| | Item 4 of the Original Schedule 13D, as previously amended, is hereby amended by the addition of the following description of events involving the Reporting Persons and the Issuer.
As disclosed on a Current Report on Form 8-K filed by the Issuer with the Commission on November 5, 2025 ("Issuer 8-K"), the Issuer entered into a definitive agreement and plan of merger (the "Merger Agreement") with SSL Sparti LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Issuer ("Holdco"), Sparti Merger Sub, Inc., a Maryland corporation and a wholly-owned subsidiary of Holdco ("SNDA Merger Sub"), CNL Healthcare Properties, Inc., a Maryland corporation ("CNL") and CHP Merger Corp., a Maryland corporation and a wholly-owned subsidiary of CNL. The Merger Agreement provides, among other things and subject to the terms and conditions in the Merger Agreement, for a business combination of the Issuer and CNL, through a series of steps ending with a forward merger of SNDA Merger Sub with and into CNL, with SNDA Merger Sub surviving the merger (the "CNL Merger"), as a result of which the Issuer will own 100% of the issued and outstanding shares of CNL. In connection with the execution of the Merger Agreement and the transactions contemplated thereby, Investor A and Investor B granted certain consents and waived certain antidilution rights arising under the existing Investor Rights Agreement and the Certificate of Designation of the Series A Preferred Stock. Concurrently with the execution of the Merger Agreement, the Issuer entered into an investment agreement (the "Investment Agreement") with Investor A, Aggregator A, CPIF Sparti SAF, L.P. ("CPIF"), and CPIF K Co-Invest SPT A, L.P. ("CPIF K" and, together with Aggregator A, Investor A and CPIF, collectively, the "IA Conversant Investors"), pursuant to which the IA Conversant Investors agreed to fund to the Issuer an aggregate amount of $100,000,005.84 in exchange for the issuance by the Issuer of 3,739,716 shares of Common Stock at a price of $26.74 per share immediately prior to the CNL Merger (the "Equity Financing"). Proceeds from the Equity Financing will be used by the Issuer to fund a portion of the cash merger consideration payable under the Merger Agreement. The Investment Agreement includes representations and warranties by the Issuer substantially similar to those under the Merger Agreement and representations and warranties by the IA Conversant Investors customary for a private financing of this type, and customary covenants of the parties, including the Issuer's compliance with interim operating covenants subject to the IA Conversant Investors' consent (not be unreasonably withheld, conditioned or delayed). The IA Conversant Investors' closing on the Equity Financing is conditioned on the execution of the Merger Agreement, satisfaction or waiver of mutual closing conditions and the Issuer's closing conditions under the Merger Agreement, and the Issuer's confirmation of occurrence of the CNL Merger substantially concurrently with the issuance of Common Stock in connection with the Equity Financing. The Issuer's closing conditions include a bringdown of the IA Conversant Investors' representations and warranties and material compliance with their covenants, and delivery by the IA Conversant Investors of the purchase price and IRS Forms W-9. The Investment Agreement may be terminated by the parties only upon their mutual agreement or upon certain customary conditions, including that the Equity Financing shall have been enjoined, that the Merger Agreement shall have been terminated, or that the CNL Merger shall not have been consummated by May 29, 2026. The Investment Agreement contains mutual indemnities by parties for breach of certain representation and warranties and post-closing covenants capped at the purchase price. The Issuer is responsible for the IA Conversant Investors' legal and other expenses in connection with the Equity Financing subject to the $2,000,000 cap. The IA Conversant Investors are entitled to 15% of the Company Termination Fee (as defined in the Merger Agreement) if the Issuer becomes entitled to such fee under the Merger Agreement. The Issuer entered into a substantially similar investment agreement with the other current investor in the Issuer, Silk Partners, LP ("Silk").
At the closing of the Equity Financing, the IA Conversant Investors, Investor B, Investor D and Investor F (collectively, the "Post-Merger Conversant Investors"), Silk and the Issuer will enter into an amended and restated Investor Rights Agreement (the "IRA") to be effective as of the CNL Merger. Pursuant to the IRA, among other things, prior to the date that is (A) on or prior to the Company's 2029 annual meeting of stockholders, the date on which the Post-Merger Conversant Investors and their affiliates (the "Conversant Parties") beneficially own less than the lesser of (I) 4% of the outstanding shares of Common Stock and (II) the number of shares of Common Stock owned by Silk and its affiliates as of the Equity Financing closing date), and (B) after the Company's 2029 annual meeting of stockholders, the date on which the Conversant Parties beneficially own less than 5% of the outstanding shares of Common Stock, the Conversant Parties will have the right to designate a member of the Issuer's board of directors (the "Board"). If the Conversant Parties beneficially own at least 15% of the outstanding shares of Common Stock, they will have the right to designate two members of the Board, and they will have the right to designate three members of the Board if they beneficially own at least 20% of outstanding shares of Common Stock. Additionally, the Conversant Parties will have the right to designate the Board's chairperson so long as the Conversant Parties own at least 5% of Common Stock and the right to designate a member of the Board's Nominating and Governance Committee so long as the Conversant Parties own at least 10% of Common Stock. Although no designations to the Board will be effective before the effective time of the CNL Merger, the Conversant Parties expect to appoint Michael Simanovsky, Conversant Capital's Managing Partner, as a member and the chairperson of the Board, to join Robert Grove, Conversant Capital's Principal, and Benjamin P. Harris, who now serve on the Board. These individuals would represent the Conversant Parties' three designees. The Reporting Persons anticipate that the Conversant Parties' designees to the Board will, in performance of their duties as members of the Board, participate in discussions with the other members of the Board, as well as with the Issuer's management, employees, advisors and investors, and other persons, that may relate to any or all of the matters described in subparagraphs (a) through (j) of Item 4 of Schedule 13D.
