and Good Standing), 6.2 (Authority; Binding Effect), 6.3 (No Conflicts), and 6.6 (Brokers).
"GAAP" means generally accepted accounting principles in the United States as in effect from time to time, consistently applied.
"Government Healthcare Programs" means Medicare (including Medicare Parts A, B, C, and D), Medicaid (including all state Medicaid programs), TRICARE, the Federal Employees Health Benefits Program, the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA), and any other federal, state, or local healthcare program.
"Governmental Authority" means any federal, state, county, local, municipal, or foreign government, any governmental, regulatory, or administrative authority, agency, commission, body, or instrumentality thereof, any court, tribunal, or arbitral body, and any quasi-governmental or private body exercising any regulatory, taxing, importing, or other governmental or quasi-governmental authority.
"Hazardous Materials" means any substance, material, or waste that is regulated, classified, or otherwise characterized under any Environmental Law as "hazardous," "toxic," "pollutant," "contaminant," "radioactive," or words of similar meaning, including petroleum or petroleum-derived products, asbestos-containing materials, polychlorinated biphenyls, lead-based paint, radon, and medical waste (as defined under applicable Law).
"Healthcare Laws" means all applicable Laws relating to the provision, administration, billing, coding, or reimbursement of healthcare services, including the Anti-Kickback Statute, the Stark Law, the False Claims Act, HIPAA, HITECH, all Laws relating to Government Healthcare Programs, all state licensure and certificate-of-need Laws, and all Laws governing the practice of medicine.
"Healthcare Regulatory Approvals" means the regulatory approvals described in Section 8.1(e), including: (a) the approval (or letter of no objection) from the NY DOH for the change of ownership of the eight (8) New York facilities; (b) the approval from the PA DOH for the change of ownership of the three (3) Pennsylvania facilities; and (c) the approval (or deemed approval) by CMS of the change-of-ownership applications for all eleven (11) CMS Certification Numbers.
"HIPAA" means the Health Insurance Portability and Accountability Act of 1996, Public Law 104-191, as amended by the Health Information Technology for Economic and Clinical Health Act ("HITECH"), enacted as part of the American Recovery and Reinvestment Act of 2009, Public Law 111-5, together with all implementing regulations promulgated thereunder, including the Standards for Privacy of Individually Identifiable Health Information (45 C.F.R. Parts 160 and 164, Subparts A, D, and E) and the Security Standards for the Protection of Electronic Protected Health Information (45 C.F.R. Parts 160 and 164, Subparts A and C).
"Imaging Equipment Leases" means the three (3) equipment lease agreements between Seller and Marlowe Asset Management Medical Equipment Finance, LLC, identified as Schedule Nos. VML-2023-1140, VML-2023-1141, and VML-2024-0219, with an aggregate outstanding balance as of the date of this Agreement of approximately Two Million Eight Hundred Seventy Thousand Dollars ($2,870,000).
"Indemnification Cap" means Thirty-Five Million Dollars ($35,000,000), being twenty-five percent (25%) of the Purchase Price.
"Indemnification Escrow Amount" means Thirty-Five Million Dollars ($35,000,000), to be deposited with the Escrow Agent at Closing in accordance with Section 3.2(b) and the Escrow Agreement.
"Indemnified Party" means a Person entitled to indemnification under Article X.
"Indemnifying Party" means a Person obligated to provide indemnification under Article X.
"intellectual Property" means all intellectual property and intellectual property rights, including: (a) patents and patent applications; (b) trademarks, service marks, trade names, trade dress, logos, slogans, and Internet domain names, together with all goodwill associated therewith; (c) copyrights and copyrightable works; (d) trade secrets, know-how, inventions, processes, formulae, and confidential business information; and (e) registrations, applications, renewals, extensions, and combinations of the foregoing.
"Knowledge of Seller" or "Seller's Knowledge" means the actual knowledge, after reasonable inquiry of direct reports and review of the relevant files and records of the Business, of Dr. Raymond Alcott, Dr. Nadia Petrosian, and Gretchen Unger (Chief Operating Officer of Seller).
"Law" means any federal, state, county, local, municipal, foreign, or other law, statute, legislation, constitution, principle of common law, resolution, ordinance, code, rule, regulation, order, decree, directive, injunction, judgment, ruling, or requirement issued, enacted, adopted, promulgated, implemented, or otherwise put into effect by or under the authority of any Governmental Authority.
"Lien" means any mortgage, pledge, lien, charge, claim, security interest, easement, covenant, right-of-way, encroachment, restriction on transfer, conditional sale or other retention-of-title arrangement, defect in title, or other encumbrance of any kind.
