[sheet: Cover]
Field | Value
Document Title | Closing Settlement Statement
Transaction | Asset Purchase of Substantially All Assets of Cardinal Peak Industries, Inc.
Purchaser | Ardent Healthcare Acquisition Corp.
Purchaser Parent | Ardent Capital Partners III LP
Seller | Cardinal Peak Industries, Inc.
Asset Purchase Agreement Date | April 2, 2024
Closing Date | June 30, 2024
Prepared By | Calderwood & Harkness LLP
Matter No. | 2024-M&A-0142
Responsible Partner | Beatrice Holloway
Lead Associate | Derek Okonkwo
Governing Law | State of Delaware
Escrow Agent | Commonwealth Trust & Escrow Company
Administrative Agent (Senior Secured Credit Facility) | Pinnacle National Bank, N.A.
Seller's Existing Lender (Payoff) | Velthorn Merchant Bank, N.A.
Status | FINAL — As of Closing, June 30, 2024
[sheet: Sources & Uses]
Line Item | Amount ($) | Notes
SOURCES OF FUNDS
Term Loan A — Pinnacle National Bank, N.A. | $310,000,000.00 | 5-year; SOFR + 325 bps; per Project Cardinal Commitment Letter dated April 2, 2024
Revolving Credit Facility — Pinnacle National Bank, N.A. | $0.00 | $90,000,000 facility; 5-year; SOFR + 300 bps; undrawn at closing
Equity Contribution — Ardent Capital Partners III LP | $220,000,000.00 | Cash equity from Fund III
Total Sources | $530,000,000.00
USES OF FUNDS
Cash to Seller (net of escrow holdback) | $558,000,000.00 | $620,000,000 Base Purchase Price less $62,000,000 escrow holdback
Less: Estimated NWC Adjustment (Seller Owes Buyer) | $0.00 | Estimated Closing NWC of $29,200,000 exceeds NWC Target of $28,000,000 by $1,200,000; exceeds $500,000 collar — adjustment in Seller's favor, reflected below
Add: Estimated NWC Adjustment (Buyer Owes Seller) | $1,200,000.00 | Estimated Closing NWC ($29,200,000) minus NWC Target ($28,000,000) = $1,200,000 payable to Seller; subject to final determination within 90 days (deadline: September 28, 2024)
Adjusted Cash to Seller (Gross) | $559,200,000.00 | $558,000,000 + $1,200,000 estimated NWC adjustment
Less: Payoff — Velthorn Merchant Bank, N.A. (from Seller Proceeds) | ($87,400,000.00) | Payoff of outstanding principal under Credit Agreement dated March 15, 2018, as amended; payoff letter dated June 26, 2024; UCC terminations filed DE and TN on June 28, 2024
Net Cash Wired to Seller | $471,800,000.00 | $559,200,000 - $87,400,000
Escrow Deposit — Commonwealth Trust & Escrow Company | $62,000,000.00 | 10% of $620,000,000 Base Purchase Price; Tranche 1 release June 30, 2025 ($31,000,000); Tranche 2 release December 30, 2025 ($31,000,000)
Payoff — Velthorn Merchant Bank, N.A. (wired from closing funds) | $87,400,000.00 | Payoff letter dated June 26, 2024; wire directly to Velthorn per payoff instructions
Estimated Transaction Fees & Expenses (Buyer) | $8,800,000.00 | Includes advisory, legal, accounting, insurance, financing, and other closing costs (see Fee Detail sheet)
Total Uses | $530,000,000.00 | Net Seller Proceeds ($471,800,000) + Velthorn Payoff ($87,400,000) + Escrow ($62,000,000) - NWC Adj ($1,200,000) - Base Adj + Buyer Fees ($8,800,000) — see Purchase Price Reconciliation sheet
Reconciliation Check (Sources minus Uses) | $0.00 | Balanced
[sheet: Purchase Price Reconciliation]
Line No. | Description | Amount ($) | Reference / Notes
1 | Base Purchase Price (per APA Section 2.3) | $620,000,000.00 | Fixed
2 | Less: Escrow Holdback (10%) | ($62,000,000.00) | Deposited with Commonwealth Trust & Escrow Company per Escrow Agreement dated June 30, 2024
3 | Subtotal: Cash Purchase Price Before Adjustments | $558,000,000.00 | $620,000,000 - $62,000,000
4 | Estimated Net Working Capital at Closing | $29,200,000.00 | Seller's estimate; subject to final determination within 90 days post-closing (deadline: September 28, 2024)
5 | NWC Target | $28,000,000.00 | Per APA Section 2.5
6 | Estimated NWC Excess / (Shortfall) | $1,200,000.00 | $29,200,000 - $28,000,000 = $1,200,000
7 | NWC De Minimis Collar | $500,000.00 | No adjustment if absolute value of NWC variance ≤ $500,000; here variance = $1,200,000, which exceeds collar
8 | Estimated NWC Adjustment (Seller favorable) | $1,200,000.00 | Dollar-for-dollar from first dollar since variance exceeds $500,000 collar
9 | Adjusted Cash Payable to Seller (Gross) | $559,200,000.00 | $558,000,000 + $1,200,000
10 | Less: Payoff of Seller's Existing Indebtedness — Velthorn Merchant Bank, N.A. | ($87,400,000.00) | Outstanding principal per payoff letter dated June 26, 2024; wire directly to Velthorn per payoff instructions
11 | Net Cash Payable to Seller and Shareholders | $471,800,000.00 | $559,200,000 - $87,400,000
