1003-00002 · Harrowgate Capital Partners · Financing

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MEMORANDUM

PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

TO: Graham Sutherland, Responsible Partner, Calderwood & Harkness LLP Catherine E. Loomis, General Counsel & Chief Compliance Officer, Harrowgate Capital Partners LLC

FROM: Stephen Adler, Lead Associate, Calderwood & Harkness LLP Theresa Kim, Working Associate, Calderwood & Harkness LLP

DATE: May 12, 2025

RE: Review of Indicative Term Sheet — $500,000,000 Revolving Subscription Credit Facility from Ashford National Bank, N.A. for Harrowgate Private Equity Fund V LP

Matter No.: 1003-00002

cc: Jonathan P. Birch, Chief Financial Officer, Harrowgate Capital Partners LLC (for review of commercial terms) Sylvia Hartwell, Specialist Tax Partner, Calderwood & Harkness LLP (for tax-related sections)

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I. Executive Summary

This memorandum presents our review and analysis of the indicative term sheet received from Ashford National Bank, N.A. ("Ashford") dated May 5, 2025, for a $500,000,000 revolving subscription credit facility (the "Facility") to be made available to Harrowgate Private Equity Fund V LP ("HPE Fund V" or the "Fund"), a Delaware limited partnership to be formed with a target hard cap of $2,000,000,000. The Facility will be secured by the Fund's right to call and receive capital contributions from its limited partners (the "LPs"), a structure commonly referred to in the fund finance market as a subscription credit facility or capital call facility.

The purpose of this memorandum is fourfold. First, we summarize the key commercial and legal terms of the indicative term sheet in a format that facilitates review by the Sponsor's deal team. Second, we identify issues of consistency between the proposed Facility terms and the draft Limited Partnership Agreement (the "LPA") circulated internally on May 9, 2025, which is currently in an advanced but pre-final form. Third, we analyze the interaction between the Facility and the Fund's capital call mechanics, investor excuse provisions, and parallel vehicle structure. Fourth, we recommend specific LPA provisions — commonly referred to as "lender accommodation" language — that should be incorporated into the LPA to support the Facility, and we flag negotiation points for further discussion with Ashford and with Harrowgate Capital Partners LLC ("HCP" or the "Sponsor").

At a high level, the indicative term sheet is broadly consistent with current market practice for subscription credit facilities extended to mid-market private equity funds. The proposed pricing (SOFR + 175 basis points drawn, 25 basis points undrawn) falls within the range we observe in comparable recent transactions. The 364-day revolving tenor, the borrowing base methodology (90% of Included Investor uncalled commitments), and the security package (pledge of capital call rights plus account control agreement) are all in line with industry standards. We have, however, identified several areas that warrant further negotiation and clarification, including the treatment of commitments made through the Fund's offshore feeder vehicle and parallel fund, the alignment of the credit agreement's event of default triggers with the LPA's Key Person Event cure/waiver provisions, the absence of a standstill period following a GP removal event, and the need to resolve the commercial terms left open in the indicative term sheet (including the upfront arrangement fee and annual administrative agent fee).

Copies of this memorandum have been circulated to Jonathan P. Birch, Chief Financial Officer of HCP, for his input on the commercial negotiation points, and to Sylvia Hartwell, Specialist Tax Partner at Calderwood & Harkness LLP, for her review of the tax-related considerations discussed in Section IX. The key contact at Ashford for purposes of the Facility negotiation is Lisa M. Osterberg, Managing Director, Fund Finance, located at 300 Vesey Street, New York, NY 10282. We understand from preliminary discussions that Ms. Osterberg's team is prepared to move promptly to definitive documentation upon agreement on the open commercial terms and receipt of the final LPA.

II. Summary of Indicative Term Sheet

Set forth below is a detailed summary of the material terms contained in the Ashford indicative term sheet dated May 5, 2025. We have organized this summary to track the structure of the term sheet itself, with our commentary and observations integrated where relevant.

A. Parties. The indicative term sheet identifies the following parties to the proposed Facility:

Borrower: Harrowgate Private Equity Fund V LP, a Delaware limited partnership to be formed in connection with the Fund's initial closing. The Fund has not yet been organized; formation documents are expected to be filed with the Delaware Secretary of State in advance of the First Close, currently targeted for August 15, 2025.

General Partner (acting on behalf of the Borrower): Harrowgate Fund V GP LLC, a Delaware limited liability company to be formed. Harrowgate Fund V GP LLC will serve as the sole general partner of the Fund. Its sole member will be Harrowgate Capital Partners LLC, the Sponsor. All actions on behalf of the Borrower under the Facility, including drawdown requests, compliance certifications, and the granting of security interests, will be taken by the General Partner in its capacity as general partner of the Fund.

Lender / Administrative Agent: Ashford National Bank, N.A., a national banking association. Ashford will serve as both the sole initial lender and the administrative agent under the Facility.

We note that the term sheet expressly contemplates that Ashford retains the right to syndicate the Facility to one or more additional financial institutions after closing. Any syndication would necessitate a review of the LPA's provisions regarding the assignability of the Facility and the sharing of LP data — including identity, commitment amounts, unfunded commitment balances, and contact information — with prospective syndication participants. We address this syndication right further in Section XI (Negotiation Point No. 2) below, and recommend that the Sponsor negotiate limitations on Ashford's syndication rights, including requiring that syndication participants be approved by the General Partner and that appropriate confidentiality protections be imposed on LP data shared in the syndication process.

B. Facility Size

The Facility is structured as a revolving credit facility in an aggregate principal amount of up to $500,000,000. Availability under the Facility is not automatic up to this amount, but is instead subject to the borrowing base limitations described in Section II.E below. The $500,000,000 commitment represents the maximum amount that Ashford is prepared to extend, subject to final credit approval, but actual availability at any given time will be the lesser of (a) the commitment amount and (b) the borrowing base.

At the Fund's target hard cap of $2.0 billion in aggregate LP commitments, the $500,000,000 Facility represents 25% of aggregate commitments. This ratio is consistent with the fund-level leverage cap set forth in the draft LPA, which restricts subscription facility borrowings to 25% of uncalled capital commitments at any time. The alignment of the Facility size with the LPA leverage cap is discussed in greater detail in Section IV.A below.

C. Tenor. The Facility has a 364-day revolving tenor, measured from the closing date. The term sheet provides that the Facility is renewable annually at the mutual agreement of the Borrower and Ashford — that is, neither party has a unilateral right to extend the Facility beyond the initial 364-day period or any subsequent renewal period.

A 364-day revolving tenor is the industry standard for subscription credit facilities. The shorter-term structure is driven by the nature of the underlying collateral: the Facility is secured by the Fund's right to call unfunded capital commitments from its LPs, which is an inherently diminishing asset as capital is drawn down over the Fund's investment period. A 364-day tenor aligns the Facility's maturity with the expected pace of capital deployment and ensures periodic reassessment of the borrowing base as LP commitments are called.

We note, however, that the absence of a committed multi-year tenor creates renewal risk. If Ashford were to decline to renew the Facility at the end of any 364-day period — whether due to changes in Ashford's credit appetite, deterioration in the credit quality of the Fund's LP base, or broader market conditions — the Fund would need to refinance the Facility with another lender or repay all outstanding borrowings from available cash or capital calls. We flag this renewal risk for the Sponsor's consideration and discuss the possibility of negotiating a committed two-year facility or a borrower-exercisable extension option in Section XI (Negotiation Point No. 7) below.

D. Pricing. The indicative pricing terms are as follows:

Drawn Spread: SOFR + 175 basis points per annum on all outstanding borrowings. The applicable benchmark rate is the Secured Overnight Financing Rate ("SOFR") as published by the Federal Reserve Bank of New York. The term sheet includes customary benchmark replacement language providing for transition to an alternative benchmark in the event of a SOFR cessation trigger event, though the specific fallback mechanics are not detailed in the term sheet and will need to be addressed in the definitive credit agreement.

Undrawn Commitment Fee: 25 basis points per annum on the daily average unused portion of the Facility commitment. The undrawn commitment fee accrues from the closing date and is payable quarterly in arrears.

Interest Payment: Interest on outstanding borrowings is payable quarterly in arrears. The term sheet does not specify a day count convention; we expect the definitive credit agreement will use Actual/360, which is standard for SOFR-based facilities.

We note that the pricing set forth in the term sheet is indicative and remains subject to final credit approval by Ashford's internal credit committee. Based on our review of recent comparable transactions in the subscription credit facility market, the proposed pricing is consistent with the current market range for mid-market private equity fund subscription facilities, which we observe at approximately SOFR + 150 to 200 basis points on drawn amounts and 20 to 30 basis points on undrawn commitments. The pricing is not at the tightest end of the range — which is typically reserved for the largest mega-cap funds with the highest-quality LP bases — but is competitive and appropriate for a fund of HPE Fund V's anticipated size and LP composition.