"Losses" means any and all damages, losses, deficiencies, liabilities, obligations, penalties, fines, judgments, settlements, claims, payments, interest, costs, and expenses (including the reasonable and documented fees and expenses of attorneys, accountants, consultants, and other professionals), whether or not involving a third-party claim, but excluding punitive, consequential, special, or exemplary damages except to the extent actually awarded to a third party in a third-party claim.
"Material Adverse Effect" means any change, effect, event, occurrence, development, circumstance, condition, or state of facts that, individually or in the aggregate with all other such changes, effects, events, occurrences, developments, circumstances, conditions, or states of facts, has had or would reasonably be expected to have a material adverse effect on: (a) the business, assets, results of operations, or condition (financial or otherwise) of the Business, taken as a whole; or (b) the ability of Seller or the Seller Principals to consummate the transactions contemplated by this Agreement or to perform their respective obligations hereunder; provided, however, that none of the following, individually or in the aggregate, shall be deemed to constitute, or shall be taken into account in determining whether there has been, a Material Adverse Effect: (i) changes in general economic, business, financial, or market conditions; (ii) changes affecting the healthcare industry generally and not disproportionately affecting the Business; (iii) changes in applicable Law or GAAP or interpretations thereof; (iv) any epidemic, pandemic, or disease outbreak (including COVID-19 and any variant thereof); (v) any act of war, armed hostility, sabotage, terrorism, or natural disaster; (vi) the announcement or pendency of this Agreement or the transactions contemplated hereby, including any impact on relationships with patients, referral sources, employees, payors, or suppliers; and (vii) any action taken or omitted to be taken by Seller at the written request of Buyer or required by this Agreement.
"Material Contract" means any Contract to which Seller is a party or by which Seller or any of its assets is bound that: (a) involves aggregate annual payments or receipts in excess of One Hundred Fifty Thousand Dollars ($150,000); (b) has a remaining term in excess of twelve (12) months and is not terminable without penalty on ninety (90) days' or less notice; (c) relates to indebtedness or guarantees of indebtedness; (d) contains covenants restricting the conduct of the Business; (e) is a managed care payor agreement; (f) is a lease of real or personal property; (g) involves the employment or engagement of any physician, nurse practitioner, or physician assistant; or (h) is otherwise material to the Business.
"Medicare Administrative Contractor" means Keystone MAC Services, LLC.
"Mini-Basket" means Seven Hundred Thousand Dollars ($700,000), being 0.50% of the Purchase Price. The Mini-Basket operates as a tipping basket, such that once the aggregate amount of Losses (individually satisfying the De Minimis Threshold) exceeds the Mini-Basket, the Buyer Indemnified Parties shall be entitled to recover all such Losses from the first dollar.
"Net Working Capital" has the meaning set forth in Section 3.3(a).
"Non-Competition Agreements" means the non-competition and non-solicitation agreements to be executed by each Seller Principal at Closing, substantially in the form attached hereto as Exhibit F.
"NY DOH" means the New York State Department of Health.
"OIG" means the Office of Inspector General of the United States Department of Health and Human Services.
"OIG Inquiry" means the informal inquiry by the OIG relating to Seller's Syracuse facility (CMS Certification No. 33-7024) regarding potential upcoding of CPT code 99214 evaluation and management services, with estimated exposure of Three Hundred Fifty Thousand Dollars ($350,000) to Nine Hundred Thousand Dollars ($900,000), as more fully described on Schedule 5.14(b).
"Order" means any order, writ, judgment, injunction, decree, stipulation, determination, decision, ruling, or award entered by or with any Governmental Authority.
"Ordinary Course of Business" means the ordinary course of business consistent with Seller's past custom and practice (including with respect to quantity, quality, frequency, and timing).
"Outside Date" means December 31, 2025, or such later date as may be mutually agreed upon by Buyer and Seller in writing.
"Owned Real Property" means the real property owned by Seller, as described in Section 2.1(b) and Schedule 2.1(b), consisting of: (i) the Rochester Main clinic facility located at 450 East Ridge Road, Rochester, NY 14621 (appraised value: Six Million Nine Hundred Thousand Dollars ($6,900,000)); and (ii) the Syracuse clinic facility (appraised value: Four Million Nine Hundred Thousand Dollars ($4,900,000)), with aggregate appraised value of Eleven Million Eight Hundred Thousand Dollars ($11,800,000).
"PA DOH" means the Pennsylvania Department of Health.
"Permits" means all permits, licenses, franchises, certificates, accreditations, registrations, consents, approvals, waivers, authorizations, and variances of or from any Governmental Authority, including, without limitation, certificates of need, operating certificates, facility licenses, CMS certifications, DEA registrations, and state professional licenses.
