1001-00001 · Ardent Capital Partners · Correspondence/Counterparty Counsel

letter-gk-coordination-protocol.docx DOCUMENT Antitrust

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CALDERWOOD & HARKNESS LLP 600 Lexington Avenue New York, NY 10022

Antitrust & Competition Practice Group

February 5, 2024

Jonathan Felder, Esq. Greenvale Durneval LLP 1800 M Street NW, Suite 1100 Washington, DC 20036

Re: Coordination Protocol for Hart-Scott-Rodino Premerger Notification Filings — Acquisition of Pinnacle Health Systems, Inc. by Ardent Capital Partners III LP

Calderwood & Harkness Matter No. 1001-00001

Dear Jonathan:

1. Introduction and Purpose

This firm represents Ardent Capital Partners III LP ("Ardent Capital"), a Delaware limited partnership, in connection with the premerger notification filing required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a, and the rules promulgated thereunder by the Federal Trade Commission, 16 C.F.R. Parts 801–803 (collectively, the "HSR Act"), in connection with the proposed acquisition by Ardent Capital of one hundred percent (100%) of the outstanding equity interests of Pinnacle Health Systems, Inc. ("Pinnacle"), a Delaware corporation (the "Transaction").

It is our understanding that Greenvale Durneval LLP serves as antitrust counsel to Pinnacle for purposes of the HSR filing and all related antitrust matters arising in connection with the Transaction. We appreciate your firm's early engagement on this matter and look forward to a productive working relationship as both filings proceed.

The purpose of this letter is to propose a comprehensive coordination protocol governing the simultaneous preparation and filing of both the acquiring person and the acquired person HSR Notification and Report Forms (each, a "Notification Form," and collectively, the "Notification Forms"). As you are aware, simultaneous filing by both the acquiring person and the acquired person is the intended approach in order to begin the initial thirty (30) calendar day statutory waiting period under Section 7A(b)(1) of the Clayton Act as promptly as practicable, thereby advancing the regulatory clearance timeline and enabling the parties to close the Transaction within the timeframe contemplated by the operative transaction documents.

In this regard, we call your attention to the Equity Purchase Agreement dated January 31, 2024 (the "EPA"), by and among Ardent Capital Partners III LP and the equity holders of Pinnacle Health Systems, Inc., a copy of which we understand your firm has received from Pinnacle's transaction counsel. Section 5.4(a) of the EPA requires each of the parties to file their respective HSR Notification Forms within fifteen (15) business days of the execution date of the EPA. Calculating from the EPA execution date of January 31, 2024, and excluding weekends and the Presidents' Day federal holiday observed on February 19, 2024, this yields a contractual filing deadline of February 22, 2024.

Calderwood & Harkness's target filing date is February 16, 2024, which provides a meaningful cushion of four business days prior to the contractual deadline. We respectfully request Greenvale Durneval's agreement to file the acquired person's Notification Form on the same date — February 16, 2024 — so that both filings are submitted simultaneously through the FTC's electronic filing portal and the statutory waiting period commences without delay. We believe this accelerated timeline is achievable and will serve the mutual interests of both parties in obtaining HSR clearance as expeditiously as possible.

2. Transaction Description Consistency

Both the acquiring person Notification Form and the acquired person Notification Form should contain a materially consistent description of the Transaction to avoid potential deficiency letters or unnecessary follow-up inquiries from the reviewing agency. Inconsistencies between the two filings in the description of the transaction structure, the identity of the parties, or the characterization of the consideration can create confusion and delay the commencement of the waiting period. Accordingly, we propose that both firms coordinate closely on the transaction description set forth in Item 3 of each respective Notification Form.

For purposes of this coordination, we set forth below the key elements of the Transaction as Calderwood & Harkness intends to describe them in the acquiring person Notification Form:

Structure. The Transaction is structured as a one hundred percent (100%) stock purchase — that is, an acquisition of all of the outstanding shares of common stock, and any other equity interests, of Pinnacle Health Systems, Inc. by Ardent Capital Partners III LP. This constitutes a voting securities acquisition within the meaning of 16 C.F.R. § 801.2.

Consideration. The Transaction has an aggregate enterprise value of approximately Nine Hundred Fifty-Two Million Dollars ($952,000,000). The equity value of the Transaction is approximately Five Hundred Thirty-Four Million Dollars ($534,000,000), comprising (i) cash consideration of Five Hundred Five Million Five Hundred Thousand Dollars ($505,500,000) and (ii) management rollover equity of approximately Twenty-Eight Million Five Hundred Thousand Dollars ($28,500,000) contributed by Dr. Marcus Ellsworth, the current Chief Executive Officer and Chairman of the Board of Directors of Pinnacle, who will retain an equity interest in the post-closing entity through a rollover of a portion of his existing equity stake.

Acquiring Person. The acquiring entity is Ardent Capital Partners III LP, a Delaware limited partnership. The Ultimate Parent Entity ("UPE") for the acquiring person is Ardent Capital Management LLC, a Delaware limited liability company and registered investment adviser with the U.S. Securities and Exchange Commission (SEC File No. 801-119247). Ardent Capital Management LLC is the sole member of Ardent Capital GP III LLC, a Delaware limited liability company, which serves as the general partner of Ardent Capital Partners III LP. The acquiring person's UPE should therefore be identified as Ardent Capital Management LLC in both Notification Forms.

Acquired Person. The acquired entity is Pinnacle Health Systems, Inc., a Delaware corporation. Calderwood & Harkness's preliminary understanding is that the UPE for the acquired person is Pinnacle Health Systems, Inc. itself. However, we are aware that Veltrano Equity Holdings LLC may hold a controlling interest in Pinnacle and therefore may properly constitute the UPE of the acquired person under the HSR Act's rules governing ultimate parent entities, 16 C.F.R. § 801.1(a)(3). We request that Greenvale Durneval advise us of the correct UPE determination for the acquired person and, if the UPE is an entity other than Pinnacle itself, provide us with sufficient identifying information (legal name, state of formation, and EIN) to ensure that both filings reflect the same UPE designation for the acquired person.

We propose that both firms exchange their respective draft transaction descriptions by no later than February 9, 2024, in order to permit mutual review and alignment. Both Notification Forms should reference the EPA execution date of January 31, 2024, and both should identify the consideration structure — including the cash component and the management rollover equity component — in a consistent manner.