E. Borrowing Base

The borrowing base under the Facility is calculated as 90% of uncalled capital commitments from "Included Investors." The term sheet defines these categories as follows:

Included Investors are limited partners that satisfy at least one of the following criteria: (i) the LP is an investment-grade rated entity, having received a credit rating of BBB- or higher (or its equivalent) from at least one nationally recognized statistical rating organization ("NRSRO"), including S&P Global Ratings, Moody's Investors Service, or Fitch Ratings; or (ii) the LP is a government-plan investor, defined to include state, municipal, or sovereign pension plans and government-sponsored investment authorities.

Excluded Investors include: (a) LPs that do not satisfy either of the foregoing criteria (i.e., unrated entities that are not government plans); (b) LPs that are in default under their respective subscription agreements with respect to their obligation to fund capital calls; and (c) LPs whose commitments are subject to legal or regulatory restrictions that would impede or prohibit the funding of capital contributions when called.

The practical impact of these inclusion and exclusion criteria on the Fund's anticipated LP base is significant. Based on the pipeline of identified prospective investors provided to us by the Sponsor, we offer the following investor-by-investor analysis:

• Northmoor State Pension System (anticipated commitment: $200,000,000). Northmoor is a state government pension plan and qualifies as an Included Investor under the government-plan criterion. No issues identified with respect to its inclusion in the borrowing base.

• Tidewater Sovereign Investment Authority (anticipated commitment: $175,000,000 via the Offshore Feeder). Tidewater is a sovereign wealth fund established by a foreign government and would likely qualify as an Included Investor under the government-plan criterion. However, Tidewater's commitment will be made through Harrowgate Fund V Offshore SLP, the Cayman Islands-domiciled offshore feeder vehicle, rather than directly into the Main Fund. Because the term sheet is drafted to apply to HPE Fund V LP (the Main Fund) only, Tidewater's commitment through the Offshore Feeder will not be included in the Main Fund's borrowing base unless the Offshore Feeder is added as a co-borrower, guarantor, or pledgor under the Facility, or unless a separate parallel facility arrangement is established. We discuss this structural issue in detail in Section III below. Subject to resolution of this structural question, Tidewater would be an Included Investor.

• Edgecombe Insurance Group Ltd. (anticipated commitment: $150,000,000). Edgecombe is a Bermuda-domiciled insurance holding company. Based on publicly available information, Edgecombe carries an investment-grade credit rating from at least one NRSRO, which would qualify it as an Included Investor. This should be confirmed directly with Ashford, as the term sheet does not specify whether ratings assigned to a non-U.S. entity by non-U.S. rating agencies will be accepted for borrowing base purposes. Subject to rating confirmation, Edgecombe would be an Included Investor.

• The Kingsbridge Endowment Fund (anticipated commitment: $100,000,000). Kingsbridge is a 501(c)(3) private endowment fund. It is not rated by any NRSRO and is not a government plan. Under the term sheet's Included Investor criteria, Kingsbridge would be classified as an Excluded Investor. The Fund's borrowing capacity would benefit from Kingsbridge's inclusion, and we recommend negotiating with Ashford to expand the Included Investor definition to encompass endowments meeting certain criteria (e.g., minimum endowment corpus size, minimum years of operation, or satisfactory credit analysis by Ashford). We note that some lenders in the subscription credit facility market do include large, well-established university and institutional endowments in the borrowing base, and this is a reasonable negotiation point.

• Stonewall Partners Fund of Funds III LP (anticipated commitment: $75,000,000). Stonewall is a fund of funds vehicle. It is unrated and is not a government plan. Under the current Included Investor criteria, Stonewall would be classified as an Excluded Investor. While it may be possible to negotiate its inclusion based on a "look-through" analysis of Stonewall's own LP base, this is less commonly accepted by lenders and would require significant additional diligence by Ashford.

• Velthorn Family Office LLC (anticipated commitment: $50,000,000). Velthorn is a single-family office. It is unrated and is not a government plan. Velthorn would be classified as an Excluded Investor under the current borrowing base criteria. Family office investors are frequently excluded from subscription facility borrowing bases due to the limited public financial information available for credit assessment.

Based on the foregoing analysis, and assuming a First Close target pipeline of $750,000,000 in aggregate commitments, the estimated Included Investor uncalled commitments at First Close would be approximately $525,000,000, comprised of Northmoor ($200,000,000), Tidewater ($175,000,000, subject to resolution of the Offshore Feeder structural question), and Edgecombe ($150,000,000, subject to rating confirmation). At a 90% advance rate, this yields an estimated borrowing base of approximately $472,500,000. If Tidewater's commitment through the Offshore Feeder is not included in the Main Fund borrowing base, the estimated Included Investor uncalled commitments would be reduced to approximately $350,000,000, yielding a borrowing base of approximately $315,000,000. Resolution of the Offshore Feeder question is therefore a high-priority item.

F. Security Package

The Facility will be secured by a first-priority perfected security interest in the following assets of the Fund:

(a) The right of the General Partner to make capital calls on the limited partners of the Fund pursuant to the LPA and the LP subscription agreements;

(b) The right to receive capital contributions from the limited partners in response to such capital calls;

(c) The Fund's deposit account at Ridgeway Trust Company, located at 1100 North Market Street, Wilmington, Delaware 19801, into which capital contributions are paid (the "Capital Call Collection Account"), and all funds on deposit therein; and

(d) All proceeds of the foregoing.

Perfection of the security interest will be accomplished through (i) the filing of UCC-1 financing statements with the Delaware Secretary of State (as the jurisdiction of organization of the Fund); and (ii) the execution and delivery of an account control agreement among the Fund, Ashford, and Ridgeway Trust Company with respect to the Capital Call Collection Account. The account control agreement will provide Ashford with "control" over the Capital Call Collection Account within the meaning of Article 9 of the Uniform Commercial Code, ensuring that Ashford has priority over any other secured creditor with respect to the funds deposited therein.

The General Partner will execute a pledge and security agreement on behalf of the Fund, granting the security interests described above. The enforceability of this pledge and security agreement is dependent upon the LPA containing adequate provisions authorizing the General Partner to grant security interests in the Fund's capital call rights and to direct LPs to fund capital contributions to a lender-designated account upon the occurrence of an event of default. These "lender accommodation" provisions are discussed in detail in Section V below, and we strongly recommend that they be incorporated into the LPA before the LPA is distributed to prospective LPs in connection with the marketing process.

G. Purpose. The term sheet specifies that proceeds of the Facility may be used for the following purposes:

(a) Funding portfolio investments pending receipt of LP capital contributions. This is the primary anticipated use of the Facility: the Fund will draw on the Facility to fund investment closings on an accelerated timeline, and subsequently issue capital calls to LPs to repay the Facility borrowings.

(b) Payment of management fees payable to HCP as investment manager of the Fund. The use of Facility proceeds for management fee payments is a common feature of subscription credit facilities and allows the Fund to smooth cash flows during the early stages of the investment period when fee revenue from investments may be limited.

(c) Payment of organizational expenses of the Fund, subject to the $3,500,000 organizational expense cap set forth in the LPA, with any organizational expenses in excess of such cap to be borne by the Sponsor. Payment of other Fund expenses (including legal, accounting, custodial, and administrative expenses) is also a permitted purpose.

(d) General working capital purposes of the Fund, including payment of fund-level expenses and other short-term liquidity needs.

With respect to the bridge financing of portfolio investments, we note that the LPA currently limits bridge financing to a maximum duration of 180 calendar days from the date the Facility draw is made to fund such investment. Facility borrowings used for investment purposes must therefore be repaid within 180 days, typically through corresponding capital calls to LPs. We discuss the interaction between this LPA bridge limitation and the Facility's 364-day revolving tenor in Section IV.B below, and recommend that the credit agreement include a specific covenant requiring repayment of investment-related draws within 180 days.

H. Representations, Covenants, and Events of Default (Summary)

The term sheet provides for the following categories of representations, covenants, and events of default, which are expected to be set forth in detail in the definitive credit agreement:

Representations and Warranties. The Borrower and the General Partner will make customary fund finance representations including, without limitation: (i) valid existence and good standing of the Fund, the GP, and HCP; (ii) authority of the GP to enter into the Facility on behalf of the Fund and to grant the security interests contemplated thereby; (iii) enforceability of the LPA and the LP subscription agreements in accordance with their terms; (iv) absence of material litigation involving the Fund, the GP, or HCP; (v) no ERISA violations (as discussed further in Section VIII); and (vi) compliance with all applicable anti-money laundering laws and regulations, including the Bank Secrecy Act and the USA PATRIOT Act, and with applicable sanctions laws and regulations administered by the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury.

Affirmative Covenants. The Borrower will be required to comply with the following affirmative covenants, among others: (i) delivery to Ashford of an updated LP commitment schedule and borrowing base certificate on a quarterly basis; (ii) prompt notice to Ashford of any LP default under any LP's subscription agreement; (iii) prompt notice of any event that would constitute a GP removal event under the LPA; (iv) prompt notice of any Key Person Event (as defined in the LPA); (v) delivery of annual audited financial statements of the Fund, prepared by Caldwell, Fitch & Hartley LLP, the Fund's independent auditor, within 120 days following the end of each fiscal year; (vi) delivery of quarterly unaudited financial statements within 60 days following the end of each fiscal quarter; and (vii) maintenance of Pinnacle Fund Services LLC (or a comparable administrator reasonably acceptable to Ashford) as the Fund's fund administrator.

