1003-00001 · Harrowgate Capital Management LLC · Memos & Analysis

termination-advisory-memo.docx DOCUMENT Antitrust

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE ATTORNEY WORK PRODUCT

MEMORANDUM

FROM: Howard Bellamy, Partner, and Elliot Nguyen, Associate — Antitrust & Competition Group Calderwood & Harkness LLP 425 Lexington Avenue New York, NY 10017

TO: Gavin Trask, Managing Partner & Chairman, and Diane Ochoa, Partner, Head of Financial Services Investments Harrowgate Capital Management LLC 1200 North Market Street, Suite 1400 Wilmington, DE 19801

DATE: August 27, 2024

RE: Transaction Abandonment Advisory — Proposed Acquisition of Ridgemark Capital Advisors, LLC by Harrowgate Private Equity Fund IV, L.P. C&H Matter No. 1003-00001 FTC Transaction No. 2418-7603

CC: Elaine Forsythe, Partner (Calderwood & Harkness LLP, Billing Partner) Aaron Liu, Associate (Calderwood & Harkness LLP, Working Associate) Marcus Hale, Vice President, Deal Execution (Harrowgate Capital Management LLC)

I. Executive Summary and Purpose

The purpose of this memorandum is to advise Harrowgate Capital Management LLC ("HCM"), in its capacity as the general partner of Harrowgate Private Equity Fund IV, L.P. ("HPE Fund IV"), on the legal mechanics, procedural requirements, and recommended timeline necessary to effectuate the orderly abandonment of the proposed acquisition of one hundred percent (100%) of the outstanding membership interests of Ridgemark Capital Advisors, LLC ("Ridgemark" or "RCA"). As discussed on a conference call among Howard Bellamy, Elliot Nguyen, Gavin Trask, Diane Ochoa, and Marcus Hale on the evening of August 26, 2024, the Harrowgate Investment Committee voted unanimously on August 26, 2024 to abandon the transaction. This memorandum sets forth the steps that must be taken to unwind the transaction in a legally complete and orderly manner, and it identifies the principal obligations and liabilities that will arise in connection with the termination.

The Investment Committee's decision to abandon the transaction is commercial in nature and is driven by a number of developments at Ridgemark that have materially altered the economics of the acquisition since the execution of the Membership Interest Purchase Agreement (as defined below) on June 4, 2024. Specifically, as reported by Diane Ochoa and the deal team, Ridgemark has experienced the following adverse developments during the pendency of the transaction:

• Deteriorating Performance Fee Revenue. Ridgemark's Q2 2024 performance fee revenue declined approximately 41% year-over-year, falling to approximately $1.8 million compared to approximately $3.05 million in Q2 2023. This decline was driven principally by underperformance in Ridgemark's alternative credit and structured product strategies and reflects a broader weakening of fund-level returns across several of Ridgemark's key investment vehicles.

• Key-Person Departures. Two senior portfolio managers in Ridgemark's alternative credit group—which accounts for approximately 28% of Ridgemark's aggregate assets under management—have submitted formal notices of departure, with anticipated last dates of employment in Q4 2024. These departures create significant key-person risk, potential disruption to client relationships, and the prospect of assets-under-management outflows in a segment that was central to the investment thesis underlying the acquisition.

• Revised Revenue Run-Rate. Based on updated financial information provided by Ridgemark and analyzed by the Harrowgate deal team, the annualized revenue run-rate for Ridgemark has declined to approximately $52.6 million, down from the trailing twelve-month ("TTM") revenue figure of approximately $58.3 million as of Q1 2024 that underpinned the pricing negotiations at signing.

• Multiple Compression. As a result of the foregoing, the implied forward EBITDA multiple on the agreed enterprise value of $370 million has compressed (i.e., increased, reflecting a deterioration in value relative to price) to approximately 25.5x on a pro forma basis ($370 million ÷ estimated $14.5 million forward EBITDA), up from approximately 22.0x at the time of signing. The Investment Committee determined that this level of multiple, combined with the operational risks described above, renders the acquisition unattractive from a risk-adjusted return perspective.

This memorandum addresses three principal areas that must be managed in connection with the abandonment: (A) the termination of the Membership Interest Purchase Agreement, including the Buyer's termination right, the reverse termination fee obligation, notice mechanics, and the effect on debt financing commitments; (B) the withdrawal of the parties' Hart-Scott-Rodino premerger notification filings with the Federal Trade Commission ("FTC") and the closure of the related FTC investigation; and (C) the post-termination obligations of HCM, HPE Fund IV, and their advisors, including confidentiality, return of materials, and standstill and non-solicitation provisions.

We recommend the following target dates for the principal steps: (i) delivery of the written termination notice under the MIPA by August 30, 2024; (ii) submission of the HSR withdrawal letter to the FTC Premerger Notification Office by September 3, 2024; and (iii) wire transfer of the reverse termination fee of $7.4 million to Ridgemark by September 10, 2024 (which is within the ten (10) business day period following the anticipated termination effective date).

A detailed timeline and action item chart is set forth in Section VII of this memorandum.

II. Termination of the Membership Interest Purchase Agreement

A. Overview of the MIPA

The operative transaction document is the Membership Interest Purchase Agreement, dated as of June 4, 2024 (the "MIPA"), entered into among the following parties:

• Harrowgate Private Equity Fund IV, L.P., a Delaware limited partnership, as Buyer;

• Ridgemark Capital Advisors, LLC, a Delaware limited liability company, as the Company;

• Jonathan Kessler, individually and in his capacity as Founder & CEO of Ridgemark;

• Priya Narayanan, individually and in her capacity as COO of Ridgemark;

• The Other Employee Partners (as defined in the MIPA), being certain senior employees of Ridgemark who hold membership interests in the Company; and

• Thornfield Growth Partners, LLC, a Delaware limited liability company, as a Seller and the principal financial sponsor with a minority interest in Ridgemark.

The MIPA provides for HPE Fund IV to acquire one hundred percent (100%) of the outstanding membership interests of Ridgemark at a total enterprise value of $370 million. After giving effect to the assumption of approximately $42 million of net funded debt at the Company level, the aggregate equity purchase price payable to the Sellers is $328 million, subject to customary adjustments for working capital, transaction expenses, and other items specified in the MIPA.

The transaction includes significant rollover equity provisions: Jonathan Kessler (Founder & CEO) and Priya Narayanan (COO) each agreed to retain approximately 10% rollover equity in the post-closing entity, reflecting the parties' alignment on a go-forward management structure in which Kessler and Narayanan would continue to lead the business. Thornfield Growth Partners, LLC, which holds approximately 30% of the pre-closing equity in Ridgemark, was to receive a full cash exit of approximately $98.4 million (calculated as 30% × $328 million, subject to adjustments), with no rollover component.

The closing of the transaction was subject to a number of conditions precedent, including, among others: (i) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (ii) the absence of any order, injunction, or decree of any governmental authority prohibiting the consummation of the transaction; (iii) the accuracy of the representations and warranties of the parties (subject to applicable materiality and Material Adverse Effect qualifiers); (iv) compliance with covenants; and (v) the receipt of certain third-party consents.

B. Buyer's Termination Right

The MIPA grants the Buyer a contractual right to terminate the agreement voluntarily (i.e., without cause) under certain circumstances. Specifically, Section 10.1(d) of the MIPA provides that the Buyer may terminate the MIPA at any time prior to the Closing by delivering written notice to the Company and the Sellers, provided that the Buyer simultaneously pays or commits to pay the Reverse Termination Fee (as defined below) in accordance with Section 10.3(b) of the MIPA. This termination right is sometimes referred to in practice as a "voluntary walk-away" or "buyer's option" right, and it reflects the negotiated allocation of deal risk in which the Buyer secured the flexibility to abandon the transaction at any time prior to closing in exchange for the payment of the Reverse Termination Fee as liquidated damages.

It is important to note that the commercial deterioration at Ridgemark described in Section I of this memorandum does not, in our assessment, constitute a basis for termination "for cause" under the MIPA's Material Adverse Effect ("MAE") definition. Section 1.1 of the MIPA defines "Material Adverse Effect" using customary language and includes a number of carve-outs (including, among others, changes in general economic or market conditions, industry-wide developments, changes in applicable law, and the effects of the announcement of the transaction itself). While the decline in performance fee revenue, the key-person departures, and the deterioration of the revenue run-rate are significant from a commercial standpoint, they likely fall within the zone of ordinary-course business fluctuations and industry conditions that are excluded from the MAE definition by the carve-outs. Moreover, the standard for establishing a Material Adverse Effect is exceedingly high under Delaware law, and any attempt to invoke the MAE termination right (Section 10.1(c) of the MIPA) would expose HPE Fund IV to litigation risk and potential claims by the Sellers that the purported MAE was not sufficiently severe or durationally significant to satisfy the legal standard. Accordingly, we strongly recommend that the termination be effectuated as a voluntary termination by the Buyer under Section 10.1(d), with the corresponding obligation to pay the Reverse Termination Fee, rather than as a termination for cause under the MAE provision.

We further note that no regulatory condition failure has occurred. The FTC has not blocked the transaction, nor has it sought or obtained a preliminary injunction or administrative order to prevent the closing. Rather, the FTC issued a Second Request for additional information and documentary material on July 16, 2024, which tolled the HSR waiting period. As of the date of this memorandum, the parties have not yet certified substantial compliance with the Second Request, and the waiting period remains tolled. The transaction is therefore being abandoned prior to the expiration or termination of the HSR waiting period, but this is a consequence of the Buyer's voluntary decision rather than any regulatory impediment to consummation.

C. Reverse Termination Fee

1. Amount. The Reverse Termination Fee payable by the Buyer in connection with a voluntary termination under Section 10.1(d) of the MIPA is $7,400,000 (Seven Million Four Hundred Thousand Dollars), calculated as 2.0% of the total enterprise value of the transaction ($370,000,000 × 2.0% = $7,400,000). This amount was negotiated at the time of signing as a mutually agreed measure of liquidated damages to compensate the Company and the Sellers for the costs, expenses, disruption, and lost opportunity arising from the Buyer's election to abandon the transaction.

