Jonathan,
I hope this finds you well. I am writing in connection with the acquisition of Meridian Surgical Technologies, Inc. ("Meridian") by Solstice Biomedical, Inc. ("Solstice" or "Buyer") to coordinate final closing logistics and circulate the funds flow memorandum. As you are aware, the Credit Agreement with Tidewater Atlantic Bank, N.A. was executed earlier today, which clears a key closing condition on the Buyer's side. We remain on track for a closing on October 31, 2024, and I wanted to use this email to walk through the remaining items so that we can ensure an orderly close next Thursday.
I have attached (1) the funds flow memorandum and (2) an updated closing conditions checklist. Details on each follow below.
**A. Funds Flow Memorandum**
Attached as Exhibit 1 is the detailed funds flow memorandum prepared by Andrew Fitzpatrick. We would appreciate it if you and your team could review and confirm all wire instructions on the Sellers' side at your earliest convenience. The key disbursements reflected in the funds flow are as follows:
1. **Closing Cash Consideration — $182,108,177.84** — to the Sellers' Representative account (Dr. Marcus Ellsworth, as Sellers' Representative) at Founders National Bank, N.A., Account No. 6654-1029-8871, ABA 031100209.
2. **Indemnity Escrow — $26,400,000** (representing 12% of the $220,000,000 base purchase price) — wired to Keystone Escrow Services, Inc., Escrow Account No. KES-2024-IND-09183 at First Continental Trust Co., N.A., ABA 021000089.
3. **Earnout Escrow Reserve — $2,500,000** (funded by Buyer) — wired to Keystone Escrow Services, Inc., Escrow Account No. KES-2024-EO-09184 at First Continental Trust Co., N.A., ABA 021000089.
4. **Ironclad Commercial Lending, LLC Payoff — $7,341,822.16** — wired to Ironclad payoff account ICL-PAYOFF-7741 at Tarrant Securities, ABA 111000025.
5. **Sellers' Transaction Expenses — $4,825,000**, allocated as follows: - Whitmore Crane & Pfeiffer LLP legal fees: $2,150,000 — to WCP Client Trust Account No. 2201-8837-5510 at Quelbryn City Savings Bank, N.A., ABA 036001808 - Pennfield Capital Advisors advisory fees: $1,800,000 — **wire instructions needed** - Dunfield & Associates consent/comfort fees: $275,000 — **wire instructions needed** - Miscellaneous transaction expenses: $600,000 — **wire instructions needed**
Please provide confirmed wire instructions for the Pennfield advisory, Dunfield, and miscellaneous payees.
6. **RWI Premium — $1,232,000** — to Ridgeline Mutual Insurance Company. This is a Buyer cost and is not deducted from Seller proceeds.
7. **D&O Tail Premium — $385,000** — to Northbridge Specialty Insurance Co. via Caldwell Risk Advisors, Inc. This is likewise a Buyer cost.
For clarity, the closing cash consideration of $182,108,177.84 is calculated as follows: $220,000,000 base purchase price, minus the $26,400,000 indemnity escrow holdback, minus the $7,341,822.16 Ironclad payoff, minus $4,825,000 in Sellers' transaction expenses, plus $675,000 in estimated net working capital surplus (estimated closing NWC of $12,175,000 versus Target NWC of $11,500,000 per the SPA).
The sources of funds are (a) a $130,000,000 draw under the Term Loan A facility from Tidewater Atlantic Bank, N.A. under the Credit Agreement executed today, and (b) an equity contribution from Solstice Biomedical Devices Ltd. to Solstice Biomedical, Inc.
**We ask that WCP confirm or provide any corrections to the wire instructions for the Sellers' Representative account and all transaction expense payees by end of day Monday, October 28, 2024.**
**B. Ironclad Payoff Letter**
We understand that the payoff letter from Ironclad Commercial Lending, LLC is expected from Thomas Briggs at Ironclad by October 28, 2024. We would appreciate it if WCP could coordinate with Meridian's CFO, David Hensley, to ensure the payoff letter is delivered on time and includes final per diem interest calculations through the anticipated closing date as well as commitments to deliver UCC-3 termination statements upon receipt of funds. The funds flow currently reflects the outstanding balance of $7,341,822.16 based on current estimates, but we will update the memorandum if the final payoff letter reflects a different amount due to per diem adjustments through October 31.
**C. Closing Deliverables — Status and Coordination**
Attached as Exhibit 2 is the updated closing conditions checklist. The following Sellers' deliverables remain outstanding and are needed for closing:
1. **Officer's Bring-Down Certificate.** The form was previously circulated. This will need to be executed by Dr. Marcus Ellsworth and David Hensley on the Closing Date, certifying the accuracy of representations and warranties and compliance with covenants as of October 31, 2024. No action needed at this time other than confirming signatories' availability on closing day.
