REPRESENTATIONS AND WARRANTIES INSURANCE POLICY
BINDER / SUMMARY OF TERMS
Northbridge Specialty Insurance Company An Illinois-Domiciled Insurance Company
Policy No. NSI-POLI-2025-04418
CONFIDENTIAL — This document contains confidential information regarding the terms of insurance coverage and the underlying transaction. Distribution is limited to the parties identified herein and their respective advisors. Unauthorized disclosure is prohibited.
I. BINDER DECLARATION
Northbridge Specialty Insurance Company, an Illinois-domiciled insurance company (the "Insurer"), hereby binds coverage on the terms and conditions summarized herein, effective as of the Closing Date, April 18, 2025 (the "Inception Date"), in connection with that certain Stock Purchase Agreement dated as of February 10, 2025 (as the same may be amended, supplemented, or otherwise modified from time to time in accordance with its terms, the "Acquisition Agreement"), by and among Ardent Healthcare Holdings Inc., a Delaware corporation (the "Purchaser"), MedVance Health Systems, Inc., a Delaware corporation (the "Company" or the "Target"), Crestline Growth Equity Fund II LP, a Delaware limited partnership, and Ryland Family Holdings LLC, a Tennessee limited liability company (collectively, the "Sellers"), and the other parties thereto.
This Binder constitutes a binding obligation of the Insurer to provide the coverage described herein, subject to the satisfaction of the conditions precedent set forth in Section XI below. Coverage bound hereunder is subject to the issuance of the final Representations and Warranties Insurance Policy (the "Policy"), which, upon issuance, shall be the governing document with respect to all matters of coverage, interpretation, and claims administration. In the event of any inconsistency between this Binder and the final Policy, the terms of the final Policy shall control in all respects; provided, however, that coverage shall not be materially less favorable to the Insured under the final Policy than as described in this Binder without the prior written consent of the Insured.
This Binder has been brokered and placed by Velthorn Risk Advisors LLC, a New York limited liability company, with offices at 599 Lexington Avenue, New York, New York 10022 (the "Broker"), acting as broker of record for the Insured in connection with the placement of this coverage.
The Insurer has completed its underwriting review of the transaction, including review of the due diligence materials specified in Section XI.F, and, based upon such review and the other terms and conditions set forth herein, has agreed to bind coverage as summarized in this Binder.
II. POLICY INFORMATION
A. Policy Number
NSI-POLI-2025-04418
B. Named Insured
Ardent Healthcare Holdings Inc., a corporation organized and existing under the laws of the State of Delaware, and its successors and permitted assigns (the "Insured" or the "Named Insured").
Ardent Capital Partners III LP, a Delaware limited partnership, and Ardent Capital Management III LLC, a Delaware limited liability company, are designated as additional insureds under this Policy solely with respect to their indirect equity interest in the Purchaser and any Losses suffered by such entities in their capacity as indirect equity holders of the Purchaser in connection with the transactions contemplated by the Acquisition Agreement. For the avoidance of doubt, the designation of Ardent Capital Partners III LP and Ardent Capital Management III LLC as additional insureds shall not increase the aggregate Policy Limit set forth in Section III.B, nor shall any Loss claimed by such additional insureds be recoverable except to the extent that such Loss constitutes or is derived from a Loss of the Purchaser arising from a covered breach of the Acquisition Agreement representations and warranties.
C. Insurer. Northbridge Specialty Insurance Company, an insurance company organized and domiciled under the laws of the State of Illinois, with its principal offices located at 233 South Wacker Drive, Suite 4800, Chicago, Illinois 60606. The Insurer is authorized to transact insurance business in the jurisdictions where required and, with respect to any surplus lines placement, is an eligible surplus lines insurer in the applicable jurisdiction.
D. Broker. Velthorn Risk Advisors LLC, 599 Lexington Avenue, 38th Floor, New York, New York 10022 (the "Broker" or "Broker of Record"). The Broker has been designated as the broker of record for the Insured in connection with the placement, binding, and servicing of this Policy. All notices required or permitted under this Binder or the final Policy, as well as all premium payments, shall be coordinated through the Broker unless otherwise expressly directed in writing by the Insured or the Insurer. The Broker shall have no authority to bind coverage, modify terms, or settle claims on behalf of the Insurer except as expressly authorized in writing by the Insurer.
E. Underlying Transaction
The Policy is issued in connection with the acquisition by the Purchaser of one hundred percent (100%) of the issued and outstanding capital stock of MedVance Health Systems, Inc., a corporation organized and existing under the laws of the State of Delaware (Employer Identification Number: 62-7083149), with its principal executive offices located at 4200 West End Avenue, Suite 1100, Nashville, Tennessee 37205, pursuant to the Acquisition Agreement dated as of February 10, 2025.
MedVance Health Systems, Inc. is a provider of ambulatory surgical center management services, physician practice management, and ancillary healthcare services across five (5) states in the southeastern United States. The Target operates through thirteen (13) wholly-owned subsidiaries and holds participation agreements with the Medicare and Medicaid programs, as well as contracts with numerous commercial health plans.
F. Purchase Price
The aggregate purchase price for the acquisition of the Target is Six Hundred Twenty Million Dollars ($620,000,000) (the "Purchase Price"), subject to customary post-closing adjustments for working capital, indebtedness, transaction expenses, and cash as set forth in the Acquisition Agreement.
III. COVERAGE SUMMARY
A. Type of Policy
This Policy is a buy-side representations and warranties insurance policy. The Insured is the Purchaser. The Policy provides coverage to the Insured for Losses arising from or in connection with any breach of the representations and warranties made by the Company and the Sellers in the Acquisition Agreement, subject to the terms, conditions, exclusions, and limitations set forth herein and in the final Policy.