Negative Covenants. The Borrower will be subject to the following negative covenants, among others: (i) no amendment, modification, supplement, or waiver of any provision of the LPA that would materially adversely affect the lender's rights under the Facility or the enforceability of the security interests without the prior written consent of Ashford; (ii) restrictions on the incurrence of additional fund-level indebtedness beyond the Facility (other than trade payables incurred in the ordinary course of business); and (iii) no release, reduction, or forgiveness of any LP's unfunded commitment without the prior written consent of Ashford if such release, reduction, or forgiveness would cause a borrowing base deficiency (i.e., would cause the aggregate outstanding borrowings under the Facility to exceed the borrowing base).

Events of Default. The term sheet identifies the following events of default, each of which would entitle Ashford to accelerate the Facility and exercise its enforcement remedies: (i) failure of the Borrower to make any payment of principal, interest, or fees when due; (ii) breach of any representation or warranty in any material respect; (iii) breach of any covenant (subject to customary cure periods for non-payment defaults); (iv) termination of the LPA or dissolution of the Fund; (v) removal of the GP (whether for cause or without cause); (vi) occurrence of a Key Person Event that is not cured or waived by a majority-in-interest of the LPs within the cure period specified in the LPA; (vii) insolvency of the Fund, the GP, or HCP, or the commencement of bankruptcy, receivership, or similar proceedings; and (viii) entry of a final, non-appealable judgment against the Fund, the GP, or HCP in excess of a threshold amount to be agreed.

We note the following with respect to the Key Person Event trigger. The LPA designates Marcus J. Harrowgate, Managing Partner and Chief Investment Officer of HCP, and Diana R. Castellano, Senior Managing Director and Head of Investments at HCP, as the "Key Persons." Under the LPA, a "Key Person Event" occurs if either Mr. Harrowgate or Ms. Castellano ceases to devote substantially all of his or her professional time and attention to the affairs of the Fund. Upon the occurrence of a Key Person Event, the investment period is automatically suspended, and the GP is required to notify the LPs. The suspension continues until the Key Person Event is cured (by replacement of the departing Key Person with a person approved by a majority-in-interest of the LPs) or waived by a majority-in-interest of the LPs.

The term sheet treats an uncured and unwaived Key Person Event as an event of default under the Facility. This treatment is standard in the subscription credit facility market — lenders view the departure of a key person as a material adverse development that may affect the Fund's ability to deploy capital and generate returns, and by extension, the LPs' willingness to continue funding capital calls. However, we recommend confirming with the Sponsor that this treatment is acceptable and that the cure/waiver period under the LPA is of sufficient length to allow the LPs to act before acceleration of the Facility would occur. We discuss this issue further in Section XI (Negotiation Point No. 5) below.

I. Conditions Precedent to Closing

The term sheet specifies the following conditions precedent to the initial closing of the Facility and the first drawdown thereunder:

(a) Execution and delivery of the LPA in final form, including all lender accommodation provisions satisfactory to Ashford;

(b) Receipt by Ashford of executed subscription agreements from all LPs participating in the First Close, with a minimum First Close of $750,000,000 in aggregate capital commitments;

(c) Delivery of legal opinions from Calderwood & Harkness LLP addressing (i) the valid formation and existence of the Fund and the GP, (ii) the enforceability of the LPA, the subscription agreements, and the credit agreement in accordance with their terms, and (iii) the creation and perfection of the security interests contemplated by the pledge and security agreement;

(d) Filing of UCC-1 financing statements with the Delaware Secretary of State naming the Fund as debtor and Ashford as secured party;

(e) Execution and delivery of an account control agreement among the Fund (acting through the GP), Ashford, and Ridgeway Trust Company with respect to the Capital Call Collection Account;

(f) Satisfactory completion of Ashford's know-your-customer ("KYC") and anti-money laundering ("AML") diligence on the Fund, the GP, and HCP, including verification of beneficial ownership information and OFAC screening; and

(g) Satisfactory review by Ashford's counsel of all LP side letters, to ensure that no LP-specific provisions impair the lender's security interest, the enforceability of the LP's capital call obligations, or the priority of the lender's claims in respect of capital contributions.

These conditions precedent are largely standard. We address the coordination of these requirements with the First Close timeline in Section XII below.

J. Fees. The term sheet references the following fees in connection with the Facility:

Upfront Arrangement Fee. The term sheet states that a "customary arrangement fee" will be payable to Ashford at closing but does not specify the amount. Based on our experience in recent comparable transactions, upfront arrangement fees for subscription credit facilities of this size typically range from 10 to 15 basis points of the total facility commitment, which would translate to $500,000 to $750,000 on a $500,000,000 facility. We recommend negotiating the arrangement fee to 10 basis points or below and confirming whether this fee is properly characterized as a Fund expense (deductible against LP capital) or a Sponsor expense. We address this in Section XI (Negotiation Point No. 1) below.

Annual Administrative Agent Fee. The term sheet also references an annual administrative agent fee payable to Ashford in its capacity as administrative agent, but the amount is not specified. These fees are typically in the range of $50,000 to $75,000 per annum for facilities of this size.

Both the arrangement fee and the administrative agent fee are expected to constitute Fund expenses under the LPA. The LPA's fund expense provisions should be reviewed to confirm that subscription credit facility fees are expressly enumerated as permissible Fund expenses, and that such fees are not subject to the organizational expense cap (as they are operational rather than organizational in nature).

III. Parallel Vehicle / Offshore Feeder Structural Considerations

The Fund's anticipated structure includes three investment vehicles: (a) Harrowgate Private Equity Fund V LP, the Main Fund (a Delaware limited partnership); (b) Harrowgate Fund V Parallel LP, the Parallel Fund (a Delaware limited partnership); and (c) Harrowgate Fund V Offshore SLP, the Offshore Feeder (a Cayman Islands exempted limited partnership). Investors in the Parallel Fund and the Offshore Feeder invest alongside the Main Fund on a pari passu, pro rata basis in each portfolio investment, and the three vehicles are managed as a single economic unit for investment purposes.

The indicative term sheet from Ashford is drafted to apply exclusively to HPE Fund V LP — the Main Fund. The Parallel Fund and the Offshore Feeder are not parties to the proposed Facility as currently contemplated. This raises several structural questions that must be resolved before the Facility can be finalized.

Multi-Borrower vs. Separate Parallel Facility. The threshold question is whether (a) the Parallel Fund and/or the Offshore Feeder should be added as co-borrowers under a single multi-vehicle facility with Ashford, with the LP commitments in each vehicle pledged to support a single, combined borrowing base; (b) the Parallel Fund and/or the Offshore Feeder should guaranty the Main Fund's obligations under the Facility, with their LP commitments pledged as additional collateral; or (c) separate parallel subscription credit facilities should be established for the Parallel Fund and the Offshore Feeder, on substantially similar terms, which would be coordinated with the Main Fund Facility but documented independently.

Each approach has distinct advantages and drawbacks. A multi-borrower structure would maximize the aggregate borrowing base by combining the LP commitments across all three vehicles, providing the greatest borrowing flexibility. However, it introduces cross-collateralization and cross-default risks between the vehicles, and it requires the involvement of Cayman Islands counsel with respect to the Offshore Feeder (including analysis of CIMA registration requirements, Cayman law security interest perfection, and the enforceability of security interests over Cayman LP commitments under Cayman law). Separate parallel facilities would preserve the structural independence of each vehicle but would result in lower borrowing capacity for the Main Fund standing alone and would add documentation complexity and cost.

Impact on Tidewater Sovereign Investment Authority. Tidewater's $175,000,000 commitment will be made through the Offshore Feeder (the Cayman-domiciled vehicle), as Tidewater has indicated a preference for investing through a non-U.S. structure for tax and regulatory reasons. If the Offshore Feeder is not a party to the Facility — either as a co-borrower or as a pledgor/guarantor — Tidewater's $175,000,000 commitment will not be included in the Main Fund's borrowing base. This would reduce the estimated borrowing base at First Close by approximately $157,500,000 (90% of $175,000,000), a material reduction that would meaningfully limit the Fund's borrowing capacity during the early stages of the investment period when Facility availability is most critical.

Impact on Kingsbridge Endowment Fund. We understand that Kingsbridge is evaluating two potential investment structures: direct investment into the Parallel Fund, or investment through HGF V blocker Corp., a Delaware C corporation that would in turn hold an LP interest in the Fund (or the Parallel Fund). If Kingsbridge invests through the blocker, the relevant LP commitment for borrowing base purposes would be the blocker's commitment to the Fund (or the Parallel Fund), not Kingsbridge's equity investment in the blocker. This distinction has practical implications: the blocker entity itself may or may not satisfy the Included Investor criteria (as a newly formed special-purpose Delaware C corporation, the blocker is unlikely to be rated by any NRSRO and is not a government plan). Ashford may require separate credit support from the blocker or direct analysis of the blocker's sole source of funding (i.e., Kingsbridge's endowment). This structural question should be raised with Ashford early in the negotiation process.