"Permitted Liens" means: (i) statutory Liens for Taxes not yet due and payable or the validity or amount of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP; (ii) mechanics', carriers', workers', repairers', materialmen's, warehousemen's, and other similar Liens arising or incurred in the Ordinary Course of Business and that are not yet due and payable or the validity or amount of which is being contested in good faith; (iii) zoning, entitlement, building, and other land use regulations imposed by Governmental Authorities having jurisdiction over the Owned Real Property or Leased Real Property that are not violated by the current use or occupancy thereof; (iv) covenants, conditions, restrictions, easements, rights-of-way, and other similar matters of record affecting title to the Owned Real Property that do not materially impair the use or occupancy of such property in the operation of the Business as currently conducted; (v) Liens described on Schedule 1.1(a); and (vi) with respect to Leased Real Property, the interests and rights of the applicable landlord under the Assumed Lease.
"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, trust, estate, unincorporated organization, Governmental Authority, or other entity.
"Pre-Closing Taxes" means all Taxes attributable to (a) any Tax period ending on or before the Closing Date and (b) with respect to any Straddle Period, the portion of such Straddle Period ending on and including the Closing Date (as determined in accordance with Section 11.2).
"Purchase Price" means One Hundred Forty Million Dollars ($140,000,000), as adjusted pursuant to Article III.
"Purchase Price Adjustment Escrow Amount" means Three Million Five Hundred Thousand Dollars ($3,500,000), being 2.5% of the Purchase Price, to be deposited with the Escrow Agent at Closing in accordance with Section 3.2(c) and the Escrow Agreement.
"Purchased Assets" has the meaning set forth in Section 2.1.
"R&W Insurance Policy" means the representation and warranty insurance policy issued by Keystone Mutual Assurance Company in favor of Buyer, with a policy limit of Thirty-Five Million Dollars ($35,000,000), a retention of Two Million One Hundred Thousand Dollars ($2,100,000), and a premium of Nine Hundred Eighty Thousand Dollars ($980,000), as more fully described on Exhibit J.
"Real Property Leases" means all leases, subleases, and other occupancy agreements pursuant to which Seller leases or subleases real property used in the Business.
"Redstone Lab Agreement" means the reference laboratory services agreement between Seller and Redstone Diagnostics, Inc., a Delaware corporation, with annual spend of approximately One Million Six Hundred Thousand Dollars ($1,600,000).
"Seller Indemnified Parties" has the meaning set forth in Section 10.3.
"Seller Principals" means Dr. Raymond Alcott and Dr. Nadia Petrosian, collectively.
"Seller's Accountants" means Seller's regularly engaged independent public accounting firm.
"Solvent" means, with respect to any Person, that as of the date of determination: (a) the sum of such Person's assets, at a fair valuation, exceeds the sum of all of such Person's debts (including contingent liabilities); (b) such Person has not incurred and does not intend to incur, and does not believe that it will incur, debts beyond its ability to pay such debts as such debts become due (whether at maturity or otherwise); (c) such Person is not engaged in a business or transaction, and does not propose to engage in a business or transaction, for which such Person's property would constitute unreasonably small capital; and (d) such Person is able to pay its debts as they become due.
"Sponsor" means Pinnacle River Capital Partners, LP, a Delaware limited partnership.
"Stark Law" means Section 1877 of the Social Security Act, 42 U.S.C. § 1395nn, as amended, and all regulations promulgated thereunder.
"Straddle Period" means any Tax period beginning on or before the Closing Date and ending after the Closing Date.
"Tax" or "Taxes" means all federal, state, local, and foreign taxes, assessments, duties, fees, levies, imposts, and other charges of any kind imposed by any Governmental Authority, including income, gross receipts, excise, property (real or personal, tangible or intangible), sales, use, transfer, franchise, payroll, withholding, social security, workers' compensation, unemployment, disability, stamp, occupation, premium, environmental, customs, duties, value added, alternative or add-on minimum, estimated, and other taxes, assessments, duties, fees, levies, imposts, and charges, together with all interest, penalties, and additions to tax imposed with respect thereto.
"Tax Return" means any return, declaration, report, claim for refund, form, information return, or statement relating to Taxes, including any schedule, attachment, or amendment thereto.
"Taxing Authority" means any Governmental Authority having jurisdiction over the assessment, determination, collection, or imposition of any Tax.
"Transfer Taxes" has the meaning set forth in Section 11.1.
"Transferred Employees" has the meaning set forth in Section 7.5(a).
