DISCLOSURE SCHEDULES
TO
STOCK PURCHASE AGREEMENT
dated as of February 10, 2025
by and among
ARDENT HEALTHCARE HOLDINGS INC., a Delaware corporation ("Purchaser")
MEDVANCE HEALTH SYSTEMS, INC., a Delaware corporation (the "Company")
CRESTLINE GROWTH EQUITY FUND II LP, a Delaware limited partnership
RYLAND FAMILY HOLDINGS LLC, a Tennessee limited liability company
and the other SELLERS party hereto
Prepared by: Whitaker, Poole & Simms LLP 333 Commerce Street, Suite 2800 Nashville, Tennessee 37201
CONFIDENTIAL TREATMENT REQUESTED — This document and the information contained herein are confidential and proprietary. Distribution is limited to the parties to the Agreement and their respective advisors.
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INTRODUCTORY NOTE TO DISCLOSURE SCHEDULES
These Disclosure Schedules (the "Disclosure Schedules") are delivered by MedVance Health Systems, Inc., a Delaware corporation (the "Company"), Crestline Growth Equity Fund II LP, a Delaware limited partnership ("Crestline"), Ryland Family Holdings LLC, a Tennessee limited liability company ("Ryland Holdings"), and each of the other Sellers identified on the signature pages to the Agreement (collectively with Crestline and Ryland Holdings, the "Sellers"), pursuant to, and as an integral part of, that certain Stock Purchase Agreement, dated as of February 10, 2025 (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the "Agreement"), by and among Ardent Healthcare Holdings Inc., a Delaware corporation ("Purchaser"), the Company, and the Sellers. These Disclosure Schedules are incorporated into and form an integral part of the Agreement, and all references in the Agreement to "Disclosure Schedules" or any individual "Schedule" shall refer to the schedules set forth herein.
Capitalized terms used but not otherwise defined in these Disclosure Schedules shall have the respective meanings ascribed to such terms in the Agreement. All section and article references herein are to the corresponding sections and articles of the Agreement unless the context otherwise requires.
No Admission of Materiality. The inclusion of any item, matter, or information in any Schedule hereto shall not be deemed an admission by the Company or any Seller that such item, matter, or information is material, that such item, matter, or information constitutes a breach or violation of any applicable Law, Contract, Order, or Permit, or that such item, matter, or information has resulted in, or would reasonably be expected to result in, a Material Adverse Effect on the Company. Items have been disclosed in certain instances for informational purposes only and in order to ensure completeness of disclosure, even though the Company and the Sellers do not believe that all such items are required to be disclosed under the terms of the Agreement.
Cross-References. The disclosure of any item, matter, or information in any particular Schedule hereto shall be deemed to be disclosed with respect to, and shall be deemed to qualify, each other representation, warranty, covenant, or agreement set forth in the Agreement, and each other Schedule to these Disclosure Schedules, to the extent the relevance of such disclosure to such other representation, warranty, covenant, agreement, or Schedule is reasonably apparent on the face of such disclosure, notwithstanding the absence of a specific cross-reference to such other representation, warranty, covenant, agreement, or Schedule. Certain matters are disclosed in more than one Schedule for ease of reference, and the inclusion or absence of any such duplicative disclosure shall not be deemed to create any implication regarding the scope, coverage, or applicability of any particular Schedule.
Headings and Summaries. The headings, captions, and brief descriptions of documents, agreements, instruments, and other matters contained in these Disclosure Schedules are provided for convenience of reference only and do not purport to be complete or to constitute a full description of the terms and conditions of the referenced items. Such headings, captions, and descriptions shall not be deemed to modify, limit, or otherwise affect the provisions of the Agreement or these Disclosure Schedules. Full copies of all documents, agreements, and instruments referenced herein have been made available to Purchaser and its counsel, Calderwood & Harkness LLP, in the electronic data room maintained by the Company on Thackeray Solutions (Project "Marlowe Asset Management") (the "Data Room"). In the event of any inconsistency between a summary of a document contained herein and the full text of such document as made available in the Data Room, the full text of such document shall control.
No Broadening of Representations. Nothing in these Disclosure Schedules is intended to, nor shall it be construed to, broaden, expand, or otherwise modify the scope of any representation, warranty, covenant, or agreement of the Company or any Seller contained in the Agreement. Without limiting the generality of the foregoing, the disclosure of any item herein that is not required to be disclosed under the Agreement shall not be deemed to establish any standard of materiality or otherwise affect the interpretation of the Agreement or any representation, warranty, covenant, or agreement set forth therein.
Information as of Specific Dates. Unless otherwise indicated, the information contained in these Disclosure Schedules is provided as of the date of the Agreement (February 10, 2025). The Company and the Sellers reserve the right, to the extent permitted under the Agreement, to supplement or amend these Disclosure Schedules between the date hereof and the Closing Date in accordance with Section 5.6 of the Agreement.
SCHEDULE 3.4 — CAPITALIZATION
Part (a) — Authorized and Outstanding Capital Stock
MedVance Health Systems, Inc. is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware (Delaware Division of Corporations File No. 4938217; Federal Employer Identification Number: 62-7083149).
The authorized capital stock of the Company, as set forth in the Company's Amended and Restated Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware on June 15, 2014, and as most recently amended by the Certificate of Amendment filed on September 22, 2016 (the "Certificate of Incorporation"), consists of the following:
(i) Common Stock. 10,000,000 shares of Common Stock, par value $0.01 per share ("Common Stock"), of which 6,850,000 shares are issued and outstanding as of the date hereof.
(ii) Preferred Stock. No shares of preferred stock of any class or series are authorized under the Certificate of Incorporation. The Company has never authorized, issued, or had outstanding any shares of preferred stock.
All 6,850,000 outstanding shares of Common Stock have been duly authorized, are validly issued, were issued in compliance with all applicable federal and state securities Laws, are fully paid and non-assessable, and are not subject to, and were not issued in violation of, any preemptive rights, rights of first refusal, rights of first offer, or other similar rights of any Person. No shares of Common Stock are held in treasury by the Company.
The rights, preferences, privileges, and restrictions of the Common Stock are as set forth in the Certificate of Incorporation, the Amended and Restated Bylaws of the Company (as amended through the date hereof), and the Amended and Restated Stockholders' Agreement referenced in Part (d) below.