The Policy is structured as a "claims-made and reported" policy. Coverage is available only for claims first made against the Insured and reported to the Insurer during the Policy Period (or the Extended Reporting Period, as applicable), subject to the provisions of Sections IV and X hereof.
B. Policy Limit
The aggregate limit of liability of the Insurer under this Policy shall be Sixty-Two Million Dollars ($62,000,000), representing ten percent (10%) of the Purchase Price (the "Policy Limit").
The Policy Limit shall be the maximum aggregate amount payable by the Insurer for all covered Losses under the Policy, regardless of the number of claims made or the number of breaches alleged. No per-claim sublimit shall apply unless otherwise specifically set forth in the final Policy. The Policy Limit is inclusive of defense costs; that is, defense costs incurred by the Insured in connection with any covered claim shall erode and reduce the available Policy Limit on a dollar-for-dollar basis. Once the aggregate amount of all payments made by the Insurer (including payments for defense costs) equals the Policy Limit, the Insurer shall have no further obligation to make any payments under the Policy.
C. Retention. The Retention applicable to the Policy shall be Six Million Two Hundred Thousand Dollars ($6,200,000), representing one percent (1%) of the Purchase Price (the "Retention").
The Retention shall be allocated and satisfied as follows:
(a) Buyer's Retention Share. Fifty percent (50%) of the Retention, in the amount of Three Million One Hundred Thousand Dollars ($3,100,000), shall be borne by the Insured (the "Buyer's Retention Share"). The Buyer's Retention Share represents Losses for which the Insured is self-insured and which shall not be recoverable under the Policy or, except to the extent otherwise provided in the Acquisition Agreement, from the Sellers.
(b) Sellers' Retention Share. Fifty percent (50%) of the Retention, in the amount of Three Million One Hundred Thousand Dollars ($3,100,000), shall be borne by the Sellers (the "Sellers' Retention Share"). The Sellers' Retention Share is intended to be satisfied through (i) the escrow mechanism established under the Acquisition Agreement, pursuant to which a portion of the Purchase Price has been deposited into Escrow Account No. CFT-ESC-2025-00327 held by Continental Fiduciary Trust Company, as escrow agent (the "Escrow Agent"), or (ii) the direct indemnification obligations of the Sellers under the Acquisition Agreement, at the election of the Insured in its sole discretion. The Insured shall be entitled, but not required, to pursue recovery of the Sellers' Retention Share from the escrow or directly from the Sellers prior to submitting a claim under the Policy.
(c) No Drop-Down. The Retention shall not "drop down" or be reduced except as expressly provided herein. The full amount of the Retention must be fully exhausted (through actual Losses incurred by the Insured, whether satisfied by the Insured, the Sellers, or the escrow) before the Insurer's payment obligations under the Policy shall attach. For the avoidance of doubt, Losses applied to the Retention need not have been actually paid or recovered by the Insured from the Sellers or the escrow; it shall be sufficient that the Insured has incurred Losses in an aggregate amount equal to or exceeding the Retention.
(d) Retention Step-Down. Notwithstanding the foregoing, with respect to Losses attributable to breaches of Fundamental Representations (as defined in Section V.B) and Tax Representations (as defined in Section V.C), the Retention shall be reduced to zero dollars ($0) effective as of the twelve (12)-month anniversary of the Closing Date (i.e., April 18, 2026) (the "Retention Step-Down"). Following the Retention Step-Down, Losses arising from breaches of Fundamental Representations or Tax Representations shall be covered by the Policy from the first dollar of Loss, without application of any Retention.
D. Coverage Trigger
Coverage under the Policy shall be triggered by the breach of any representation or warranty made by the Company or the Sellers in the Acquisition Agreement (specifically, the representations and warranties set forth in Articles III and IV thereof) that results in a Loss to the Insured, subject to the terms, conditions, exclusions, and limitations of the Policy.
For purposes of determining whether a breach has occurred and the quantum of any resulting Loss, the representations and warranties shall be read without giving effect to any materiality qualifiers, Material Adverse Effect qualifiers, or similar qualifications contained therein (the "materiality scrape"), except to the extent that the final Policy specifies otherwise with respect to specific representations.
IV. POLICY PERIOD AND SURVIVAL
A. Inception Date
The Policy shall incept on April 18, 2025, which is the date of the closing of the transactions contemplated by the Acquisition Agreement (the "Closing Date" and the "Inception Date").
B. Expiration Date
The Policy shall expire at 11:59 p.m. Eastern Time on October 18, 2026, which is eighteen (18) months following the Closing Date (the "Expiration Date").
C. Extended Reporting Period
Claims first made against the Insured and reported to the Insurer during the Policy Period or within sixty (60) calendar days following the Expiration Date (the "Extended Reporting Period") shall be deemed timely made and reported for all purposes under the Policy, provided that the underlying breach or alleged breach of a representation or warranty is one that occurred during the Policy Period. The Extended Reporting Period shall be automatic and shall not require the payment of any additional premium.
For the avoidance of doubt, the Extended Reporting Period is intended solely to provide the Insured with a reasonable period of time in which to report claims that arise near the end of the Policy Period and shall not extend the period during which a breach may first occur or be discovered.
D. Alignment with Acquisition Agreement Survival
The Policy Period is co-terminous with the eighteen (18)-month general survival period for representations and warranties set forth in the Acquisition Agreement. The representations and warranties of the Company and the Sellers contained in the Acquisition Agreement survive the Closing for a period of eighteen (18) months, after which they expire and are of no further force or effect, except as otherwise provided below.
Notwithstanding the foregoing, the following categories of representations and warranties survive the Closing for the longer of (i) the Policy Period or (ii) the applicable statute of limitations (including any extensions or tolling thereof):
(a) Fundamental Representations. The Fundamental Representations (as defined in Section V.B) survive for the longer of the Policy Period or the applicable statute of limitations.