2. Payment Obligation

The Reverse Termination Fee is payable by HPE Fund IV to Ridgemark Capital Advisors, LLC. The payment obligation is triggered upon the effective termination of the MIPA by the Buyer without cause under Section 10.1(d). Pursuant to Section 10.3(b) of the MIPA, the Reverse Termination Fee must be paid no later than ten (10) business days following the date on which the termination becomes effective. Assuming that the termination notice is delivered and becomes effective on August 30, 2024, the ten-business-day deadline would fall on or about September 13, 2024. We recommend, however, that the wire transfer be initiated on or before September 10, 2024 to provide a reasonable buffer and to demonstrate good faith and prompt compliance.

3. Payment Mechanism

Payment of the Reverse Termination Fee shall be made by wire transfer of immediately available funds to the bank account designated by Ridgemark in Schedule 2.3 of the MIPA, or to such other account as Ridgemark or its counsel may designate in writing. We recommend that Calderwood & Harkness confirm the wire instructions with Catherine Oakes at Blackwell, Oakes & Hardin LLP (Ridgemark's lead M&A counsel) prior to the wire date to ensure accuracy and to obtain written confirmation of the receiving account information. The wire transfer should be initiated by the appropriate personnel at HCM or the fund administrator for HPE Fund IV, and a copy of the wire confirmation should be retained for the transaction records.

4. Sole and Exclusive Remedy

Section 10.3(b) of the MIPA expressly provides that the Reverse Termination Fee constitutes the sole and exclusive remedy of Ridgemark, the Sellers, and their respective affiliates against HPE Fund IV, HCM, and their respective affiliates, equityholders, partners, officers, directors, employees, agents, and representatives in connection with a voluntary termination of the MIPA by the Buyer. Upon timely payment of the Reverse Termination Fee, neither Ridgemark nor any Seller shall have any further claim for damages (whether direct, indirect, consequential, or otherwise), specific performance, or other equitable relief against the Buyer or any Buyer-related party arising out of, relating to, or in connection with the MIPA, the termination thereof, or the abandonment of the transaction. This provision is a critical protection for HPE Fund IV and HCM, and it underscores the importance of timely and complete payment of the Reverse Termination Fee.

5. Tax Treatment Considerations

The characterization and deductibility of the $7.4 million Reverse Termination Fee payment for U.S. federal, state, and local income tax purposes should be analyzed by HCM's tax advisors. We recommend that HCM consult with Pallister & Greaves Bramwell CPAs LLP, Harrowgate's outside auditor, regarding whether the Reverse Termination Fee is deductible as an ordinary and necessary business expense under Section 162 of the Internal Revenue Code, whether it is treated as a capital expenditure that must be added to the basis of an abandoned transaction (and, if so, whether and when a loss deduction may be claimed), and whether any other tax considerations apply at the fund or investor level. Calderwood & Harkness does not provide tax advice, and this memorandum does not address the tax implications of the Reverse Termination Fee payment.

D. Termination Notice Mechanics

1. Form of Notice

Section 12.1 of the MIPA specifies the procedures for the delivery of notices under the agreement. A notice of termination must be in writing and must be delivered to the Company, the Sellers' Representative, and each of the parties entitled to receive notice under the MIPA. The notice must reference the specific section of the MIPA under which termination is being effected (i.e., Section 10.1(d)), must state that the termination is effective as of the date of delivery (or such later date as may be specified), and must confirm the Buyer's intention to pay the Reverse Termination Fee in accordance with Section 10.3(b).

2. Required Recipients and Addresses

The termination notice must be delivered to the following parties at the addresses specified in Section 12.1 of the MIPA:

(a) Ridgemark Capital Advisors, LLC 600 Boylston Street, Suite 3200 Boston, MA 02116

Attention: Jonathan Kessler, Chief Executive Officer

(b) Thornfield Growth Partners, LLC 399 Park Avenue, 28th Floor New York, NY 10022

Attention: Sandra Wellman, Partner

Attention: Catherine Oakes

(d) Lyle & Pennington LLP (Counsel to Thornfield Growth Partners, LLC) 51 West 52nd Street New York, NY 10019

Attention: Thomas Pennington III

3. Delivery Methods

Pursuant to Section 12.1 of the MIPA, notices are deemed received upon (i) personal delivery, (ii) the next business day following deposit with a nationally recognized overnight courier service (with proof of delivery), or (iii) the date of transmission by email if sent prior to 5:00 p.m. Eastern Time on a business day and confirmed by a non-automated reply or by delivery of an original via overnight courier within two (2) business days thereafter. We recommend that the termination notice be sent by overnight courier (Severin Partners LLC or UPS Next Day Air) to each of the above addresses, with simultaneous email transmission to the designated contacts at each party and their respective counsel. This dual-delivery approach will ensure that the "receipt" requirements under Section 12.1 are satisfied and will provide a clear documentary record of the date and time of delivery.

4. Drafting and Delivery Timeline

Calderwood & Harkness will prepare and circulate a draft termination notice for HCM's review by August 28, 2024. We request that HCM review the draft and provide any comments or approval by August 29, 2024, with a target delivery date of August 30, 2024. If HCM approves the draft on the expected timeline, Calderwood & Harkness will arrange for the overnight courier deliveries and email transmissions to be completed on August 30, 2024.

5. Effective Date of Termination

Subject to the specific language of Section 12.1 of the MIPA, the termination will become effective upon delivery of the notice to the Company and the Sellers' Representative (i.e., upon the earliest of personal delivery, overnight courier delivery, or confirmed email delivery). Assuming delivery on August 30, 2024, the effective date of termination will be August 30, 2024, and all post-termination deadlines (including the Reverse Termination Fee payment deadline) will run from that date.

E. Effect on Debt Financing Commitment

The commitment letter dated June 3, 2024, issued by Meridian National Bank, N.A. to HPE Fund IV in connection with the transaction, provides for a senior secured credit facility in the aggregate principal amount of $280 million, consisting of a $220 million term loan and a $60 million revolving credit facility. The commitment letter includes customary terms providing that the commitments thereunder will terminate automatically upon the termination of the MIPA in accordance with its terms, without any further action by the parties. Accordingly, upon the effective date of the termination of the MIPA, the Meridian commitment letter will terminate by its own terms, and no separate notice of termination is required to effectuate the termination of the financing commitments.

Notwithstanding the foregoing, we recommend that HCM send a courtesy notification to Gerald Statham, Senior Vice President, Sponsor Finance, Meridian National Bank, N.A., 70 Hudson Street, Jersey City, NJ 07302, promptly following the delivery of the MIPA termination notice, confirming that the transaction has been abandoned and that the commitment letter has terminated in accordance with its terms. This notification is not legally required but is consistent with good practice and will preserve the relationship between Harrowgate and Meridian for future transactions.

We further recommend that HCM and Marcus Hale coordinate with Greycastle Partners LLC (Mitchell Avery, Managing Director) to confirm whether any commitment fee, break fee, or other compensation is payable to Meridian National Bank, N.A. under the terms of the commitment letter in connection with the termination. The commitment letter includes a work fee of $350,000 that was payable upon signing and a commitment fee of 0.35% per annum on unutilized commitments, accruing from the date of the commitment letter. It is possible that a portion of the work fee is non-refundable regardless of whether the transaction closes, and Marcus Hale should confirm the status of this fee with Meridian and Greycastle.

III. Withdrawal of the HSR Notification

A. Procedural Basis for Withdrawal

1. Statutory and Regulatory Framework

The proposed acquisition is subject to the premerger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a (the "HSR Act"), and the implementing regulations promulgated thereunder by the Federal Trade Commission at 16 C.F.R. Parts 801–803. The HSR Act requires that the parties to certain mergers and acquisitions exceeding specified size-of-transaction and size-of-person thresholds file Notification and Report Forms with both the FTC and the Antitrust Division of the U.S. Department of Justice ("DOJ") and observe a mandatory waiting period before consummating the transaction. The waiting period affords the enforcement agencies an opportunity to review the competitive implications of the proposed transaction and to determine whether to challenge it.

2. Withdrawal Authority

The specific regulatory authority for the withdrawal of an HSR notification is set forth in 16 C.F.R. § 803.7, which provides that a filing person may withdraw its notification at any time prior to the expiration or termination of the waiting period, or, in the case of a transaction that is subject to a Request for Additional Information and Documentary Material (commonly known as a "Second Request"), at any time prior to the filing person's certification of substantial compliance with the Second Request. Upon withdrawal of the notification, the waiting period ceases to run, and the filing person may not consummate the transaction unless a new notification is filed and a new waiting period has commenced and expired or been terminated.

3. Current Procedural Posture

The parties filed their respective HSR Notification and Report Forms with the FTC and DOJ on June 18, 2024. The FTC acknowledged receipt of both filings on June 21, 2024, and clearance to review the transaction was assigned to the FTC (rather than DOJ). The initial thirty (30)-day waiting period under the HSR Act commenced upon the FTC's acknowledgment of receipt and would have expired on July 21, 2024 (adjusted for weekends). However, on July 16, 2024, prior to the expiration of the initial waiting period, the FTC issued a Second Request to both filing parties, which tolled the waiting period pursuant to 15 U.S.C. § 18a(e)(2).

As of the date of this memorandum, the parties have not yet certified substantial compliance with the Second Request. The document collection and review process had commenced, and Calderwood & Harkness had begun coordinating with Harrowgate personnel and Dunmore Asset Management LLC (a portfolio company of HPE Fund IV identified by the FTC as a potential competitive overlap) to identify and collect responsive documents. However, no formal production had been made to the FTC pursuant to the Second Request, with the exception of twenty-three (23) supplemental documents that were produced to the FTC on July 10, 2024 in response to a voluntary access letter issued by FTC staff on July 8, 2024 (which predated the formal Second Request). No interrogatory responses, data submissions, or white papers had been submitted.

4. Effect of Withdrawal

Upon the FTC's receipt of the Acquiring Person's withdrawal letter, the HSR investigation will effectively be closed. The FTC will have no further basis to compel compliance with the Second Request, as the Second Request is ancillary to the pending notification and becomes moot upon withdrawal. No further obligation to comply with the Second Request will exist once the filing is withdrawn and the transaction is abandoned. The FTC's Premerger Notification Office will process the withdrawal and update its records to reflect that the notification has been withdrawn and the transaction abandoned.