Part (b) — Record Holders
The following table sets forth, as of the date of the Agreement, the record holders of the outstanding shares of Common Stock of the Company, the number of shares held by each such holder, and the percentage of the total outstanding shares represented thereby:
Each of the foregoing record holders is also the beneficial owner of the shares set forth opposite such holder's name. No Person other than the holders listed above has any record or beneficial ownership of any shares of Common Stock of the Company. The shares of Common Stock held by Daniel Burch, Angela Moretti, Dr. Samir Patel, and Karen Tolliver (collectively, the "Management Stockholders") were acquired by such individuals pursuant to the transactions described in the Amended and Restated Stockholders' Agreement and the Management Stockholders' Agreement, each as referenced in Part (d) below, and, in certain instances, upon exercises of stock options granted under the 2016 Equity Incentive Plan referenced in Part (c) below.
Part (c) — Options, Warrants, and Other Rights
2016 Equity Incentive Plan. On September 22, 2016, the Board of Directors of the Company adopted, and the stockholders of the Company approved, the MedVance Health Systems, Inc. 2016 Equity Incentive Plan (as amended on March 15, 2019 and July 8, 2021, the "Equity Incentive Plan"). A true and complete copy of the Equity Incentive Plan, including all amendments thereto and the forms of award agreement used thereunder, has been made available to Purchaser in the Data Room.
Authorized Shares. A total of 1,200,000 shares of Common Stock have been reserved for issuance under the Equity Incentive Plan. As of the date hereof, (a) 785,000 shares of Common Stock are subject to outstanding and unexercised stock options, (b) 62,000 shares of Common Stock are subject to outstanding restricted stock units ("RSUs"), (c) 198,000 shares have been issued upon prior exercises of options (and are reflected in the share ownership table in Part (b) above as shares held by the respective Management Stockholders), and (d) 155,000 shares remain available for future issuance under the Equity Incentive Plan.
Treatment Upon Change of Control. Pursuant to Section 12.2 of the Equity Incentive Plan, upon a "Change of Control" (as defined therein, which definition includes the Transaction contemplated by the Agreement), all outstanding stock options shall become fully vested and exercisable, and all outstanding RSUs shall become fully vested and non-forfeitable, in each case immediately prior to the consummation of such Change of Control. This acceleration is automatic and does not require any additional Board or committee action. See also the cross-reference to Schedule 3.23 for change-of-control matters.
Outstanding Stock Options. The following table sets forth each stock option outstanding under the Equity Incentive Plan as of the date hereof:
All options listed above that are not yet fully vested as of the date hereof will become fully vested and exercisable immediately prior to the Closing pursuant to the acceleration provisions of Section 12.2 of the Equity Incentive Plan.
Outstanding Restricted Stock Units. The following RSUs are outstanding under the Equity Incentive Plan as of the date hereof:
All RSUs listed above that are not yet fully vested as of the date hereof will become fully vested and non-forfeitable immediately prior to the Closing pursuant to the acceleration provisions of Section 12.2 of the Equity Incentive Plan and will be settled in cash at the Per Share Price as set forth in Section 2.3(b) of the Agreement.
No Other Equity Rights. Other than (a) the outstanding stock options and RSUs described above and (b) the shares reserved for future issuance under the Equity Incentive Plan, there are no outstanding options, warrants, calls, rights of conversion, exchange rights, or other securities, agreements, arrangements, or commitments of any kind obligating the Company to issue, deliver, or sell, or cause to be issued, delivered, or sold, any shares of capital stock or other equity interests of the Company, or any securities or obligations convertible into or exchangeable for any such shares or equity interests. The Company has no outstanding phantom equity, stock appreciation rights, profits interests, or similar equity-linked compensation arrangements other than as described in this Schedule 3.4(c). No Person has any right to require the Company to register any securities under the Securities Act of 1933, as amended, except as set forth in the Registration Rights Agreement referenced in Part (d) below.
Part (d) — Stockholders' Agreement and Other Equity Agreements
The following agreements relate to the equity securities of the Company:
1. Amended and Restated Stockholders' Agreement, dated as of June 15, 2014, by and among the Company, Crestline Growth Equity Fund II LP, Ryland Family Holdings LLC, and the Management Stockholders party thereto, as amended by that certain First Amendment to Amended and Restated Stockholders' Agreement, dated as of September 22, 2016, and that certain Second Amendment to Amended and Restated Stockholders' Agreement, dated as of March 15, 2019 (as so amended, the "Stockholders' Agreement"). The Stockholders' Agreement contains, among other things, provisions relating to (a) restrictions on transfer of shares (including rights of first refusal in favor of the Company and co-sale rights in favor of Crestline), (b) drag-along rights in favor of Crestline (as majority stockholder), (c) tag-along rights in favor of minority stockholders, (d) Board of Directors composition and committee structure, (e) information rights and inspection rights, (f) preemptive rights on new issuances of securities, and (g) provisions regarding termination of the Stockholders' Agreement upon a change of control of the Company.
2. Registration Rights Agreement, dated as of June 15, 2014, by and among the Company, Crestline Growth Equity Fund II LP, and Ryland Family Holdings LLC (the "Registration Rights Agreement"). The Registration Rights Agreement provides Crestline with two demand registration rights and provides both Crestline and Ryland Holdings with unlimited piggyback registration rights, in each case subject to customary underwriter cutbacks and other terms. The Registration Rights Agreement will terminate upon the Closing by its terms.
3. Management Stockholders' Agreement, dated as of June 15, 2014, by and among the Company and the Management Stockholders party thereto (as amended on September 22, 2016), together with Joinder Agreements executed by Daniel Burch (dated June 15, 2014), Angela Moretti (dated June 15, 2014), Dr. Samir Patel (dated September 22, 2016), and Karen Tolliver (dated September 22, 2016) (collectively, the "Management Stockholders' Agreement"). The Management Stockholders' Agreement contains provisions relating to (a) vesting of management shares (all management shares are fully vested as of the date hereof), (b) non-competition and non-solicitation obligations of the Management Stockholders, (c) Company repurchase rights upon termination of employment, and (d) customary representations, warranties, and covenants regarding securities Law compliance.
