Catherine and Samuel,
I hope this email finds you well. I am writing in connection with the Asset Purchase Agreement, dated as of April 2, 2024 (the "APA"), by and between Ardent Healthcare Acquisition Corp. ("Purchaser") and Cardinal Peak Industries, Inc. ("CPI" or "Seller"). As you are aware, the target Closing Date under the APA is June 20, 2024 — now six days away. Following our team's review of the closing checklist and the current status of Seller's closing deliverables, we have identified a number of outstanding closing conditions and deliverables under Articles VI and VII of the APA that have not yet been satisfied or delivered as of the date of this email. We wanted to flag these items promptly so that we can work together to resolve them in advance of the target Closing Date.
The outstanding items are as follows:
**1. Outstanding Landlord Consents**
As you know, the consummation of the transactions contemplated by the APA triggers change-of-control or assignment provisions in 29 of the 37 clinic leases included in the Acquired Assets. Based on the lease consent tracker maintained by Tiffany Rosenthal (most recently circulated on June 11), consents have been obtained for only 17 of the 29 required locations, leaving 12 consents outstanding. We note that the outstanding consents appear to be concentrated in Tennessee (5 of 14 locations), Georgia (3 of 8 locations), Alabama (2 of 3 locations), and one each in South Carolina and Virginia.
We would appreciate a detailed update from your team on the status of each outstanding consent, including the identity of the landlord contact, the date on which the consent request was submitted, and the expected timeline for resolution. Additionally, as certain of these landlord consents constitute conditions to Closing under Section 6.2(f) of the APA, we would like to understand BKP's position on whether any waivers, estoppel-based arguments, or other workarounds may be available in the event that one or more consents cannot be obtained by the target Closing Date. We would like to discuss this issue sooner rather than later so that the parties can assess their options.
**2. Velthorn Merchant Bank Payoff Letter**
We have not yet received the payoff letter from Velthorn Merchant Bank, N.A. confirming the outstanding balance under that certain Credit Agreement, dated as of March 15, 2018, as amended (the "Velthorn Credit Agreement"). As you know, the payoff letter is required to facilitate the payoff of Seller's existing indebtedness (outstanding principal of approximately $87,400,000) at Closing and the filing of UCC-3 termination statements with the Delaware Secretary of State and the Tennessee Secretary of State to release Velthorn's liens on the Acquired Assets.
We request that Seller coordinate with Velthorn to deliver the payoff letter — including per diem interest calculations effective through and including June 21, 2024 (to account for any one-day delay) and wire instructions for payoff — no later than Tuesday, June 18, 2024. Upon receipt, our team will need to prepare and arrange for the prompt filing of UCC termination statements, and any delay in receiving the payoff letter will compress that timeline considerably.
**3. Updated Good Standing Certificates**
The APA requires delivery at Closing of certificates of good standing for CPI from the Delaware Secretary of State (CPI's state of incorporation, File No. 5487231) and from each state in which CPI is qualified to do business: Tennessee, Georgia, North Carolina, South Carolina, Alabama, Virginia, and Kentucky. The certificates delivered during the due diligence phase are now stale, and current certificates dated within 10 days of the Closing Date will be required as closing deliverables. We would appreciate confirmation that Seller has ordered or will promptly order updated certificates from each of the eight applicable jurisdictions.
**4. Officer's Certificate re: No Material Adverse Effect**
Pursuant to Section 6.2(a) of the APA, Seller is required to deliver at Closing a certificate executed by a duly authorized officer of CPI certifying that no Material Adverse Effect (as defined in Section 1.1 of the APA) has occurred since April 2, 2024 through and including the Closing Date. We request that Seller prepare this certificate and be in a position to deliver it at Closing. In addition, we would ask whether Seller is currently aware of any facts, circumstances, events, or developments that might prevent delivery of this certificate or that would need to be disclosed therein. An early indication on this point would be appreciated.
**5. Seller's Closing Certificate**
The Seller's Closing Certificate — certifying the bring-down of Seller's representations and warranties as of the Closing Date, Seller's compliance with pre-closing covenants under Article V, and the satisfaction of all applicable closing conditions — has not yet been delivered to us in draft form. Given the complexity of the bring-down and the number of representations at issue, we would like to receive a draft of this certificate for review by Purchaser's counsel as soon as possible, and in any event no later than Tuesday, June 18, 2024, so that we have adequate time to review and provide comments in advance of Closing.
**6. Secretary's Certificate of Seller**
We have not yet received the Secretary's Certificate of Cardinal Peak Industries, Inc. The certificate should attach certified copies of (a) resolutions of CPI's Board of Directors authorizing the execution, delivery, and performance of the APA and the consummation of the transactions contemplated thereby, (b) incumbency certificates for all signing officers, including Dr. Randall J. Whitfield in his capacity as Founder, Chairman & CEO, and (c) certified copies of CPI's certificate of incorporation and bylaws (in each case, as currently in effect). To the extent that stockholder approval is required under applicable law or CPI's governing documents in connection with the asset sale, evidence of such approval (whether by written consent or meeting minutes) should also be included.
**7. Additional Items and General Reminders**
We also wish to flag the following items for your attention:
- *Disclosure Schedule Updates.* Please confirm whether Seller is aware of any updates or supplements to the Disclosure Schedules that may be required under the interim operating covenants set forth in Section 5.1 of the APA. If any supplemental disclosures are necessary, they should be delivered promptly.
- *State Healthcare Change-of-Ownership Notices.* We understand that change-of-ownership notices were filed on March 4, 2024 with the applicable state agencies in Tennessee, Georgia, and North Carolina. We would appreciate an update on the status of each filing, including whether any agency has issued a receipt, acknowledgment, or approval, and whether any additional information requests have been received.
- *Funds Flow and Wire Instructions.* As we approach Closing, we will need to finalize the funds flow memorandum, including wire instructions for all parties. This will include payment to Seller's shareholders (Dr. Randall J. Whitfield — 52%; Whitfield-Torres Family Trust — 18%; Ridgeline Growth Equity Fund II, LP — 22%; and other management holders — 8%). We ask that you circulate confirmed wire instructions for each payee at your earliest convenience.
- *Escrow Funding.* The escrow deposit of $62,000,000 to Commonwealth Trust & Escrow Company (attention: Martin Galbraith, Vice President, Corporate Trust Services) will need to be coordinated simultaneously with the Closing. We will circulate a draft of the joint escrow funding instructions early next week, and we would appreciate your confirmation of Commonwealth's wire details and any related logistics on your end.
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Catherine, Samuel — we very much want to work cooperatively with your team to resolve all outstanding items promptly and close the transaction on schedule. To that end, we would appreciate a comprehensive status update from BKP no later than **Monday, June 17, 2024**, identifying the current status of and expected delivery date for each of the items outlined above.
If, based on your assessment, the target Closing Date of June 20, 2024 cannot be met, we believe the parties should discuss an adjusted timeline as soon as possible so that all stakeholders can plan accordingly.
Please do not hesitate to reach out to me directly at (212) 506-4738 or at dokonkwo@calderwoodharkness.com if you have any questions or would like to discuss any of these items. Beatrice Holloway is also available to discuss any issues at the partner level.
Thank you for your attention to these matters, and we look forward to hearing from you.
Best regards,
Derek Okonkwo Associate Calderwood & Harkness LLP One World Financial Center 200 Liberty Street, 40th Floor New York, NY 10281 T: (212) 506-4738 E: dokonkwo@calderwoodharkness.com
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