The IRA will also provide that for so long as the Conversant Parties beneficially own at least 15% of the outstanding shares of Common Stock, the Issuer will not without Investor A's consent undertake certain fundamental or significant actions or transactions, such as changing the Issuer's business, entering into any merger or acquisition in excess of certain agreed limits, issuing debt or equity beyond certain agreed limits, transferring equity of the Issuer's subsidiaries, entering into change of control agreements, liquidating or dissolving the Issuer, or engaging in certain preferential transactions in respect of the Issuer securities ranked junior to its Series A Preferred Stock. Further, the IRA will provide that for so long as the Conversant Parties beneficially own at least 14.9% of the outstanding shares of Common Stock, the Conversant Parties will remain entitled to certain pre-emptive rights with respect to certain issuances of the Issuer equity securities. Common Stock held by the Conversant Parties will not be subject to the contractual transfer restrictions, however, for eighteen months following the closing of the Equity Financing, the Conversant Parties will be subject to standstill pursuant to which they will not (i) participate in nominating or removing any Board member (other than a director designees by the Conversant Parties) or in changing the composition of the Board, or engaging in a proxy solicitation, and (ii) initiating or proposing to call a special meeting of the Issuer's stockholders.
The Post-Merger Conversant Investors, Silk, PF Investors, LLC (together with Silk, the "Silk Investors"), and, together with the Post-Merger Conversant Investors, collectively, the "Investors") and the Issuer have also agreed that at the closing of the Equity Financing they will enter into an amended and restated Registration Rights Agreement (the "RRA") to be effective as of the CNL Merger, pursuant to which, among other things, the Issuer will be obligated to prepare and file, as soon as reasonably practicable following the Equity Financing closing and no later than three (3) months thereafter, a shelf registration statement registering the resale of all Issuer equity securities acquired by the Conversant Parties prior to and pursuant to the Equity Financing. The Issuer will further agree to use its reasonable best efforts to cause the registration statement to become effective as soon as practicable after the filing and to maintain the effectiveness of the registration statement until the termination of the RRA. If the shelf registration described above is not effective and not available for use by the Investors then the Investors will be entitled to "demand" registration of their Issuer equity securities, with the Post-Merger Conversant Investors having 2 demand registration rights. Additionally, the Investors may request up to 4 takedowns within any 12-month period, subject to certain limitations, including a minimum aggregate offering price of $10,000,000. The Investors will have piggyback registration rights whenever the Issuer proposes to register its equity securities. In connection with the foregoing, the Post-Merger Conversant Investors will also agree that for so long as they beneficially own 5% or more of Common Stock, they will agree to enter into customary lock-up agreements (not to exceed 60 days) with managing underwriters in connection with underwritten offerings of the Issuer's equity securities. The RRA will terminate upon the earlier of (1) the date when all securities held by the Investors have been sold, and (2) the later of (i) the date when the Post-Merger Conversant Investors or the Silk Investors, as applicable, are able to sell all of its securities pursuant to Rule 144 without being subject to volume or manner of sale limitations thereunder and (ii) the Post-Merger Conversant Investors or the Silk Investors, as applicable, together with their affiliates, beneficially own less than 10% of Common Stock.
The Reporting Persons expect to review from time to time their investment in the Issuer and may, depending on the market and other conditions, determine to: (i) subject to the terms and conditions of the RRA, increase or decrease their position in the Issuer through, among other things, the purchase or sale of shares of Common Stock and/or other equity, debt, derivative securities or other instruments that are convertible into Common Stock, or are based upon or relate to the value of shares of Common Stock (collectively, "Securities") on the open market or in private transactions, including through a trading plan created under Rule 10b5-1(c) or otherwise, on such terms and at such times as the Reporting Persons may deem advisable and/or (ii) enter into transactions that increase or hedge its economic exposure to shares of Common Stock or other Securities without affecting the Reporting Persons' beneficial ownership of Common Stock or other Securities. Such transactions may take place at any time and without prior notice. There can be no assurance, however, that any Reporting Person or any of their affiliates will take any such actions.
The Reporting Persons may, from time to time, engage in discussions with members of the Issuer's management and Board, other current and prospective holders of the Issuer's equity and debt securities, industry analysts, existing or potential strategic partners or competitors, investment and financing professionals, equity and debt financing sources and other third parties regarding a variety of matters relating to the Issuer, which (in addition to the matters discussed above) may include, among other things, the Issuer's business, management, capital structure, capital allocation, corporate governance, board composition and strategic alternatives and direction, and may take other steps seeking to bring about changes to increase shareholder value as well as pursue other plans or proposals that relate to or could result in any of the matters set forth in paragraphs (a) through (j), inclusive, of the instructions to Item 4 of Schedule 13D.
Except as set forth herein and to the extent that the Reporting Persons may have influence over the corporate activities of the Issuer, including activities of the Conversant Parties' designees to the Board, that may relate to the items described in subparagraphs (a) through (j) of Item 4 of Schedule 13D, the Reporting Persons do not have any present plan or proposal that relate to or would result in any of the matters set forth in subparagraphs (a) through (j) of Item 4 of Schedule 13D.
Subject to the terms and conditions of the Investment Agreement, IRA and RRA, the Reporting Persons reserve the right to change their intention with respect to any and all matters referred to in this Item 4.
The foregoing description of the Investment Agreement, IRA, RRA and the Equity Financing set forth herein and in Item 3 does not purport to be complete and is subject to, and is qualified in its entirety by, reference to the full texts of the Investment Agreement, and substantially final forms of the IRA and the RRA which are attached to the Investment Agreement, filed by the Issuer with the Commission on November 5, 2025, as Exhibit 10.1 to the Issuer's Current Report on Form 8-K and incorporated herein by reference. |