4. Voting Agreement. There is no separate voting agreement in effect with respect to the Common Stock of the Company. Voting provisions applicable to the stockholders are contained within the Stockholders' Agreement described in item 1 above.
5. Irrevocable Proxies. No irrevocable proxies have been granted by any stockholder of the Company with respect to any shares of Common Stock, other than (a) the drag-along proxy granted by each Management Stockholder in favor of Crestline pursuant to Section 4.2 of the Stockholders' Agreement, which proxy expires upon consummation of the Transaction, and (b) the voting proxy granted by each Management Stockholder in favor of Crestline pursuant to the Joinder Agreements referenced in item 3 above.
6. Transfer Restrictions. All shares of Common Stock are subject to transfer restrictions under the Stockholders' Agreement and, with respect to shares held by Management Stockholders, under the Management Stockholders' Agreement. In addition, all certificates representing shares of Common Stock bear legends referencing such transfer restrictions and applicable securities Law restrictions. All such transfer restrictions will terminate upon the Closing.
Part (e) — Subsidiaries
The Company holds a 100% equity interest in the following Subsidiary:
MedVance Ambulatory Services LLC, a Tennessee limited liability company (Tennessee Secretary of State Control No. 001256493), formed on October 3, 2017. MedVance Ambulatory Services LLC is a single-member limited liability company wholly owned by MedVance Health Systems, Inc. It is treated as a disregarded entity for federal and state income tax purposes. Its authorized membership interests consist of a single class of limited liability company interests, all of which are held by the Company. MedVance Ambulatory Services LLC operates certain ambulatory care and outpatient clinic facilities in Tennessee and Georgia, as further described in Schedule 3.10 and Schedule 3.14. MedVance Ambulatory Services LLC has no subsidiaries.
Other than MedVance Ambulatory Services LLC, the Company does not own, directly or indirectly, any equity interest, membership interest, partnership interest, joint venture interest, or other ownership interest in any Person.
SCHEDULE 3.6 — FINANCIAL STATEMENTS
Part (a) — Audited Financial Statements
The following audited financial statements have been delivered to Purchaser and are available in the Data Room:
1. Fiscal Year Ended December 31, 2022. Audited consolidated balance sheet of MedVance Health Systems, Inc. and its Subsidiary as of December 31, 2022, and the related audited consolidated statements of income, stockholders' equity, and cash flows for the fiscal year then ended, together with the notes thereto and the report of the independent registered public accounting firm thereon. These financial statements were audited by Prumvane & Reese LLP, Certified Public Accountants and Business Advisors (424 Church Street, Nashville, Tennessee 37219). The audit was conducted in accordance with auditing standards generally accepted in the United States of America ("GAAS"), and Prumvane & Reese LLP issued an unqualified opinion dated March 28, 2023, with no emphasis-of-matter paragraphs, other-matter paragraphs, or going concern qualifications.
2. Fiscal Year Ended December 31, 2023. Audited consolidated balance sheet of MedVance Health Systems, Inc. and its Subsidiary as of December 31, 2023, and the related audited consolidated statements of income, stockholders' equity, and cash flows for the fiscal year then ended, together with the notes thereto and the report of the independent registered public accounting firm thereon. These financial statements were audited by Prumvane & Reese LLP. The audit was conducted in accordance with GAAS, and Prumvane & Reese LLP issued an unqualified opinion dated March 22, 2024, with no emphasis-of-matter paragraphs, other-matter paragraphs, or going concern qualifications.
In each case, the audited financial statements described above present fairly, in all material respects, the consolidated financial position of the Company and its Subsidiary as of the respective dates thereof and the consolidated results of operations, changes in stockholders' equity, and cash flows for the respective periods then ended, in conformity with accounting principles generally accepted in the United States of America ("GAAP"), applied on a consistent basis throughout the periods indicated.
Prumvane & Reese LLP has served as the Company's independent auditor since 2012 and has confirmed to the Company that it is independent of the Company within the meaning of the applicable AICPA professional standards.
Part (b) — Unaudited Interim Financial Statements
The following unaudited financial statements have been delivered to Purchaser and are available in the Data Room:
1. Nine-Month Period Ended September 30, 2024. Unaudited consolidated balance sheet of MedVance Health Systems, Inc. and its Subsidiary as of September 30, 2024, and the related unaudited consolidated statements of income and cash flows for the nine-month period then ended. These financial statements were prepared by the management of the Company under the supervision and direction of Angela Moretti, the Company's Chief Financial Officer.
2. Twelve-Month Period Ended December 31, 2024 (the "2024 Annual Financials"). Unaudited consolidated balance sheet of MedVance Health Systems, Inc. and its Subsidiary as of December 31, 2024, and the related unaudited consolidated statements of income and cash flows for the twelve-month period then ended. These financial statements were prepared by the management of the Company under the supervision and direction of Angela Moretti. Key metrics reflected in the 2024 Annual Financials are as follows:
(a) Revenue: $387,000,000 (unaudited).
(b) Adjusted EBITDA: $78,400,000 (unaudited), as confirmed by the Quality of Earnings analysis prepared by Blackwell Thornton LLP, Certified Public Accountants (200 Park Avenue, 41st Floor, New York, New York 10166) (the "QofE Report"), dated January 15, 2025, which has been delivered to Purchaser and is available in the Data Room.
(c) Net Income: $31,200,000 (unaudited).
The unaudited financial statements described above were prepared in accordance with GAAP applied on a basis consistent with the audited financial statements described in Part (a), except (i) for the absence of footnote disclosures and (ii) for normal year-end adjustments (which are not expected to be material in amount, individually or in the aggregate). The unaudited financial statements present fairly, in all material respects, the consolidated financial position of the Company and its Subsidiary as of the respective dates thereof and the consolidated results of operations and cash flows for the respective periods then ended, subject to the foregoing exceptions.
Part (c) — Exceptions to GAAP / Known Adjustments
The following matters are disclosed with respect to the unaudited financial statements described in Part (b) above and the QofE Report:
1. Absence of Footnote Disclosures. The unaudited interim financial statements for the nine-month period ended September 30, 2024, and the 2024 Annual Financials do not include footnote disclosures required by GAAP for complete financial statements. Such footnote disclosures, if provided, would not differ materially from those included in the audited financial statements for the fiscal year ended December 31, 2023.