(b) Tax Representations. The Tax Representations (as defined in Section V.C) survive for the longer of the Policy Period or the applicable statute of limitations with respect to the assessment or collection of the relevant Tax.
The Policy will follow the Acquisition Agreement survival schedule as to such representations, and coverage shall remain available for claims arising from breaches of Fundamental Representations or Tax Representations for the full survival period applicable to such representations, even if the survival period extends beyond the Expiration Date of the Policy, provided that such claims are first made and reported to the Insurer in accordance with the applicable notice provisions.
V. COVERED REPRESENTATIONS AND WARRANTIES
A. General Representations (Company and Sellers)
The Policy provides coverage with respect to all representations and warranties of the Company (as set forth in Article III of the Acquisition Agreement) and of the Sellers (as set forth in Article IV of the Acquisition Agreement), including without limitation the following:
(i) Organization and Good Standing. Representations regarding the due organization, valid existence, and good standing of the Company and each of its subsidiaries in their respective jurisdictions of organization and qualification.
(ii) Authority and Enforceability. Representations regarding the corporate or other organizational power and authority of the Company and the Sellers to execute, deliver, and perform their respective obligations under the Acquisition Agreement and the ancillary transaction documents, and the due authorization, execution, and enforceability thereof.
(iii) Capitalization; Title to Shares. Representations regarding the authorized and outstanding capital stock of the Company, the absence of outstanding options, warrants, or other rights to acquire equity interests, and the good and marketable title of the Sellers to the shares being sold, free and clear of all liens, encumbrances, and restrictions (other than restrictions arising under applicable securities laws).
(iv) No Conflicts; Consents. Representations regarding the absence of conflicts between the execution, delivery, and performance of the Acquisition Agreement and the Company's organizational documents, applicable law, or existing contractual obligations, and the identification of all consents, approvals, and authorizations required in connection with the transactions.
(v) Financial Statements. Representations regarding the accuracy, completeness, and fair presentation of the Company's audited financial statements for the fiscal years ended December 31, 2022, December 31, 2023, and December 31, 2024, and the unaudited interim financial statements for the period ended January 31, 2025, each prepared in accordance with generally accepted accounting principles consistently applied.
(vi) Absence of Certain Changes. Representations regarding the absence of any Material Adverse Effect and the conduct of the Company's business in the ordinary course consistent with past practice during the period from the date of the most recent balance sheet through the Closing Date, including compliance with interim operating covenants.
(vii) Material Contracts. Representations regarding the identification, delivery, and status of all material contracts to which the Company or any subsidiary is a party, including the absence of any default or breach thereunder.
(viii) Real Property (Owned and Leased). Representations regarding the Company's interests in owned and leased real property, including the identification of all such properties, the validity and enforceability of lease agreements, and compliance with applicable zoning and land use requirements.
(ix) intellectual Property. Representations regarding the Company's ownership of or valid licenses to all intellectual property used in the conduct of its business, the absence of infringement or misappropriation, and the adequacy of protections for proprietary information and trade secrets.
(x) Employment and Employee Benefits (ERISA). Representations regarding compliance with applicable employment and labor laws, the identification and status of all employee benefit plans (including plans subject to the Employee Retirement Income Security Act of 1974, as amended), and the absence of any unfunded or underfunded pension liabilities.
(xi) Tax Matters. Representations regarding the timely filing of all tax returns, the payment of all taxes due and owing, the absence of pending or threatened audits or assessments, and compliance with applicable tax laws and regulations.
(xii) Compliance with Laws (General). Representations regarding the Company's compliance in all material respects with all applicable federal, state, and local laws, rules, and regulations.
(xiii) Healthcare Regulatory Compliance. Representations regarding the Company's compliance with all applicable healthcare laws and regulations, including without limitation: (a) participation in and compliance with the conditions of participation for the Medicare and Medicaid programs; (b) possession of all required licenses, permits, certifications, and accreditations necessary for the operation of the Company's healthcare facilities and services; (c) compliance with the physician self-referral prohibition set forth in 42 U.S.C. Section 1395nn and its implementing regulations (the "Stark Law"); (d) compliance with the federal Anti-Kickback Statute, 42 U.S.C. Section 1320a-7b(b), and applicable state equivalents; (e) the absence of any pending or threatened actions under the False Claims Act, 31 U.S.C. Sections 3729-3733, or applicable state false claims statutes; and (f) compliance with the Health Insurance Portability and Accountability Act of 1996, as amended ("HIPAA"), including the privacy, security, and breach notification rules promulgated thereunder.
(xiv) Environmental Matters. Representations regarding the Company's compliance with applicable environmental laws, the absence of releases or threatened releases of hazardous substances, and the status of any environmental remediation obligations.
(xv) Insurance. Representations regarding the Company's maintenance of insurance coverage in types and amounts consistent with industry practice.
(xvi) Litigation and Proceedings. Representations regarding the identification and status of all pending or threatened litigation, arbitration, administrative proceedings, or governmental investigations involving the Company or any subsidiary.
(xvii) Brokers and Finders. Representations regarding the absence of any liability for brokerage commissions, finders' fees, or similar compensation in connection with the transactions, other than as disclosed in the Acquisition Agreement.
(xviii) Customers, Payors, and Suppliers. Representations regarding the status of the Company's relationships with its material customers, payors, and suppliers, including without limitation BlueLine Health Plan of Tennessee (the Company's largest commercial payor by revenue) and SouthPoint Insurance Co. (the Company's second-largest commercial payor by revenue), including the absence of any notice of termination, material adverse change in terms, or dispute with such parties.
B. Fundamental Representations
The following representations and warranties of the Company and the Sellers are designated as "Fundamental Representations" under the Acquisition Agreement and under this Policy:
(i) Organization and good standing; (ii) Authority and enforceability; (iii) Capitalization; (iv) Title to shares; and (v) Brokers and finders.