12 | Contingent Consideration — Earnout (not payable at closing) | $0.00 | Up to $45,000,000 aggregate; Tranche 1 up to $22,500,000 (EP1 ending June 30, 2025); Tranche 2 up to $22,500,000 (EP2 ending June 30, 2026); per Earnout Agreement
13 | Maximum Aggregate Purchase Price (if full earnout achieved) | $665,000,000.00 | $620,000,000 + $45,000,000
14 | Estimated Buyer Transaction Fees & Expenses | $8,800,000.00 | See Fee Detail sheet; funded from Buyer's sources
15 | Total Buyer Funding Required at Closing | $530,000,000.00 | Net Seller Proceeds ($471,800,000) + Velthorn Payoff ($87,400,000) - NWC Adj already in Seller proceeds + Escrow ($62,000,000) - reconciling items + Buyer Fees ($8,800,000) = $530,000,000
[sheet: Seller Proceeds Allocation]
Shareholder | Ownership % | Gross Allocation ($) | Pro Rata Share of Escrow Holdback ($) | Pro Rata Share of Velthorn Payoff ($) | Net Cash at Closing ($) | Notes
Dr. Randall J. Whitfield | 52.00% | $290,784,000.00 | ($32,240,000.00) | ($45,448,000.00) | $245,336,000.00 | Founder, Chairman & CEO; 52% of outstanding shares
Elaine Whitfield-Torres | 18.00% | $100,656,000.00 | ($11,160,000.00) | ($15,732,000.00) | $84,924,000.00 | Co-Founder & CCO; 18% of outstanding shares
Ridgeline Growth Equity Fund II LP | 22.00% | $123,024,000.00 | ($13,640,000.00) | ($19,228,000.00) | $103,796,000.00 | Minority PE investor since 2018; GP: Ridgeline Growth Equity Advisors LLC, Atlanta, GA
Other Management Shareholders | 8.00% | $44,736,000.00 | ($4,960,000.00) | ($6,992,000.00) | $37,744,000.00 | Remaining management holders; 8% aggregate
TOTAL | 100.00% | $559,200,000.00 | ($62,000,000.00) | ($87,400,000.00) | $471,800,000.00
[sheet: Escrow Summary]
Item | Amount ($) | Date | Notes
Escrow Deposit at Closing | $62,000,000.00 | June 30, 2024 | 10% of $620,000,000 Base Purchase Price; deposited with Commonwealth Trust & Escrow Company; contact: Martin Galbraith, VP, Corporate Trust Services; address: 3801 Kennett Pike, Suite 250, Greenville, DE 19807
Tranche 1 Scheduled Release | $31,000,000.00 | June 30, 2025 | 50% of escrow; net of any pending or resolved indemnification claims as of release date
Tranche 2 Scheduled Release (Final) | $31,000,000.00 | December 30, 2025 | Remaining 50% of escrow; net of any pending or resolved indemnification claims; coincides with expiration of 18-month general R&W survival period
Total Scheduled Releases | $62,000,000.00 | N/A | Assumes no indemnification claims offset against escrow
Indemnification Cap (for reference) | $124,000,000.00 | N/A | 20% of Base Purchase Price; indemnification basket of $3,100,000 (0.5%); de minimis threshold of $100,000 per claim; first-dollar tipping basket
R&W Insurance Coverage (for reference) | $62,000,000.00 | N/A | Sentinel Specialty Insurance Company; Policy No. SSI-RWI-2024-05178; retention of $6,200,000 (1% of purchase price; 50/50 split Buyer/Seller)
R&W Insurance Retention — Buyer's Share | $3,100,000.00 | N/A | 50% of $6,200,000 retention
R&W Insurance Retention — Seller's Share | $3,100,000.00 | N/A | 50% of $6,200,000 retention
Governing Law — Escrow Agreement | N/A | N/A | State of Delaware
[sheet: Earnout Summary]
Item | Value | Notes
Earnout — Maximum Aggregate | $45,000,000.00 | Per Earnout Agreement dated June 30, 2024
Tranche 1 — Maximum Payout | $22,500,000.00 | If Adjusted EBITDA ≥ $85,000,000 for 12-month period ending June 30, 2025 (Earnout Period 1)
Tranche 1 — Threshold (Zero Payout) | $80,000,000.00 | Below this EBITDA level, $0 payout for Tranche 1
Tranche 1 — Linear Ramp | $4.50 per $1 of EBITDA above $80,000,000 | $22,500,000 ÷ $5,000,000 spread = $4.50 per dollar
Tranche 2 — Maximum Payout | $22,500,000.00 | If Adjusted EBITDA ≥ $95,000,000 for 12-month period ending June 30, 2026 (Earnout Period 2)
Tranche 2 — Threshold (Zero Payout) | $90,000,000.00 | Below this EBITDA level, $0 payout for Tranche 2
Tranche 2 — Linear Ramp | $4.50 per $1 of EBITDA above $90,000,000 | $22,500,000 ÷ $5,000,000 spread = $4.50 per dollar
Change of Control Acceleration | 100% of remaining maximum earnout | If a change of control of the Acquired Business or Ardent Healthcare Acquisition Corp. occurs prior to the end of an Earnout Period, 100% of the maximum remaining earnout becomes immediately due and payable
Amount Payable at Closing | $0.00 | Earnout is contingent consideration; not payable at closing
LTM Adjusted EBITDA (CPI, FY2023, for reference) | $74,160,000.00 | 18.0% margin on $412,000,000 LTM revenue; purchase price multiple of ~8.36x