2. Estimated Accruals. The 2024 Annual Financials include certain accruals and estimates that are preliminary in nature and subject to finalization during the audit process. These include (a) estimated accruals for professional liability claims (see Schedule 3.15), (b) estimated reserves for accounts receivable allowances and contractual adjustments, and (c) estimated accruals for employee bonuses and incentive compensation. Management believes these estimates are reasonable and consistent with the Company's historical practices.
3. QofE Adjustments. The QofE Report prepared by Blackwell Thornton LLP identified the following categories of adjustments in arriving at the Adjusted EBITDA figure of $78,400,000:
(a) Non-recurring transaction expenses related to the Transaction (legal, accounting, and advisory fees): add-back of approximately $3,100,000.
(b) Non-recurring litigation settlement expense (one-time settlement of a vendor dispute in Q2 2024): add-back of approximately $725,000.
(c) Above-market management fees paid to Crestline Growth Equity Fund II LP (which will be eliminated at Closing): add-back of approximately $1,500,000.
(d) One-time costs associated with the implementation of the Vertex Health Technologies Inc. EHR platform migration in Q1 2024: add-back of approximately $890,000.
(e) Normalization of rent expense for one below-market related-party lease arrangement (lease of premises from Ryland Real Estate Partners LLC, an Affiliate of Ryland Family Holdings LLC): adjustment of approximately $(210,000).
(f) Other miscellaneous normalization adjustments: net add-back of approximately $395,000.
No other material adjustments were identified by Blackwell Thornton LLP. The QofE Report noted no material exceptions to the Company's revenue recognition policies or the consistency of accounting principles applied during the periods under review.
4. Working Capital. The Company's Estimated Closing Working Capital (as defined in the Agreement) is $35,100,000, compared to the Working Capital Target of $34,500,000 established in Section 2.5 of the Agreement. The difference of $600,000 is within the ±$2,000,000 collar specified in Section 2.5(c) of the Agreement, and accordingly no Working Capital Adjustment is anticipated based on current estimates. The final determination of Closing Working Capital will be made in accordance with the procedures set forth in Section 2.5 of the Agreement. The components of the Estimated Closing Working Capital calculation have been delivered to Purchaser in a separate schedule prepared by Angela Moretti and reviewed by Blackwell Thornton LLP.
Part (d) — Indebtedness
As of January 31, 2025, the Company has the following funded Indebtedness outstanding:
1. Term Loan — Granton Savings Bank, N.A. Pursuant to that certain Credit Agreement, dated as of June 15, 2014, by and among MedVance Health Systems, Inc. (as borrower), Granton Savings Bank, N.A. (500 Church Street, Nashville, Tennessee 37219) (as lender and administrative agent), and the guarantors party thereto (as amended by the First Amendment dated September 22, 2016 and the Second Amendment dated March 15, 2019) (the "Credit Agreement"), the Company has an outstanding term loan with a principal balance of $41,300,000 as of January 31, 2025. Interest accrues at a rate of SOFR plus 3.25% per annum. The term loan matures on June 15, 2026. The Credit Agreement contains customary affirmative and negative covenants, including financial covenants requiring maintenance of a maximum total leverage ratio of 3.50:1.00 and a minimum fixed charge coverage ratio of 1.25:1.00. As of the date hereof, the Company is in compliance with all covenants under the Credit Agreement. The entire outstanding principal balance of the term loan, together with accrued and unpaid interest and any applicable prepayment premiums, is to be repaid in full at the Closing from Seller proceeds in accordance with Section 2.4(b) of the Agreement. A payoff letter from Granton Savings Bank, N.A. will be delivered to Purchaser at or prior to the Closing in accordance with Section 7.2(j) of the Agreement.
2. Capital Lease Obligations. The Company has capital lease obligations aggregating approximately $2,850,000 as of January 31, 2025, relating to medical equipment and diagnostic imaging systems leased from the following lessors:
(a) Harborview Industries — Capital lease for MRI equipment at the Company's Chattanooga, Tennessee facility; original lease amount of $1,800,000; remaining balance of approximately $1,450,000; lease term expires August 2027; monthly payment of $38,500.
(b) Calderon Industries Finance — Capital lease for CT scanner and related equipment at the Company's Birmingham, Alabama facility; original lease amount of $1,200,000; remaining balance of approximately $840,000; lease term expires March 2027; monthly payment of $29,100.
(c) Thackeray Partners LLC — Capital lease for ultrasound and patient monitoring systems deployed across multiple facilities; original lease amount of $850,000; remaining balance of approximately $560,000; lease term expires December 2026; monthly payment of $22,750.
3. Letters of Credit. The Company maintains one outstanding standby letter of credit issued by Granton Savings Bank, N.A. in the amount of $500,000 for the benefit of TennCare (the Tennessee Medicaid managed care program) as security for the Company's obligations under certain provider participation agreements. This letter of credit will need to be replaced or released at or following the Closing.
4. Guarantees. Ryland Family Holdings LLC has provided a limited guaranty (the "Ryland Guaranty") in favor of Granton Savings Bank, N.A. guaranteeing up to $10,000,000 of the Company's obligations under the Credit Agreement. The Ryland Guaranty will be released upon repayment of the term loan at Closing.
5. No Other Funded Indebtedness. Other than the term loan, capital lease obligations, letter of credit, and Ryland Guaranty described above, the Company has no other funded Indebtedness (including, without limitation, any notes payable, bonds, debentures, seller financing, earn-out obligations, or other debt instruments) outstanding as of the date hereof.
SCHEDULE 3.8 — MATERIAL CONTRACTS
Set forth below is a list of each Material Contract (as defined in Section 3.8 of the Agreement) to which the Company or any of its Subsidiaries is a party or by which the Company, its Subsidiary, or any of their respective properties or assets is bound, as of the date hereof. True, correct, and complete copies of each Material Contract listed below (including all amendments, supplements, side letters, and modifications thereto) have been made available in the Data Room.