B. Withdrawal Letter

Calderwood & Harkness will prepare a formal withdrawal letter addressed to the Premerger Notification Office of the Federal Trade Commission, Bureau of Competition, 600 Pennsylvania Avenue NW, Washington, D.C. 20580. The letter will be submitted under the signature of Howard Bellamy as counsel for the Acquiring Person (Harrowgate Capital Management LLC, as the Ultimate Parent Entity of the Acquiring Person).

The withdrawal letter will include the following content:

(i) Identification of the filing parties: Harrowgate Capital Management LLC, as the Ultimate Parent Entity of the Acquiring Person; and Ridgemark Capital Advisors, LLC, as the Acquired Person.

(ii) The FTC Transaction Number: 2418-7603.

(iii) A reference to the original filing date of June 18, 2024, and the FTC's acknowledgment of receipt on June 21, 2024.

(iv) A statement that the parties have abandoned the proposed transaction as of August 30, 2024, and that the Membership Interest Purchase Agreement dated June 4, 2024 has been terminated by the Buyer.

(v) A formal request, pursuant to 16 C.F.R. § 803.7, for the withdrawal of the Acquiring Person's HSR Notification and Report Form.

(vi) A statement that the Second Request issued by the FTC on July 16, 2024 is rendered moot by the withdrawal and abandonment, and that no further compliance obligations will be undertaken.

(vii) A request for written confirmation from the FTC Premerger Notification Office that the withdrawal has been accepted and processed, and that the file has been closed.

(viii) The statutory citations: 15 U.S.C. § 18a; 16 C.F.R. § 803.7.

The target submission date for the withdrawal letter is September 3, 2024, which is the first business day following the Labor Day holiday weekend. We note that the withdrawal letter may be submitted by email to the FTC Premerger Notification Office, with a hard copy to follow by mail, consistent with the FTC's current filing procedures.

A courtesy copy of the withdrawal letter will be sent to Rajesh Subramaniam at Blackwell, Oakes & Hardin LLP, who serves as Ridgemark's antitrust counsel. Mr. Subramaniam may separately coordinate the withdrawal of the Acquired Person's filing or confirm to the FTC that the transaction has been abandoned.

C. Coordination with Acquired Person's Filing

The Acquired Person, Ridgemark Capital Advisors, LLC, filed its own HSR Notification and Report Form on June 18, 2024, simultaneously with the Acquiring Person's filing. Under the HSR Act and the implementing regulations, each filing party has the right to withdraw its own notification independently. While the Acquiring Person's withdrawal alone is sufficient to prevent consummation of the transaction (since a new notification and new waiting period would be required in order to consummate), it is prudent and customary practice for both filing parties to submit withdrawal letters to the FTC to ensure a clean closure of the investigation file.

We recommend that Elliot Nguyen contact Rajesh Subramaniam at Blackwell, Oakes & Hardin LLP promptly following the delivery of the MIPA termination notice to coordinate the parallel withdrawal of the Acquired Person's filing. We expect that Ridgemark's counsel will cooperate in this process, given that the transaction is being abandoned and there is no dispute between the parties regarding the termination. If Ridgemark elects not to submit its own withdrawal letter, the FTC may independently close the file upon receipt of the Acquiring Person's withdrawal and confirmation that the transaction has been abandoned, but a parallel withdrawal by both parties is the most efficient and clean approach.

IV. Post-Termination Obligations

A. Confidentiality and Non-Disclosure Obligations

The MIPA contains comprehensive confidentiality and non-disclosure provisions in Section 8.3, which by their terms survive the termination of the agreement. These provisions impose ongoing obligations on HPE Fund IV, HCM, and their respective officers, directors, employees, agents, and representatives (including outside advisors) to maintain the confidentiality of all proprietary, non-public, and confidential information received from or on behalf of Ridgemark during the course of the transaction, including information obtained through the due diligence process, the virtual data room, management presentations, and other disclosures made by Ridgemark and the Sellers.

HPE Fund IV and HCM remain fully bound by these confidentiality obligations following the termination of the MIPA, and such obligations continue in accordance with the survival period specified in Section 8.3 (which, based on our review of the MIPA, extends for a period of two (2) years following the date of termination). All Harrowgate personnel who had access to Ridgemark's confidential information during the transaction—including, without limitation, Gavin Trask, Diane Ochoa, Marcus Hale, and all members of the investment team, as well as all outside advisors engaged in connection with the transaction—must continue to safeguard such information and may not use it for any purpose other than as expressly permitted under the surviving provisions of the MIPA.

The following advisors and their respective personnel are subject to the confidentiality obligations either directly under the MIPA or under separate confidentiality undertakings or engagement letters:

• Calderwood & Harkness LLP — legal counsel to HPE Fund IV and HCM

• Greycastle Partners LLC (Mitchell Avery, Managing Director) — financial advisor to HPE Fund IV

• Pallister & Greaves Bramwell CPAs LLP — auditor and tax advisor to Harrowgate

Calderwood & Harkness will circulate a written reminder to all members of the transaction team—including all partners, counsel, associates, and paralegals who worked on the matter—confirming the continuing nature of the confidentiality obligations and instructing them to refrain from any disclosure or use of Ridgemark's confidential information. We recommend that HCM issue a parallel internal communication to all Harrowgate personnel, as discussed further in Section V.C below.

B. Return and Destruction of Confidential Materials

Section 8.3(d) of the MIPA requires that, upon termination of the agreement, the Buyer and its representatives promptly return or destroy all confidential information received from the Company and the Sellers, and provide a written certification of destruction or return to the Company. This obligation extends to all copies of confidential information in any format, including electronic copies, printed documents, summaries, analyses, compilations, and other materials that contain or reflect confidential information.

We recommend that HCM take the following steps to comply with this obligation:

(i) Data Room Materials. Coordinate with the data room provider (we understand that the virtual data room was hosted by Crestline Solutions) to terminate HPE Fund IV's and HCM's access to the data room and to obtain confirmation that access has been revoked. Any materials downloaded from the data room by Harrowgate personnel or advisors should be identified, collected, and destroyed (with a record of destruction maintained).

(ii) Financial Models and Projections. All financial models, projections, and analyses prepared by Cairnstone Advisory Group LLC (Laura Feng, Managing Director) on behalf of Ridgemark, as well as any derivative models or analyses prepared by Harrowgate or its advisors based on such materials, should be returned or destroyed.

(iii) Employee and Client Information. All employee lists, compensation data, client lists, and related information received from Ridgemark during due diligence must be destroyed. Given the sensitive nature of this information, particular care should be taken to ensure that no copies are retained.

(iv) Investment Performance Records. All fund-level and strategy-level performance records, track records, attribution analyses, and related materials received from Ridgemark must be destroyed.

(v) Other Proprietary Information. Any other materials containing proprietary or confidential information of Ridgemark—including, without limitation, organizational documents, contracts, compliance records, regulatory filings, and marketing materials—should be returned or destroyed.

We recommend that Marcus Hale coordinate with all advisors to ensure that the return or destruction of materials is completed by September 13, 2024, and that a certification of destruction be provided to Ridgemark (through its counsel, Catherine Oakes at Blackwell, Oakes & Hardin LLP) promptly thereafter.

C. Second Request Materials

The FTC Second Request issued on July 16, 2024 generated a significant document collection and review effort, which was underway at the time of the Investment Committee's decision to abandon the transaction. The status and disposition of the materials compiled in connection with the Second Request are as follows:

Documents Produced to the FTC. As noted above, twenty-three (23) supplemental documents were produced to the FTC on July 10, 2024, in response to a voluntary access letter issued by FTC staff on July 8, 2024. These documents are now in the possession of the FTC. There is no mechanism available to compel the return of these documents from the FTC. However, the FTC's confidentiality rules, set forth in 16 C.F.R. Part 4, impose strict restrictions on the FTC's use and further disclosure of materials received in connection with HSR investigations. Specifically, materials submitted to the FTC pursuant to the HSR Act are treated as confidential and exempt from disclosure under the Freedom of Information Act, subject to certain limited exceptions (e.g., disclosure to other law enforcement agencies or pursuant to a court order). We do not anticipate any further disclosure by the FTC of these materials, particularly given that the transaction is being abandoned and the investigation will be closed.

Internally Compiled Materials. A substantial volume of documents and data was collected from Harrowgate, HPE Fund IV, and Dunmore Asset Management LLC in the early stages of the Second Request compliance process but was not produced to the FTC prior to the abandonment decision. These materials include custodian files, email archives, transactional records, and other documents identified as potentially responsive to the Second Request. These materials should be preserved in accordance with Calderwood & Harkness's document retention policy and the terms of the engagement letter between Calderwood & Harkness and HCM. They may be archived and marked as matter-closed work product. There is no legal obligation to produce these materials to the FTC following the withdrawal of the HSR notification and the abandonment of the transaction.

We confirm that no formal certification of substantial compliance was submitted to the FTC on behalf of either filing party. Accordingly, there are no additional compliance obligations outstanding under the Second Request, and the withdrawal of the notification will fully discharge the parties' obligations in connection with the HSR filing.

D. Standstill and Non-Solicitation Provisions

We recommend that HCM carefully review the MIPA for any standstill or non-solicitation provisions that survive the termination of the agreement. Based on our review of the MIPA, Section 8.5 includes a non-solicitation of employees covenant that restricts the Buyer and its affiliates from, directly or indirectly, soliciting, recruiting, hiring, or otherwise seeking to engage any employee of Ridgemark for a period of eighteen (18) months following the termination of the MIPA. This restriction applies to all employees of Ridgemark, not merely to senior or key employees, and it extends to the Buyer's affiliates, which would include HCM and its portfolio companies.

This provision is particularly relevant in light of the fact that two senior portfolio managers in Ridgemark's alternative credit group have given notice of their intention to depart Ridgemark. As noted in Section I above, the departure of these individuals was one of the factors that contributed to the Investment Committee's decision to abandon the transaction. To the extent that HPE Fund IV, HCM, or any Harrowgate-affiliated entity (including, without limitation, Dunmore Asset Management LLC) may have an interest in recruiting or hiring these individuals, such actions would be subject to the non-solicitation restriction in Section 8.5 of the MIPA. We strongly advise that HPE Fund IV, HCM, and all affiliated entities refrain from any contact with these individuals (or any other Ridgemark employees) for the purpose of recruitment, hiring, or engagement during the restricted period, unless and until a determination is made that such contact does not violate the non-solicitation covenant.