3. NAICS Code Alignment

It is critical that both the acquiring person Notification Form and the acquired person Notification Form identify the same North American Industry Classification System ("NAICS") codes applicable to Pinnacle's business operations. Discrepancies in NAICS code identification between the two filings may result in the reviewing agency issuing a deficiency letter or initiating additional inquiries regarding the scope of Pinnacle's business activities, which would be an unnecessary impediment to the timely commencement of the statutory waiting period.

Based on Calderwood & Harkness's review of Pinnacle's publicly available business descriptions, investor materials, and the information provided in the Confidential Information Memorandum prepared by Apex Advisory Group LLC, our understanding is that Pinnacle's primary NAICS codes are as follows:

• 621111 — Offices of Physicians (encompassing Pinnacle's network of physician-operated primary care and specialty care clinics)

• 621493 — Freestanding Ambulatory Surgical and Emergency Centers (encompassing Pinnacle's ambulatory surgery center operations and its freestanding emergency departments)

The acquiring person Notification Form will report these NAICS codes as the industry codes applicable to the acquired entity in accordance with Item 5 of the Notification Form. Correspondingly, the acquired person Notification Form should report these same codes as the filing person's own industry codes. We request that Greenvale Durneval confirm that Pinnacle agrees with the designation of NAICS codes 621111 and 621493 as Pinnacle's primary industry codes, and further request that Greenvale Durneval advise us of any additional NAICS codes that Pinnacle intends to report on its Notification Form. This confirmation should be provided by February 9, 2024, so that any discrepancies in NAICS classification can be identified and resolved well in advance of the target filing date.

Additionally, we note that the acquiring person Notification Form must report NAICS codes for Ardent Capital's existing portfolio companies that operate in healthcare services or in other industries that may overlap with Pinnacle's lines of business. Specifically, the following Ardent Capital portfolio companies are relevant:

• Marlowe Asset Management Rehabilitation Holdings LLC — a provider of outpatient physical therapy services. Calderwood & Harkness's preliminary classification for this portfolio company is NAICS code 621340 (Offices of Physical, Occupational and Speech Therapists, and Audiologists), though we are in the process of confirming this code and may revise our classification upon further review.

• Clearpath Diagnostics Inc. — a provider of clinical laboratory testing services, classified under NAICS code 621511 (Medical Laboratories).

Calderwood & Harkness will prepare the acquiring person's NAICS code disclosures independently and does not require input from Greenvale Durneval with respect to the acquiring person's portfolio companies. We note these codes here solely for your awareness, as they may be relevant to Greenvale Durneval's own competitive overlap analysis.

4. Revenue and Financial Data

Both the acquiring person and the acquired person Notification Forms require the reporting of certain revenue and financial data for the filing person's UPE and its controlled entities. In order to ensure consistency across both filings — particularly with respect to Pinnacle's financial data, which will appear in both the acquiring person form (as data about the acquired entity) and the acquired person form (as data about the filing person) — we propose to coordinate on the financial figures to be reported.

For purposes of the acquiring person Notification Form, Calderwood & Harkness intends to use the following Pinnacle financial data, which has been sourced from audited financial statements for the fiscal year ended December 31, 2023, prepared by Harland & Marsh CPAs LLP, Pinnacle's independent auditing firm, and supplemented by the quality of earnings report prepared by Apex Advisory Group LLC in connection with Ardent Capital's diligence review of the Transaction:

• Pinnacle FY2023 Annual Net Sales / Operating Revenues: $637.4 million

• Pinnacle Total Assets (as of December 31, 2023): approximately $812 million

We respectfully request that Greenvale Durneval confirm these figures or, if there is any discrepancy between these figures and the data that Pinnacle intends to report on the acquired person Notification Form, advise us of such discrepancy by February 9, 2024. It is essential that the revenue and total asset figures be reported consistently across both filings.

With respect to the acquiring person financial data, Ardent Capital Partners III LP reports total assets of approximately $4.8 billion, representing the committed capital of Fund III as of the most recently completed fiscal year. Calderwood & Harkness will prepare the acquiring person's financial data disclosures independently on the basis of information provided directly by Ardent Capital Management LLC and does not require any financial data from Greenvale Durneval for the acquiring person side of the filing.

5. Size-of-Transaction and Size-of-Person Threshold Analysis

For coordination purposes and to ensure that both filings reflect a consistent threshold analysis, Calderwood & Harkness sets forth below its analysis of the applicable 2024 HSR filing thresholds as adjusted by the FTC pursuant to Section 7A(a)(2) of the Clayton Act:

Size-of-Transaction Test. The aggregate total amount of voting securities and assets of Pinnacle to be held as a result of the Transaction has a value of approximately $952 million, which substantially exceeds the 2024 size-of-transaction threshold of $111.4 million. The size-of-transaction test is therefore satisfied.

Size-of-Person Test (Acquiring Person). Ardent Capital Partners III LP, through its UPE Ardent Capital Management LLC, has total assets of approximately $4.8 billion, which substantially exceeds the $22.3 million threshold applicable to one of the persons involved in the transaction. The acquiring person size-of-person test is satisfied.

Size-of-Person Test (Acquired Person). Pinnacle Health Systems, Inc. had annual net sales of $637.4 million and total assets of approximately $812 million for fiscal year 2023, each of which substantially exceeds the $22.3 million threshold. The acquired person size-of-person test is satisfied.

Because the Transaction value exceeds $500 million but is less than $1 billion, the Transaction falls within the $500 million to $999.9 million tier under the 2024 FTC filing fee schedule, as amended by the Merger Filing Fee Modernization Act of 2022. The applicable filing fee is $280,000. Pursuant to Section 5.4(a) of the EPA, the filing fee is to be borne solely by the acquirer, Ardent Capital Partners III LP. Calderwood & Harkness will arrange for payment of the $280,000 filing fee by wire transfer and will share wire transfer confirmation with Greenvale Durneval prior to the filing date so that both parties can confirm that the fee has been received and credited by the FTC before the Notification Forms are submitted.

