Kit and Samuel,
I hope you are both well. On behalf of our client, Ardent Healthcare Acquisition Corp. (the "Purchaser"), we are pleased to circulate the attached initial draft of the Asset Purchase Agreement (the "Draft APA") for the proposed acquisition of substantially all of the assets of Cardinal Peak Industries, Inc. ("CPI" or the "Seller"). The draft is attached in Word format for your review and comment.
Please note that the Draft APA is marked "Draft – Subject to Further Review" and remains subject to further internal review by the Purchaser and its advisors. We reserve the right to supplement or revise the draft accordingly.
For ease of reference, below is a high-level summary of certain key terms addressed in the Draft APA (this summary is illustrative and not exhaustive):
- **Structure:** Asset purchase — the Purchaser will acquire substantially all assets of CPI and assume certain specified liabilities. - **Base Purchase Price:** $620,000,000. - **Earnout:** Performance-based earnout of up to $45,000,000 in the aggregate, tied to Adjusted EBITDA targets over two post-closing measurement periods, with change of control acceleration provisions. - **Escrow:** $62,000,000 holdback (10% of the base purchase price), subject to a two-tranche release schedule. - **Working Capital Adjustment:** Customary adjustment mechanism with a Net Working Capital Target of $28,000,000. - **Indemnification:** Overall cap of 20% of the base purchase price ($124,000,000); 18-month survival period for general representations and warranties; tipping basket of $3,100,000. - **Excluded Assets:** Includes, among others, cash, tax refunds, and equity interests in Cardinal Peak Labs, Inc. - **Excluded Liabilities:** Includes, among others, pre-closing litigation and pre-closing tax liabilities. - **Governing Law:** Delaware. - **Key Principal Employment/Non-Compete Arrangements:** Provisions regarding employment and non-competition arrangements for certain key principals will be circulated separately.
**Disclosure Schedules.** The Draft APA does not yet include disclosure schedules. The draft identifies required schedules by section reference throughout. We would ask that Seller's counsel begin assembling the disclosure schedules at your earliest convenience so that preparation of those schedules can proceed in parallel with your review of the Draft APA.
**Ancillary Agreements.** Certain ancillary agreements — including the earnout agreement, escrow agreement, transition services agreement, employment and non-competition agreements, and IP assignment agreement — are being prepared separately and will be circulated in the coming days and weeks as drafts become available.
**Due Diligence.** As you know, due diligence commenced on February 5, 2024, and remains ongoing. The Draft APA may be supplemented or revised as additional diligence findings are incorporated.
**Timing.** We would appreciate it if you could review the Draft APA and provide a markup or written comments at your earliest convenience. Given the parties' shared desire to move toward signing expeditiously, would a two-week turnaround — i.e., on or about February 26, 2024 — be feasible on your end? We are, of course, happy to schedule a call at any point to discuss preliminary questions or structural comments in advance of a full markup.
Finally, we would remind all recipients that the Draft APA and the terms discussed herein are confidential and subject to the confidentiality provisions of the executed Letter of Intent dated January 29, 2024.
Please do not hesitate to reach out with any questions. I can be reached at the number and email below, and Beatrice is likewise available.
Best regards,
**Derek Okonkwo** Associate Calderwood & Harkness LLP One World Financial Center 200 Liberty Street, 40th Floor New York, NY 10281 T: (212) 558-4000 E: dokonkwo@calderwoodharkness.com
C&H Matter No. 2024-M&A-0142
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