"Transition Services Agreement" means the transition services agreement to be entered into at Closing between Buyer and Seller, substantially in the form attached hereto as Exhibit D.
"Willful Breach" means a material breach of this Agreement that is a consequence of an act or omission undertaken by the breaching Party with actual knowledge that such act or omission constitutes or would reasonably be expected to result in a breach of this Agreement.
"Working Capital Collar" means plus or minus Five Hundred Thousand Dollars ($500,000) from the Working Capital Target, establishing a range of Five Million Seven Hundred Thousand Dollars ($5,700,000) to Six Million Seven Hundred Thousand Dollars ($6,700,000).
"Working Capital Target" means Six Million Two Hundred Thousand Dollars ($6,200,000).
"Working Capital True-Up Deadline" means ninety (90) days following the Closing Date (estimated: November 13, 2025).
Section 1.2 — Rules of Construction
Unless the context of this Agreement otherwise requires: (a) words of any gender include each other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms "hereof," "herein," "hereby," "hereto," and derivative or similar words refer to this entire Agreement, including the Disclosure Schedules and Exhibits; (d) the terms "Article," "Section," "Schedule," "Exhibit," and "Disclosure Schedule" refer to the specified Article, Section, Schedule, Exhibit, or Disclosure Schedule of or to this Agreement unless otherwise specified; (e) the word "including" and words of similar import when used in this Agreement mean "including, without limitation," unless otherwise specified; (f) the word "or" shall not be exclusive; (g) references to any Person include such Person's successors and permitted assigns; (h) references to any Law include all statutory and regulatory provisions consolidating, amending, replacing, supplementing, or interpreting such Law, and any reference to any Law shall, unless otherwise specified, refer to such Law as amended, modified, supplemented, or replaced from time to time; (i) references to "dollars" or "$" mean United States dollars; (j) all accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data and information required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP; (k) the headings and captions used in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; and (l) references to "days" mean calendar days unless otherwise specified. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event of any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
ARTICLE II — PURCHASE AND SALE
Section 2.1 — Purchased Assets
Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller shall sell, convey, assign, transfer, and deliver to Buyer, and Buyer shall purchase and acquire from Seller, all right, title, and interest of Seller in and to substantially all of the assets of the Business (collectively, the "Purchased Assets"), free and clear of all Liens other than Permitted Liens. The Purchased Assets shall include, without limitation, the following:
(a) Tangible Personal Property. All tangible personal property, furniture, fixtures, equipment, instruments, medical devices, supplies, and inventory used in or held for use in the Business, including all imaging equipment subject to the Imaging Equipment Leases, clinical equipment, office furniture and equipment, computer hardware, telecommunications equipment, signage, and all other tangible assets located at or used in connection with the eleven (11) clinic facilities, as more particularly described on Schedule 2.1(a).
(b) Owned Real Property. The Owned Real Property described on Schedule 2.1(b), consisting of: (i) the Rochester Main clinic facility located at 450 East Ridge Road, Rochester, NY 14621, with an appraised value of Six Million Nine Hundred Thousand Dollars ($6,900,000); and (ii) the Syracuse clinic facility, with an appraised value of Four Million Nine Hundred Thousand Dollars ($4,900,000), together with all buildings, structures, fixtures, and improvements thereon and all rights, privileges, and appurtenances pertaining thereto. The aggregate appraised value of the Owned Real Property is Eleven Million Eight Hundred Thousand Dollars ($11,800,000).
(c) Leasehold Interests. All leasehold interests of Seller under the nine (9) Real Property Leases described on Schedule 2.1(c) (the "Assumed Leases"), with Aggregate Annual Base Rent of Two Million Seven Hundred Forty Thousand Dollars ($2,740,000), including all rights to extensions, renewals, and options with respect thereto and all leasehold improvements and fixtures located on the premises subject to such Assumed Leases.
(d) Assigned Contracts. All of Seller's right, title, and interest in and to the Assigned Contracts, as set forth on Schedule 2.1(d), including, without limitation: (i) the Clearpath License Agreement (No. CP-ENT-2022-0487), providing electronic health record services with an annual license fee of Eight Hundred Forty Thousand Dollars ($840,000); (ii) the Redstone Lab Agreement, providing reference laboratory services with annual spend of approximately One Million Six Hundred Thousand Dollars ($1,600,000); (iii) the Imaging Equipment Leases (VML-2023-1140, VML-2023-1141, and VML-2024-0219), with an aggregate outstanding balance of approximately Two Million Eight Hundred Seventy Thousand Dollars ($2,870,000); and (iv) all managed care payor agreements, including the agreement with Meridian Shield Health Plans, Inc., which represents approximately Seventeen Million Two Hundred Forty-Eight Thousand Dollars ($17,248,000) annually (approximately 22% of Seller's annual net revenue).