6. Item 4(c) and 4(d) Document Collection

Both the acquiring person and the acquired person are required to identify and produce, as part of their respective Notification Forms, all documents responsive to Item 4(c) and Item 4(d) of the HSR Notification and Report Form. As you know, Item 4(c) requires the production of documents that were prepared by or for any officer(s) or director(s) of the filing person (or, in the case of unincorporated entities, equivalent individuals) for the purpose of evaluating or analyzing the Transaction with respect to markets, market shares, competition, competitors, potential for sales growth, or expansion into product or geographic markets. Item 4(d) requires the production of studies, surveys, analyses, and reports that were prepared by or for any officer(s) or director(s) of the filing person for the purpose of evaluating or analyzing the Transaction with respect to synergies, efficiencies, or other strategic rationales.

Calderwood & Harkness issued formal document collection instructions to Ardent Capital and its relevant personnel — including the partners and managing directors involved in the Transaction, as well as members of the deal team — as of February 4, 2024. Our preliminary assessment, based on initial custodian interviews and a review of the deal file, is that the acquiring person will have approximately seven (7) documents responsive to Items 4(c) and 4(d). These documents are expected to include Confidential Information Memoranda and teaser materials provided to Ardent Capital during the auction process, internal investment committee memoranda prepared in connection with the approval of the Transaction, board presentations and materials prepared for the Advisory Committee of Fund III, and certain email communications among Ardent Capital deal team members discussing the competitive landscape and strategic rationale for the acquisition.

We request that Greenvale Durneval confirm its anticipated timeline for completing the acquired person's Item 4(c) and 4(d) document collection. Based on our review of the EPA and the information available to us, we understand that Pinnacle will separately prepare and produce its own responsive documents. We further understand that Pinnacle's responsive documents may include, among other things, strategic planning presentations prepared by Pinnacle management, minutes of meetings of Pinnacle's Board of Directors at which the Transaction was discussed, consultant reports prepared by third-party advisors engaged by Pinnacle in connection with the Transaction or its competitive strategy, and internal communications among Pinnacle's senior leadership regarding competitive positioning, market share, and growth opportunities.

We wish to emphasize that neither party is expected to share the substance of its Item 4(c) or 4(d) documents with the other party. The document productions of each filing person are confidential and proprietary, and the coordination protocol proposed herein does not contemplate or require the exchange of responsive documents between the firms. However, both parties should coordinate to ensure that their respective document indices are completed and that all document productions are assembled, reviewed, and ready for electronic submission by the target filing date of February 16, 2024.

In this connection, we request that any privilege review issues — including any disputes regarding the responsiveness or privileged nature of potentially responsive documents — be flagged promptly so as not to delay the overall filing timeline. If either party anticipates that its document collection and review process will extend beyond February 14, 2024, we ask that the other party be notified immediately so that the target filing date can be reassessed if necessary.

7. Early Termination Request

Calderwood & Harkness intends to request early termination of the initial thirty (30) calendar day statutory waiting period under Section 7A(b)(1) of the Clayton Act on behalf of the acquiring person in the Notification Form filed on February 16, 2024. An early termination request is made by checking the appropriate box on the face page of the Notification Form.

We respectfully request that Greenvale Durneval similarly request early termination on behalf of the acquired person in the acquired person Notification Form. As you are aware, the likelihood of the FTC granting early termination is meaningfully enhanced when both the acquiring person and the acquired person have requested it. A request from only one party may signal to agency staff that the other party has reservations about the transaction or believes that the competitive analysis warrants additional agency scrutiny — neither of which is the case here.

We believe the substantive basis for early termination in this matter is strong. The Transaction presents no horizontal overlaps between Ardent Capital's existing portfolio companies and Pinnacle in any relevant product market or geographic market. Ardent Capital's healthcare services portfolio consists of Marlowe Asset Management Rehabilitation Holdings LLC, which provides outpatient physical therapy services, and Clearpath Diagnostics Inc., which provides clinical laboratory testing services. Neither of these businesses competes with Pinnacle's physician practice management and ambulatory surgery center operations. There are no vertical relationships that would give rise to foreclosure concerns. The anticipated post-Transaction Herfindahl-Hirschman Index ("HHI") in all relevant markets shows no change attributable to the Transaction, as the Transaction does not combine any competing businesses.

To support the early termination request, Calderwood & Harkness intends to prepare and file a voluntary submission — commonly referred to as a "white paper" — with the FTC Bureau of Competition, setting forth the competitive analysis in detail. The white paper will describe the relevant markets, the absence of competitive overlaps, and the procompetitive rationale for the Transaction. We anticipate submitting the white paper concurrently with the Notification Form on February 16, 2024, or within one to two business days thereafter. We will provide a copy of the white paper to Greenvale Durneval under the terms of confidentiality set forth in Section 9 of this letter.

8. Information Sharing Protocol

To facilitate efficient coordination between the two firms and to ensure that both Notification Forms are consistent, complete, and ready for simultaneous filing, Calderwood & Harkness proposes the following information sharing arrangements and timeline:

1. Exchange of Draft Transaction Descriptions — February 9, 2024. Each firm shall circulate to the other its draft transaction description (Item 3 narrative) for review and comment. Any inconsistencies shall be identified and resolved promptly.

2. Exchange of NAICS Code and Revenue/Financial Data Confirmations — February 9, 2024. Greenvale Durneval shall confirm or propose revisions to the NAICS codes and financial data set forth in Sections 3 and 4 of this letter. Calderwood & Harkness shall similarly confirm the accuracy of any data provided by Greenvale Durneval.

3. Exchange of Completed Draft Notification Forms — February 12, 2024. Each firm shall circulate to the other a substantially complete draft of its respective Notification Form, excluding Item 4(c) and 4(d) document productions, for purposes of cross-review and consistency verification. Each firm shall review the other's draft and provide comments or identify any inconsistencies by close of business on February 13, 2024.

4. Finalization of Notification Forms — February 15, 2024. Final versions of both Notification Forms, incorporating all agreed-upon revisions and reconciliations, shall be completed no later than February 15, 2024, in order to allow for final quality assurance review and preparation for electronic filing.