The Fundamental Representations are subject to enhanced survival provisions as set forth in Section IV.D above. In addition, Losses attributable to breaches of Fundamental Representations are subject to the Retention Step-Down described in Section III.C(d), such that the Retention applicable to such Losses shall be reduced to zero dollars ($0) after the twelve (12)-month anniversary of the Closing Date.
C. Tax Representations
All representations and warranties of the Company and the Sellers regarding Tax matters, as set forth in the applicable sections of Articles III and IV of the Acquisition Agreement, are designated as "Tax Representations" for purposes of this Policy. Tax Representations are subject to enhanced survival provisions as set forth in Section IV.D above and are subject to the Retention Step-Down described in Section III.C(d).
VI. EXCLUSIONS
A. Standard Exclusions
The following matters are excluded from coverage under the Policy and shall not constitute covered Losses:
1. Known Breaches / Fraud by Insured. Any breach of a representation or warranty of which the deal team of the Insured (i.e., the members of the Knowledge Group identified in Schedule C hereto: Graham Whitfield, Priya Ranganathan, Thomas Kearney, and Audrey Sato) had actual knowledge prior to the Inception Date. For purposes of this exclusion, "actual knowledge" means the conscious awareness by any member of the Knowledge Group of a fact, circumstance, or condition that constitutes or would reasonably be expected to constitute a breach of a representation or warranty, and does not include constructive knowledge, imputed knowledge, or knowledge that could have been obtained through further investigation or inquiry. The burden of establishing the applicability of this exclusion shall rest with the Insurer.
2. Seller Fraud. The Policy does not provide coverage for Losses arising from, based upon, or attributable to fraud committed by any Seller. For purposes of this exclusion, "fraud" means actual and intentional common law fraud (including fraudulent misrepresentation and fraudulent concealment) committed by a Seller with the specific intent to deceive the Purchaser or the Insurer. The Insured retains all rights and remedies against the Sellers under the Acquisition Agreement and applicable law with respect to any fraud by the Sellers, and the Policy shall not be deemed to limit or restrict such rights. The Insurer shall have no obligation to pay, and shall not be liable for, any Loss to the extent that such Loss is recoverable from the Sellers on account of Seller fraud.
3. Purchase Price / Valuation Adjustments. Post-closing working capital adjustments, including any true-up payments, and any other purchase price adjustments made pursuant to the Acquisition Agreement shall not constitute "Losses" under the Policy. For reference, the Working Capital Target under the Acquisition Agreement is Thirty-Four Million Five Hundred Thousand Dollars ($34,500,000), with a Working Capital Collar of plus or minus Two Million Dollars (±$2,000,000). Any disputes regarding working capital or purchase price adjustments shall be resolved exclusively in accordance with the provisions of the Acquisition Agreement and shall not give rise to a claim under the Policy.
4. Forward-Looking Covenants and Obligations. Any Loss arising from or attributable to the breach of any covenant, agreement, or obligation to be performed by any party after the Closing Date, including without limitation post-closing covenants, non-competition obligations, and transition services obligations, is excluded from coverage. The Policy covers only breaches of representations and warranties and does not extend to breach of contract claims based on post-closing obligations.
5. Pension / Multiemployer Plan Withdrawal Liability. Any Loss arising from or attributable to withdrawal liability under Title IV of ERISA or any similar obligation arising from the withdrawal from, or termination of, any multiemployer plan (as defined in Section 3(37) of ERISA) in which the Company or any subsidiary participates or has participated. This exclusion is a standard carve-out applicable to all representations and warranties insurance policies issued by the Insurer.
6. Transfer Pricing and Net Operating Loss Adjustments. Any Loss arising from or attributable to (a) adjustments to intercompany transfer pricing by any taxing authority, whether domestic or foreign, or (b) the disallowance, reduction, or adjustment of any net operating loss, net operating loss carryforward, or tax credit of the Company or any subsidiary, in each case to the extent arising from periods prior to the Closing Date.
7. Asbestos, PFAS, and Nuclear Hazard Exclusion. Any Loss arising from or attributable to (a) the presence, release, or threatened release of asbestos or asbestos-containing materials, (b) the presence, release, or threatened release of per- and polyfluoroalkyl substances ("PFAS") in any environmental media, or (c) nuclear reaction, nuclear radiation, or radioactive contamination, regardless of cause. Notwithstanding the foregoing, this exclusion shall not apply to the extent that a Loss arises from a breach of a representation or warranty regarding the findings, conclusions, or recommendations contained in the Phase I Environmental Site Assessment reports and, if applicable, Phase II Environmental Site Assessment reports, prepared by Fieldstone Environmental Associates Inc. and made available in the virtual data room established in connection with the transaction (the "Environmental Carve-Back"). The Environmental Carve-Back is limited to matters specifically addressed in such reports and does not extend to conditions not identified therein.
8. Criminal or Civil Fines and Penalties. Any Loss consisting of criminal or civil fines, penalties, or sanctions imposed directly on the Insured by a governmental authority. Notwithstanding the foregoing, this exclusion shall not apply to (a) defense costs incurred by the Insured in connection with any proceeding in which such fines, penalties, or sanctions are sought, or (b) Losses (other than fines, penalties, or sanctions imposed directly on the Insured) arising from the underlying breach of a representation or warranty that gives rise to such proceeding.
9. Consequential, Punitive, or Multiplied Damages. Any Loss consisting of consequential damages, punitive damages, exemplary damages, or multiplied damages (including treble damages), except to the extent that such damages are payable by the Insured to a third party in connection with a Third-Party Claim and are otherwise covered under the Policy. For purposes of this exclusion, amounts payable by the Insured to a third party in settlement of or in satisfaction of a judgment in a Third-Party Claim shall be treated as Losses to the extent they do not exceed the Policy Limit and are not otherwise excluded.