We will provide a separate, more detailed analysis of the scope and enforceability of the non-solicitation provision if HCM requests, including an assessment of any exceptions or carve-outs that may apply (e.g., for employees who respond to general advertising or who independently approach Harrowgate without solicitation).

The MIPA does not appear to include a separate standstill provision that would restrict HPE Fund IV from acquiring or seeking to acquire Ridgemark or its membership interests during a specified period following termination. Accordingly, HPE Fund IV would not be contractually precluded from re-approaching Ridgemark with a new acquisition proposal at a future date, although any such proposal would, of course, be subject to new negotiations and a new HSR filing.

V. Notifications to Other Parties and Advisors

A. Notification to Financial Advisors

Greycastle Partners LLC served as the financial advisor to HPE Fund IV and HCM in connection with the proposed acquisition. HCM should notify Mitchell Avery, Managing Director, at Greycastle Partners LLC, 300 Atlantic Street, Stamford, CT 06901, of the termination of the transaction promptly following the delivery of the MIPA termination notice. In addition to confirming the abandonment, HCM should coordinate with Greycastle on the following matters: (i) any break fee or other payment obligations under the Meridian National Bank, N.A. commitment letter (as discussed in Section II.E above); (ii) the implications of the transaction termination for the advisory fee arrangement between HPE Fund IV and Greycastle, including whether any success fee was conditioned on closing and whether any retainer or monthly advisory fees remain outstanding; and (iii) Greycastle's obligations with respect to the return or destruction of Ridgemark's confidential information.

No separate notification from HCM to Cairnstone Advisory Group LLC (Laura Feng, Managing Director), which served as the financial advisor to Ridgemark, is required or appropriate. Ridgemark will handle its own notifications to its advisors, and any communication from HCM or HPE Fund IV to Cairnstone regarding the termination should be channeled through Ridgemark's counsel.

B. Notification to Dunmore Asset Management LLC

Dunmore Asset Management LLC ("Dunmore") is a portfolio company of a prior Harrowgate fund (HPE Fund II) and was identified by the FTC during its investigation as a potential competitive overlap with Ridgemark in the alternative credit and structured product advisory segments. As a result, Dunmore personnel—including senior investment professionals and compliance staff—were involved in the Second Request document collection and preparation process, and certain Dunmore custodians were identified as having potentially responsive documents.

HCM should promptly notify Franklin Broussard, Chief Executive Officer, at Dunmore Asset Management LLC, 227 West Monroe Street, Suite 4100, Chicago, IL 60606, that the proposed acquisition of Ridgemark has been abandoned and that no further document collection or Second Request compliance work is required. This notification should also reiterate the confidentiality obligations applicable to any Ridgemark-related information to which Dunmore personnel may have been exposed during the course of the investigation, and it should confirm the non-solicitation restrictions applicable to Dunmore as an affiliate of HPE Fund IV and HCM with respect to Ridgemark employees.

C. Internal Harrowgate Notifications

We recommend that HCM issue an internal communication to all Harrowgate personnel who were involved in the proposed transaction, including investment professionals, legal and compliance staff, back-office support personnel, and any other individuals who had access to information relating to the transaction or to Ridgemark's confidential information. The communication should: (i) confirm that the proposed acquisition of Ridgemark has been abandoned and the MIPA has been terminated; (ii) instruct all personnel to cease any work related to the transaction; (iii) reiterate the continuing confidentiality obligations under the MIPA and any applicable non-disclosure agreements; (iv) instruct all personnel to return or destroy any Ridgemark confidential materials in their possession; and (v) remind all personnel of the non-solicitation restrictions applicable to Ridgemark employees.

Additionally, HCM should consider whether the limited partnership agreement governing HPE Fund IV requires notification to limited partners of the abandoned transaction. Many limited partnership agreements for private equity funds include reporting obligations that require the general partner to notify limited partners of material events, including the abandonment of a significant investment opportunity and the payment of a reverse termination fee. The $7.4 million Reverse Termination Fee is a material expense of the fund and may require disclosure in the next quarterly report or, depending on the terms of the limited partnership agreement, on an interim basis. We recommend that Marcus Hale coordinate with HCM's outside LP counsel on this point and ensure that any required notifications are delivered on a timely basis.

VI. Financial Summary and Fee Implications

The following is a summary of the principal financial obligations and fee matters arising in connection with the termination of the transaction:

Calderwood & Harkness Legal Fees. As of the date of this memorandum, Calderwood & Harkness has billed approximately $487,000 in legal fees for all work performed on the matter from the engagement through the present date. This amount reflects work performed through the initial HSR filing, the review and analysis of the Second Request, the commencement of the Second Request compliance process (including custodian identification, document collection planning, and coordination with Dunmore Asset Management), and the preparation of this memorandum and the termination-related deliverables described herein.

At the outset of the engagement, Calderwood & Harkness agreed to a voluntary fee cap of $650,000 for all legal work through the initial clearance of the HSR filing (defined as the expiration or early termination of the initial waiting period or, if applicable, the resolution of any Second Request without the need for extended investigation or litigation). This voluntary fee cap was voided upon the issuance of the Second Request by the FTC on July 16, 2024, in accordance with the terms of the engagement letter, and the matter reverted to standard hourly billing at the following rates:

Because the matter is terminating prior to the commencement of substantial Second Request compliance work (i.e., no major document review, production, or deposition preparation was undertaken), total legal fees remain below the original voluntary cap of $650,000. Calderwood & Harkness will prepare and submit a final invoice upon the closing of the matter, which we anticipate will occur on or about September 12, 2024.

Disbursements. Disbursements billed to HCM in connection with this matter include the $160,000 HSR filing fee payable to the Federal Trade Commission, which was passed through to the client at cost. The filing fee is non-refundable and cannot be recovered upon withdrawal of the notification. Other disbursements (including courier charges, research database fees, and similar costs) are de minimis and will be reflected on the final invoice.

Reverse Termination Fee. The $7,400,000 Reverse Termination Fee payable by HPE Fund IV to Ridgemark Capital Advisors, LLC is a client obligation arising under the MIPA and is not a Calderwood & Harkness charge. This amount is payable directly by HPE Fund IV (or on its behalf by HCM as general partner) to Ridgemark as described in Section II.C of this memorandum.

VII. Recommended Action Items and Timeline

The following table summarizes the recommended steps, responsible parties, and target dates for the orderly execution of the transaction abandonment:

The foregoing timeline is aggressive but achievable, and we recommend adhering to it to ensure the prompt and orderly completion of all termination-related steps. We note that the Labor Day holiday falls on September 2, 2024, which may affect the availability of certain personnel; Calderwood & Harkness attorneys will be available to work over the holiday weekend to prepare the HSR withdrawal letter as needed.

VIII. Conclusion

Calderwood & Harkness stands ready to execute each of the steps described in this memorandum promptly upon HCM's instruction. We believe the recommended timeline is achievable and will result in a clean and orderly termination of the proposed acquisition, withdrawal of the HSR notification, and satisfaction of all post-termination obligations.

We respectfully request authorization from Gavin Trask or Diane Ochoa to proceed with the following immediate next steps: (i) the drafting and circulation of the MIPA termination notice for HCM's review; and (ii) the preparation of the HSR withdrawal letter for submission to the FTC Premerger Notification Office. Upon receipt of such authorization, we will commence work immediately and will endeavor to adhere to the timeline set forth in Section VII.

We are available to discuss any aspect of this memorandum at your convenience and can be reached at the following:

Howard Bellamy, Partner Antitrust & Competition Group Calderwood & Harkness LLP Tel: (212) 558-3400

Email: hbellamy@calderwoodharkness.com

Elliot Nguyen, Associate Antitrust & Competition Group Calderwood & Harkness LLP Tel: (212) 558-3742

Email: enguyen@calderwoodharkness.com

We appreciate HCM's confidence in Calderwood & Harkness in connection with this matter and look forward to your prompt instructions.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Howard Bellamy Partner, Antitrust & Competition Group

By: ________

Elliot Nguyen Associate, Antitrust & Competition Group

Enclosures / Attachments:

None attached to this memorandum. The following documents will be circulated under separate cover:

(1) Draft Termination Notice under the MIPA (to be circulated by August 28, 2024)

(2) Draft HSR Withdrawal Letter to the FTC Premerger Notification Office (to be circulated by September 2, 2024)

This memorandum is a privileged and confidential communication prepared by Calderwood & Harkness LLP for the exclusive use of Harrowgate Capital Management LLC and Harrowgate Private Equity Fund IV, L.P. It is protected by the attorney-client privilege and constitutes attorney work product. It is not intended for distribution to, or use by, any third party without the prior written consent of Calderwood & Harkness LLP. Any unauthorized disclosure, copying, or distribution of this memorandum or its contents is strictly prohibited.

Timekeeper Level	Hourly Rate
Partners	$1,650
Counsel	$1,350
Associates	$875
Action Item	Responsible Party	Target Date
Draft termination notice under MIPA (Section 10.1(d))	Calderwood & Harkness (Bellamy / Nguyen)	August 28, 2024
Client review and approval of termination notice	HCM (Trask / Ochoa / Hale)	August 29, 2024
Deliver termination notice to Ridgemark, Thornfield, BOH, and L&P	Calderwood & Harkness	August 30, 2024
Notify Meridian National Bank, N.A. of termination	HCM / Greycastle Partners	August 30, 2024
Notify Dunmore Asset Management LLC of transaction abandonment	HCM (Ochoa)	August 30, 2024
Prepare HSR withdrawal letter for submission to FTC PNO	Calderwood & Harkness (Nguyen / Liu)	September 2, 2024
Submit HSR withdrawal letter to FTC Premerger Notification Office	Calderwood & Harkness (Bellamy)	September 3, 2024
Coordinate with BOH on Acquired Person HSR withdrawal	Calderwood & Harkness (Nguyen) / BOH (Subramaniam)	September 3, 2024
Issue confidentiality reminder to all Harrowgate personnel and advisors	HCM (Hale)	September 6, 2024
Wire reverse termination fee ($7,400,000) to Ridgemark	HCM / HPE Fund IV	September 10, 2024
Coordinate return/destruction of all confidential materials	HCM / All advisors	September 13, 2024
C&H final invoice and matter closing	Calderwood & Harkness (Forsythe)	September 12, 2024