5. Simultaneous Electronic Filing — February 16, 2024. Both the acquiring person Notification Form and the acquired person Notification Form shall be filed simultaneously through the FTC's electronic filing portal (the "E-Filing System") on February 16, 2024. Both firms shall coordinate on the timing of submission so that, to the extent practicable, both forms are submitted within the same filing session. Both firms shall request early termination of the waiting period. Calderwood & Harkness shall submit its voluntary submission (white paper) on or about the same date.

Both parties should designate a primary point of contact for day-to-day coordination of the HSR filing process. Calderwood & Harkness's primary contact for this matter will be Monica Reyes, Lead Associate in the Antitrust & Competition Practice Group. Ms. Reyes's contact information will be provided under separate cover. We request that Greenvale Durneval similarly designate its primary contact and provide that individual's name, direct telephone number, and email address at its earliest convenience.

9. Confidentiality

Each party's HSR Notification Form and supporting materials contain competitively sensitive and proprietary business information of the respective filing person, including but not limited to revenue data, NAICS code designations, descriptions of business operations, and documents produced under Items 4(c) and 4(d). The parties and their respective counsel must take appropriate care to safeguard the confidentiality of such information throughout the coordination process.

Information shared between Calderwood & Harkness and Greenvale Durneval pursuant to this coordination protocol shall be used solely for the purpose of ensuring consistency and coordination of the HSR filings and related regulatory submissions. Such information shall not be disclosed to any third party, including the respective parties' clients, except to the extent that disclosure to the client is strictly necessary for counsel's preparation of its own filing. In no event shall information received from the other firm be used for any commercial, competitive, or strategic purpose unrelated to the HSR filing process.

This confidentiality understanding is consistent with, and is intended to complement, the confidentiality provisions set forth in Article VII of the EPA and the Mutual Nondisclosure Agreement dated November 14, 2023, between Ardent Capital Management LLC and Pinnacle Health Systems, Inc. Nothing in this letter is intended to supersede, modify, or diminish the obligations of either party under any existing confidentiality agreement between the parties or their respective clients.

Specifically, and for the avoidance of doubt, neither Calderwood & Harkness nor Greenvale Durneval shall share the other party's Item 4(c) or 4(d) documents, or any index or description thereof, with its own client absent the prior written consent of the producing party's counsel. We believe this restriction is appropriate given the competitively sensitive nature of such documents and is consistent with customary practice in HSR coordination matters.

In the event that Calderwood & Harkness provides a copy of its voluntary submission (white paper) to Greenvale Durneval as contemplated in Section 7 above, such white paper shall be treated as outside counsel's eyes only and shall not be shared with Pinnacle, its officers, directors, employees, or other advisors unless and until Greenvale Durneval has obtained Calderwood & Harkness's prior written authorization to do so.

10. Communication with FTC/DOJ Staff

In the event that staff of the Federal Trade Commission or the Antitrust Division of the U.S. Department of Justice contacts either Calderwood & Harkness or Greenvale Durneval with questions, requests for information, or other communications related to the Transaction or the Notification Forms (which will be assigned a Transaction Number upon filing), each firm shall promptly notify the other of such contact. Prompt notification will enable both firms to coordinate their responses and to present a consistent and accurate picture of the Transaction and the parties' business operations to the reviewing agency.

Neither Calderwood & Harkness nor Greenvale Durneval shall make substantive representations to the FTC, DOJ, or any other governmental authority regarding the other party's business operations, competitive position, or strategic plans without first consulting with the other firm and obtaining its concurrence. This restriction is intended to prevent inadvertent mischaracterizations and to ensure that each party retains control over the presentation of its own client's business to the reviewing agency.

Based on the nature of the Transaction and the industries involved, Calderwood & Harkness anticipates that the reviewing division will be the FTC Bureau of Competition, Mergers IV Division, which has primary responsibility for transactions in the healthcare services sector. Our preliminary understanding is that the FTC staff attorney assigned to matters in this area is Sarah Whitman, Attorney, Mergers IV Division, although this assignment will not be confirmed until after the Notification Forms are filed and a Transaction Number is assigned.

11. Proposed Timeline Summary

For ease of reference, the key dates and milestones contemplated by this coordination protocol are summarized in the following table:

12. Closing and Request for Confirmation

We respectfully request that Greenvale Durneval confirm its agreement to the coordination protocol set forth in this letter, or propose any modifications it deems appropriate, by no later than February 7, 2024. A response by email to the undersigned or to Ms. Reyes will be sufficient for purposes of this confirmation; a countersigned copy of this letter is not required, although we would welcome one if Greenvale Durneval prefers to memorialize its agreement in that manner.

We are, of course, willing to discuss any aspect of the proposed protocol by telephone at your convenience. Please do not hesitate to contact me directly at (212) 506-7400 or by email if you would like to schedule a call to address any questions or concerns.

We look forward to working with you and your team at Greenvale Durneval to ensure a smooth, efficient, and well-coordinated HSR filing process. We believe that the protocol outlined herein will serve the interests of both parties and their respective clients in achieving timely regulatory clearance of the Transaction.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Howard Bellamy Partner, Antitrust & Competition Practice Group Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022

cc: Monica Reyes, Lead Associate, Calderwood & Harkness LLP cc: Elliot Nguyen, Counsel, Calderwood & Harkness LLP cc: David Ostrander, Esq., Whitfield & Crane LLP (transaction counsel to Ardent Capital Partners III LP)

Date	Milestone
January 31, 2024	Execution of the Equity Purchase Agreement
February 5, 2024	Issuance of this coordination protocol letter
February 7, 2024	Deadline for Greenvale Durneval's confirmation or proposed modifications to this protocol
February 9, 2024	Exchange of draft transaction descriptions, NAICS code confirmations, and financial data confirmations
February 12, 2024	Exchange of completed draft HSR Notification Forms (excluding Item 4(c)/4(d) document productions) for cross-review
February 13, 2024	Comments on draft Notification Forms due
February 14, 2024	Filing fee wire transfer ($280,000) to FTC
February 15, 2024	Finalization of both HSR Notification Forms
February 16, 2024	Simultaneous filing of acquiring person and acquired person HSR Notification Forms via FTC E-Filing System; early termination request; submission of voluntary white paper
February 22, 2024	EPA § 5.4(a) contractual filing deadline (to be met well in advance)
March 17, 2024	Expiration of initial 30-day statutory waiting period (absent earlier grant of early termination or issuance of a Second Request)
June 30, 2024	EPA outside date for consummation of the Transaction