Recommendation. We recommend scheduling a call with Lisa M. Osterberg at Ashford to discuss the preferred approach to the parallel vehicle and Offshore Feeder borrowing base question. The decision should be informed by the relative costs and benefits of a multi-borrower structure versus separate parallel facilities, taking into account (i) the impact on aggregate borrowing capacity, (ii) the additional legal costs associated with Cayman Islands counsel involvement, (iii) the structural preferences of the Sponsor, and (iv) Ashford's willingness to accept cross-vehicle security. If a multi-borrower structure is pursued, we will need to coordinate with Cayman counsel (we recommend engaging Broadwell & Associates, with whom we have worked on prior Harrowgate fund formations) for advice on Cayman law security interest perfection and CIMA implications.

IV. LPA Consistency Analysis

We have reviewed the draft LPA circulated on May 9, 2025 for consistency with the terms of the indicative term sheet. Set forth below is our analysis of the key areas where the LPA and the Facility terms interact, along with our assessment of whether any inconsistencies exist and our recommendations for resolution.

A. Fund-Level Leverage Limit

The draft LPA includes an investment restriction (in the "Investment Restrictions" section, the specific section number of which has not yet been finalized) providing that subscription facility borrowings outstanding at any time shall not exceed 25% of the aggregate uncalled capital commitments of the Fund's limited partners. This 25% cap is an investor-protection provision commonly included in PE fund limited partnership agreements, and is consistent with institutional LP expectations and ILPA guidance.

At the Fund's target hard cap of $2,000,000,000 in aggregate commitments, 25% of uncalled commitments equals $500,000,000 — exactly equal to the Facility's maximum commitment amount. The Facility size is therefore calibrated to the LPA leverage limit at the hard cap, and no inconsistency exists at full fundraise.

At the First Close minimum of $750,000,000 in aggregate commitments, 25% of uncalled commitments equals $187,500,000. At First Close, the Facility availability will be constrained by both the LPA leverage limit and the borrowing base calculation, with the more restrictive of the two constraints governing. If the estimated borrowing base at First Close is approximately $472,500,000 (as calculated in Section II.E above, assuming Tidewater is included), the binding constraint at First Close will be the LPA leverage limit of $187,500,000, not the borrowing base. This means that the Fund will have access to significantly less than the full $500,000,000 Facility commitment during the early stages of the investment period, with availability increasing as additional LPs are admitted in subsequent closings.

We have not identified any inconsistency between the LPA leverage limit and the Facility terms. However, we recommend confirming that the LPA leverage limit is measured against "aggregate uncalled commitments" across all Fund vehicles — including the Main Fund, the Parallel Fund, and the Offshore Feeder — rather than Main Fund commitments only. If the leverage limit is measured on a Main Fund-only basis, the available leverage headroom will be significantly lower than if it is measured on an aggregate cross-vehicle basis. The LPA drafting should clarify this point.

B. Bridge Financing Duration

The draft LPA provides that bridge financing for portfolio investments is limited to 180 calendar days. This provision restricts the maximum duration for which Facility borrowings used to fund investments may remain outstanding before being repaid with capital contributions from LPs. The 180-day limitation is a common provision in PE fund LPAs and reflects LP expectations that subscription credit facilities will be used as short-term bridge financing rather than as a means of permanently leveraging the Fund.

The Facility's 364-day revolving tenor permits borrowings to remain outstanding for up to 364 days. This creates a potential inconsistency: while the Facility permits revolving borrowings of up to 364 days' duration, the LPA limits investment-related bridge borrowings to 180 days. The resolution is straightforward — the LPA bridge limit is an internal governance constraint on the Fund's use of Facility proceeds for investment purposes, and the Fund must comply with the LPA bridge limit regardless of the Facility's longer contractual tenor. Borrowings used for purposes other than bridge financing of investments (e.g., management fee payments, organizational expenses, and general working capital) are not subject to the 180-day bridge limit.

Nevertheless, we recommend the following measures to ensure compliance:

(a) The definitive credit agreement should include a specific covenant requiring the Borrower to certify that any borrowing used to fund a portfolio investment will be repaid from LP capital contributions within 180 calendar days of the applicable draw date.

(b) The Fund's capital call notice procedures should be designed to allow timely capital calls following investment-related draws, so that capital contributions are received in sufficient time to repay the Facility within the 180-day window.

(c) The LPA should clarify whether the 180-day limitation runs from (i) the date of the initial Facility draw, or (ii) the date of the closing of the portfolio investment funded by such draw. If the Fund draws on the Facility in advance of an investment closing (e.g., to fund a deposit or an escrow), the measurement date has practical significance.

C. No-Fault GP Removal and For-Cause Removal

The draft LPA provides for two mechanisms by which the General Partner may be removed: (i) no-fault removal, which requires the affirmative vote of 75% in interest of the LPs (excluding GP-affiliated commitments); and (ii) for-cause removal, which requires the affirmative vote of a majority in interest of the LPs. These provisions are customary in PE fund limited partnership agreements and provide LPs with governance rights to replace a general partner that is underperforming, engaged in misconduct, or otherwise failing to serve the interests of the Fund.

The indicative term sheet treats GP removal — whether for cause or without cause — as an event of default under the Facility. Upon the occurrence of an event of default, Ashford would have the right to accelerate the Facility (i.e., declare all outstanding borrowings immediately due and payable), exercise its enforcement remedies under the security agreement (including the right to issue capital calls directly to LPs and direct capital contributions to a lender-controlled account), and cease making further advances under the Facility.

This treatment is standard in the subscription credit facility market, as the removal of the GP represents a fundamental change in the management of the Fund and may affect the lender's willingness to continue extending credit. However, we note that the existence of the Facility and the GP removal event-of-default trigger create a practical impediment to LPs exercising their removal rights. LPs considering a vote to remove the GP must weigh the consequences of triggering a Facility event of default, which could result in immediate acceleration and the forced calling of capital to repay the Facility — a result that is likely undesirable from the LPs' perspective and that may effectively deter LPs from exercising their removal rights.

We recommend the following:

(a) The existence of the Facility, and the fact that GP removal constitutes an event of default, should be clearly disclosed to LPs in the Private Placement Memorandum ("PPM") as part of the Fund's risk factors and operational disclosures.

(b) We should negotiate with Ashford to include a standstill or cure period in the credit agreement following a GP removal event. We recommend a standstill period of at least 90 days, during which Ashford would refrain from exercising acceleration or enforcement remedies, to provide the Fund with an orderly period in which to transition to a successor GP or to refinance or repay the Facility. This is discussed further in Section XI (Negotiation Point No. 6) below.

D. Transfer Restrictions

The draft LPA restricts transfers of LP interests without the prior written consent of the General Partner. The form of Transfer (Assignment) Agreement appended to the LPA requires any transferee to assume all obligations of the transferor LP, including the obligation to fund future capital calls in respect of the transferred interest.

The credit agreement will likely require that any transfer of an LP interest be subject to prior written notice to Ashford and, in certain circumstances, Ashford's prior written consent. Specifically, if a transfer would result in an Included Investor transferring its interest to a transferee that does not qualify as an Included Investor, the transfer could reduce the borrowing base and potentially cause a borrowing base deficiency if the Facility is drawn close to its borrowing base limit.

We recommend that the LPA's transfer provisions be revised to include an express acknowledgment that transfers of LP interests are subject to the notification and consent requirements of any outstanding subscription credit facility. This can be accomplished by adding a proviso to the transfer restriction section stating that the GP shall not consent to any transfer of an LP interest if such transfer would cause a borrowing base deficiency under any outstanding credit facility, unless the lender under such credit facility has consented to such transfer.

E. LP Default Provisions

The draft LPA contains customary default provisions for LPs that fail to fund capital calls when due. The consequences of an LP default include: (i) reduction of the defaulting LP's percentage interest in the Fund by 50%; (ii) the GP's right to force a sale of the defaulting LP's interest at a discount of not less than 25% to the net asset value of such interest; and (iii) the GP's right to pursue legal remedies against the defaulting LP for damages arising from the default, including the amount of the unfunded capital call and any costs or losses incurred by the Fund as a result of the default.

The credit agreement will require (a) prompt written notice to Ashford of any LP default, (b) automatic exclusion of the defaulting LP's unfunded commitment from the borrowing base (whether or not the LP is cured), and (c) the GP's cooperation with Ashford in pursuing remedies against the defaulting LP if necessary to protect the lender's security interest.

We recommend that the LPA's default provisions be reviewed for consistency with these credit agreement requirements. In particular, the LPA should confirm that the GP has the authority to share information regarding LP defaults with the lender, including the identity of the defaulting LP, the amount of the defaulted capital call, and the status of any cure or enforcement actions. LP default information is typically subject to confidentiality provisions in the LPA and subscription agreements, and the lender's right to receive such information should be carved out from these confidentiality restrictions.

V. Recommended LPA Provisions — Lender Accommodation Language

Based on our review of the indicative term sheet and our analysis of the draft LPA, we recommend that the following "lender accommodation" provisions be incorporated into the LPA before the LPA is finalized and distributed to prospective LPs. These provisions are essential to support the Facility and are expected by Ashford as a condition precedent to closing. We have prepared draft language for each provision, which is attached as Attachment C (Draft Lender Accommodation Provisions for LPA — Redline Insert). Set forth below is a summary of the recommended provisions.