2. **Secretary's Certificate for Meridian.** This certificate should certify the board resolutions authorizing the transaction, incumbency of officers (Dr. Marcus Ellsworth, Catherine Pryor, and David Hensley), and attach the Certificate of Incorporation and Bylaws. **We request that WCP circulate a draft by Monday, October 28.**
3. **FIRPTA Certificates.** Certificates of non-foreign status under IRC § 1445 from each Seller (or from Dr. Ellsworth as Sellers' Representative on behalf of all Sellers). The forms were previously provided. We will need execution copies at closing.
4. **Good Standing Certificates.** Certificates of good standing for Meridian from the Delaware Secretary of State and the Pennsylvania Department of State. Please confirm whether these have been ordered or obtained.
5. **Executed Escrow Agreement.** The Escrow Agreement among Solstice Biomedical, Inc., Dr. Ellsworth as Sellers' Representative, and Keystone Escrow Services, Inc. Patricia Langford at Keystone has confirmed that Keystone is ready to execute. Please confirm Dr. Ellsworth's availability to execute on the Closing Date.
6. **Section 338(h)(10) Election Forms.** IRS Form 8023 and related state election forms have been prepared by Leonard Cross and Brindoval & Albright LLP. Sellers' signature pages will be needed at closing.
7. **Employment Agreements and Non-Competition Agreements.** The forms for Dr. Marcus Ellsworth, Catherine Pryor, and Dr. Raj Subramanian — please confirm that these are in final form and that all three individuals are prepared to execute at closing.
8. **Sellers' Representative Appointment.** Please confirm that holders of at least 65% of Meridian's outstanding shares have executed the joinder appointing Dr. Ellsworth as Sellers' Representative, as required under the SPA.
On the Buyer's side, the Secretary's Certificate for Solstice Biomedical, Inc. (certifying resolutions and incumbency of Helena Byrne as President, Conor Muldoon as Treasurer, and Patrick Lennox as Secretary) will be delivered at closing.
**D. Closing Mechanics**
We propose that closing occur virtually on October 31, 2024, with pre-signed signature pages held in escrow and released upon mutual authorization of counsel. Specifically, we suggest the following:
- A closing call at **10:00 AM ET on October 31** to confirm satisfaction or waiver of all closing conditions, authorize release of signature pages, and initiate wire transfers. - Tidewater Atlantic Bank has confirmed that it can fund the Term Loan A draw on the morning of October 31 provided that final closing deliverables — including the executed Credit Agreement (now complete) and the closing certificates — are in order.
Please confirm that this proposed timeline works for the Sellers and their signatories.
**E. Miscellaneous Items**
A few additional items for your reference:
- **D&O Tail Policy.** The D&O tail policy from Northbridge Specialty Insurance Co. has been arranged through Caldwell Risk Advisors (Allison Trent) and will be bound at closing, with the $385,000 premium paid by Buyer as required under the SPA.
- **RWI Policy.** The representations and warranties insurance policy from Ridgeline Mutual Insurance Company (Policy No. RMI-RWI-2024-08172) was bound on August 14, 2024, and remains in full force and effect. The $1,232,000 premium is payable at closing as reflected in the funds flow.
- **Third-Party Consents.** The consent from Titanium Precision Components, Inc. under the supply agreement was obtained on August 5, 2024, and the change-of-control notice to OrthoLink Distribution, LLC was provided on August 12, 2024. Both are reflected as satisfied on the closing checklist.
- **Hartwell Litigation.** Please let us know whether there are any updates on the Hartwell litigation (*Hartwell Orthopedic Solutions, Inc. v. Meridian Surgical Technologies, Inc.*, Civil Action No. 2:23-cv-04817, E.D. Pa.) that would require supplemental disclosure schedule updates prior to closing. As you know, this matter is disclosed in the Disclosure Schedules and is subject to specific indemnification under the SPA.
* * *
To summarize the key asks: we would appreciate WCP's comments on the funds flow and confirmation of all wire instructions by **end of day Monday, October 28**. I would also like to propose a pre-closing coordination call on **Tuesday, October 29** — I am available at 2:00 PM or 3:30 PM ET, but happy to work around your schedule — to walk through the checklist together and resolve any remaining open items.
We are looking forward to a smooth closing next week. Please do not hesitate to reach out to me directly at the number below, or to Tiffany Rosenthal or Andrew Fitzpatrick, who are available for day-to-day coordination on any of the items discussed above.
Best regards,
Beatrice Holloway Partner, Mergers & Acquisitions Calderwood & Harkness LLP 590 Lexington Avenue, 35th Floor New York, NY 10022 Direct: (212) 558-4923 bholloway@calderwoodharkness.com
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