CALDERWOOD & HARKNESS LLP 600 Lexington Avenue New York, NY 10022
Antitrust & Competition Practice Group
February 5, 2024
Jonathan Felder, Esq. Greenvale Durneval LLP 1800 M Street NW, Suite 1100 Washington, DC 20036
Re: Coordination Protocol for Hart-Scott-Rodino Premerger Notification Filings — Acquisition of Pinnacle Health Systems, Inc. by Ardent Capital Partners III LP
Calderwood & Harkness Matter No. 1001-00001
Dear Jonathan:
1. Introduction and Purpose
This firm represents Ardent Capital Partners III LP ("Ardent Capital"), a Delaware limited partnership, in connection with the premerger notification filing required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a, and the rules promulgated thereunder by the Federal Trade Commission, 16 C.F.R. Parts 801–803 (collectively, the "HSR Act"), in connection with the proposed acquisition by Ardent Capital of one hundred percent (100%) of the outstanding equity interests of Pinnacle Health Systems, Inc. ("Pinnacle"), a Delaware corporation (the "Transaction").
It is our understanding that Greenvale Durneval LLP serves as antitrust counsel to Pinnacle for purposes of the HSR filing and all related antitrust matters arising in connection with the Transaction. We appreciate your firm's early engagement on this matter and look forward to a productive working relationship as both filings proceed.
The purpose of this letter is to propose a comprehensive coordination protocol governing the simultaneous preparation and filing of both the acquiring person and the acquired person HSR Notification and Report Forms (each, a "Notification Form," and collectively, the "Notification Forms"). As you are aware, simultaneous filing by both the acquiring person and the acquired person is the intended approach in order to begin the initial thirty (30) calendar day statutory waiting period under Section 7A(b)(1) of the Clayton Act as promptly as practicable, thereby advancing the regulatory clearance timeline and enabling the parties to close the Transaction within the timeframe contemplated by the operative transaction documents.
In this regard, we call your attention to the Equity Purchase Agreement dated January 31, 2024 (the "EPA"), by and among Ardent Capital Partners III LP and the equity holders of Pinnacle Health Systems, Inc., a copy of which we understand your firm has received from Pinnacle's transaction counsel. Section 5.4(a) of the EPA requires each of the parties to file their respective HSR Notification Forms within fifteen (15) business days of the execution date of the EPA. Calculating from the EPA execution date of January 31, 2024, and excluding weekends and the Presidents' Day federal holiday observed on February 19, 2024, this yields a contractual filing deadline of February 22, 2024.
Calderwood & Harkness's target filing date is February 16, 2024, which provides a meaningful cushion of four business days prior to the contractual deadline. We respectfully request Greenvale Durneval's agreement to file the acquired person's Notification Form on the same date — February 16, 2024 — so that both filings are submitted simultaneously through the FTC's electronic filing portal and the statutory waiting period commences without delay. We believe this accelerated timeline is achievable and will serve the mutual interests of both parties in obtaining HSR clearance as expeditiously as possible.
2. Transaction Description Consistency
Both the acquiring person Notification Form and the acquired person Notification Form should contain a materially consistent description of the Transaction to avoid potential deficiency letters or unnecessary follow-up inquiries from the reviewing agency. Inconsistencies between the two filings in the description of the transaction structure, the identity of the parties, or the characterization of the consideration can create confusion and delay the commencement of the waiting period. Accordingly, we propose that both firms coordinate closely on the transaction description set forth in Item 3 of each respective Notification Form.
For purposes of this coordination, we set forth below the key elements of the Transaction as Calderwood & Harkness intends to describe them in the acquiring person Notification Form:
Structure. The Transaction is structured as a one hundred percent (100%) stock purchase — that is, an acquisition of all of the outstanding shares of common stock, and any other equity interests, of Pinnacle Health Systems, Inc. by Ardent Capital Partners III LP. This constitutes a voting securities acquisition within the meaning of 16 C.F.R. § 801.2.
Consideration. The Transaction has an aggregate enterprise value of approximately Nine Hundred Fifty-Two Million Dollars ($952,000,000). The equity value of the Transaction is approximately Five Hundred Thirty-Four Million Dollars ($534,000,000), comprising (i) cash consideration of Five Hundred Five Million Five Hundred Thousand Dollars ($505,500,000) and (ii) management rollover equity of approximately Twenty-Eight Million Five Hundred Thousand Dollars ($28,500,000) contributed by Dr. Marcus Ellsworth, the current Chief Executive Officer and Chairman of the Board of Directors of Pinnacle, who will retain an equity interest in the post-closing entity through a rollover of a portion of his existing equity stake.
Acquiring Person. The acquiring entity is Ardent Capital Partners III LP, a Delaware limited partnership. The Ultimate Parent Entity ("UPE") for the acquiring person is Ardent Capital Management LLC, a Delaware limited liability company and registered investment adviser with the U.S. Securities and Exchange Commission (SEC File No. 801-119247). Ardent Capital Management LLC is the sole member of Ardent Capital GP III LLC, a Delaware limited liability company, which serves as the general partner of Ardent Capital Partners III LP. The acquiring person's UPE should therefore be identified as Ardent Capital Management LLC in both Notification Forms.
Acquired Person. The acquired entity is Pinnacle Health Systems, Inc., a Delaware corporation. Calderwood & Harkness's preliminary understanding is that the UPE for the acquired person is Pinnacle Health Systems, Inc. itself. However, we are aware that Veltrano Equity Holdings LLC may hold a controlling interest in Pinnacle and therefore may properly constitute the UPE of the acquired person under the HSR Act's rules governing ultimate parent entities, 16 C.F.R. § 801.1(a)(3). We request that Greenvale Durneval advise us of the correct UPE determination for the acquired person and, if the UPE is an entity other than Pinnacle itself, provide us with sufficient identifying information (legal name, state of formation, and EIN) to ensure that both filings reflect the same UPE designation for the acquired person.
We propose that both firms exchange their respective draft transaction descriptions by no later than February 9, 2024, in order to permit mutual review and alignment. Both Notification Forms should reference the EPA execution date of January 31, 2024, and both should identify the consideration structure — including the cash component and the management rollover equity component — in a consistent manner.
3. NAICS Code Alignment
It is critical that both the acquiring person Notification Form and the acquired person Notification Form identify the same North American Industry Classification System ("NAICS") codes applicable to Pinnacle's business operations. Discrepancies in NAICS code identification between the two filings may result in the reviewing agency issuing a deficiency letter or initiating additional inquiries regarding the scope of Pinnacle's business activities, which would be an unnecessary impediment to the timely commencement of the statutory waiting period.