A. Authorization to Grant Security Interests

The LPA should include an express authorization for the General Partner, acting on behalf of the Fund, to enter into one or more credit facilities and to grant security interests in the Fund's capital call rights as collateral for the Fund's obligations under such facilities. Without this express authorization, there is a risk that an LP could challenge the enforceability of the security interest on the grounds that the GP exceeded its authority under the LPA.

We recommend the following specific language:

"The General Partner is authorized, on behalf of the Partnership, to enter into one or more credit facilities, including subscription credit facilities or capital call facilities, and to grant security interests in the Partnership's right to make Capital Calls and to receive Capital Contributions from the Limited Partners, and in the Partnership's accounts and proceeds thereof, as collateral for obligations under such credit facilities. Each Limited Partner acknowledges and agrees that the General Partner may exercise such authority without further approval of or consent from the Limited Partners."

This provision should be located in the LPA section addressing the GP's powers and authority and should be cross-referenced in the section governing capital calls and capital contributions.

B. LP Obligation to Fund Capital Calls Notwithstanding Assignment

The LPA should include a provision confirming that each LP's obligation to fund capital calls is absolute, unconditional, and irrevocable, and that such obligation shall not be subject to any defense, set-off, counterclaim, or reduction of any kind, including by reason of any dispute with the GP, any other LP, or any third party. This provision is critical for the enforceability of the lender's security interest. If an LP could assert defenses or set-offs against its obligation to fund capital calls, the value of the lender's collateral would be uncertain and the borrowing base calculation would be unreliable.

We recommend the following language:

"Each Limited Partner's obligation to make Capital Contributions in response to Capital Calls shall be absolute, unconditional, and irrevocable, and shall not be subject to any defense, set-off, counterclaim, reduction, or termination for any reason whatsoever, including without limitation (i) any dispute between such Limited Partner and the General Partner, any other Limited Partner, or any third party, (ii) any claim of breach of any agreement or obligation by the General Partner or the Partnership, (iii) any change in the financial condition of such Limited Partner, or (iv) any assignment of the Partnership's right to receive such Capital Contributions to a lender or other secured party pursuant to Section [_] hereof."

C. Lender Direction Rights

The LPA should permit the lender, upon the occurrence and during the continuance of an event of default under the credit facility, to exercise certain direction rights with respect to capital calls and capital contributions. Specifically, the lender should have the right to:

(a) Issue capital call notices directly to LPs, or direct the GP to issue capital call notices, in amounts sufficient to repay the outstanding Facility obligations;

(b) Direct that capital contributions made by LPs in response to such capital calls be paid directly into a lender-controlled account (rather than the Fund's regular Capital Call Collection Account) for application against the outstanding Facility obligations; and

(c) Exercise any and all rights and remedies available to it under the pledge and security agreement, the credit agreement, and applicable law.

The effectiveness of these direction rights depends upon the execution and delivery of an account control agreement with Ridgeway Trust Company, the Fund's custodian, which will give Ashford control over the Capital Call Collection Account. Upon the occurrence of an event of default, Ashford would instruct Ridgeway Trust Company to redirect incoming capital contributions to a lender-designated account or to hold such funds for the lender's benefit, rather than releasing them to the Fund for general use.

D. LP Acknowledgment and Consent

Each LP's subscription agreement should include a specific acknowledgment and consent provision addressing the Fund's subscription credit facility. The subscription agreement should include, at a minimum, the following:

(a) An acknowledgment that the Fund may enter into one or more subscription credit facilities secured by the Fund's right to call and receive capital contributions from the LPs;

(b) An acknowledgment that the LP's commitment may be pledged as security for the Fund's obligations under such facilities;

(c) A consent to the sharing of the LP's identity, commitment amount, unfunded commitment balance, and contact information with the lender, the administrative agent, and any syndication participants under such facilities; and

(d) An agreement that the LP's obligation to fund capital calls shall be enforceable by the lender directly, and that capital contributions may be required to be paid into a lender-controlled account, upon the occurrence and during the continuance of an event of default under the credit facility.

This consent is essential for several reasons. First, the delivery of quarterly borrowing base certificates to Ashford requires the disclosure of LP-specific commitment and unfunded balance information. Second, the lender must have the ability to contact LPs directly in an enforcement scenario. Third, if Ashford exercises its syndication rights, LP data will need to be shared with prospective syndication participants. Without this consent, the Fund's confidentiality obligations to its LPs could impede the operation of the Facility.

E. No Amendment Without Lender Consent

The LPA should provide that certain enumerated provisions may not be amended, modified, supplemented, or waived without the prior written consent of any subscription facility lender whose facility is then outstanding. The protected provisions should include, at a minimum:

(a) Provisions governing LP capital commitment obligations and the obligation to fund capital calls;

(b) Capital call mechanics, including notice periods, payment procedures, and the consequences of failure to fund;

(d) Fund-level leverage limits;

(e) The authorization to grant security interests (Section V.A above); and

(f) LP acknowledgment and consent provisions (Section V.D above).

This is a standard lender accommodation provision and is necessary to protect the lender against amendments to the LPA that could impair the value of its collateral or the enforceability of its security interest. However, we recommend that this provision be narrowly tailored to the specific provisions listed above, in order to avoid giving the lender an effective veto over general LPA amendments that are unrelated to the Facility. Overbroad no-amendment provisions can create governance difficulties and may be resisted by sophisticated LPs during the subscription process.

F. Restriction on Release of LP Commitments

The LPA should include a restriction on the GP's ability to excuse, release, or reduce an LP's unfunded commitment, or to permit an LP withdrawal, if such action would cause a borrowing base deficiency under any outstanding subscription credit facility. A "borrowing base deficiency" would exist if, after giving effect to the release or reduction, the aggregate outstanding borrowings under the Facility would exceed the borrowing base.

This provision has particular relevance in the context of the excuse provisions contained in several negotiated side letters. As discussed in Section VII below, certain LPs have negotiated excuse rights that permit them to be excused from funding capital contributions for specific investments that conflict with their investment policies or regulatory requirements. These include:

• Tidewater Sovereign Investment Authority: Sharia compliance excuse rights

• Northmoor State Pension System: restricted jurisdiction excuse rights

• The Kingsbridge Endowment Fund: UBTI excuse rights

• Edgecombe Insurance Group Ltd.: insurance regulatory concentration limit excuse rights

If a large Included Investor exercises its excuse rights with respect to a significant investment, its unfunded commitment attributable to that investment would effectively be unavailable to support the borrowing base. While the exercise of excuse rights does not typically release the LP from its overall commitment to the Fund (the LP remains obligated to fund future capital calls for non-excused investments), the practical effect may be a temporary reduction in the lender's collateral coverage.

We recommend including a proviso in the LPA's excuse and withdrawal provisions stating that the GP shall not exercise its discretion to excuse an LP from participation in any investment if such excusal would cause a borrowing base deficiency under any outstanding credit facility, unless either (a) the lender has consented to such excusal or (b) the borrowing base deficiency is cured by a corresponding reduction in outstanding borrowings.

VI. Interaction with Capital Call Mechanics

A. Capital Call Timing

The draft LPA provides for a minimum notice period of 10 business days for capital calls. Upon receipt of a capital call notice, each LP has 10 business days to wire its pro rata share of the called amount to the Fund's Capital Call Collection Account at Ridgeway Trust Company.

The credit agreement will specify the procedures by which the Fund may draw on the Facility, including drawdown request mechanics, minimum draw amounts, and settlement timing. The critical operational question is how Facility draws and capital calls are coordinated to ensure compliance with the LPA's 180-day bridge limitation for investment-related borrowings.

The timing dynamics are as follows. If the Fund draws on the Facility to fund a portfolio investment on Day 1, the 180-day clock begins running. The GP must issue a capital call to LPs in an amount sufficient to repay the Facility borrowing. Given the 10-business-day notice period for capital calls (which translates to approximately 14 calendar days), plus an additional one to two business days for wire transfer settlement and application of proceeds to the Facility, the minimum elapsed time from issuance of a capital call to receipt and application of LP capital contributions is approximately 16 calendar days. If the GP issues the capital call promptly following the Facility draw, this leaves ample time within the 180-day window. However, if the GP delays issuing the capital call — for example, to batch multiple investments into a single capital call — the remaining time within the 180-day window may become tight.

We recommend that the Sponsor establish an internal capital call policy that coordinates Facility draws with timely capital calls. Specifically, we recommend a target repayment period of 120 calendar days for investment-related draws, which would provide a 60-day buffer against the 180-day LPA limit. The capital call policy should provide that for each Facility draw used to fund a portfolio investment, the GP will issue a corresponding capital call within 30 calendar days of the draw date, with a target collection date no later than 120 days after the draw date.

B. Capital Call Priorities

When the Fund issues a capital call to repay Facility borrowings, the capital call notice should clearly identify the purpose of the capital call as including repayment of amounts borrowed under the Facility. This identification is important for several reasons. First, certain LPs may have the right to receive information about the purposes for which their capital contributions will be used. Second, the LPA may impose different requirements on capital calls for different purposes (e.g., investment capital calls versus expense capital calls). Third, proper identification of the purpose aids in the Fund's internal accounting and reporting.