Part (a) — Contracts Involving Payments or Receipts in Excess of $500,000 Annually
The following Contracts involve, or are reasonably expected to involve, aggregate annual payments to or by the Company or its Subsidiary in excess of $500,000:
1. BlueLine Health Plan of Tennessee — Master Participation Agreement, dated as of April 1, 2017, by and between BlueLine Health Plan of Tennessee and MedVance Health Systems, Inc., as amended by the First Amendment dated July 15, 2019 and the Second Amendment dated January 1, 2022 (payor contract). The Master Participation Agreement provides for the Company's participation in BlueLine's commercial health plan and Medicare Advantage networks across all Company facilities in the State of Tennessee. Annual payments received by the Company under this agreement approximated $58,200,000 in fiscal year 2024. See also Schedule 3.20 for additional detail regarding payor contracts.
2. SouthPoint Insurance Co. — Provider Participation Agreement, dated as of October 1, 2018, by and between SouthPoint Insurance Company and MedVance Health Systems, Inc., as amended by the First Amendment dated March 1, 2021 (payor contract). This agreement covers the Company's participation in SouthPoint's preferred provider organization ("PPO") and health maintenance organization ("HMO") networks in Tennessee and Alabama. Annual payments received by the Company under this agreement approximated $31,500,000 in fiscal year 2024. See also Schedule 3.20.
3. Peachtree Health Alliance — Provider Services Agreement, dated as of January 15, 2019, by and between Peachtree Health Alliance, Inc. and MedVance Health Systems, Inc. (payor contract). This agreement covers the Company's participation in Peachtree's managed care networks in the State of Georgia. Annual payments received by the Company under this agreement approximated $22,700,000 in fiscal year 2024. See also Schedule 3.20.
4. Commonwealth Health Plans of Kentucky — Participating Provider Agreement, dated as of May 1, 2020, by and between Commonwealth Health Plans of Kentucky, Inc. and MedVance Health Systems, Inc. (payor contract). This agreement covers the Company's participation in Commonwealth's managed care networks in the Commonwealth of Kentucky. Annual payments received by the Company under this agreement approximated $14,800,000 in fiscal year 2024. See also Schedule 3.20.
5. Magnolia Regional Health Network — Network Participation Agreement, dated as of August 1, 2020, by and between Magnolia Regional Health Network LLC and MedVance Health Systems, Inc., as amended by the First Amendment dated February 1, 2023 (payor contract). This agreement covers the Company's participation as a preferred provider in the Magnolia network across Alabama and Georgia. Annual payments received by the Company under this agreement approximated $11,300,000 in fiscal year 2024. See also Schedule 3.20.
6. Cardinal Medical Supply Co. — Master Supply Agreement, dated as of March 1, 2021, by and between Cardinal Medical Supply Co. and MedVance Health Systems, Inc. (medical and surgical supply purchasing agreement). This agreement covers the Company's purchases of medical supplies, pharmaceuticals, and related products. Annual payments made by the Company under this agreement approximated $18,400,000 in fiscal year 2024. The agreement has an initial term expiring February 28, 2026, with automatic one-year renewal periods thereafter.
7. Pinnacle Staffing Solutions LLC — Staffing Services Agreement, dated as of June 1, 2022, by and between Pinnacle Staffing Solutions LLC and MedVance Health Systems, Inc. (temporary nursing and allied health staffing). Annual payments made by the Company under this agreement approximated $7,200,000 in fiscal year 2024, though such amount has been trending downward as the Company has reduced reliance on temporary staffing. The agreement is terminable by either party upon 90 days' written notice.
8. Vertex Health Technologies Inc. — Master Services Agreement. See Part (d) below.
Part (b) — Loan and Credit Agreements
1. Credit Agreement, dated as of June 15, 2014, by and among MedVance Health Systems, Inc. (as borrower), Granton Savings Bank, N.A. (as lender and administrative agent), and the guarantors party thereto, as amended by the First Amendment dated September 22, 2016 and the Second Amendment dated March 15, 2019. Outstanding principal balance of $41,300,000 as of January 31, 2025. To be repaid in full at Closing. See Schedule 3.6(d) for additional detail.
2. Security Agreement, dated as of June 15, 2014, by and among MedVance Health Systems, Inc., MedVance Ambulatory Services LLC, and Granton Savings Bank, N.A. (as secured party), granting a first-priority security interest in substantially all personal property assets of the Company and its Subsidiary to secure obligations under the Credit Agreement. UCC-1 Financing Statements filed in the State of Delaware (File No. 2014-4158392, as continued) and the State of Tennessee (File No. 127-0045389, as continued). Liens to be released at Closing upon repayment.
3. Pledge Agreement, dated as of June 15, 2014, by MedVance Health Systems, Inc. in favor of Granton Savings Bank, N.A., pledging 100% of the membership interests in MedVance Ambulatory Services LLC to secure obligations under the Credit Agreement. Pledge to be released at Closing upon repayment.
4. Limited Guaranty, dated as of June 15, 2014, by Ryland Family Holdings LLC in favor of Granton Savings Bank, N.A., guaranteeing up to $10,000,000 of the Company's obligations under the Credit Agreement. To be released at Closing upon repayment. See Schedule 3.6(d).
5. Mortgage and Deed of Trust. Deed of Trust, Security Agreement, Assignment of Leases and Rents, and Fixture Filing, dated as of June 15, 2014, by MedVance Health Systems, Inc. (as grantor) in favor of Granton Savings Bank, N.A. (as beneficiary), recorded in the Register's Office of Davidson County, Tennessee, at Instrument No. 20140615-0054832, encumbering the Company's owned real property at 1800 Patterson Street, Nashville, Tennessee 37203. See Schedule 3.10(a). To be released at Closing upon repayment.
Part (c) — Leases (Real and Personal Property)
Real Property Leases. See Schedule 3.10(b) for a complete listing of all real property leases to which the Company or its Subsidiary is a party.
Equipment and Personal Property Leases. In addition to the capital leases described in Schedule 3.6(d), the following material equipment and personal property leases are in effect:
1. Northpoint Corporation — Equipment Lease Agreement, dated as of November 1, 2021, for surgical equipment and instruments deployed at the Company's Nashville and Chattanooga, Tennessee facilities. Lease term: 60 months (expiring October 31, 2026). Annual lease payments: approximately $384,000. Operating lease classification.