Based on Calderwood & Harkness's review of Pinnacle's publicly available business descriptions, investor materials, and the information provided in the Confidential Information Memorandum prepared by Apex Advisory Group LLC, our understanding is that Pinnacle's primary NAICS codes are as follows:
• 621111 — Offices of Physicians (encompassing Pinnacle's network of physician-operated primary care and specialty care clinics)
• 621493 — Freestanding Ambulatory Surgical and Emergency Centers (encompassing Pinnacle's ambulatory surgery center operations and its freestanding emergency departments)
The acquiring person Notification Form will report these NAICS codes as the industry codes applicable to the acquired entity in accordance with Item 5 of the Notification Form. Correspondingly, the acquired person Notification Form should report these same codes as the filing person's own industry codes. We request that Greenvale Durneval confirm that Pinnacle agrees with the designation of NAICS codes 621111 and 621493 as Pinnacle's primary industry codes, and further request that Greenvale Durneval advise us of any additional NAICS codes that Pinnacle intends to report on its Notification Form. This confirmation should be provided by February 9, 2024, so that any discrepancies in NAICS classification can be identified and resolved well in advance of the target filing date.
Additionally, we note that the acquiring person Notification Form must report NAICS codes for Ardent Capital's existing portfolio companies that operate in healthcare services or in other industries that may overlap with Pinnacle's lines of business. Specifically, the following Ardent Capital portfolio companies are relevant:
• Marlowe Asset Management Rehabilitation Holdings LLC — a provider of outpatient physical therapy services. Calderwood & Harkness's preliminary classification for this portfolio company is NAICS code 621340 (Offices of Physical, Occupational and Speech Therapists, and Audiologists), though we are in the process of confirming this code and may revise our classification upon further review.
• Clearpath Diagnostics Inc. — a provider of clinical laboratory testing services, classified under NAICS code 621511 (Medical Laboratories).
Calderwood & Harkness will prepare the acquiring person's NAICS code disclosures independently and does not require input from Greenvale Durneval with respect to the acquiring person's portfolio companies. We note these codes here solely for your awareness, as they may be relevant to Greenvale Durneval's own competitive overlap analysis.
4. Revenue and Financial Data
Both the acquiring person and the acquired person Notification Forms require the reporting of certain revenue and financial data for the filing person's UPE and its controlled entities. In order to ensure consistency across both filings — particularly with respect to Pinnacle's financial data, which will appear in both the acquiring person form (as data about the acquired entity) and the acquired person form (as data about the filing person) — we propose to coordinate on the financial figures to be reported.
For purposes of the acquiring person Notification Form, Calderwood & Harkness intends to use the following Pinnacle financial data, which has been sourced from audited financial statements for the fiscal year ended December 31, 2023, prepared by Harland & Marsh CPAs LLP, Pinnacle's independent auditing firm, and supplemented by the quality of earnings report prepared by Apex Advisory Group LLC in connection with Ardent Capital's diligence review of the Transaction:
• Pinnacle FY2023 Annual Net Sales / Operating Revenues: $637.4 million
• Pinnacle Total Assets (as of December 31, 2023): approximately $812 million
We respectfully request that Greenvale Durneval confirm these figures or, if there is any discrepancy between these figures and the data that Pinnacle intends to report on the acquired person Notification Form, advise us of such discrepancy by February 9, 2024. It is essential that the revenue and total asset figures be reported consistently across both filings.
With respect to the acquiring person financial data, Ardent Capital Partners III LP reports total assets of approximately $4.8 billion, representing the committed capital of Fund III as of the most recently completed fiscal year. Calderwood & Harkness will prepare the acquiring person's financial data disclosures independently on the basis of information provided directly by Ardent Capital Management LLC and does not require any financial data from Greenvale Durneval for the acquiring person side of the filing.
5. Size-of-Transaction and Size-of-Person Threshold Analysis
For coordination purposes and to ensure that both filings reflect a consistent threshold analysis, Calderwood & Harkness sets forth below its analysis of the applicable 2024 HSR filing thresholds as adjusted by the FTC pursuant to Section 7A(a)(2) of the Clayton Act:
Size-of-Transaction Test. The aggregate total amount of voting securities and assets of Pinnacle to be held as a result of the Transaction has a value of approximately $952 million, which substantially exceeds the 2024 size-of-transaction threshold of $111.4 million. The size-of-transaction test is therefore satisfied.
Size-of-Person Test (Acquiring Person). Ardent Capital Partners III LP, through its UPE Ardent Capital Management LLC, has total assets of approximately $4.8 billion, which substantially exceeds the $22.3 million threshold applicable to one of the persons involved in the transaction. The acquiring person size-of-person test is satisfied.
Size-of-Person Test (Acquired Person). Pinnacle Health Systems, Inc. had annual net sales of $637.4 million and total assets of approximately $812 million for fiscal year 2023, each of which substantially exceeds the $22.3 million threshold. The acquired person size-of-person test is satisfied.
Because the Transaction value exceeds $500 million but is less than $1 billion, the Transaction falls within the $500 million to $999.9 million tier under the 2024 FTC filing fee schedule, as amended by the Merger Filing Fee Modernization Act of 2022. The applicable filing fee is $280,000. Pursuant to Section 5.4(a) of the EPA, the filing fee is to be borne solely by the acquirer, Ardent Capital Partners III LP. Calderwood & Harkness will arrange for payment of the $280,000 filing fee by wire transfer and will share wire transfer confirmation with Greenvale Durneval prior to the filing date so that both parties can confirm that the fee has been received and credited by the FTC before the Notification Forms are submitted.
6. Item 4(c) and 4(d) Document Collection
Both the acquiring person and the acquired person are required to identify and produce, as part of their respective Notification Forms, all documents responsive to Item 4(c) and Item 4(d) of the HSR Notification and Report Form. As you know, Item 4(c) requires the production of documents that were prepared by or for any officer(s) or director(s) of the filing person (or, in the case of unincorporated entities, equivalent individuals) for the purpose of evaluating or analyzing the Transaction with respect to markets, market shares, competition, competitors, potential for sales growth, or expansion into product or geographic markets. Item 4(d) requires the production of studies, surveys, analyses, and reports that were prepared by or for any officer(s) or director(s) of the filing person for the purpose of evaluating or analyzing the Transaction with respect to synergies, efficiencies, or other strategic rationales.