We note that the LPA's waterfall provisions — governing the distribution of investment proceeds among return of capital, preferred return, and carried interest — are not directly affected by the use of the Facility. The waterfall calculations are based on aggregate capital contributed and distributed, regardless of the timing of capital calls. However, the timing of capital calls does affect performance metric calculations, particularly internal rate of return ("IRR"). By using the Facility to bridge investments and delaying the corresponding capital calls, the Fund effectively reduces the period during which LP capital is outstanding, which mechanically increases the reported IRR. This IRR enhancement effect is well recognized in the private equity industry and has been the subject of significant commentary from institutional LP groups, including the Institutional Limited Partners Association ("ILPA").

We recommend that the PPM include appropriate disclosure regarding the impact of subscription credit facility usage on performance metrics, consistent with ILPA Guidance on Subscription Lines of Credit and Call Facilities (as updated). The disclosure should note that the use of the Facility may result in higher reported IRR compared to what would have been achieved if LP capital had been called at the time of each investment, and should describe the Fund's policy with respect to the use of the Facility, including the 180-day bridge limitation and the target repayment period.

C. Interaction with Distribution Mechanics

The LPA provides for a European-style whole-fund waterfall for the distribution of investment proceeds. Under a European-style waterfall, carried interest is not calculated or distributed on a deal-by-deal basis but is instead calculated across the entire Fund portfolio, with the GP receiving carried interest only after the LPs have received a return of all contributed capital plus their preferred return. This whole-fund approach is more conservative from an LP perspective and reduces the risk of carried interest "clawback."

The use of the Facility does not alter the mechanics of the European-style waterfall. Capital contributions called to repay Facility borrowings are treated as contributed capital in the waterfall calculation, and the timing of the capital call (whether made contemporaneously with the investment or delayed by the use of the Facility) does not affect the aggregate amount of contributed capital or the preferred return calculation.

However, as noted above, the timing of capital calls does affect the J-curve profile of t

MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
TO: Graham Sutherland, Responsible Partner, Calderwood & Harkness LLP Catherine E. Loomis, General Counsel & Chief Compliance Officer, Harrowgate Capital Partners LLC
FROM: Stephen Adler, Lead Associate, Calderwood & Harkness LLP Theresa Kim, Working Associate, Calderwood & Harkness LLP
DATE: May 12, 2025
RE: Review of Indicative Term Sheet — $500,000,000 Revolving Subscription Credit Facility from Ashford National Bank, N.A. for Harrowgate Private Equity Fund V LP
Matter No.: 1003-00002
cc: Jonathan P. Birch, Chief Financial Officer, Harrowgate Capital Partners LLC (for review of commercial terms) Sylvia Hartwell, Specialist Tax Partner, Calderwood & Harkness LLP (for tax-related sections)
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I. Executive Summary
This memorandum presents our review and analysis of the indicative term sheet received from Ashford National Bank, N.A. ("Ashford") dated May 5, 2025, for a $500,000,000 revolving subscription credit facility (the "Facility") to be made available to Harrowgate Private Equity Fund V LP ("HPE Fund V" or the "Fund"), a Delaware limited partnership to be formed with a target hard cap of $2,000,000,000. The Facility will be secured by the Fund's right to call and receive capital contributions from its limited partners (the "LPs"), a structure commonly referred to in the fund finance market as a subscription credit facility or capital call facility.
The purpose of this memorandum is fourfold. First, we summarize the key commercial and legal terms of the indicative term sheet in a format that facilitates review by the Sponsor's deal team. Second, we identify issues of consistency between the proposed Facility terms and the draft Limited Partnership Agreement (the "LPA") circulated internally on May 9, 2025, which is currently in an advanced but pre-final form. Third, we analyze the interaction between the Facility and the Fund's capital call mechanics, investor excuse provisions, and parallel vehicle structure. Fourth, we recommend specific LPA provisions — commonly referred to as "lender accommodation" language — that should be incorporated into the LPA to support the Facility, and we flag negotiation points for further discussion with Ashford and with Harrowgate Capital Partners LLC ("HCP" or the "Sponsor").
At a high level, the indicative term sheet is broadly consistent with current market practice for subscription credit facilities extended to mid-market private equity funds. The proposed pricing (SOFR + 175 basis points drawn, 25 basis points undrawn) falls within the range we observe in comparable recent transactions. The 364-day revolving tenor, the borrowing base methodology (90% of Included Investor uncalled commitments), and the security package (pledge of capital call rights plus account control agreement) are all in line with industry standards. We have, however, identified several areas that warrant further negotiation and clarification, including the treatment of commitments made through the Fund's offshore feeder vehicle and parallel fund, the alignment of the credit agreement's event of default triggers with the LPA's Key Person Event cure/waiver provisions, the absence of a standstill period following a GP removal event, and the need to resolve the commercial terms left open in the indicative term sheet (including the upfront arrangement fee and annual administrative agent fee).
Copies of this memorandum have been circulated to Jonathan P. Birch, Chief Financial Officer of HCP, for his input on the commercial negotiation points, and to Sylvia Hartwell, Specialist Tax Partner at Calderwood & Harkness LLP, for her review of the tax-related considerations discussed in Section IX. The key contact at Ashford for purposes of the Facility negotiation is Lisa M. Osterberg, Managing Director, Fund Finance, located at 300 Vesey Street, New York, NY 10282. We understand from preliminary discussions that Ms. Osterberg's team is prepared to move promptly to definitive documentation upon agreement on the open commercial terms and receipt of the final LPA.
II. Summary of Indicative Term Sheet
Set forth below is a detailed summary of the material terms contained in the Ashford indicative term sheet dated May 5, 2025. We have organized this summary to track the structure of the term sheet itself, with our commentary and observations integrated where relevant.
A. Parties. The indicative term sheet identifies the following parties to the proposed Facility:
Borrower: Harrowgate Private Equity Fund V LP, a Delaware limited partnership to be formed in connection with the Fund's initial closing. The Fund has not yet been organized; formation documents are expected to be filed with the Delaware Secretary of State in advance of the First Close, currently targeted for August 15, 2025.
General Partner (acting on behalf of the Borrower): Harrowgate Fund V GP LLC, a Delaware limited liability company to be formed. Harrowgate Fund V GP LLC will serve as the sole general partner of the Fund. Its sole member will be Harrowgate Capital Partners LLC, the Sponsor. All actions on behalf of the Borrower under the Facility, including drawdown requests, compliance certifications, and the granting of security interests, will be taken by the General Partner in its capacity as general partner of the Fund.
Lender / Administrative Agent: Ashford National Bank, N.A., a national banking association. Ashford will serve as both the sole initial lender and the administrative agent under the Facility.
We note that the term sheet expressly contemplates that Ashford retains the right to syndicate the Facility to one or more additional financial institutions after closing. Any syndication would necessitate a review of the LPA's provisions regarding the assignability of the Facility and the sharing of LP data — including identity, commitment amounts, unfunded commitment balances, and contact information — with prospective syndication participants. We address this syndication right further in Section XI (Negotiation Point No. 2) below, and recommend that the Sponsor negotiate limitations on Ashford's syndication rights, including requiring that syndication participants be approved by the General Partner and that appropriate confidentiality protections be imposed on LP data shared in the syndication process.
B. Facility Size
The Facility is structured as a revolving credit facility in an aggregate principal amount of up to $500,000,000. Availability under the Facility is not automatic up to this amount, but is instead subject to the borrowing base limitations described in Section II.E below. The $500,000,000 commitment represents the maximum amount that Ashford is prepared to extend, subject to final credit approval, but actual availability at any given time will be the lesser of (a) the commitment amount and (b) the borrowing base.
At the Fund's target hard cap of $2.0 billion in aggregate LP commitments, the $500,000,000 Facility represents 25% of aggregate commitments. This ratio is consistent with the fund-level leverage cap set forth in the draft LPA, which restricts subscription facility borrowings to 25% of uncalled capital commitments at any time. The alignment of the Facility size with the LPA leverage cap is discussed in greater detail in Section IV.A below.
C. Tenor. The Facility has a 364-day revolving tenor, measured from the closing date. The term sheet provides that the Facility is renewable annually at the mutual agreement of the Borrower and Ashford — that is, neither party has a unilateral right to extend the Facility beyond the initial 364-day period or any subsequent renewal period.
A 364-day revolving tenor is the industry standard for subscription credit facilities. The shorter-term structure is driven by the nature of the underlying collateral: the Facility is secured by the Fund's right to call unfunded capital commitments from its LPs, which is an inherently diminishing asset as capital is drawn down over the Fund's investment period. A 364-day tenor aligns the Facility's maturity with the expected pace of capital deployment and ensures periodic reassessment of the borrowing base as LP commitments are called.
We note, however, that the absence of a committed multi-year tenor creates renewal risk. If Ashford were to decline to renew the Facility at the end of any 364-day period — whether due to changes in Ashford's credit appetite, deterioration in the credit quality of the Fund's LP base, or broader market conditions — the Fund would need to refinance the Facility with another lender or repay all outstanding borrowings from available cash or capital calls. We flag this renewal risk for the Sponsor's consideration and discuss the possibility of negotiating a committed two-year facility or a borrower-exercisable extension option in Section XI (Negotiation Point No. 7) below.
D. Pricing. The indicative pricing terms are as follows:
Drawn Spread: SOFR + 175 basis points per annum on all outstanding borrowings. The applicable benchmark rate is the Secured Overnight Financing Rate ("SOFR") as published by the Federal Reserve Bank of New York. The term sheet includes customary benchmark replacement language providing for transition to an alternative benchmark in the event of a SOFR cessation trigger event, though the specific fallback mechanics are not detailed in the term sheet and will need to be addressed in the definitive credit agreement.
Undrawn Commitment Fee: 25 basis points per annum on the daily average unused portion of the Facility commitment. The undrawn commitment fee accrues from the closing date and is payable quarterly in arrears.
Interest Payment: Interest on outstanding borrowings is payable quarterly in arrears. The term sheet does not specify a day count convention; we expect the definitive credit agreement will use Actual/360, which is standard for SOFR-based facilities.
We note that the pricing set forth in the term sheet is indicative and remains subject to final credit approval by Ashford's internal credit committee. Based on our review of recent comparable transactions in the subscription credit facility market, the proposed pricing is consistent with the current market range for mid-market private equity fund subscription facilities, which we observe at approximately SOFR + 150 to 200 basis points on drawn amounts and 20 to 30 basis points on undrawn commitments. The pricing is not at the tightest end of the range — which is typically reserved for the largest mega-cap funds with the highest-quality LP bases — but is competitive and appropriate for a fund of HPE Fund V's anticipated size and LP composition.
E. Borrowing Base
The borrowing base under the Facility is calculated as 90% of uncalled capital commitments from "Included Investors." The term sheet defines these categories as follows:
Included Investors are limited partners that satisfy at least one of the following criteria: (i) the LP is an investment-grade rated entity, having received a credit rating of BBB- or higher (or its equivalent) from at least one nationally recognized statistical rating organization ("NRSRO"), including S&P Global Ratings, Moody's Investors Service, or Fitch Ratings; or (ii) the LP is a government-plan investor, defined to include state, municipal, or sovereign pension plans and government-sponsored investment authorities.
Excluded Investors include: (a) LPs that do not satisfy either of the foregoing criteria (i.e., unrated entities that are not government plans); (b) LPs that are in default under their respective subscription agreements with respect to their obligation to fund capital calls; and (c) LPs whose commitments are subject to legal or regulatory restrictions that would impede or prohibit the funding of capital contributions when called.
The practical impact of these inclusion and exclusion criteria on the Fund's anticipated LP base is significant. Based on the pipeline of identified prospective investors provided to us by the Sponsor, we offer the following investor-by-investor analysis:
• Northmoor State Pension System (anticipated commitment: $200,000,000). Northmoor is a state government pension plan and qualifies as an Included Investor under the government-plan criterion. No issues identified with respect to its inclusion in the borrowing base.
• Tidewater Sovereign Investment Authority (anticipated commitment: $175,000,000 via the Offshore Feeder). Tidewater is a sovereign wealth fund established by a foreign government and would likely qualify as an Included Investor under the government-plan criterion. However, Tidewater's commitment will be made through Harrowgate Fund V Offshore SLP, the Cayman Islands-domiciled offshore feeder vehicle, rather than directly into the Main Fund. Because the term sheet is drafted to apply to HPE Fund V LP (the Main Fund) only, Tidewater's commitment through the Offshore Feeder will not be included in the Main Fund's borrowing base unless the Offshore Feeder is added as a co-borrower, guarantor, or pledgor under the Facility, or unless a separate parallel facility arrangement is established. We discuss this structural issue in detail in Section III below. Subject to resolution of this structural question, Tidewater would be an Included Investor.
• Edgecombe Insurance Group Ltd. (anticipated commitment: $150,000,000). Edgecombe is a Bermuda-domiciled insurance holding company. Based on publicly available information, Edgecombe carries an investment-grade credit rating from at least one NRSRO, which would qualify it as an Included Investor. This should be confirmed directly with Ashford, as the term sheet does not specify whether ratings assigned to a non-U.S. entity by non-U.S. rating agencies will be accepted for borrowing base purposes. Subject to rating confirmation, Edgecombe would be an Included Investor.
• The Kingsbridge Endowment Fund (anticipated commitment: $100,000,000). Kingsbridge is a 501(c)(3) private endowment fund. It is not rated by any NRSRO and is not a government plan. Under the term sheet's Included Investor criteria, Kingsbridge would be classified as an Excluded Investor. The Fund's borrowing capacity would benefit from Kingsbridge's inclusion, and we recommend negotiating with Ashford to expand the Included Investor definition to encompass endowments meeting certain criteria (e.g., minimum endowment corpus size, minimum years of operation, or satisfactory credit analysis by Ashford). We note that some lenders in the subscription credit facility market do include large, well-established university and institutional endowments in the borrowing base, and this is a reasonable negotiation point.
• Stonewall Partners Fund of Funds III LP (anticipated commitment: $75,000,000). Stonewall is a fund of funds vehicle. It is unrated and is not a government plan. Under the current Included Investor criteria, Stonewall would be classified as an Excluded Investor. While it may be possible to negotiate its inclusion based on a "look-through" analysis of Stonewall's own LP base, this is less commonly accepted by lenders and would require significant additional diligence by Ashford.
• Velthorn Family Office LLC (anticipated commitment: $50,000,000). Velthorn is a single-family office. It is unrated and is not a government plan. Velthorn would be classified as an Excluded Investor under the current borrowing base criteria. Family office investors are frequently excluded from subscription facility borrowing bases due to the limited public financial information available for credit assessment.