B. Transaction-Specific Exclusions
In addition to the standard exclusions set forth in Section VI.A, the following transaction-specific matters are excluded from coverage under the Policy:
1. Pending Litigation. The two (2) medical malpractice suits identified on the disclosure schedules to the Acquisition Agreement, with an aggregate reserved exposure of Four Million Two Hundred Thousand Dollars ($4,200,000), are excluded from coverage. These suits are known to the Insured and have been specifically disclosed in connection with the underwriting of this Policy. Any Losses arising from, related to, or in connection with such pending suits, including any defense costs, settlements, judgments, or indemnification obligations related thereto, shall not be covered under the Policy. The specific matters subject to this exclusion are further described in Schedule B hereto.
2. Specific Healthcare Regulatory Matters. Any matters identified in Schedule B to the final Policy that arise from or relate to specific healthcare regulatory issues identified during the underwriting process. Schedule B will be populated from the No-Claims Declaration delivered by the Insured, the Buyer's healthcare regulatory due diligence conducted by Langford Moss & Crane LLP, and the legal due diligence report prepared by Calderwood & Harkness LLP. The Insurer shall provide the Insured with a draft of Schedule B for review and comment prior to the Inception Date, and the final content of Schedule B shall be agreed upon by the Insurer and the Insured (acting reasonably and in good faith) prior to the issuance of the final Policy.
VII. PREMIUM AND COSTS
A. Premium. The total premium for the Policy shall be One Million Two Hundred Forty Thousand Dollars ($1,240,000), representing two percent (2%) of the Policy Limit (the "Premium"). The Premium is fully earned upon the Inception Date and is non-refundable.
The Premium shall be payable by the Insured (Purchaser) in full on or before the Inception Date. Payment shall be made by wire transfer of immediately available funds to the account designated by the Insurer, with payment coordinated through the Broker. The Insurer's obligation to provide coverage under this Binder and the Policy is conditioned upon receipt of the full Premium on or before the Inception Date.
B. Broker Commission
The Broker shall be entitled to a commission payable by the Insurer in connection with the placement of this Policy, pursuant to a separate commission agreement between the Insurer and Velthorn Risk Advisors LLC. The Broker's commission is included in the Premium amount stated above and shall not result in any additional charge, fee, or cost to the Insured.
C. Underwriting Fee
A non-refundable underwriting and diligence access fee of Fifty Thousand Dollars ($50,000) was previously paid by the Insured to the Insurer upon the engagement of the Insurer to underwrite this Policy (the "Underwriting Fee"). The Underwriting Fee shall be credited against the Premium, such that the net amount payable by the Insured at the Inception Date shall be One Million One Hundred Ninety Thousand Dollars ($1,190,000). In the event that the transaction does not close or coverage is not bound for any reason, the Underwriting Fee shall be retained by the Insurer and shall not be refundable.
D. Surplus Lines Taxes and Fees
All applicable surplus lines taxes, stamping fees, regulatory filing fees, and other governmental charges or assessments arising in connection with the placement of this Policy shall be determined and invoiced separately to the Insured. Such taxes and fees shall be borne solely by the Insured and are in addition to the Premium. The Broker shall assist the Insured in identifying and calculating the applicable surplus lines taxes and fees and shall coordinate payment thereof on behalf of the Insured to the extent required by applicable law.
VIII. KEY DEFINITIONS
The following terms shall have the meanings set forth below for purposes of this Binder. To the extent not defined herein, capitalized terms used in this Binder shall have the meanings ascribed to them in the Acquisition Agreement or, upon issuance, the final Policy.
"Acquisition Agreement" means that certain Stock Purchase Agreement dated as of February 10, 2025, by and among the Purchaser, the Company, the Sellers, and the other parties thereto, as the same may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"Closing Date" means April 18, 2025, the date on which the closing of the transactions contemplated by the Acquisition Agreement occurs.
"Insured" means Ardent Healthcare Holdings Inc. and the additional insureds identified in Section II.B of this Binder, including Ardent Capital Partners III LP and Ardent Capital Management III LLC, solely with respect to their indirect equity interest in the Purchaser.
"Loss" means any and all losses, damages, liabilities, costs, expenses, deficiencies, and obligations incurred by the Insured arising from or in connection with a breach of any representation or warranty covered by the Policy, including without limitation (a) diminution in value of the Company or the shares acquired, (b) out-of-pocket costs and expenses reasonably incurred in investigating, mitigating, or remedying such breach, (c) defense costs (including reasonable attorneys' fees, expert witness fees, court costs, and other litigation expenses), and (d) damages payable to third parties in connection with Third-Party Claims. "Loss" shall be defined consistently with the definition of "Losses" in the Acquisition Agreement. Notwithstanding the foregoing, "Loss" shall not include consequential, punitive, exemplary, or multiplied damages, except to the extent payable to a third party in a Third-Party Claim as provided in Section VI.A(9).
"Retention" means Six Million Two Hundred Thousand Dollars ($6,200,000), as more fully described in Section III.C of this Binder.
"Policy Limit" means Sixty-Two Million Dollars ($62,000,000), as more fully described in Section III.B of this Binder.
"Knowledge Group" means, collectively, Graham Whitfield, Priya Ranganathan, Thomas Kearney, and Audrey Sato, each in their capacity as members of the deal team of the Insured, as further identified in Schedule C hereto. The Knowledge Group is the reference group for purposes of the known-breach exclusion set forth in Section VI.A(1).
"Fundamental Representations" has the meaning ascribed to such term in the Acquisition Agreement, and as further described in Section V.B of this Binder.