Calderwood & Harkness issued formal document collection instructions to Ardent Capital and its relevant personnel — including the partners and managing directors involved in the Transaction, as well as members of the deal team — as of February 4, 2024. Our preliminary assessment, based on initial custodian interviews and a review of the deal file, is that the acquiring person will have approximately seven (7) documents responsive to Items 4(c) and 4(d). These documents are expected to include Confidential Information Memoranda and teaser materials provided to Ardent Capital during the auction process, internal investment committee memoranda prepared in connection with the approval of the Transaction, board presentations and materials prepared for the Advisory Committee of Fund III, and certain email communications among Ardent Capital deal team members discussing the competitive landscape and strategic rationale for the acquisition.
We request that Greenvale Durneval confirm its anticipated timeline for completing the acquired person's Item 4(c) and 4(d) document collection. Based on our review of the EPA and the information available to us, we understand that Pinnacle will separately prepare and produce its own responsive documents. We further understand that Pinnacle's responsive documents may include, among other things, strategic planning presentations prepared by Pinnacle management, minutes of meetings of Pinnacle's Board of Directors at which the Transaction was discussed, consultant reports prepared by third-party advisors engaged by Pinnacle in connection with the Transaction or its competitive strategy, and internal communications among Pinnacle's senior leadership regarding competitive positioning, market share, and growth opportunities.
We wish to emphasize that neither party is expected to share the substance of its Item 4(c) or 4(d) documents with the other party. The document productions of each filing person are confidential and proprietary, and the coordination protocol proposed herein does not contemplate or require the exchange of responsive documents between the firms. However, both parties should coordinate to ensure that their respective document indices are completed and that all document productions are assembled, reviewed, and ready for electronic submission by the target filing date of February 16, 2024.
In this connection, we request that any privilege review issues — including any disputes regarding the responsiveness or privileged nature of potentially responsive documents — be flagged promptly so as not to delay the overall filing timeline. If either party anticipates that its document collection and review process will extend beyond February 14, 2024, we ask that the other party be notified immediately so that the target filing date can be reassessed if necessary.
7. Early Termination Request
Calderwood & Harkness intends to request early termination of the initial thirty (30) calendar day statutory waiting period under Section 7A(b)(1) of the Clayton Act on behalf of the acquiring person in the Notification Form filed on February 16, 2024. An early termination request is made by checking the appropriate box on the face page of the Notification Form.
We respectfully request that Greenvale Durneval similarly request early termination on behalf of the acquired person in the acquired person Notification Form. As you are aware, the likelihood of the FTC granting early termination is meaningfully enhanced when both the acquiring person and the acquired person have requested it. A request from only one party may signal to agency staff that the other party has reservations about the transaction or believes that the competitive analysis warrants additional agency scrutiny — neither of which is the case here.
We believe the substantive basis for early termination in this matter is strong. The Transaction presents no horizontal overlaps between Ardent Capital's existing portfolio companies and Pinnacle in any relevant product market or geographic market. Ardent Capital's healthcare services portfolio consists of Marlowe Asset Management Rehabilitation Holdings LLC, which provides outpatient physical therapy services, and Clearpath Diagnostics Inc., which provides clinical laboratory testing services. Neither of these businesses competes with Pinnacle's physician practice management and ambulatory surgery center operations. There are no vertical relationships that would give rise to foreclosure concerns. The anticipated post-Transaction Herfindahl-Hirschman Index ("HHI") in all relevant markets shows no change attributable to the Transaction, as the Transaction does not combine any competing businesses.
To support the early termination request, Calderwood & Harkness intends to prepare and file a voluntary submission — commonly referred to as a "white paper" — with the FTC Bureau of Competition, setting forth the competitive analysis in detail. The white paper will describe the relevant markets, the absence of competitive overlaps, and the procompetitive rationale for the Transaction. We anticipate submitting the white paper concurrently with the Notification Form on February 16, 2024, or within one to two business days thereafter. We will provide a copy of the white paper to Greenvale Durneval under the terms of confidentiality set forth in Section 9 of this letter.
8. Information Sharing Protocol
To facilitate efficient coordination between the two firms and to ensure that both Notification Forms are consistent, complete, and ready for simultaneous filing, Calderwood & Harkness proposes the following information sharing arrangements and timeline:
1. Exchange of Draft Transaction Descriptions — February 9, 2024. Each firm shall circulate to the other its draft transaction description (Item 3 narrative) for review and comment. Any inconsistencies shall be identified and resolved promptly.
2. Exchange of NAICS Code and Revenue/Financial Data Confirmations — February 9, 2024. Greenvale Durneval shall confirm or propose revisions to the NAICS codes and financial data set forth in Sections 3 and 4 of this letter. Calderwood & Harkness shall similarly confirm the accuracy of any data provided by Greenvale Durneval.
3. Exchange of Completed Draft Notification Forms — February 12, 2024. Each firm shall circulate to the other a substantially complete draft of its respective Notification Form, excluding Item 4(c) and 4(d) document productions, for purposes of cross-review and consistency verification. Each firm shall review the other's draft and provide comments or identify any inconsistencies by close of business on February 13, 2024.
4. Finalization of Notification Forms — February 15, 2024. Final versions of both Notification Forms, incorporating all agreed-upon revisions and reconciliations, shall be completed no later than February 15, 2024, in order to allow for final quality assurance review and preparation for electronic filing.
5. Simultaneous Electronic Filing — February 16, 2024. Both the acquiring person Notification Form and the acquired person Notification Form shall be filed simultaneously through the FTC's electronic filing portal (the "E-Filing System") on February 16, 2024. Both firms shall coordinate on the timing of submission so that, to the extent practicable, both forms are submitted within the same filing session. Both firms shall request early termination of the waiting period. Calderwood & Harkness shall submit its voluntary submission (white paper) on or about the same date.