2. Glenrock Industries — Master Lease Agreement, dated as of February 1, 2022, for copiers, printers, and multifunction devices deployed across all Company facilities. Lease term: 48 months (expiring January 31, 2026). Annual lease payments: approximately $126,000. Operating lease classification.
3. Dunmore Partners LLC — Equipment Lease, dated as of September 15, 2023, for high-volume document production equipment at the Company's Nashville corporate headquarters. Lease term: 36 months (expiring September 14, 2026). Annual lease payments: approximately $42,000. Operating lease classification.
4. Hollowell Group — Vehicle Lease Agreements (fleet). Multiple vehicle leases for Company-owned fleet vehicles used by regional supervisors and field clinical staff. Aggregate annual lease payments: approximately $215,000. Individual lease terms range from 24 to 36 months, with staggered expiration dates through 2027.
Part (d) — Technology and Software Agreements
1. Vertex Health Technologies Inc. — Master Services Agreement, dated as of September 1, 2022, by and between Vertex Health Technologies Inc. (2500 Bee Caves Road, Suite 300, Austin, Texas 78746) and MedVance Health Systems, Inc., as amended by the First Amendment dated March 15, 2023, and the Statement of Work No. 2 dated June 1, 2023 (the "Vertex MSA"). The Vertex MSA provides for the licensing, implementation, hosting, and support of the Vertex HealthCore electronic health records ("EHR") platform across all Company facilities. The initial term of the Vertex MSA expires on August 31, 2027, with automatic renewal for successive two-year periods unless either party provides written notice of non-renewal at least 180 days prior to the end of the then-current term. Annual license and support fees under the Vertex MSA are approximately $4,200,000 (subject to annual CPI adjustments not to exceed 4%). The Vertex MSA contains a change-of-control provision requiring written notice to Vertex within 30 days of a change of control and Vertex's prior written consent for assignment of the agreement (such consent not to be unreasonably withheld, conditioned, or delayed). See also Schedule 3.23.
2. Athena Revenue Cycle Management LLC — Professional Services Agreement, dated as of April 1, 2021, by and between Athena Revenue Cycle Management LLC and MedVance Health Systems, Inc. Revenue cycle management and medical billing services. Annual fees: approximately $2,100,000 (based on a percentage-of-collections fee model). Term expires March 31, 2026, with automatic one-year renewals.
3. Brightmoor Partners LLC — Enterprise Agreement, Enrollment No. 78452319, effective July 1, 2023. Licensing of Ashgrove Software, Azure cloud services, and related enterprise software. Annual subscription fees: approximately $685,000. Three-year term expiring June 30, 2026.
4. Sterling Reach Holdings — Service Agreement, dated as of January 15, 2022. Network infrastructure, telephony (Granite Harbor Software), and cybersecurity services. Annual fees: approximately $410,000. Term expires January 14, 2025 (renewal in process as of the date hereof).
5. Crestline Corporation — Subscription Services Agreement, dated as of October 1, 2022. Human capital management ("HCM") and payroll processing platform. Annual subscription fees: approximately $520,000. Three-year term expiring September 30, 2025, with automatic one-year renewals.
Part (e) — Employment, Consulting, and Management Agreements
1. Employment Agreement — Daniel Burch, Chief Executive Officer, dated as of June 15, 2014, as amended by the First Amendment dated September 22, 2016 and the Second Amendment dated January 1, 2022, by and between MedVance Health Systems, Inc. and Daniel Burch. Initial term of three years, automatically renewing for successive one-year periods unless either party provides 90 days' written notice of non-renewal. Current annual base salary: $625,000. Annual bonus target: 75% of base salary, based on achievement of Company financial and operational performance metrics established by the Board. Change-of-control provisions: upon a "Change of Control" (as defined therein), if Mr. Burch's employment is terminated by the Company without "Cause" or by Mr. Burch for "Good Reason" within 24 months following such Change of Control (double-trigger), Mr. Burch is entitled to a severance payment equal to two times the sum of his base salary and target bonus, plus continuation of health benefits for 18 months, accelerated vesting of all outstanding equity awards, and a pro-rata bonus for the year of termination. See also Schedule 3.23.
2. Employment Agreement — Angela Moretti, Chief Financial Officer, dated as of June 15, 2014, as amended by the First Amendment dated January 1, 2020, by and between MedVance Health Systems, Inc. and Angela Moretti. Current annual base salary: $475,000. Annual bonus target: 60% of base salary. Change-of-control provisions: double-trigger; severance payment equal to 1.5 times the sum of base salary and target bonus, plus continuation of health benefits for 12 months, accelerated vesting of all outstanding equity awards, and a pro-rata bonus for the year of termination. See also Schedule 3.23.
3. Employment Agreement — Dr. Samir Patel, Chief Medical Officer, dated as of September 22, 2016, as amended by the First Amendment dated January 1, 2021, by and between MedVance Health Systems, Inc. and Dr. Samir Patel. Current annual base salary: $510,000. Annual bonus target: 50% of base salary. Change-of-control provisions: double-trigger; severance payment equal to 1.5 times the sum of base salary and target bonus, plus continuation of health benefits for 12 months, accelerated vesting of all outstanding equity awards, and a pro-rata bonus for the year of termination. See also Schedule 3.23.
4. Employment Agreement — Karen Tolliver, Chief Operating Officer, dated as of September 22, 2016, as amended by the First Amendment dated January 1, 2021, by and between MedVance Health Systems, Inc. and Karen Tolliver. Current annual base salary: $440,000. Annual bonus target: 55% of base salary. Change-of-control provisions: double-trigger; severance payment equal to 1.5 times the sum of base salary and target bonus, plus continuation of health benefits for 12 months, accelerated vesting of all outstanding equity awards, and a pro-rata bonus for the year of termination. See also Schedule 3.23.
5. Management Services Agreement, dated as of June 15, 2014, by and between MedVance Health Systems, Inc. and Crestline Growth Equity Fund II LP (the "Crestline MSA"). Pursuant to the Crestline MSA, Crestline provides certain management, advisory, and oversight services to the Company in exchange for an annual management fee of $1,500,000, payable in equal quarterly installments. The Crestline MSA also entitles Crestline to reimbursement of reasonable out-of-pocket expenses incurred in connection with the performance of such services. The Crestline MSA provides that it will terminate automatically upon the consummation of a Change of Control, and upon such termination, the Company is obligated to pay Crestline a termination fee equal to the net present value of the management fees that would have been payable during the remainder of the then-current term, discounted at a rate of 8% per annum. The estimated termination fee payable at Closing is approximately $2,400,000. See also Schedule 3.23.