"Third-Party Claim" means any claim, action, suit, arbitration, proceeding, investigation, demand, or assessment brought or asserted by any Person other than the Insured (including any governmental authority, commercial counterparty, patient, or other third party) against the Insured, the Company, or any subsidiary of the Company.
IX. SUBROGATION
A. Waiver Against Sellers
The Insurer hereby waives any and all rights of subrogation against the Sellers, including Crestline Growth Equity Fund II LP and Ryland Family Holdings LLC, and their respective officers, directors, employees, agents, members, partners, and affiliates, in connection with any Loss paid or payable under the Policy. This waiver of subrogation shall apply to all claims, whether arising in contract, tort, or otherwise, and whether based on the Acquisition Agreement, applicable law, or any other legal theory.
Notwithstanding the foregoing, this waiver of subrogation shall not apply in the event of Seller fraud. In the event that any Loss paid under the Policy is attributable to or arises from fraud committed by any Seller, the Insurer shall retain, and is hereby subrogated to, all rights and remedies of the Insured against such Seller(s) to the full extent of any payment made by the Insurer under the Policy. The Insured agrees to preserve and not waive or compromise any claims against a Seller for fraud without the Insurer's prior written consent.
B. Subrogation Against Third Parties
The Insurer retains full rights of subrogation against any and all third parties (other than the Sellers, except in cases of Seller fraud) with respect to any Loss paid or payable under the Policy, including without limitation rights of subrogation against professional advisors, consultants, accountants, appraisers, environmental consultants, and any other persons or entities whose acts, errors, or omissions may have contributed to or caused a covered Loss. The Insured hereby assigns to the Insurer, to the extent of any payment made by the Insurer under the Policy, all rights of recovery and claims that the Insured may have against any such third party.
C. Cooperation. The Insured agrees to cooperate fully with the Insurer in connection with any subrogation action or proceeding commenced or contemplated by the Insurer, including by providing access to relevant documents, records, personnel, and information, and by executing such assignments, proofs of loss, and other instruments as the Insurer may reasonably request. The Insured shall not settle, waive, release, or compromise any claim, right, or cause of action against any third party that may be the subject of the Insurer's subrogation rights without the Insurer's prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed. Any recovery obtained by the Insured from a third party with respect to a Loss for which the Insurer has made or is obligated to make payment shall be applied first to reimburse the Insurer for amounts paid under the Policy, and thereafter to reimburse the Insured for any amounts in excess of the Policy Limit or within the Retention.
X. CLAIMS PROCEDURES
A. Notice of Claim
The Insured must provide prompt written notice to the Insurer (with a copy to Velthorn Risk Advisors LLC) of (a) any actual claim made against the Insured that may give rise to a Loss under the Policy, (b) any threatened claim of which the Insured becomes aware that may give rise to a Loss under the Policy, or (c) any facts or circumstances of which the Insured becomes aware that could reasonably be expected to give rise to a claim under the Policy. Such notice shall be provided within thirty (30) calendar days after the date on which any member of the Knowledge Group or any senior officer of the Insured first becomes aware of a potential Loss, claim, or circumstance giving rise thereto.
Notice shall include, to the extent then known and reasonably available, a description of the claim or potential claim, the relevant representation(s) or warranty(ies) allegedly breached, the factual basis for the claim, the estimated amount of the Loss, and copies of any relevant correspondence, pleadings, demand letters, or other documentation received in connection with such claim.
Failure by the Insured to provide timely notice as required hereunder shall not relieve the Insurer of its obligations under the Policy except to the extent that the Insurer has been actually and materially prejudiced by such failure. The burden of establishing actual and material prejudice shall rest with the Insurer.
B. Notice Address
All notices required or permitted under this Binder or the Policy shall be delivered to:
Northbridge Specialty Insurance Company Claims Department 233 South Wacker Drive, Suite 4800 Chicago, Illinois 60606
Attention: Director of Claims — Transactional Liability
Email: claims.transactional@northbridgespecialty.com
With a copy to:
Velthorn Risk Advisors LLC 599 Lexington Avenue, 38th Floor New York, New York 10022
Attention: Transactional Risk Practice
Email: rw.claims@greylockrisk.com
All notices shall be in writing and shall be deemed duly given when delivered by hand, sent by nationally recognized overnight courier service, or transmitted by electronic mail (with confirmation of receipt). The Insurer and the Insured may update their respective notice addresses by written notice to the other party.
C. Defense of Third-Party Claims
The Insured shall have the right and obligation to control the defense of any Third-Party Claim, including the selection of defense counsel, the conduct of litigation or arbitration, and the making of strategic and tactical decisions in connection therewith. The Insurer shall have the right to associate counsel of its own selection and at its own expense in connection with any Third-Party Claim for which coverage is sought under the Policy; provided that the Insurer's associated counsel shall not have the authority to direct or control the defense.
The selection of defense counsel by the Insured shall be subject to the Insurer's prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed. Calderwood & Harkness LLP is hereby pre-approved by the Insurer as defense counsel for all Third-Party Claims under the Policy. In the event that the Insured wishes to retain defense counsel other than Calderwood & Harkness LLP, the Insured shall provide the Insurer with the name, qualifications, and proposed fee arrangement of such counsel for the Insurer's review and approval.
D. Settlement. No settlement, compromise, or consent to judgment of any claim in excess of Five Hundred Thousand Dollars ($500,000) (individually or in the aggregate with related claims) shall be entered into by the Insured without the Insurer's prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed. The Insured shall promptly notify the Insurer of any settlement demand or offer received in connection with a Third-Party Claim and shall consult with the Insurer in good faith regarding the terms of any proposed settlement.
In the event that the Insurer consents to a proposed settlement and the Insured declines to accept such settlement, the Insurer's liability with respect to such claim shall not exceed the amount for which the claim could have been settled, plus defense costs incurred through the date of the Insurer's consent.
