Janet,
I hope you had a good weekend. Attached please find the initial draft of the Agreement and Plan of Merger (the "Merger Agreement"), prepared on behalf of our client, Harrowgate Private Equity Fund IV, LP ("HPE Fund IV"), in connection with the proposed take-private acquisition of Pennfield Holdings, Inc. ("Pennfield" or the "Company") (Project Summit). As you will see, the draft contemplates a reverse triangular merger under DGCL § 251 in which Pinnacle Merger Sub, Inc., a newly formed, wholly owned subsidiary of HPE Fund IV, will merge with and into Pennfield, with Pennfield surviving as a wholly owned subsidiary of HPE Fund IV.
To orient your team's review, I have set forth below a summary of the principal terms reflected in the draft.
**Merger Consideration.** The draft provides for aggregate merger consideration of $980,000,000, representing $15.95 per share on a fully diluted basis (based on 61,450,000 fully diluted shares, consisting of 58,200,000 outstanding shares of common stock and 3,250,000 shares underlying outstanding options and RSUs). This represents a premium of approximately 30.95% to the 30-day VWAP of $12.18 and approximately 10.0% to the 52-week high of $14.50.
**No-Shop Covenant.** The draft includes a no-shop covenant restricting Pennfield from soliciting, initiating, or encouraging competing proposals following execution. The covenant includes a customary fiduciary-out exception permitting the Pennfield Board to engage with an unsolicited Superior Proposal (as defined in the draft). As you know, the Special Committee's pre-signing market check, conducted by Whitmore Zanthor & Co. and concluded on March 14, 2025, yielded no competing indications of interest, which we believe supports this approach in lieu of a go-shop period.
**Termination Fee.** The draft provides for a Company termination fee of 3.5% of aggregate merger consideration, equal to $34,300,000, payable upon customary triggering events (including a Board recommendation change, acceptance of a Superior Proposal, and failure to hold the stockholder vote within the required period). The draft contemplates an escrow arrangement with Grandview Trust Company, N.A. for the termination fee amount.
**Reverse Termination Fee.** The draft provides for a Buyer reverse termination fee of 6.0% of aggregate merger consideration, equal to $58,800,000, payable in the event of a financing failure or willful breach by Buyer or Merger Sub, backed by a Limited Guarantee from HPE Fund IV.
**Indemnification.** The draft includes an indemnification cap of 12% of aggregate merger consideration, equal to $117,600,000. As you are aware, the buyer-side representations and warranties insurance policy was bound with Meridian Specialty Insurance Company on March 28, 2025, with a $100,000,000 policy limit and a $9,800,000 retention. The indemnification provisions in the draft have been coordinated with the terms of the R&W policy.
**Representations and Warranties.** The draft contains comprehensive representations and warranties from both the Company and the Buyer/Merger Sub, with customary qualifiers (including materiality and Material Adverse Effect qualifications, as applicable). Buyer disclosure schedules will be delivered concurrently with execution.
**Stockholder Approval.** The Merger will require approval by holders of a majority of the outstanding shares of Pennfield common stock entitled to vote, as required by DGCL § 251.
**Closing Conditions.** The draft includes customary closing conditions, including: (i) HSR Act clearance (we anticipate filing on or about April 8, 2025, triggering a 30-day initial waiting period); (ii) the absence of legal restraints; (iii) accuracy of representations and warranties (subject to applicable bring-down standards); (iv) compliance with covenants in all material respects; and (v) receipt of required third-party consents, including those triggered by change-of-control provisions in certain of Pennfield's existing commercial and credit agreements.
**Marketing Period.** The draft provides for a 15-business-day marketing period following signing to permit Falconer National Bank, N.A. and Dunmore Capital Markets LLC, as the debt commitment parties, to syndicate the committed financing (consisting of a $490,000,000 Term Loan B facility and a $150,000,000 Revolving Credit Facility).
**Outside Date.** The draft provides for an Outside Date of September 30, 2025 (approximately six months from anticipated signing), subject to customary extension provisions.
**Management Rollover.** The draft reflects rollover arrangements with Catherine Langford ($12.5 million), Derek Simmons ($5.0 million), and Maxwell Dunn ($4.0 million), totaling $21.5 million in rollover equity. The specific terms of these arrangements are addressed in a separate Rollover Agreement and Voting and Support Agreement, which we will circulate separately.
**Financing.** The transaction is supported by committed debt financing pursuant to commitment letters executed on March 24, 2025, and an equity commitment letter from HPE Fund IV executed on March 27, 2025, with a co-investment commitment from Ashford Growth Partners LP. The draft includes customary financing cooperation covenants requiring Pennfield's reasonable cooperation with the debt syndication process during the marketing period.
**Process and Timeline.** As we have discussed, we are targeting execution of the definitive Merger Agreement and public announcement on April 7, 2025. This timeline contemplates a preliminary proxy statement filing on or about April 22, 2025, and a special meeting of Pennfield stockholders in mid-June 2025. Several parallel workstreams remain underway, including HSR filing preparation (Elaine Forsythe on our side is handling), SEC filing preparation (Schedule 13E-3 and Schedule 14A), and preparation of the ancillary transaction documents.
To maintain this execution timeline, we would appreciate receiving a consolidated mark-up and any comments from your team by **Thursday, April 3, 2025**. We are happy to schedule a call with the full deal teams — including Ridgepoint Partners and Whitmore Zanthor, as appropriate — to discuss any significant open points once you have had an opportunity to review the draft. Ryan Kowalski on our team is available to coordinate logistics and document exchange; please feel free to reach out to him directly.
Janet, thank you to you, Steven, and Linda for your anticipated prompt attention to this. We look forward to working with you and your team toward a smooth execution.
Best regards,
**Oliver Mackenzie** Partner, Mergers & Acquisitions Calderwood & Harkness LLP One Liberty Plaza, 55th Floor New York, NY 10006 T: (212) 506-7300 E: omackenzie@calderwoodharkness.com
Matter Ref: 1003-00004
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