(e) Permits and Regulatory Approvals. All Permits, licenses, and regulatory approvals of Seller used in or related to the Business that are transferable by their terms or by applicable Law, including the NY Article 28 Operating Certificates (D&TC-4821 through D&TC-4828) and the PA facility licenses (OPC-20140892, OPC-20140893, and OPC-20140894), in each case subject to obtaining the requisite Healthcare Regulatory Approvals as contemplated by Section 7.3 and Section 8.1(e).
(f) CMS Certification Numbers. All of Seller's right, title, and interest in and to the CMS Certification Numbers (33-7021 through 33-7028 and 39-6011 through 39-6013), subject to CMS change-of-ownership approvals.
(g) Books and Records. All books, records, files, papers, patient records and charts (subject to HIPAA and applicable state privacy Laws), medical records, financial and accounting records, billing records, claims files, correspondence, studies, reports, and other documents relating to the Business, in whatever form maintained (including electronic form).
(h) intellectual Property. All intellectual Property owned by Seller and used in or related to the Business, including the trade name "Lakewood" and all derivations thereof, all trademarks, service marks, logos, and domain names used in the Business, and all goodwill associated therewith, as more particularly described on Schedule 5.9.
(i) Goodwill. All goodwill of the Business, including the going-concern value of the Business, the assembled workforce value, and the value of all patient relationships, referral source relationships, payor relationships, supplier relationships, and vendor relationships.
(j) Claims and Rights of Recovery. All claims, causes of action, choses in action, rights of recovery, rights of set-off, and rights of recoupment of Seller, in each case to the extent arising from or relating to the Purchased Assets or the Assumed Liabilities, whether arising by way of counterclaim or otherwise.
(k) Prepaid Expenses and Deposits. All prepaid expenses, advance payments, prepaid items, and deposits to the extent included in the calculation of Net Working Capital, including security deposits under the Assumed Leases and deposits with utility providers.
(l) Communications. All telephone numbers, fax numbers, email addresses, internet accounts, social media accounts, and websites used in or related to the Business.
(m) Other Assets. All other assets, properties, and rights of every kind and description, wherever located, whether tangible or intangible, real, personal, or mixed, that are used in or related to the Business, except for the Excluded Assets.
Section 2.2 — Excluded Assets
Notwithstanding anything to the contrary in Section 2.1, the following assets of Seller (collectively, the "Excluded Assets") are excluded from the Purchased Assets and shall be retained by Seller:
(a) All cash, cash equivalents, bank accounts, and short-term investments of Seller (other than cash amounts to the extent reflected in Net Working Capital);
(b) All rights of Seller under this Agreement and under each Ancillary Agreement to which Seller is a party;
(c) The organizational documents, operating agreements, minute books, membership interest records, Tax Returns, financial statements, and corporate seals of Seller, and all documents and records related to Seller's organization, qualification, existence, or capitalization;
(d) All rights to Tax refunds, credits, overpayments, and prepayments attributable to Pre-Closing Tax periods;
(e) All insurance policies of Seller and all rights thereunder, including the right to any claims, proceeds, premium refunds, and other amounts relating thereto (including the professional liability and directors and officers tail insurance policies to be obtained by Seller pursuant to Section 7.6);
(f) All Benefit Plans of Seller and all assets, trust funds, insurance contracts, and administrative service agreements relating thereto;
(g) All accounts receivable of Seller arising prior to the Closing Date, to the extent not included in the calculation of Net Working Capital;
(h) The assets listed on Schedule 2.2;
(i) The personal assets of the Seller Principals that are unrelated to the Business, including the personal bank accounts, investment accounts, real estate, vehicles, and other personal property of each Seller Principal; and
(j) Any assets that are expressly designated as Excluded Assets elsewhere in this Agreement.