Both parties should designate a primary point of contact for day-to-day coordination of the HSR filing process. Calderwood & Harkness's primary contact for this matter will be Monica Reyes, Lead Associate in the Antitrust & Competition Practice Group. Ms. Reyes's contact information will be provided under separate cover. We request that Greenvale Durneval similarly designate its primary contact and provide that individual's name, direct telephone number, and email address at its earliest convenience.
9. Confidentiality
Each party's HSR Notification Form and supporting materials contain competitively sensitive and proprietary business information of the respective filing person, including but not limited to revenue data, NAICS code designations, descriptions of business operations, and documents produced under Items 4(c) and 4(d). The parties and their respective counsel must take appropriate care to safeguard the confidentiality of such information throughout the coordination process.
Information shared between Calderwood & Harkness and Greenvale Durneval pursuant to this coordination protocol shall be used solely for the purpose of ensuring consistency and coordination of the HSR filings and related regulatory submissions. Such information shall not be disclosed to any third party, including the respective parties' clients, except to the extent that disclosure to the client is strictly necessary for counsel's preparation of its own filing. In no event shall information received from the other firm be used for any commercial, competitive, or strategic purpose unrelated to the HSR filing process.
This confidentiality understanding is consistent with, and is intended to complement, the confidentiality provisions set forth in Article VII of the EPA and the Mutual Nondisclosure Agreement dated November 14, 2023, between Ardent Capital Management LLC and Pinnacle Health Systems, Inc. Nothing in this letter is intended to supersede, modify, or diminish the obligations of either party under any existing confidentiality agreement between the parties or their respective clients.
Specifically, and for the avoidance of doubt, neither Calderwood & Harkness nor Greenvale Durneval shall share the other party's Item 4(c) or 4(d) documents, or any index or description thereof, with its own client absent the prior written consent of the producing party's counsel. We believe this restriction is appropriate given the competitively sensitive nature of such documents and is consistent with customary practice in HSR coordination matters.
In the event that Calderwood & Harkness provides a copy of its voluntary submission (white paper) to Greenvale Durneval as contemplated in Section 7 above, such white paper shall be treated as outside counsel's eyes only and shall not be shared with Pinnacle, its officers, directors, employees, or other advisors unless and until Greenvale Durneval has obtained Calderwood & Harkness's prior written authorization to do so.
10. Communication with FTC/DOJ Staff
In the event that staff of the Federal Trade Commission or the Antitrust Division of the U.S. Department of Justice contacts either Calderwood & Harkness or Greenvale Durneval with questions, requests for information, or other communications related to the Transaction or the Notification Forms (which will be assigned a Transaction Number upon filing), each firm shall promptly notify the other of such contact. Prompt notification will enable both firms to coordinate their responses and to present a consistent and accurate picture of the Transaction and the parties' business operations to the reviewing agency.
Neither Calderwood & Harkness nor Greenvale Durneval shall make substantive representations to the FTC, DOJ, or any other governmental authority regarding the other party's business operations, competitive position, or strategic plans without first consulting with the other firm and obtaining its concurrence. This restriction is intended to prevent inadvertent mischaracterizations and to ensure that each party retains control over the presentation of its own client's business to the reviewing agency.
Based on the nature of the Transaction and the industries involved, Calderwood & Harkness anticipates that the reviewing division will be the FTC Bureau of Competition, Mergers IV Division, which has primary responsibility for transactions in the healthcare services sector. Our preliminary understanding is that the FTC staff attorney assigned to matters in this area is Sarah Whitman, Attorney, Mergers IV Division, although this assignment will not be confirmed until after the Notification Forms are filed and a Transaction Number is assigned.
11. Proposed Timeline Summary
For ease of reference, the key dates and milestones contemplated by this coordination protocol are summarized in the following table:
12. Closing and Request for Confirmation
We respectfully request that Greenvale Durneval confirm its agreement to the coordination protocol set forth in this letter, or propose any modifications it deems appropriate, by no later than February 7, 2024. A response by email to the undersigned or to Ms. Reyes will be sufficient for purposes of this confirmation; a countersigned copy of this letter is not required, although we would welcome one if Greenvale Durneval prefers to memorialize its agreement in that manner.
We are, of course, willing to discuss any aspect of the proposed protocol by telephone at your convenience. Please do not hesitate to contact me directly at (212) 506-7400 or by email if you would like to schedule a call to address any questions or concerns.
We look forward to working with you and your team at Greenvale Durneval to ensure a smooth, efficient, and well-coordinated HSR filing process. We believe that the protocol outlined herein will serve the interests of both parties and their respective clients in achieving timely regulatory clearance of the Transaction.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Howard Bellamy Partner, Antitrust & Competition Practice Group Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022
cc: Monica Reyes, Lead Associate, Calderwood & Harkness LLP cc: Elliot Nguyen, Counsel, Calderwood & Harkness LLP cc: David Ostrander, Esq., Whitfield & Crane LLP (transaction counsel to Ardent Capital Partners III LP)
Date | Milestone
January 31, 2024 | Execution of the Equity Purchase Agreement
February 5, 2024 | Issuance of this coordination protocol letter
February 7, 2024 | Deadline for Greenvale Durneval's confirmation or proposed modifications to this protocol
February 9, 2024 | Exchange of draft transaction descriptions, NAICS code confirmations, and financial data confirmations
February 12, 2024 | Exchange of completed draft HSR Notification Forms (excluding Item 4(c)/4(d) document productions) for cross-review
February 13, 2024 | Comments on draft Notification Forms due
February 14, 2024 | Filing fee wire transfer ($280,000) to FTC
February 15, 2024 | Finalization of both HSR Notification Forms
February 16, 2024 | Simultaneous filing of acquiring person and acquired person HSR Notification Forms via FTC E-Filing System; early termination request; submission of voluntary white paper
February 22, 2024 | EPA § 5.4(a) contractual filing deadline (to be met well in advance)
March 17, 2024 | Expiration of initial 30-day statutory waiting period (absent earlier grant of early termination or issuance of a Second Request)
June 30, 2024 | EPA outside date for consummation of the Transaction

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