Part (f) — Non-Competition and Non-Solicitation Agreements
The following non-competition and non-solicitation agreements are in effect:
1. Non-competition and non-solicitation provisions contained in the Employment Agreement with Daniel Burch (referenced in Part (e)(1) above): 24-month post-termination non-competition period; geographic scope: the states of Tennessee, Alabama, Georgia, and Kentucky; 24-month post-termination non-solicitation of employees and referral sources.
2. Non-competition and non-solicitation provisions contained in the Employment Agreement with Angela Moretti (referenced in Part (e)(2) above): 18-month post-termination non-competition period; geographic scope: the states of Tennessee, Alabama, Georgia, and Kentucky; 18-month post-termination non-solicitation of employees.
3. Non-competition and non-solicitation provisions contained in the Employment Agreement with Dr. Samir Patel (referenced in Part (e)(3) above): 18-month post-termination non-competition period; geographic scope: the states of Tennessee, Alabama, Georgia, and Kentucky; 18-month post-termination non-solicitation of employees and referral sources.
4. Non-competition and non-solicitation provisions contained in the Employment Agreement with Karen Tolliver (referenced in Part (e)(4) above): 18-month post-termination non-competition period; geographic scope: the states of Tennessee, Alabama, Georgia, and Kentucky; 18-month post-termination non-solicitation of employees.
5. Non-competition and non-solicitation provisions contained in the Management Stockholders' Agreement (referenced in Schedule 3.4(d)) applicable to all Management Stockholders: 24-month post-termination non-competition period; geographic scope: the states of Tennessee, Alabama, Georgia, and Kentucky; 24-month post-termination non-solicitation of employees and customers.
6. Standalone Confidentiality, Non-Competition, and Non-Solicitation Agreements have been entered into by the following additional employees: Jennifer Caldwell, Marcus Webb, Lisa Nakamura, Dr. Robert Finch, and Priya Sharma. Each such agreement was entered into in connection with the applicable employee's initial hiring or promotion and contains a 12-month post-termination non-competition period within the Company's market areas and an 18-month non-solicitation period for employees and customers.
Part (g) — Joint Ventures and Partnership Agreements
None.
Part (h) — Government Contracts and Grants
1. Medicare Provider Agreements. The Company and MedVance Ambulatory Services LLC are each parties to Medicare Provider Agreements with the Centers for Medicare & Medicaid Services ("CMS"), as administered by Palmetto GBA LLC (Medicare Administrative Contractor), with respect to each facility location holding a CMS Certification Number. See Schedule 3.14(a) for a listing of Medicare provider numbers by facility and Schedule 3.20(a) for revenue concentration data.
2. Medicaid Provider Agreements. The Company and MedVance Ambulatory Services LLC participate in the following state Medicaid programs:
(a) Tennessee (TennCare): Provider Participation Agreement with TennCare Division, Tennessee Department of Finance & Administration; administered by the applicable managed care organizations (BlueCare Tennessee, Thackeray Mutual Insurance Tennessee, and Greaves Insurance of Tennessee).
(b) Alabama: Provider Agreement with the Alabama Medicaid Agency.
(c) Georgia: Provider Agreement with the Georgia Department of Community Health, Division of Medicaid.
(d) Kentucky: Provider Agreement with the Kentucky Department for Medicaid Services, Cabinet for Health and Family Services.
3. TRICARE. The Company participates as a TRICARE-authorized provider through the TRICARE South Region network administered by Pemberton Mutual Insurance. No separate written contract beyond the standard TRICARE participation terms is in effect.
4. Government Grants. The Company received grant funding from the Health Resources and Services Administration ("HRSA") under the Provider Relief Fund in 2020 and 2021, totaling approximately $4,100,000. All reporting obligations under these grants have been satisfied, and no amounts remain subject to potential recoupment to the Company's knowledge as of the date hereof.
Part (i) — Other Material Contracts
1. Professional Services Agreement — Whitaker, Poole & Simms LLP, for ongoing corporate and transactional legal services. Billed on an hourly fee basis. No fixed term; terminable at will by either party.
2. Professional Services Agreement — Langford Moss & Crane LLP, for healthcare regulatory counsel. Billed on an hourly fee basis. No fixed term; terminable at will by either party.
3. Professional Services Agreement — Prumvane & Reese LLP, for audit, tax preparation, and advisory services. Annual engagement letters renewed annually; current engagement letter dated October 1, 2024. Annual fees: approximately $340,000 for audit services and $95,000 for tax preparation services.
4. Janitorial and Facilities Maintenance Services Agreement — Sundial Technologies of Tennessee, dated as of May 1, 2021. Covers janitorial services at nine Company facilities in Tennessee. Annual cost: approximately $620,000. Three-year term expiring April 30, 2024, renewed for a successive three-year term through April 30, 2027.
5. Waste Management Services Agreement — Pemberton Partners LLC, dated as of January 1, 2020, as amended. Regulated medical waste collection, transportation, treatment, and disposal for all Company and Subsidiary facilities. Annual cost: approximately $510,000. Auto-renewal for successive one-year periods. See also Schedule 3.17.
6. Advertising and Marketing Services Agreement — Clearpoint Health Marketing LLC, dated as of September 1, 2023. Digital marketing, brand management, and patient acquisition services. Annual fee: approximately $780,000. Initial 24-month term expiring August 31, 2025, with automatic one-year renewals. Terminable by either party upon 60 days' written notice.
SCHEDULE 3.10 — REAL PROPERTY
Part (a) — Owned Real Property
The Company owns the following parcels of real property:
1. 1800 Patterson Street, Nashville, Davidson County, Tennessee 37203.
Legal Description: Lot 14, Block B, Patterson Industrial Park, as recorded in Plat Book 7900, Page 215, in the Register's Office of Davidson County, Tennessee. Approximate building area: 45,000 square feet (two-story medical office and outpatient clinic building with attached parking structure).
Title Insurance: Owner's policy of title insurance issued by Commonwealth Abstract & Title Co. (211 Commerce Street, Suite 100, Nashville, Tennessee 37201), Policy No. OT-2014-TN-008834, effective June 15, 2014, insuring the Company's fee simple title in the amount of $8,500,000. No exceptions other than standard printed exceptions, real property taxes for the current year not yet due and payable, and the easements, restrictions, and encumbrances of record as set forth in the title commitment.
Encumbrances: (a) Deed of Trust, Security Agreement, Assignment of Leases and Rents, and Fixture Filing in favor of Granton Savings Bank, N.A., recorded at Instrument No. 20140615-0054832 in the Register's Office of Davidson County, Tennessee, securing the Company's obligations under the Credit Agreement (to be released at Closing upon repayment of the term loan); (b) utility easements of record; (c) restrictive covenants of record pertaining to Patterson Industrial Park (no material restrictions on current use); (d) real property taxes and assessments for the current tax year, not yet due and payable.
2. 3500 Broad Street, Chattanooga, Hamilton County, Tennessee 37408.
Legal Description: Parcel 15.02 as shown on Tax Map 147K, Group A, Hamilton County, Tennessee, being a portion of Lot 3 of the Williams Subdivision, as recorded in Plat Book 46, Page 78, in the Register's Office of Hamilton County, Tennessee. Approximate building area: 32,000 square feet (single-story outpatient clinic and ambulatory surgery facility).
Title Insurance: Owner's policy of title insurance issued by Commonwealth Abstract & Title Co., Policy No. OT-2017-TN-012247, effective October 3, 2017, insuring the Company's fee simple title in the amount of $5,200,000.
Encumbrances: (a) Utility easements of record; (b) real property taxes and assessments for the current tax year, not yet due and payable. No mortgage or deed of trust currently encumbers this property.
3. 2200 Memorial Drive, Birmingham, Jefferson County, Alabama 35205.
Legal Description: Lot 8, Southern Medical Office Park, Phase II, as recorded in Map Book 221, Page 44, in the Probate Court of Jefferson County, Alabama. Approximate building area: 28,000 square feet (single-story medical office and outpatient clinic building).
Title Insurance: Owner's policy of title insurance issued by Commonwealth Abstract & Title Co., Policy No. OT-2018-AL-003156, effective March 1, 2018, insuring the Company's fee simple title in the amount of $4,100,000.
Encumbrances: (a) Utility and drainage easements of record; (b) real property taxes and assessments for the current tax year, not yet due and payable. No mortgage or deed of trust currently encumbers this property.
Part (b) — Leased Real Property
The Company and its Subsidiary are tenants or lessees under the following real property leases:
1. Corporate Headquarters — 4200 West End Avenue, Suite 1100, Nashville, Davidson County, Tennessee 37205.
Lessor: Highmark Office Properties LLC.
Lease: Office Lease Agreement, dated as of January 1, 2016, as amended by the First Amendment dated July 1, 2019 and the Second Amendment dated January 1, 2023 (collectively, the "HQ Lease").
Premises: Approximately 18,500 rentable square feet on the 11th floor.
Term: Current term expires December 31, 2027, with two five-year renewal options exercisable by the Company upon 12 months' prior written notice.
Annual Base Rent: $592,000 ($32.00 per rentable square foot), subject to annual escalations of 2.5%.
Change-of-Control / Assignment: Section 15.2 of the HQ Lease requires the prior written consent of the Lessor for any assignment of the lease or change of control of the tenant (defined as a transfer of more than 50% of the voting or ownership interests in the tenant), which consent shall not be unreasonably withheld, conditioned, or delayed. See also Schedule 3.23. The Company submitted a consent request to Highmark Office Properties LLC on January 20, 2025. As of the date hereof, such consent remains pending.
2. Knoxville Outpatient Clinic — 900 Clinch Avenue, Suite 200, Knoxville, Knox County, Tennessee 37902.
Lessor: Volunteer Realty Partners LLC.
Lease: Commercial Lease Agreement, dated as of April 1, 2019, as amended by the First Amendment dated April 1, 2022.
Premises: Approximately 12,400 rentable square feet on the 2nd floor.
Term: Current term expires March 31, 2027, with one five-year renewal option.
Annual Base Rent: $322,400 ($26.00 per rentable square foot), subject to annual escalations of 3.0%.
Change-of-Control / Assignment: Landlord consent required for assignment or change of control. Consent request submitted January 22, 2025. As of the date hereof, consent has been obtained (written consent dated February 3, 2025).
3. Atlanta-Buckhead Clinic — 3445 Peachtree Road NE, Suite 510, Atlanta, Fulton County, Georgia 30326.
Lessor: Peachtree Tower Holdings LP.
Lease: Office Lease Agreement, dated as of January 15, 2019, by and between Peachtree Tower Holdings LP and MedVance Ambulatory Services LLC.
Premises: Approximately 14,200 rentable square feet on the 5th floor.
Term: Current term expires January 14, 2026, with two three-year renewal options. The Company intends to exercise the first renewal option.
Annual Base Rent: $440,200 ($31.00 per rentable square foot), subject to annual escalations of 2.75%.
Change-of-Control / Assignment: Landlord consent required for assignment; change of control of the tenant's parent entity requires written notice within 30 days but does not require consent. Notice submitted January 25, 2025.
4. Atlanta-Midtown Clinic — 1100 Spring Street NW, Suite 300, Atlanta, Fulton County, Georgia 30309.
Lessor: Midtown Medical Properties LLC.
Lease: Commercial Lease, dated as of August 1, 2020, by and between Midtown Medical Properties LLC and MedVance Ambulatory Services LLC.
Premises: Approximately 9,800 rentable square feet on the 3rd floor.
Term: Current term expires July 31, 2025, with one three-year renewal option. The Company intends to exercise the renewal option.
Annual Base Rent: $303,800 ($31.00 per rentable square foot), subject to annual escalations of 3.0%.
Change-of-Control / Assignment: Landlord consent required for assignment or change of control. Consent request submitted January 25, 2025. As of the date hereof, consent remains pending.
5. Huntsville Clinic — 4710 University Drive NW, Suite 140, Huntsville, Madison County, Alabama 35816.