E. Access to Information
The Insured shall provide the Insurer with reasonable access to the books, records, financial data, correspondence, personnel, and professional advisors of the Insured, the Company, and the Company's subsidiaries, to the extent reasonably relevant to the investigation, evaluation, and resolution of any claim or potential claim under the Policy. Such access shall include, without limitation, access to work product and analyses prepared by Blackwell Thornton LLP in connection with its Quality of Earnings engagement, to the extent that the attorney-client privilege or work-product protection is not waived by such disclosure. The Insured shall use reasonable efforts to make available for interview such officers, employees, and representatives of the Insured and the Company as the Insurer may reasonably request. All information provided to the Insurer shall be treated as confidential and shall be used solely for purposes of claims investigation and administration.
XI. CONDITIONS PRECEDENT TO BINDING
The Insurer's obligation to bind coverage and to issue the final Policy is subject to the satisfaction (or waiver by the Insurer in writing) of each of the following conditions precedent on or before the Inception Date:
A. Signed Acquisition Agreement
The fully executed Stock Purchase Agreement dated as of February 10, 2025, together with all schedules, exhibits, and ancillary agreements thereto, shall have been delivered to the Insurer (or its counsel or the Broker, on behalf of the Insurer) in final, fully executed form. Any amendment, supplement, or modification to the Acquisition Agreement made after the date of delivery to the Insurer shall be promptly disclosed to the Insurer, and the Insurer shall have the right to review and approve any such amendment, supplement, or modification to the extent it affects the representations and warranties or the indemnification provisions of the Acquisition Agreement.
B. Payment of Premium
The Insurer shall have received the full Premium of One Million Two Hundred Forty Thousand Dollars ($1,240,000) (net of the previously paid Underwriting Fee of Fifty Thousand Dollars ($50,000), resulting in a net amount due of One Million One Hundred Ninety Thousand Dollars ($1,190,000)) on or before the Inception Date. Payment shall be made by wire transfer of immediately available funds to the account specified by the Insurer, with payment coordinated through the Broker.
C. No-Claims Declaration (NCD)
The Insured shall have delivered to the Insurer a No-Claims Declaration in substantially the form attached hereto as Exhibit 1 (the "NCD"), duly executed by a member of the Knowledge Group, confirming that, as of the Inception Date, such member of the Knowledge Group has no actual knowledge of (a) any breach or alleged breach of any representation or warranty contained in the Acquisition Agreement, or (b) any facts or circumstances that would reasonably be expected to give rise to a claim under the Policy. The NCD shall be dated as of the Inception Date and shall be delivered concurrently with the closing of the transaction.
D. Closing of the Transaction
The acquisition contemplated by the Acquisition Agreement shall have been consummated in all material respects in accordance with the terms of the Acquisition Agreement, including the transfer of one hundred percent (100%) of the issued and outstanding capital stock of the Company to the Purchaser and the payment (or deemed payment) of the Purchase Price.
E. Escrow Funding
The Insurer shall have received confirmation, in form and substance reasonably satisfactory to the Insurer, that the Escrow Amount in the amount of Forty-Nine Million Six Hundred Thousand Dollars ($49,600,000) has been funded into Escrow Account No. CFT-ESC-2025-00327 at Continental Fiduciary Trust Company, as Escrow Agent, in accordance with the terms of the Escrow Agreement entered into in connection with the Acquisition Agreement.
F. Due Diligence Materials
The Insurer shall have received copies of, or been provided reasonable access to, the following due diligence materials prepared in connection with the transaction:
(i) the Quality of Earnings report prepared by Blackwell Thornton LLP for the Purchaser;
(ii) the healthcare regulatory due diligence memoranda prepared by Langford Moss & Crane LLP for the Purchaser, including analyses of Medicare and Medicaid compliance, Stark Law and Anti-Kickback Statute exposure, and HIPAA compliance;
(iii) the Phase I Environmental Site Assessment reports prepared by Fieldstone Environmental Associates Inc. for each of the Company's owned and leased facilities;
(iv) the comprehensive legal due diligence report prepared by Calderwood & Harkness LLP for the Purchaser; and
(v) the debt commitment letters issued by Ridgeline National Bank, N.A. and Pinnacle Commercial Credit Corp. in connection with the financing of the acquisition.
The Insurer acknowledges that it has reviewed the foregoing materials in connection with its underwriting of this Policy and that the terms of this Binder reflect the Insurer's assessment of the risks identified in such materials.
XII. ASSIGNMENT AND CHANGE OF CONTROL
This Policy may not be assigned, transferred, or conveyed by the Insured to any third party without the prior written consent of the Insurer, which consent may be granted or withheld in the Insurer's sole discretion; provided, however, that the Policy may be assigned without the Insurer's consent in the following circumstances:
(a) Internal Reorganization. The Policy may be assigned to a successor entity in connection with an internal reorganization of the Purchaser's corporate structure, including a merger with or into, or consolidation with, a wholly-owned subsidiary or affiliate of the Purchaser, provided that (i) the successor entity assumes all of the Insured's obligations under the Policy and (ii) written notice of such assignment is provided to the Insurer and the Broker within fifteen (15) business days following the effective date of such reorganization.
(b) Collateral Assignment to Lenders. The Policy may be assigned as collateral to one or more lenders in connection with the senior credit facilities financing the acquisition. Ridgeline National Bank, N.A. and Pinnacle Commercial Credit Corp. are hereby pre-approved as loss payees and additional insureds for purposes of the senior credit facilities provided in connection with the transaction (Reference No. RNB-HC-2025-0418). Any such collateral assignment shall be subject to the terms and conditions of a customary lender's loss payable endorsement, the form of which shall be agreed upon between the Insurer and the applicable lender(s). The addition of Ridgeline National Bank, N.A. and Pinnacle Commercial Credit Corp. as loss payees and additional insureds shall not increase the Policy Limit or otherwise expand the scope of coverage beyond that provided to the Named Insured.