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE ATTORNEY WORK PRODUCT
MEMORANDUM
FROM: Howard Bellamy, Partner, and Elliot Nguyen, Associate — Antitrust & Competition Group Calderwood & Harkness LLP 425 Lexington Avenue New York, NY 10017
TO: Gavin Trask, Managing Partner & Chairman, and Diane Ochoa, Partner, Head of Financial Services Investments Harrowgate Capital Management LLC 1200 North Market Street, Suite 1400 Wilmington, DE 19801
DATE: August 27, 2024
RE: Transaction Abandonment Advisory — Proposed Acquisition of Ridgemark Capital Advisors, LLC by Harrowgate Private Equity Fund IV, L.P. C&H Matter No. 1003-00001 FTC Transaction No. 2418-7603
CC: Elaine Forsythe, Partner (Calderwood & Harkness LLP, Billing Partner) Aaron Liu, Associate (Calderwood & Harkness LLP, Working Associate) Marcus Hale, Vice President, Deal Execution (Harrowgate Capital Management LLC)
I. Executive Summary and Purpose
The purpose of this memorandum is to advise Harrowgate Capital Management LLC ("HCM"), in its capacity as the general partner of Harrowgate Private Equity Fund IV, L.P. ("HPE Fund IV"), on the legal mechanics, procedural requirements, and recommended timeline necessary to effectuate the orderly abandonment of the proposed acquisition of one hundred percent (100%) of the outstanding membership interests of Ridgemark Capital Advisors, LLC ("Ridgemark" or "RCA"). As discussed on a conference call among Howard Bellamy, Elliot Nguyen, Gavin Trask, Diane Ochoa, and Marcus Hale on the evening of August 26, 2024, the Harrowgate Investment Committee voted unanimously on August 26, 2024 to abandon the transaction. This memorandum sets forth the steps that must be taken to unwind the transaction in a legally complete and orderly manner, and it identifies the principal obligations and liabilities that will arise in connection with the termination.
The Investment Committee's decision to abandon the transaction is commercial in nature and is driven by a number of developments at Ridgemark that have materially altered the economics of the acquisition since the execution of the Membership Interest Purchase Agreement (as defined below) on June 4, 2024. Specifically, as reported by Diane Ochoa and the deal team, Ridgemark has experienced the following adverse developments during the pendency of the transaction:
• Deteriorating Performance Fee Revenue. Ridgemark's Q2 2024 performance fee revenue declined approximately 41% year-over-year, falling to approximately $1.8 million compared to approximately $3.05 million in Q2 2023. This decline was driven principally by underperformance in Ridgemark's alternative credit and structured product strategies and reflects a broader weakening of fund-level returns across several of Ridgemark's key investment vehicles.
• Key-Person Departures. Two senior portfolio managers in Ridgemark's alternative credit group—which accounts for approximately 28% of Ridgemark's aggregate assets under management—have submitted formal notices of departure, with anticipated last dates of employment in Q4 2024. These departures create significant key-person risk, potential disruption to client relationships, and the prospect of assets-under-management outflows in a segment that was central to the investment thesis underlying the acquisition.
• Revised Revenue Run-Rate. Based on updated financial information provided by Ridgemark and analyzed by the Harrowgate deal team, the annualized revenue run-rate for Ridgemark has declined to approximately $52.6 million, down from the trailing twelve-month ("TTM") revenue figure of approximately $58.3 million as of Q1 2024 that underpinned the pricing negotiations at signing.
• Multiple Compression. As a result of the foregoing, the implied forward EBITDA multiple on the agreed enterprise value of $370 million has compressed (i.e., increased, reflecting a deterioration in value relative to price) to approximately 25.5x on a pro forma basis ($370 million ÷ estimated $14.5 million forward EBITDA), up from approximately 22.0x at the time of signing. The Investment Committee determined that this level of multiple, combined with the operational risks described above, renders the acquisition unattractive from a risk-adjusted return perspective.
This memorandum addresses three principal areas that must be managed in connection with the abandonment: (A) the termination of the Membership Interest Purchase Agreement, including the Buyer's termination right, the reverse termination fee obligation, notice mechanics, and the effect on debt financing commitments; (B) the withdrawal of the parties' Hart-Scott-Rodino premerger notification filings with the Federal Trade Commission ("FTC") and the closure of the related FTC investigation; and (C) the post-termination obligations of HCM, HPE Fund IV, and their advisors, including confidentiality, return of materials, and standstill and non-solicitation provisions.
We recommend the following target dates for the principal steps: (i) delivery of the written termination notice under the MIPA by August 30, 2024; (ii) submission of the HSR withdrawal letter to the FTC Premerger Notification Office by September 3, 2024; and (iii) wire transfer of the reverse termination fee of $7.4 million to Ridgemark by September 10, 2024 (which is within the ten (10) business day period following the anticipated termination effective date).
A detailed timeline and action item chart is set forth in Section VII of this memorandum.
II. Termination of the Membership Interest Purchase Agreement
A. Overview of the MIPA
The operative transaction document is the Membership Interest Purchase Agreement, dated as of June 4, 2024 (the "MIPA"), entered into among the following parties:
• Harrowgate Private Equity Fund IV, L.P., a Delaware limited partnership, as Buyer;
• Ridgemark Capital Advisors, LLC, a Delaware limited liability company, as the Company;
• Jonathan Kessler, individually and in his capacity as Founder & CEO of Ridgemark;
• Priya Narayanan, individually and in her capacity as COO of Ridgemark;
• The Other Employee Partners (as defined in the MIPA), being certain senior employees of Ridgemark who hold membership interests in the Company; and
• Thornfield Growth Partners, LLC, a Delaware limited liability company, as a Seller and the principal financial sponsor with a minority interest in Ridgemark.
The MIPA provides for HPE Fund IV to acquire one hundred percent (100%) of the outstanding membership interests of Ridgemark at a total enterprise value of $370 million. After giving effect to the assumption of approximately $42 million of net funded debt at the Company level, the aggregate equity purchase price payable to the Sellers is $328 million, subject to customary adjustments for working capital, transaction expenses, and other items specified in the MIPA.
The transaction includes significant rollover equity provisions: Jonathan Kessler (Founder & CEO) and Priya Narayanan (COO) each agreed to retain approximately 10% rollover equity in the post-closing entity, reflecting the parties' alignment on a go-forward management structure in which Kessler and Narayanan would continue to lead the business. Thornfield Growth Partners, LLC, which holds approximately 30% of the pre-closing equity in Ridgemark, was to receive a full cash exit of approximately $98.4 million (calculated as 30% × $328 million, subject to adjustments), with no rollover component.
The closing of the transaction was subject to a number of conditions precedent, including, among others: (i) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (ii) the absence of any order, injunction, or decree of any governmental authority prohibiting the consummation of the transaction; (iii) the accuracy of the representations and warranties of the parties (subject to applicable materiality and Material Adverse Effect qualifiers); (iv) compliance with covenants; and (v) the receipt of certain third-party consents.
B. Buyer's Termination Right
The MIPA grants the Buyer a contractual right to terminate the agreement voluntarily (i.e., without cause) under certain circumstances. Specifically, Section 10.1(d) of the MIPA provides that the Buyer may terminate the MIPA at any time prior to the Closing by delivering written notice to the Company and the Sellers, provided that the Buyer simultaneously pays or commits to pay the Reverse Termination Fee (as defined below) in accordance with Section 10.3(b) of the MIPA. This termination right is sometimes referred to in practice as a "voluntary walk-away" or "buyer's option" right, and it reflects the negotiated allocation of deal risk in which the Buyer secured the flexibility to abandon the transaction at any time prior to closing in exchange for the payment of the Reverse Termination Fee as liquidated damages.
It is important to note that the commercial deterioration at Ridgemark described in Section I of this memorandum does not, in our assessment, constitute a basis for termination "for cause" under the MIPA's Material Adverse Effect ("MAE") definition. Section 1.1 of the MIPA defines "Material Adverse Effect" using customary language and includes a number of carve-outs (including, among others, changes in general economic or market conditions, industry-wide developments, changes in applicable law, and the effects of the announcement of the transaction itself). While the decline in performance fee revenue, the key-person departures, and the deterioration of the revenue run-rate are significant from a commercial standpoint, they likely fall within the zone of ordinary-course business fluctuations and industry conditions that are excluded from the MAE definition by the carve-outs. Moreover, the standard for establishing a Material Adverse Effect is exceedingly high under Delaware law, and any attempt to invoke the MAE termination right (Section 10.1(c) of the MIPA) would expose HPE Fund IV to litigation risk and potential claims by the Sellers that the purported MAE was not sufficiently severe or durationally significant to satisfy the legal standard. Accordingly, we strongly recommend that the termination be effectuated as a voluntary termination by the Buyer under Section 10.1(d), with the corresponding obligation to pay the Reverse Termination Fee, rather than as a termination for cause under the MAE provision.
We further note that no regulatory condition failure has occurred. The FTC has not blocked the transaction, nor has it sought or obtained a preliminary injunction or administrative order to prevent the closing. Rather, the FTC issued a Second Request for additional information and documentary material on July 16, 2024, which tolled the HSR waiting period. As of the date of this memorandum, the parties have not yet certified substantial compliance with the Second Request, and the waiting period remains tolled. The transaction is therefore being abandoned prior to the expiration or termination of the HSR waiting period, but this is a consequence of the Buyer's voluntary decision rather than any regulatory impediment to consummation.
C. Reverse Termination Fee
1. Amount. The Reverse Termination Fee payable by the Buyer in connection with a voluntary termination under Section 10.1(d) of the MIPA is $7,400,000 (Seven Million Four Hundred Thousand Dollars), calculated as 2.0% of the total enterprise value of the transaction ($370,000,000 × 2.0% = $7,400,000). This amount was negotiated at the time of signing as a mutually agreed measure of liquidated damages to compensate the Company and the Sellers for the costs, expenses, disruption, and lost opportunity arising from the Buyer's election to abandon the transaction.
2. Payment Obligation
The Reverse Termination Fee is payable by HPE Fund IV to Ridgemark Capital Advisors, LLC. The payment obligation is triggered upon the effective termination of the MIPA by the Buyer without cause under Section 10.1(d). Pursuant to Section 10.3(b) of the MIPA, the Reverse Termination Fee must be paid no later than ten (10) business days following the date on which the termination becomes effective. Assuming that the termination notice is delivered and becomes effective on August 30, 2024, the ten-business-day deadline would fall on or about September 13, 2024. We recommend, however, that the wire transfer be initiated on or before September 10, 2024 to provide a reasonable buffer and to demonstrate good faith and prompt compliance.
3. Payment Mechanism
Payment of the Reverse Termination Fee shall be made by wire transfer of immediately available funds to the bank account designated by Ridgemark in Schedule 2.3 of the MIPA, or to such other account as Ridgemark or its counsel may designate in writing. We recommend that Calderwood & Harkness confirm the wire instructions with Catherine Oakes at Blackwell, Oakes & Hardin LLP (Ridgemark's lead M&A counsel) prior to the wire date to ensure accuracy and to obtain written confirmation of the receiving account information. The wire transfer should be initiated by the appropriate personnel at HCM or the fund administrator for HPE Fund IV, and a copy of the wire confirmation should be retained for the transaction records.
4. Sole and Exclusive Remedy
Section 10.3(b) of the MIPA expressly provides that the Reverse Termination Fee constitutes the sole and exclusive remedy of Ridgemark, the Sellers, and their respective affiliates against HPE Fund IV, HCM, and their respective affiliates, equityholders, partners, officers, directors, employees, agents, and representatives in connection with a voluntary termination of the MIPA by the Buyer. Upon timely payment of the Reverse Termination Fee, neither Ridgemark nor any Seller shall have any further claim for damages (whether direct, indirect, consequential, or otherwise), specific performance, or other equitable relief against the Buyer or any Buyer-related party arising out of, relating to, or in connection with the MIPA, the termination thereof, or the abandonment of the transaction. This provision is a critical protection for HPE Fund IV and HCM, and it underscores the importance of timely and complete payment of the Reverse Termination Fee.
5. Tax Treatment Considerations
The characterization and deductibility of the $7.4 million Reverse Termination Fee payment for U.S. federal, state, and local income tax purposes should be analyzed by HCM's tax advisors. We recommend that HCM consult with Pallister & Greaves Bramwell CPAs LLP, Harrowgate's outside auditor, regarding whether the Reverse Termination Fee is deductible as an ordinary and necessary business expense under Section 162 of the Internal Revenue Code, whether it is treated as a capital expenditure that must be added to the basis of an abandoned transaction (and, if so, whether and when a loss deduction may be claimed), and whether any other tax considerations apply at the fund or investor level. Calderwood & Harkness does not provide tax advice, and this memorandum does not address the tax implications of the Reverse Termination Fee payment.
D. Termination Notice Mechanics
1. Form of Notice
Section 12.1 of the MIPA specifies the procedures for the delivery of notices under the agreement. A notice of termination must be in writing and must be delivered to the Company, the Sellers' Representative, and each of the parties entitled to receive notice under the MIPA. The notice must reference the specific section of the MIPA under which termination is being effected (i.e., Section 10.1(d)), must state that the termination is effective as of the date of delivery (or such later date as may be specified), and must confirm the Buyer's intention to pay the Reverse Termination Fee in accordance with Section 10.3(b).
2. Required Recipients and Addresses
The termination notice must be delivered to the following parties at the addresses specified in Section 12.1 of the MIPA:
(a) Ridgemark Capital Advisors, LLC 600 Boylston Street, Suite 3200 Boston, MA 02116
Attention: Jonathan Kessler, Chief Executive Officer
(b) Thornfield Growth Partners, LLC 399 Park Avenue, 28th Floor New York, NY 10022
Attention: Sandra Wellman, Partner
(c) Blackwell, Oakes & Hardin LLP (Counsel to Ridgemark) 125 High Street, Suite 2800 Boston, MA 02110
Attention: Catherine Oakes
(d) Lyle & Pennington LLP (Counsel to Thornfield Growth Partners, LLC) 51 West 52nd Street New York, NY 10019
Attention: Thomas Pennington III
3. Delivery Methods
Pursuant to Section 12.1 of the MIPA, notices are deemed received upon (i) personal delivery, (ii) the next business day following deposit with a nationally recognized overnight courier service (with proof of delivery), or (iii) the date of transmission by email if sent prior to 5:00 p.m. Eastern Time on a business day and confirmed by a non-automated reply or by delivery of an original via overnight courier within two (2) business days thereafter. We recommend that the termination notice be sent by overnight courier (Severin Partners LLC or UPS Next Day Air) to each of the above addresses, with simultaneous email transmission to the designated contacts at each party and their respective counsel. This dual-delivery approach will ensure that the "receipt" requirements under Section 12.1 are satisfied and will provide a clear documentary record of the date and time of delivery.
4. Drafting and Delivery Timeline
Calderwood & Harkness will prepare and circulate a draft termination notice for HCM's review by August 28, 2024. We request that HCM review the draft and provide any comments or approval by August 29, 2024, with a target delivery date of August 30, 2024. If HCM approves the draft on the expected timeline, Calderwood & Harkness will arrange for the overnight courier deliveries and email transmissions to be completed on August 30, 2024.
5. Effective Date of Termination
Subject to the specific language of Section 12.1 of the MIPA, the termination will become effective upon delivery of the notice to the Company and the Sellers' Representative (i.e., upon the earliest of personal delivery, overnight courier delivery, or confirmed email delivery). Assuming delivery on August 30, 2024, the effective date of termination will be August 30, 2024, and all post-termination deadlines (including the Reverse Termination Fee payment deadline) will run from that date.
E. Effect on Debt Financing Commitment
The commitment letter dated June 3, 2024, issued by Meridian National Bank, N.A. to HPE Fund IV in connection with the transaction, provides for a senior secured credit facility in the aggregate principal amount of $280 million, consisting of a $220 million term loan and a $60 million revolving credit facility. The commitment letter includes customary terms providing that the commitments thereunder will terminate automatically upon the termination of the MIPA in accordance with its terms, without any further action by the parties. Accordingly, upon the effective date of the termination of the MIPA, the Meridian commitment letter will terminate by its own terms, and no separate notice of termination is required to effectuate the termination of the financing commitments.
Notwithstanding the foregoing, we recommend that HCM send a courtesy notification to Gerald Statham, Senior Vice President, Sponsor Finance, Meridian National Bank, N.A., 70 Hudson Street, Jersey City, NJ 07302, promptly following the delivery of the MIPA termination notice, confirming that the transaction has been abandoned and that the commitment letter has terminated in accordance with its terms. This notification is not legally required but is consistent with good practice and will preserve the relationship between Harrowgate and Meridian for future transactions.
We further recommend that HCM and Marcus Hale coordinate with Greycastle Partners LLC (Mitchell Avery, Managing Director) to confirm whether any commitment fee, break fee, or other compensation is payable to Meridian National Bank, N.A. under the terms of the commitment letter in connection with the termination. The commitment letter includes a work fee of $350,000 that was payable upon signing and a commitment fee of 0.35% per annum on unutilized commitments, accruing from the date of the commitment letter. It is possible that a portion of the work fee is non-refundable regardless of whether the transaction closes, and Marcus Hale should confirm the status of this fee with Meridian and Greycastle.
III. Withdrawal of the HSR Notification
A. Procedural Basis for Withdrawal
1. Statutory and Regulatory Framework
The proposed acquisition is subject to the premerger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a (the "HSR Act"), and the implementing regulations promulgated thereunder by the Federal Trade Commission at 16 C.F.R. Parts 801–803. The HSR Act requires that the parties to certain mergers and acquisitions exceeding specified size-of-transaction and size-of-person thresholds file Notification and Report Forms with both the FTC and the Antitrust Division of the U.S. Department of Justice ("DOJ") and observe a mandatory waiting period before consummating the transaction. The waiting period affords the enforcement agencies an opportunity to review the competitive implications of the proposed transaction and to determine whether to challenge it.
2. Withdrawal Authority
The specific regulatory authority for the withdrawal of an HSR notification is set forth in 16 C.F.R. § 803.7, which provides that a filing person may withdraw its notification at any time prior to the expiration or termination of the waiting period, or, in the case of a transaction that is subject to a Request for Additional Information and Documentary Material (commonly known as a "Second Request"), at any time prior to the filing person's certification of substantial compliance with the Second Request. Upon withdrawal of the notification, the waiting period ceases to run, and the filing person may not consummate the transaction unless a new notification is filed and a new waiting period has commenced and expired or been terminated.
3. Current Procedural Posture
The parties filed their respective HSR Notification and Report Forms with the FTC and DOJ on June 18, 2024. The FTC acknowledged receipt of both filings on June 21, 2024, and clearance to review the transaction was assigned to the FTC (rather than DOJ). The initial thirty (30)-day waiting period under the HSR Act commenced upon the FTC's acknowledgment of receipt and would have expired on July 21, 2024 (adjusted for weekends). However, on July 16, 2024, prior to the expiration of the initial waiting period, the FTC issued a Second Request to both filing parties, which tolled the waiting period pursuant to 15 U.S.C. § 18a(e)(2).
As of the date of this memorandum, the parties have not yet certified substantial compliance with the Second Request. The document collection and review process had commenced, and Calderwood & Harkness had begun coordinating with Harrowgate personnel and Dunmore Asset Management LLC (a portfolio company of HPE Fund IV identified by the FTC as a potential competitive overlap) to identify and collect responsive documents. However, no formal production had been made to the FTC pursuant to the Second Request, with the exception of twenty-three (23) supplemental documents that were produced to the FTC on July 10, 2024 in response to a voluntary access letter issued by FTC staff on July 8, 2024 (which predated the formal Second Request). No interrogatory responses, data submissions, or white papers had been submitted.
4. Effect of Withdrawal
Upon the FTC's receipt of the Acquiring Person's withdrawal letter, the HSR investigation will effectively be closed. The FTC will have no further basis to compel compliance with the Second Request, as the Second Request is ancillary to the pending notification and becomes moot upon withdrawal. No further obligation to comply with the Second Request will exist once the filing is withdrawn and the transaction is abandoned. The FTC's Premerger Notification Office will process the withdrawal and update its records to reflect that the notification has been withdrawn and the transaction abandoned.
B. Withdrawal Letter
Calderwood & Harkness will prepare a formal withdrawal letter addressed to the Premerger Notification Office of the Federal Trade Commission, Bureau of Competition, 600 Pennsylvania Avenue NW, Washington, D.C. 20580. The letter will be submitted under the signature of Howard Bellamy as counsel for the Acquiring Person (Harrowgate Capital Management LLC, as the Ultimate Parent Entity of the Acquiring Person).
The withdrawal letter will include the following content:
(i) Identification of the filing parties: Harrowgate Capital Management LLC, as the Ultimate Parent Entity of the Acquiring Person; and Ridgemark Capital Advisors, LLC, as the Acquired Person.
(ii) The FTC Transaction Number: 2418-7603.
(iii) A reference to the original filing date of June 18, 2024, and the FTC's acknowledgment of receipt on June 21, 2024.
(iv) A statement that the parties have abandoned the proposed transaction as of August 30, 2024, and that the Membership Interest Purchase Agreement dated June 4, 2024 has been terminated by the Buyer.
(v) A formal request, pursuant to 16 C.F.R. § 803.7, for the withdrawal of the Acquiring Person's HSR Notification and Report Form.
(vi) A statement that the Second Request issued by the FTC on July 16, 2024 is rendered moot by the withdrawal and abandonment, and that no further compliance obligations will be undertaken.
(vii) A request for written confirmation from the FTC Premerger Notification Office that the withdrawal has been accepted and processed, and that the file has been closed.
(viii) The statutory citations: 15 U.S.C. § 18a; 16 C.F.R. § 803.7.
The target submission date for the withdrawal letter is September 3, 2024, which is the first business day following the Labor Day holiday weekend. We note that the withdrawal letter may be submitted by email to the FTC Premerger Notification Office, with a hard copy to follow by mail, consistent with the FTC's current filing procedures.
A courtesy copy of the withdrawal letter will be sent to Rajesh Subramaniam at Blackwell, Oakes & Hardin LLP, who serves as Ridgemark's antitrust counsel. Mr. Subramaniam may separately coordinate the withdrawal of the Acquired Person's filing or confirm to the FTC that the transaction has been abandoned.
C. Coordination with Acquired Person's Filing
The Acquired Person, Ridgemark Capital Advisors, LLC, filed its own HSR Notification and Report Form on June 18, 2024, simultaneously with the Acquiring Person's filing. Under the HSR Act and the implementing regulations, each filing party has the right to withdraw its own notification independently. While the Acquiring Person's withdrawal alone is sufficient to prevent consummation of the transaction (since a new notification and new waiting period would be required in order to consummate), it is prudent and customary practice for both filing parties to submit withdrawal letters to the FTC to ensure a clean closure of the investigation file.
We recommend that Elliot Nguyen contact Rajesh Subramaniam at Blackwell, Oakes & Hardin LLP promptly following the delivery of the MIPA termination notice to coordinate the parallel withdrawal of the Acquired Person's filing. We expect that Ridgemark's counsel will cooperate in this process, given that the transaction is being abandoned and there is no dispute between the parties regarding the termination. If Ridgemark elects not to submit its own withdrawal letter, the FTC may independently close the file upon receipt of the Acquiring Person's withdrawal and confirmation that the transaction has been abandoned, but a parallel withdrawal by both parties is the most efficient and clean approach.
IV. Post-Termination Obligations
A. Confidentiality and Non-Disclosure Obligations
The MIPA contains comprehensive confidentiality and non-disclosure provisions in Section 8.3, which by their terms survive the termination of the agreement. These provisions impose ongoing obligations on HPE Fund IV, HCM, and their respective officers, directors, employees, agents, and representatives (including outside advisors) to maintain the confidentiality of all proprietary, non-public, and confidential information received from or on behalf of Ridgemark during the course of the transaction, including information obtained through the due diligence process, the virtual data room, management presentations, and other disclosures made by Ridgemark and the Sellers.
HPE Fund IV and HCM remain fully bound by these confidentiality obligations following the termination of the MIPA, and such obligations continue in accordance with the survival period specified in Section 8.3 (which, based on our review of the MIPA, extends for a period of two (2) years following the date of termination). All Harrowgate personnel who had access to Ridgemark's confidential information during the transaction—including, without limitation, Gavin Trask, Diane Ochoa, Marcus Hale, and all members of the investment team, as well as all outside advisors engaged in connection with the transaction—must continue to safeguard such information and may not use it for any purpose other than as expressly permitted under the surviving provisions of the MIPA.
The following advisors and their respective personnel are subject to the confidentiality obligations either directly under the MIPA or under separate confidentiality undertakings or engagement letters:
• Calderwood & Harkness LLP — legal counsel to HPE Fund IV and HCM
• Greycastle Partners LLC (Mitchell Avery, Managing Director) — financial advisor to HPE Fund IV
• Pallister & Greaves Bramwell CPAs LLP — auditor and tax advisor to Harrowgate
Calderwood & Harkness will circulate a written reminder to all members of the transaction team—including all partners, counsel, associates, and paralegals who worked on the matter—confirming the continuing nature of the confidentiality obligations and instructing them to refrain from any disclosure or use of Ridgemark's confidential information. We recommend that HCM issue a parallel internal communication to all Harrowgate personnel, as discussed further in Section V.C below.
B. Return and Destruction of Confidential Materials
Section 8.3(d) of the MIPA requires that, upon termination of the agreement, the Buyer and its representatives promptly return or destroy all confidential information received from the Company and the Sellers, and provide a written certification of destruction or return to the Company. This obligation extends to all copies of confidential information in any format, including electronic copies, printed documents, summaries, analyses, compilations, and other materials that contain or reflect confidential information.
We recommend that HCM take the following steps to comply with this obligation:
(i) Data Room Materials. Coordinate with the data room provider (we understand that the virtual data room was hosted by Crestline Solutions) to terminate HPE Fund IV's and HCM's access to the data room and to obtain confirmation that access has been revoked. Any materials downloaded from the data room by Harrowgate personnel or advisors should be identified, collected, and destroyed (with a record of destruction maintained).
(ii) Financial Models and Projections. All financial models, projections, and analyses prepared by Cairnstone Advisory Group LLC (Laura Feng, Managing Director) on behalf of Ridgemark, as well as any derivative models or analyses prepared by Harrowgate or its advisors based on such materials, should be returned or destroyed.
(iii) Employee and Client Information. All employee lists, compensation data, client lists, and related information received from Ridgemark during due diligence must be destroyed. Given the sensitive nature of this information, particular care should be taken to ensure that no copies are retained.
(iv) Investment Performance Records. All fund-level and strategy-level performance records, track records, attribution analyses, and related materials received from Ridgemark must be destroyed.
(v) Other Proprietary Information. Any other materials containing proprietary or confidential information of Ridgemark—including, without limitation, organizational documents, contracts, compliance records, regulatory filings, and marketing materials—should be returned or destroyed.
We recommend that Marcus Hale coordinate with all advisors to ensure that the return or destruction of materials is completed by September 13, 2024, and that a certification of destruction be provided to Ridgemark (through its counsel, Catherine Oakes at Blackwell, Oakes & Hardin LLP) promptly thereafter.
C. Second Request Materials
The FTC Second Request issued on July 16, 2024 generated a significant document collection and review effort, which was underway at the time of the Investment Committee's decision to abandon the transaction. The status and disposition of the materials compiled in connection with the Second Request are as follows:
Documents Produced to the FTC. As noted above, twenty-three (23) supplemental documents were produced to the FTC on July 10, 2024, in response to a voluntary access letter issued by FTC staff on July 8, 2024. These documents are now in the possession of the FTC. There is no mechanism available to compel the return of these documents from the FTC. However, the FTC's confidentiality rules, set forth in 16 C.F.R. Part 4, impose strict restrictions on the FTC's use and further disclosure of materials received in connection with HSR investigations. Specifically, materials submitted to the FTC pursuant to the HSR Act are treated as confidential and exempt from disclosure under the Freedom of Information Act, subject to certain limited exceptions (e.g., disclosure to other law enforcement agencies or pursuant to a court order). We do not anticipate any further disclosure by the FTC of these materials, particularly given that the transaction is being abandoned and the investigation will be closed.
Internally Compiled Materials. A substantial volume of documents and data was collected from Harrowgate, HPE Fund IV, and Dunmore Asset Management LLC in the early stages of the Second Request compliance process but was not produced to the FTC prior to the abandonment decision. These materials include custodian files, email archives, transactional records, and other documents identified as potentially responsive to the Second Request. These materials should be preserved in accordance with Calderwood & Harkness's document retention policy and the terms of the engagement letter between Calderwood & Harkness and HCM. They may be archived and marked as matter-closed work product. There is no legal obligation to produce these materials to the FTC following the withdrawal of the HSR notification and the abandonment of the transaction.
We confirm that no formal certification of substantial compliance was submitted to the FTC on behalf of either filing party. Accordingly, there are no additional compliance obligations outstanding under the Second Request, and the withdrawal of the notification will fully discharge the parties' obligations in connection with the HSR filing.
D. Standstill and Non-Solicitation Provisions
We recommend that HCM carefully review the MIPA for any standstill or non-solicitation provisions that survive the termination of the agreement. Based on our review of the MIPA, Section 8.5 includes a non-solicitation of employees covenant that restricts the Buyer and its affiliates from, directly or indirectly, soliciting, recruiting, hiring, or otherwise seeking to engage any employee of Ridgemark for a period of eighteen (18) months following the termination of the MIPA. This restriction applies to all employees of Ridgemark, not merely to senior or key employees, and it extends to the Buyer's affiliates, which would include HCM and its portfolio companies.
This provision is particularly relevant in light of the fact that two senior portfolio managers in Ridgemark's alternative credit group have given notice of their intention to depart Ridgemark. As noted in Section I above, the departure of these individuals was one of the factors that contributed to the Investment Committee's decision to abandon the transaction. To the extent that HPE Fund IV, HCM, or any Harrowgate-affiliated entity (including, without limitation, Dunmore Asset Management LLC) may have an interest in recruiting or hiring these individuals, such actions would be subject to the non-solicitation restriction in Section 8.5 of the MIPA. We strongly advise that HPE Fund IV, HCM, and all affiliated entities refrain from any contact with these individuals (or any other Ridgemark employees) for the purpose of recruitment, hiring, or engagement during the restricted period, unless and until a determination is made that such contact does not violate the non-solicitation covenant.
We will provide a separate, more detailed analysis of the scope and enforceability of the non-solicitation provision if HCM requests, including an assessment of any exceptions or carve-outs that may apply (e.g., for employees who respond to general advertising or who independently approach Harrowgate without solicitation).
The MIPA does not appear to include a separate standstill provision that would restrict HPE Fund IV from acquiring or seeking to acquire Ridgemark or its membership interests during a specified period following termination. Accordingly, HPE Fund IV would not be contractually precluded from re-approaching Ridgemark with a new acquisition proposal at a future date, although any such proposal would, of course, be subject to new negotiations and a new HSR filing.
V. Notifications to Other Parties and Advisors
A. Notification to Financial Advisors
Greycastle Partners LLC served as the financial advisor to HPE Fund IV and HCM in connection with the proposed acquisition. HCM should notify Mitchell Avery, Managing Director, at Greycastle Partners LLC, 300 Atlantic Street, Stamford, CT 06901, of the termination of the transaction promptly following the delivery of the MIPA termination notice. In addition to confirming the abandonment, HCM should coordinate with Greycastle on the following matters: (i) any break fee or other payment obligations under the Meridian National Bank, N.A. commitment letter (as discussed in Section II.E above); (ii) the implications of the transaction termination for the advisory fee arrangement between HPE Fund IV and Greycastle, including whether any success fee was conditioned on closing and whether any retainer or monthly advisory fees remain outstanding; and (iii) Greycastle's obligations with respect to the return or destruction of Ridgemark's confidential information.
No separate notification from HCM to Cairnstone Advisory Group LLC (Laura Feng, Managing Director), which served as the financial advisor to Ridgemark, is required or appropriate. Ridgemark will handle its own notifications to its advisors, and any communication from HCM or HPE Fund IV to Cairnstone regarding the termination should be channeled through Ridgemark's counsel.
B. Notification to Dunmore Asset Management LLC
Dunmore Asset Management LLC ("Dunmore") is a portfolio company of a prior Harrowgate fund (HPE Fund II) and was identified by the FTC during its investigation as a potential competitive overlap with Ridgemark in the alternative credit and structured product advisory segments. As a result, Dunmore personnel—including senior investment professionals and compliance staff—were involved in the Second Request document collection and preparation process, and certain Dunmore custodians were identified as having potentially responsive documents.
HCM should promptly notify Franklin Broussard, Chief Executive Officer, at Dunmore Asset Management LLC, 227 West Monroe Street, Suite 4100, Chicago, IL 60606, that the proposed acquisition of Ridgemark has been abandoned and that no further document collection or Second Request compliance work is required. This notification should also reiterate the confidentiality obligations applicable to any Ridgemark-related information to which Dunmore personnel may have been exposed during the course of the investigation, and it should confirm the non-solicitation restrictions applicable to Dunmore as an affiliate of HPE Fund IV and HCM with respect to Ridgemark employees.
C. Internal Harrowgate Notifications
We recommend that HCM issue an internal communication to all Harrowgate personnel who were involved in the proposed transaction, including investment professionals, legal and compliance staff, back-office support personnel, and any other individuals who had access to information relating to the transaction or to Ridgemark's confidential information. The communication should: (i) confirm that the proposed acquisition of Ridgemark has been abandoned and the MIPA has been terminated; (ii) instruct all personnel to cease any work related to the transaction; (iii) reiterate the continuing confidentiality obligations under the MIPA and any applicable non-disclosure agreements; (iv) instruct all personnel to return or destroy any Ridgemark confidential materials in their possession; and (v) remind all personnel of the non-solicitation restrictions applicable to Ridgemark employees.
Additionally, HCM should consider whether the limited partnership agreement governing HPE Fund IV requires notification to limited partners of the abandoned transaction. Many limited partnership agreements for private equity funds include reporting obligations that require the general partner to notify limited partners of material events, including the abandonment of a significant investment opportunity and the payment of a reverse termination fee. The $7.4 million Reverse Termination Fee is a material expense of the fund and may require disclosure in the next quarterly report or, depending on the terms of the limited partnership agreement, on an interim basis. We recommend that Marcus Hale coordinate with HCM's outside LP counsel on this point and ensure that any required notifications are delivered on a timely basis.
VI. Financial Summary and Fee Implications
The following is a summary of the principal financial obligations and fee matters arising in connection with the termination of the transaction:
Calderwood & Harkness Legal Fees. As of the date of this memorandum, Calderwood & Harkness has billed approximately $487,000 in legal fees for all work performed on the matter from the engagement through the present date. This amount reflects work performed through the initial HSR filing, the review and analysis of the Second Request, the commencement of the Second Request compliance process (including custodian identification, document collection planning, and coordination with Dunmore Asset Management), and the preparation of this memorandum and the termination-related deliverables described herein.
At the outset of the engagement, Calderwood & Harkness agreed to a voluntary fee cap of $650,000 for all legal work through the initial clearance of the HSR filing (defined as the expiration or early termination of the initial waiting period or, if applicable, the resolution of any Second Request without the need for extended investigation or litigation). This voluntary fee cap was voided upon the issuance of the Second Request by the FTC on July 16, 2024, in accordance with the terms of the engagement letter, and the matter reverted to standard hourly billing at the following rates:
Because the matter is terminating prior to the commencement of substantial Second Request compliance work (i.e., no major document review, production, or deposition preparation was undertaken), total legal fees remain below the original voluntary cap of $650,000. Calderwood & Harkness will prepare and submit a final invoice upon the closing of the matter, which we anticipate will occur on or about September 12, 2024.
Disbursements. Disbursements billed to HCM in connection with this matter include the $160,000 HSR filing fee payable to the Federal Trade Commission, which was passed through to the client at cost. The filing fee is non-refundable and cannot be recovered upon withdrawal of the notification. Other disbursements (including courier charges, research database fees, and similar costs) are de minimis and will be reflected on the final invoice.
Reverse Termination Fee. The $7,400,000 Reverse Termination Fee payable by HPE Fund IV to Ridgemark Capital Advisors, LLC is a client obligation arising under the MIPA and is not a Calderwood & Harkness charge. This amount is payable directly by HPE Fund IV (or on its behalf by HCM as general partner) to Ridgemark as described in Section II.C of this memorandum.
VII. Recommended Action Items and Timeline
The following table summarizes the recommended steps, responsible parties, and target dates for the orderly execution of the transaction abandonment:
The foregoing timeline is aggressive but achievable, and we recommend adhering to it to ensure the prompt and orderly completion of all termination-related steps. We note that the Labor Day holiday falls on September 2, 2024, which may affect the availability of certain personnel; Calderwood & Harkness attorneys will be available to work over the holiday weekend to prepare the HSR withdrawal letter as needed.
VIII. Conclusion
Calderwood & Harkness stands ready to execute each of the steps described in this memorandum promptly upon HCM's instruction. We believe the recommended timeline is achievable and will result in a clean and orderly termination of the proposed acquisition, withdrawal of the HSR notification, and satisfaction of all post-termination obligations.
We respectfully request authorization from Gavin Trask or Diane Ochoa to proceed with the following immediate next steps: (i) the drafting and circulation of the MIPA termination notice for HCM's review; and (ii) the preparation of the HSR withdrawal letter for submission to the FTC Premerger Notification Office. Upon receipt of such authorization, we will commence work immediately and will endeavor to adhere to the timeline set forth in Section VII.
We are available to discuss any aspect of this memorandum at your convenience and can be reached at the following:
Howard Bellamy, Partner Antitrust & Competition Group Calderwood & Harkness LLP Tel: (212) 558-3400
Email: hbellamy@calderwoodharkness.com
Elliot Nguyen, Associate Antitrust & Competition Group Calderwood & Harkness LLP Tel: (212) 558-3742
Email: enguyen@calderwoodharkness.com
We appreciate HCM's confidence in Calderwood & Harkness in connection with this matter and look forward to your prompt instructions.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Howard Bellamy Partner, Antitrust & Competition Group
By: ________
Elliot Nguyen Associate, Antitrust & Competition Group
Enclosures / Attachments:
None attached to this memorandum. The following documents will be circulated under separate cover:
(1) Draft Termination Notice under the MIPA (to be circulated by August 28, 2024)
(2) Draft HSR Withdrawal Letter to the FTC Premerger Notification Office (to be circulated by September 2, 2024)
This memorandum is a privileged and confidential communication prepared by Calderwood & Harkness LLP for the exclusive use of Harrowgate Capital Management LLC and Harrowgate Private Equity Fund IV, L.P. It is protected by the attorney-client privilege and constitutes attorney work product. It is not intended for distribution to, or use by, any third party without the prior written consent of Calderwood & Harkness LLP. Any unauthorized disclosure, copying, or distribution of this memorandum or its contents is strictly prohibited.
Timekeeper Level | Hourly Rate
Partners | $1,650
Counsel | $1,350
Associates | $875
Action Item | Responsible Party | Target Date
Draft termination notice under MIPA (Section 10.1(d)) | Calderwood & Harkness (Bellamy / Nguyen) | August 28, 2024
Client review and approval of termination notice | HCM (Trask / Ochoa / Hale) | August 29, 2024
Deliver termination notice to Ridgemark, Thornfield, BOH, and L&P | Calderwood & Harkness | August 30, 2024
Notify Meridian National Bank, N.A. of termination | HCM / Greycastle Partners | August 30, 2024
Notify Dunmore Asset Management LLC of transaction abandonment | HCM (Ochoa) | August 30, 2024
Prepare HSR withdrawal letter for submission to FTC PNO | Calderwood & Harkness (Nguyen / Liu) | September 2, 2024
Submit HSR withdrawal letter to FTC Premerger Notification Office | Calderwood & Harkness (Bellamy) | September 3, 2024
Coordinate with BOH on Acquired Person HSR withdrawal | Calderwood & Harkness (Nguyen) / BOH (Subramaniam) | September 3, 2024
Issue confidentiality reminder to all Harrowgate personnel and advisors | HCM (Hale) | September 6, 2024
Wire reverse termination fee ($7,400,000) to Ridgemark | HCM / HPE Fund IV | September 10, 2024
Coordinate return/destruction of all confidential materials | HCM / All advisors | September 13, 2024
C&H final invoice and matter closing | Calderwood & Harkness (Forsythe) | September 12, 2024

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