Section 2.3 — Assumed Liabilities
At the Closing, Buyer shall assume and agree to pay, perform, and discharge the following, and only the following, Liabilities of Seller (collectively, the "Assumed Liabilities"):
(a) All Liabilities and obligations arising under the Assigned Contracts and the Assumed Leases, in each case to the extent such Liabilities and obligations arise on or after the Closing Date and do not arise from any breach, default, or violation by Seller occurring prior to the Closing Date;
(b) All obligations under the Imaging Equipment Leases (Schedule Nos. VML-2023-1140, VML-2023-1141, and VML-2024-0219), which have an aggregate outstanding balance of approximately Two Million Eight Hundred Seventy Thousand Dollars ($2,870,000) as of the date hereof, with lease expirations ranging from March 2026 through November 2027;
(c) All accrued paid time off obligations owed to Transferred Employees, estimated at One Million Three Hundred Forty Thousand Dollars ($1,340,000) as of the Closing Date, which Buyer shall honor in accordance with Section 7.5(d);
(d) All Liabilities included in the calculation of Net Working Capital as of the Closing Date, as reflected in the final Closing Statement;
(e) All Liabilities arising from the ownership, use, or operation of the Purchased Assets from and after the Closing Date, including Liabilities arising from the conduct of the Business from and after the Closing Date; and
(f) Those specific additional Liabilities set forth on Schedule 2.3.
Section 2.4 — Excluded Liabilities
Buyer shall not assume or be responsible for, and Seller shall retain, pay, perform, and discharge, all Liabilities of Seller other than the Assumed Liabilities (collectively, the "Excluded Liabilities"), including the following:
(a) All Liabilities of Seller arising prior to the Closing Date, except to the extent expressly included in the Assumed Liabilities;
(b) All indebtedness for borrowed money of Seller, including any obligations under any existing credit facility, promissory note, loan agreement, or similar instrument, including all principal, interest, prepayment penalties, breakage costs, and other amounts due thereunder;
(c) All Liabilities arising from, relating to, or in connection with the OIG Inquiry, including all fines, penalties, settlements, refund obligations, overpayment obligations, defense costs, attorneys' fees, expert fees, and any other costs or expenses related thereto (with estimated exposure of Three Hundred Fifty Thousand Dollars ($350,000) to Nine Hundred Thousand Dollars ($900,000)), and any other investigations, proceedings, or claims by any Governmental Authority arising from or relating to the conduct of the Business prior to the Closing Date;
(d) All Liabilities relating to Seller's Benefit Plans, including any underfunding, withdrawal liability (including any multiemployer plan withdrawal liability), benefit claims, and administrative costs arising under or relating to such Benefit Plans;
(e) All Liabilities for Taxes of Seller attributable to Pre-Closing Tax periods (subject to the proration provisions of Section 11.2);
(f) All Liabilities arising from any litigation, action, suit, claim, investigation, or proceeding pending or, to Seller's Knowledge, threatened against Seller prior to the Closing Date, except to the extent expressly disclosed on Schedule 2.3 and assumed by Buyer thereon;
(g) All Liabilities arising from any violation of Law by Seller prior to the Closing Date, including, without limitation, any violation of Government Healthcare Program requirements, the Anti-Kickback Statute, the Stark Law, the False Claims Act, HIPAA, or any other Healthcare Law;
(h) All Transaction expenses of Seller, including the fees and expenses of Bellweather Partners LLP (success fee of Two Million Eight Hundred Thousand Dollars ($2,800,000), being 2% of the Purchase Price) and Whitfield, Ames & Greer LLP, and all other fees and expenses of attorneys, accountants, financial advisors, consultants, and other professionals engaged by Seller in connection with the transactions contemplated by this Agreement;
(i) All Liabilities set forth on Schedule 2.4; and
(j) All other Liabilities of Seller that are not expressly included in the Assumed Liabilities.
Section 2.5 — Assignment and Assumption; Consents
(a) To the extent that Seller's rights under any Purchased Asset, including any Assigned Contract, Assumed Lease, or Permit, may not be assigned or transferred without the consent of a third party, and such consent has not been obtained prior to the Closing, nothing in this Agreement shall constitute an assignment or transfer, or an attempted assignment or attempted transfer, of such Purchased Asset if such assignment or transfer, or attempted assignment or attempted transfer, would constitute a breach thereof or a violation of any applicable Law. Schedule 2.5 sets forth a list of all consents, approvals, waivers, authorizations, and estoppel certificates required to be obtained in connection with the assignment and transfer of the Purchased Assets, including, without limitation, consents required under managed care payor contracts (including the Meridian Shield Health Plans, Inc. agreement), the Clearpath License Agreement, and landlord consents under each of the nine (9) Assumed Leases.
(b) If any such consent is not obtained prior to the Closing, and Buyer nonetheless elects to proceed with the Closing, Seller and Buyer shall cooperate in a mutually agreeable arrangement (including, without limitation, subleasing, sublicensing, or subcontracting) under which Buyer would, in compliance with applicable Law, obtain the benefits and assume the obligations and burdens thereunder in accordance with this Agreement, including by means of any reasonable economic arrangement or agency arrangement, and Seller would enforce for the benefit of Buyer, at Buyer's cost and expense, any and all rights of Seller against any third party thereto. Seller shall use commercially reasonable efforts, and Buyer shall cooperate with Seller, to obtain any such consent as promptly as practicable after the Closing.