Any purported assignment in violation of this Section XII shall be void and of no force or effect.
XIII. GOVERNING LAW AND DISPUTE RESOLUTION
A. Governing Law
This Binder, the Policy, and any dispute arising out of or in connection herewith or therewith, shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any choice-of-law or conflicts-of-law rules or principles that would cause the application of the laws of any other jurisdiction.
B. Dispute Resolution
Any dispute, controversy, or claim arising out of or relating to this Binder, the Policy, or any breach, termination, or invalidity thereof, that cannot be resolved by good faith negotiation between the parties within thirty (30) days of written notice of such dispute, shall be finally resolved by binding arbitration in New York, New York, administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules then in effect.
The arbitration shall be conducted before a panel of three (3) arbitrators. Each party shall select one (1) arbitrator within fifteen (15) business days of the commencement of the arbitration, and the two (2) party-selected arbitrators shall jointly select the third arbitrator, who shall serve as the chairperson of the panel, within fifteen (15) business days of their appointment. If the two party-selected arbitrators are unable to agree upon the third arbitrator within the specified period, the third arbitrator shall be appointed by the American Arbitration Association in accordance with its rules.
The arbitration proceedings shall be confidential, and the arbitrators shall issue a reasoned award. The award of the arbitrators shall be final and binding upon the parties and may be entered and enforced in any court of competent jurisdiction. Each party shall bear its own costs and expenses of the arbitration, including attorneys' fees, unless the arbitrators determine that the circumstances warrant a different allocation of costs.
C. Service of Process
The Insurer hereby designates its registered agent for service of process in the State of New York. The current registered agent is Ashgrove Services Inc., 28 Liberty Street, New York, New York 10005. The Insurer agrees to maintain a registered agent for service of process in the State of New York for the duration of the Policy Period and any applicable Extended Reporting Period.
XIV. MISCELLANEOUS
Entire Agreement. The final Policy, when issued by the Insurer, shall supersede this Binder in its entirety and shall constitute the complete and exclusive statement of the terms and conditions of the insurance coverage provided by the Insurer to the Insured. Until the final Policy is issued, this Binder shall serve as evidence of coverage and shall be binding upon the Insurer and the Insured in accordance with its terms. In the event of any conflict between this Binder and the final Policy, the terms of the final Policy shall control; provided that coverage under the final Policy shall not be materially less favorable to the Insured than as described in this Binder without the Insured's prior written consent.
Confidentiality. The terms and conditions of this Binder, the Policy, and all information exchanged between the parties in connection with the placement, underwriting, and administration of the Policy are confidential and shall not be disclosed to any third party without the prior written consent of the other party; provided, however, that disclosure may be made without such consent (a) to the parties' respective attorneys, accountants, auditors, and professional advisors who have a need to know such information and who are bound by confidentiality obligations, (b) to the lenders under the senior credit facilities (Ridgeline National Bank, N.A. and Pinnacle Commercial Credit Corp.) and their counsel, (c) to the Escrow Agent (Continental Fiduciary Trust Company), (d) to the Sellers to the extent necessary in connection with the indemnification provisions of the Acquisition Agreement or the resolution of claims, (e) in connection with any arbitration or legal proceeding arising under or relating to the Policy, and (f) as required by applicable law, regulation, court order, or the rules of any stock exchange or regulatory authority.
Severability. If any provision of this Binder or the Policy is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction or an arbitration panel, such provision shall be modified to the minimum extent necessary to make it valid, legal, and enforceable, and the validity, legality, and enforceability of the remaining provisions shall not be affected or impaired thereby. The parties agree to negotiate in good faith to replace any invalid, illegal, or unenforceable provision with a valid, legal, and enforceable provision that, to the greatest extent possible, achieves the intended economic and legal effect of the replaced provision.
Counterparts / Electronic Execution. This Binder may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Execution and delivery of this Binder by facsimile, portable document format (PDF), or other electronic means (including electronic signature platforms compliant with the Electronic Signatures in Global and National Commerce Act (E-SIGN Act) and the Uniform Electronic Transactions Act (UETA)) shall be deemed to be, and shall have the same force and effect as, execution and delivery of an original.
Currency. All amounts referenced in this Binder, the Policy, and any claim, payment, or calculation made hereunder or thereunder are denominated in, and shall be paid in, United States Dollars (USD).
XV. BINDER EFFECTIVE DATE AND EXPIRATION
This Binder is effective as of April 18, 2025, and shall remain in full force and effect until the earlier of:
(a) the date on which the final Policy is issued by the Insurer to the Insured, at which time the final Policy shall supersede this Binder in its entirety; or
(b) sixty (60) calendar days from the date hereof (i.e., June 17, 2025), unless extended in writing by the Insurer upon written request of the Insured, in which case the Binder shall remain in effect for such additional period as the Insurer may agree.
In the event that the final Policy has not been issued within the sixty (60)-day period specified above (as may be extended), the parties shall negotiate in good faith regarding the terms and timing of issuance. The Insurer shall not unreasonably delay the issuance of the final Policy.
For the avoidance of doubt, coverage under this Binder is effective as of the Inception Date regardless of whether the final Policy has been issued, subject to the satisfaction of the conditions precedent set forth in Section XI.
[Remainder of page intentionally left blank. Signature page follows.]
EXECUTION
IN WITNESS WHEREOF, the undersigned have executed this Binder as of the date set forth below.
NORTHBRIDGE SPECIALTY INSURANCE COMPANY
By: ________
Name: ________
Title: ________
Date: ________
Acknowledged and Agreed: