Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the excuse and exclusion rights currently being negotiated in the side letter (the "Side Letter") between Briarwood Family Office LLC ("BFO") and Meridian Peak Capital Partners Fund IV, L.P. ("Fund IV"), Meridian Peak Capital Partners GP IV LLC (the "GP"), and Meridian Peak Capital Advisors LLC ("MPCA," and together with Fund IV and the GP, the "Meridi

II. Background and Procedural History A. Fund IV Overview Fund IV is a Delaware limited partnership formed for the purpose of making value-add and opportunistic investments in North American commercial real estate, real estate operating companies, and asset management platforms. The general partner is Meridian Peak Capital Partners GP IV LLC, a Delaware limited liability company whose sole member is MPCA. Fund IV's r

III. Excuse Rights Under the Fund IV LPA A. Base LPA Provisions A thorough review of the Fund IV LPA (dated December 20, 2023) reveals that the base LPA contains only limited excuse and exclusion mechanics. Under the existing provisions of the LPA, an LP's right to be excused from a particular investment is narrowly circumscribed and is available only where participation in the investment would cause the LP to violat

IV. Proposed Side-Letter Excuse/Exclusion Rights — Detailed Analysis A. Enumerated Excuse Categories BFO has proposed excuse rights for four specifically defined categories. Each category is described below, together with the rationale for its inclusion and relevant drafting considerations.

1. Cannabis-Related Assets BFO seeks the right to be excused from investments in properties or operating companies primarily engaged in the cultivation, processing, distribution, or sale of cannabis or cannabis-derived products. This category encompasses both direct investments in cannabis enterprises and investments in real property where the primary tenant or operator is engaged in cannabis-related activities. The

2. Gaming/Casino Properties BFO seeks the right to be excused from investments in properties or operating companies primarily engaged in gaming, casino operations, or related hospitality assets where gaming revenues constitute a material portion of income. This category is intended to capture both direct investments in gaming and casino properties and investments in real estate operating companies or platforms whose

3. Investments in Sanctioned Jurisdictions BFO seeks the right to be excused from investments in jurisdictions subject to comprehensive U.S. sanctions administered by the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury. Comprehensive sanctions programs currently apply to countries and regions including, among others, Cuba, Iran, North Korea, Syria, the Crimea region of Ukraine, and th

4. ERISA Plan-Asset Investments BFO seeks the right to be excused from investments that would cause BFO to be treated as holding "plan assets" within the meaning of Section 3(42) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the regulations promulgated thereunder by the U.S. Department of Labor (specifically, 29 C.F.R. § 2510.3-101, as modified by Section 3(42) of ERISA). While BFO

1. GP's Proposed 15% Cap Meridian Peak, through its counsel Ashford Crane & Hewitt LLP, has proposed capping the total amount of excused investments at 15% of BFO's aggregate commitment to Fund IV. At BFO's $75,000,000 commitment level, this cap would limit the total amount of excused investments to $11,250,000. As articulated in the GP's markups and related correspondence, the rationale for the 15% cap centers on th

2. C&H's Counter-Proposed 25% Cap On behalf of BFO, C&H proposed a 25% aggregate excuse cap in the revised term sheet delivered to Ashford Crane on February 21, 2024. At BFO's $75,000,000 commitment level, this cap would limit the total amount of excused investments to $18,750,000. The 25% cap provides meaningful protection across multiple investments over Fund IV's four-year investment period. It accounts for the po

3. Analysis of 20% as Potential Compromise Should the GP prove unwilling to accept the 25% cap, we have analyzed a 20% cap as a potential compromise position. A 20% cap applied to BFO's $75,000,000 commitment would yield a maximum excused amount of $15,000,000. A 20% cap would provide $3,750,000 more headroom than the GP's proposed 15% cap and is consistent with the market median identified in our benchmarking analys

4. Impact on Unfunded Commitment Calculations Under the proposed mechanics, each amount excused reduces BFO's unfunded commitment on a dollar-for-dollar basis. The following examples illustrate the impact of excuse elections at each proposed cap level: Example at 25% Cap: If BFO exercises excuse rights for investments totaling $18,750,000 in aggregate (the full extent of the 25% cap), and assuming no prior capital ca

V. Delaware Law Considerations — Enforceability of Excuse Provisions A. Freedom of Contract Under the Delaware Revised Uniform Limited Partnership Act (DRULPA) The Fund IV LPA and the Side Letter are governed by the laws of the State of Delaware. Delaware's Revised Uniform Limited Partnership Act (6 Del. C. §§ 17-101 et seq.) ("DRULPA") provides a highly favorable legal framework for the enforcement of excuse provisi

Section 17-1101(c) of DRULPA provides that "[i]t is the policy of this chapter to give maximum effect to the principle of freedom of contract and to the enforceability of partnership agreements." This statutory directive reflects Delaware's long-standing commitment to respecting the contractual arrangements negotiated by sophisticated parties in the limited partnership context. Delaware courts have consistently inter

VI. Market Practice Comparison A. Excuse Cap Benchmarking To inform BFO's negotiating position, we have conducted a survey of excuse cap provisions in recent mid-market and large-cap real estate and private equity fund side letters. Our survey covers side letters of 2022–2024 vintage, across a range of fund sizes and strategies, with a focus on real estate funds with investment mandates comparable to Fund IV's. The r

VII. ERISA Implications — Plan-Asset Excuse A. Overview of the Plan-Asset Issue The plan-asset rules under ERISA and the regulations promulgated by the U.S. Department of Labor present a distinct and important regulatory concern that supports BFO's request for an ERISA-specific excuse right and, separately, a carve-out of ERISA-related excuses from the aggregate excuse cap. Under the DOL's plan-asset regulation (29 C

VIII. Practical Considerations and Drafting Recommendations A. Drafting the Excuse Provision Precise drafting of the excuse provision is essential to ensure its administrability and to minimize the risk of disputes between BFO and the GP over the scope and application of the excuse categories. We offer the following specific drafting recommendations: Category Definitions. Each excuse category should be defined with s

IX. Recommendations Based on the analysis set forth in this memorandum, we recommend the following approach for the continued negotiation of the excuse rights provisions of the Side Letter: A. Primary Position: Maintain 25% Cap ($18,750,000) BFO should maintain its position that the aggregate excuse cap be set at 25% of BFO's committed capital, yielding a maximum excused amount of $18,750,000. The 25% cap provides ad