(c) Neither Seller nor Buyer shall be deemed to be in breach of this Agreement by reason of the failure to obtain any consent required for the assignment of any Purchased Asset if such failure results despite the commercially reasonable efforts of such party.
Section 2.6 — Wrong-Pocket Provision
If at any time after the Closing, Buyer or Seller discovers that any asset or liability has been inadvertently retained by Seller that constitutes a Purchased Asset or an Assumed Liability, or has been inadvertently transferred to Buyer that constitutes an Excluded Asset or an Excluded Liability, the party in possession of such asset or bearing such liability shall promptly transfer, assign, and convey such asset or liability to the appropriate party, without the payment of any additional consideration, and the receiving party shall accept and assume such asset or liability. The parties shall execute and deliver such documents and instruments and take such other actions as may be reasonably necessary to effectuate any such transfer, assignment, conveyance, acceptance, and assumption. Any revenues or payments received by Seller after the Closing with respect to any Purchased Asset shall be promptly remitted to Buyer, and any revenues or payments received by Buyer after the Closing with respect to any Excluded Asset shall be promptly remitted to Seller.
ARTICLE III — PURCHASE PRICE AND ADJUSTMENTS
Section 3.1 — Purchase Price
The aggregate consideration for the Purchased Assets shall be One Hundred Forty Million Dollars ($140,000,000) (the "Purchase Price"), subject to adjustment as set forth in this Article III. The Purchase Price reflects an implied enterprise value multiple of approximately 8.7x trailing twelve-month Adjusted EBITDA of Sixteen Million One Hundred Thousand Dollars ($16,100,000) as of March 31, 2025.
Section 3.2 — Payment of Purchase Price at Closing
At the Closing, Buyer shall pay or cause to be paid the Purchase Price as follows:
(a) Closing Cash Consideration. To Seller (or to such other Persons as Seller may direct in a payment direction letter delivered to Buyer not later than two (2) Business Days prior to the Closing Date): an amount equal to One Hundred One Million Five Hundred Thousand Dollars ($101,500,000) (being the Purchase Price minus the Indemnification Escrow Amount minus the Purchase Price Adjustment Escrow Amount), by wire transfer of immediately available funds to an account or accounts designated by Seller in writing at least two (2) Business Days prior to the Closing Date.
(b) Indemnification Escrow Amount. To the Escrow Agent: the Indemnification Escrow Amount of Thirty-Five Million Dollars ($35,000,000), by wire transfer of immediately available funds to the indemnification escrow account established pursuant to the Escrow Agreement, to be held, invested, and distributed in accordance with the terms of the Escrow Agreement.
(c) Purchase Price Adjustment Escrow Amount. To the Escrow Agent: the Purchase Price Adjustment Escrow Amount of Three Million Five Hundred Thousand Dollars ($3,500,000), by wire transfer of immediately available funds to the purchase price adjustment escrow account established pursuant to the Escrow Agreement, to be held, invested, and distributed in accordance with the terms of the Escrow Agreement and the provisions of Section 3.3.
Section 3.3 — Working Capital Adjustment
(a) Definitions; Target. "Net Working Capital" means (i) the aggregate amount of the current assets included in the Purchased Assets, minus (ii) the aggregate amount of the current liabilities included in the Assumed Liabilities, in each case as of the close of business on the Business Day immediately preceding the Closing Date, calculated in accordance with GAAP applied using the same accounting principles, policies, practices, and methodologies used in the preparation of the Financial Statements and as reflected in the example calculation set forth on Exhibit C. For the avoidance of doubt, Net Working Capital shall exclude cash, indebtedness for borrowed money, Transaction expenses of Seller, and income Tax liabilities. Accrued paid time off (estimated at One Million Three Hundred Forty Thousand Dollars ($1,340,000)) shall be included as a current liability in the calculation of Net Working Capital. The "Working Capital Target" is Six Million Two Hundred Thousand Dollars ($6,200,000). The "Working Capital Collar" is plus or minus Five Hundred Thousand Dollars ($500,000) from the Working Capital Target, establishing a range of Five Million Seven Hundred Thousand Dollars ($5,700,000) to Six Million Seven Hundred Thousand Dollars ($6,700,000).
(b) Estimated Closing Statement. Not later than three (3) Business Days prior to the Closing Date, Seller shall deliver to Buyer a written statement (the "Estimated Closing Statement") setting forth Seller's good-faith estimate of Net Working Capital as of the Closing Date (the "Estimated Net Working Capital"), together with reasonable supporting documentation and work papers. Seller shall consider in good faith any comments of Buyer on the Estimated Closing Statement delivered prior to the Closing, but Seller's good-faith estimate shall be used for purposes of any adjustment to the Closing Cash Consideration. If the Estimated Net Working Capital exceeds the Working Capital Target by more than Five Hundred Thousand Dollars ($500,000), the Closing Cash Consideration shall be increased dollar-for-dollar by the amount of such excess (less Five Hundred Thousand Dollars ($500,000)). If the Estimated Net Working Capital is less than the Working Capital Target by more than Five Hundred Thousand Dollars ($500,000), the Closing Cash Consideration shall be decreased dollar-for-dollar by the amount of such shortfall (less Five Hundred Thousand Dollars ($500,000)). If the Estimated Net Working Capital is within the Working Capital Collar, no adjustment shall be made to the Closing Cash Consideration.
(c) Post-Closing Adjustment. Within ninety (90) days following the Closing Date (the "Working Capital True-Up Deadline," which is estimated to be November 13, 2025), Buyer shall prepare and deliver to Seller a written statement (the "Closing Statement") setting forth Buyer's good-faith calculation of the final Net Working Capital as of the close of business on the Business Day immediately preceding the Closing Date, together with reasonable supporting documentation and work papers. Seller and Seller's Accountants shall have thirty (30) days following receipt of the Closing Statement (the "Review Period") to review the Closing Statement and deliver to Buyer a written notice (the "Objection Notice") setting forth in reasonable detail any objections to Buyer's calculation of Net Working Capital, including the basis for each such objection and the amount in dispute. If Seller does not deliver an Objection Notice within the Review Period, the Closing Statement as prepared by Buyer shall be deemed final, binding, and conclusive on all Parties. If Seller delivers a timely Objection Notice, Buyer and Seller shall negotiate in good faith for a period of twenty (20) days following Buyer's receipt of the Objection Notice (the "Resolution Period") to resolve all disputed items. Any items not resolved during the Resolution Period shall be submitted for determination to the Accounting Firm. The Accounting Firm shall act as an expert and not as an arbitrator and shall determine only those items in dispute. The Accounting Firm shall render its determination within thirty (30) days after submission of the disputed items, and such determination shall be final, binding, and non-appealable on all Parties, absent manifest error. The Accounting Firm shall not assign a value to any disputed item that is greater than the highest value, or less than the lowest value, claimed for such item by either Buyer or Seller. The fees and expenses of the Accounting Firm shall be borne by Buyer and Seller in inverse proportion to the degree to which the Accounting Firm resolves the disputed items in favor of each such Party (such that the non-prevailing Party bears a larger share of the fees and expenses).
(d) True-Up Payment. Promptly (and in any event within five (5) Business Days) following the final determination of Net Working Capital pursuant to Section 3.3(c), the following adjustments shall be made:
(i) If the final Net Working Capital exceeds the Working Capital Target by more than Five Hundred Thousand Dollars ($500,000), Buyer shall pay to Seller an amount equal to the excess of the final Net Working Capital over the Working Capital Target, minus Five Hundred Thousand Dollars ($500,000), first from the Purchase Price Adjustment Escrow Amount (by delivery of joint written instructions to the Escrow Agent) and, to the extent the Purchase Price Adjustment Escrow Amount is insufficient, by wire transfer of immediately available funds to an account designated by Seller. Any such payment shall be further adjusted to account for any estimated working capital adjustment applied at Closing pursuant to Section 3.3(b) to avoid duplication.
(ii) If the final Net Working Capital is less than the Working Capital Target by more than Five Hundred Thousand Dollars ($500,000), Seller shall pay to Buyer an amount equal to the excess of the Working Capital Target over the final Net Working Capital, minus Five Hundred Thousand Dollars ($500,000), first from the Purchase Price Adjustment Escrow Amount (by delivery of joint written instructions to the Escrow Agent) and, to the extent the Purchase Price Adjustment Escrow Amount is insufficient, by wire transfer of immediately available funds to an account designated by Buyer within five (5) Business Days of such final determination. Any such payment shall be further adjusted to account for any estimated working capital adjustment applied at Closing pursuant to Section 3.3(b) to avoid duplication.
(iii) If the final Net Working Capital is within the Working Capital Collar (i.e., between Five Million Seven Hundred Thousand Dollars ($5,700,000) and Six Million Seven Hundred Thousand Dollars ($6,700,000), inclusive), no adjustment shall be made, and any estimated working capital adjustment applied at Closing pursuant to Section 3.3(b) shall be reversed.