Based on the foregoing analysis, and assuming a First Close target pipeline of $750,000,000 in aggregate commitments, the estimated Included Investor uncalled commitments at First Close would be approximately $525,000,000, comprised of Northmoor ($200,000,000), Tidewater ($175,000,000, subject to resolution of the Offshore Feeder structural question), and Edgecombe ($150,000,000, subject to rating confirmation). At a 90% advance rate, this yields an estimated borrowing base of approximately $472,500,000. If Tidewater's commitment through the Offshore Feeder is not included in the Main Fund borrowing base, the estimated Included Investor uncalled commitments would be reduced to approximately $350,000,000, yielding a borrowing base of approximately $315,000,000. Resolution of the Offshore Feeder question is therefore a high-priority item.
F. Security Package
The Facility will be secured by a first-priority perfected security interest in the following assets of the Fund:
(a) The right of the General Partner to make capital calls on the limited partners of the Fund pursuant to the LPA and the LP subscription agreements;
(b) The right to receive capital contributions from the limited partners in response to such capital calls;
(c) The Fund's deposit account at Ridgeway Trust Company, located at 1100 North Market Street, Wilmington, Delaware 19801, into which capital contributions are paid (the "Capital Call Collection Account"), and all funds on deposit therein; and
(d) All proceeds of the foregoing.
Perfection of the security interest will be accomplished through (i) the filing of UCC-1 financing statements with the Delaware Secretary of State (as the jurisdiction of organization of the Fund); and (ii) the execution and delivery of an account control agreement among the Fund, Ashford, and Ridgeway Trust Company with respect to the Capital Call Collection Account. The account control agreement will provide Ashford with "control" over the Capital Call Collection Account within the meaning of Article 9 of the Uniform Commercial Code, ensuring that Ashford has priority over any other secured creditor with respect to the funds deposited therein.
The General Partner will execute a pledge and security agreement on behalf of the Fund, granting the security interests described above. The enforceability of this pledge and security agreement is dependent upon the LPA containing adequate provisions authorizing the General Partner to grant security interests in the Fund's capital call rights and to direct LPs to fund capital contributions to a lender-designated account upon the occurrence of an event of default. These "lender accommodation" provisions are discussed in detail in Section V below, and we strongly recommend that they be incorporated into the LPA before the LPA is distributed to prospective LPs in connection with the marketing process.
G. Purpose. The term sheet specifies that proceeds of the Facility may be used for the following purposes:
(a) Funding portfolio investments pending receipt of LP capital contributions. This is the primary anticipated use of the Facility: the Fund will draw on the Facility to fund investment closings on an accelerated timeline, and subsequently issue capital calls to LPs to repay the Facility borrowings.
(b) Payment of management fees payable to HCP as investment manager of the Fund. The use of Facility proceeds for management fee payments is a common feature of subscription credit facilities and allows the Fund to smooth cash flows during the early stages of the investment period when fee revenue from investments may be limited.
(c) Payment of organizational expenses of the Fund, subject to the $3,500,000 organizational expense cap set forth in the LPA, with any organizational expenses in excess of such cap to be borne by the Sponsor. Payment of other Fund expenses (including legal, accounting, custodial, and administrative expenses) is also a permitted purpose.
(d) General working capital purposes of the Fund, including payment of fund-level expenses and other short-term liquidity needs.
With respect to the bridge financing of portfolio investments, we note that the LPA currently limits bridge financing to a maximum duration of 180 calendar days from the date the Facility draw is made to fund such investment. Facility borrowings used for investment purposes must therefore be repaid within 180 days, typically through corresponding capital calls to LPs. We discuss the interaction between this LPA bridge limitation and the Facility's 364-day revolving tenor in Section IV.B below, and recommend that the credit agreement include a specific covenant requiring repayment of investment-related draws within 180 days.
H. Representations, Covenants, and Events of Default (Summary)
The term sheet provides for the following categories of representations, covenants, and events of default, which are expected to be set forth in detail in the definitive credit agreement:
Representations and Warranties. The Borrower and the General Partner will make customary fund finance representations including, without limitation: (i) valid existence and good standing of the Fund, the GP, and HCP; (ii) authority of the GP to enter into the Facility on behalf of the Fund and to grant the security interests contemplated thereby; (iii) enforceability of the LPA and the LP subscription agreements in accordance with their terms; (iv) absence of material litigation involving the Fund, the GP, or HCP; (v) no ERISA violations (as discussed further in Section VIII); and (vi) compliance with all applicable anti-money laundering laws and regulations, including the Bank Secrecy Act and the USA PATRIOT Act, and with applicable sanctions laws and regulations administered by the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury.
Affirmative Covenants. The Borrower will be required to comply with the following affirmative covenants, among others: (i) delivery to Ashford of an updated LP commitment schedule and borrowing base certificate on a quarterly basis; (ii) prompt notice to Ashford of any LP default under any LP's subscription agreement; (iii) prompt notice of any event that would constitute a GP removal event under the LPA; (iv) prompt notice of any Key Person Event (as defined in the LPA); (v) delivery of annual audited financial statements of the Fund, prepared by Caldwell, Fitch & Hartley LLP, the Fund's independent auditor, within 120 days following the end of each fiscal year; (vi) delivery of quarterly unaudited financial statements within 60 days following the end of each fiscal quarter; and (vii) maintenance of Pinnacle Fund Services LLC (or a comparable administrator reasonably acceptable to Ashford) as the Fund's fund administrator.
Negative Covenants. The Borrower will be subject to the following negative covenants, among others: (i) no amendment, modification, supplement, or waiver of any provision of the LPA that would materially adversely affect the lender's rights under the Facility or the enforceability of the security interests without the prior written consent of Ashford; (ii) restrictions on the incurrence of additional fund-level indebtedness beyond the Facility (other than trade payables incurred in the ordinary course of business); and (iii) no release, reduction, or forgiveness of any LP's unfunded commitment without the prior written consent of Ashford if such release, reduction, or forgiveness would cause a borrowing base deficiency (i.e., would cause the aggregate outstanding borrowings under the Facility to exceed the borrowing base).
Events of Default. The term sheet identifies the following events of default, each of which would entitle Ashford to accelerate the Facility and exercise its enforcement remedies: (i) failure of the Borrower to make any payment of principal, interest, or fees when due; (ii) breach of any representation or warranty in any material respect; (iii) breach of any covenant (subject to customary cure periods for non-payment defaults); (iv) termination of the LPA or dissolution of the Fund; (v) removal of the GP (whether for cause or without cause); (vi) occurrence of a Key Person Event that is not cured or waived by a majority-in-interest of the LPs within the cure period specified in the LPA; (vii) insolvency of the Fund, the GP, or HCP, or the commencement of bankruptcy, receivership, or similar proceedings; and (viii) entry of a final, non-appealable judgment against the Fund, the GP, or HCP in excess of a threshold amount to be agreed.
We note the following with respect to the Key Person Event trigger. The LPA designates Marcus J. Harrowgate, Managing Partner and Chief Investment Officer of HCP, and Diana R. Castellano, Senior Managing Director and Head of Investments at HCP, as the "Key Persons." Under the LPA, a "Key Person Event" occurs if either Mr. Harrowgate or Ms. Castellano ceases to devote substantially all of his or her professional time and attention to the affairs of the Fund. Upon the occurrence of a Key Person Event, the investment period is automatically suspended, and the GP is required to notify the LPs. The suspension continues until the Key Person Event is cured (by replacement of the departing Key Person with a person approved by a majority-in-interest of the LPs) or waived by a majority-in-interest of the LPs.
The term sheet treats an uncured and unwaived Key Person Event as an event of default under the Facility. This treatment is standard in the subscription credit facility market — lenders view the departure of a key person as a material adverse development that may affect the Fund's ability to deploy capital and generate returns, and by extension, the LPs' willingness to continue funding capital calls. However, we recommend confirming with the Sponsor that this treatment is acceptable and that the cure/waiver period under the LPA is of sufficient length to allow the LPs to act before acceleration of the Facility would occur. We discuss this issue further in Section XI (Negotiation Point No. 5) below.
I. Conditions Precedent to Closing
The term sheet specifies the following conditions precedent to the initial closing of the Facility and the first drawdown thereunder:
(a) Execution and delivery of the LPA in final form, including all lender accommodation provisions satisfactory to Ashford;
(b) Receipt by Ashford of executed subscription agreements from all LPs participating in the First Close, with a minimum First Close of $750,000,000 in aggregate capital commitments;
(c) Delivery of legal opinions from Calderwood & Harkness LLP addressing (i) the valid formation and existence of the Fund and the GP, (ii) the enforceability of the LPA, the subscription agreements, and the credit agreement in accordance with their terms, and (iii) the creation and perfection of the security interests contemplated by the pledge and security agreement;
(d) Filing of UCC-1 financing statements with the Delaware Secretary of State naming the Fund as debtor and Ashford as secured party;
(e) Execution and delivery of an account control agreement among the Fund (acting through the GP), Ashford, and Ridgeway Trust Company with respect to the Capital Call Collection Account;
(f) Satisfactory completion of Ashford's know-your-customer ("KYC") and anti-money laundering ("AML") diligence on the Fund, the GP, and HCP, including verification of beneficial ownership information and OFAC screening; and
(g) Satisfactory review by Ashford's counsel of all LP side letters, to ensure that no LP-specific provisions impair the lender's security interest, the enforceability of the LP's capital call obligations, or the priority of the lender's claims in respect of capital contributions.
These conditions precedent are largely standard. We address the coordination of these requirements with the First Close timeline in Section XII below.
J. Fees. The term sheet references the following fees in connection with the Facility:
Upfront Arrangement Fee. The term sheet states that a "customary arrangement fee" will be payable to Ashford at closing but does not specify the amount. Based on our experience in recent comparable transactions, upfront arrangement fees for subscription credit facilities of this size typically range from 10 to 15 basis points of the total facility commitment, which would translate to $500,000 to $750,000 on a $500,000,000 facility. We recommend negotiating the arrangement fee to 10 basis points or below and confirming whether this fee is properly characterized as a Fund expense (deductible against LP capital) or a Sponsor expense. We address this in Section XI (Negotiation Point No. 1) below.
Annual Administrative Agent Fee. The term sheet also references an annual administrative agent fee payable to Ashford in its capacity as administrative agent, but the amount is not specified. These fees are typically in the range of $50,000 to $75,000 per annum for facilities of this size.
Both the arrangement fee and the administrative agent fee are expected to constitute Fund expenses under the LPA. The LPA's fund expense provisions should be reviewed to confirm that subscription credit facility fees are expressly enumerated as permissible Fund expenses, and that such fees are not subject to the organizational expense cap (as they are operational rather than organizational in nature).
III. Parallel Vehicle / Offshore Feeder Structural Considerations
The Fund's anticipated structure includes three investment vehicles: (a) Harrowgate Private Equity Fund V LP, the Main Fund (a Delaware limited partnership); (b) Harrowgate Fund V Parallel LP, the Parallel Fund (a Delaware limited partnership); and (c) Harrowgate Fund V Offshore SLP, the Offshore Feeder (a Cayman Islands exempted limited partnership). Investors in the Parallel Fund and the Offshore Feeder invest alongside the Main Fund on a pari passu, pro rata basis in each portfolio investment, and the three vehicles are managed as a single economic unit for investment purposes.
The indicative term sheet from Ashford is drafted to apply exclusively to HPE Fund V LP — the Main Fund. The Parallel Fund and the Offshore Feeder are not parties to the proposed Facility as currently contemplated. This raises several structural questions that must be resolved before the Facility can be finalized.
Multi-Borrower vs. Separate Parallel Facility. The threshold question is whether (a) the Parallel Fund and/or the Offshore Feeder should be added as co-borrowers under a single multi-vehicle facility with Ashford, with the LP commitments in each vehicle pledged to support a single, combined borrowing base; (b) the Parallel Fund and/or the Offshore Feeder should guaranty the Main Fund's obligations under the Facility, with their LP commitments pledged as additional collateral; or (c) separate parallel subscription credit facilities should be established for the Parallel Fund and the Offshore Feeder, on substantially similar terms, which would be coordinated with the Main Fund Facility but documented independently.
Each approach has distinct advantages and drawbacks. A multi-borrower structure would maximize the aggregate borrowing base by combining the LP commitments across all three vehicles, providing the greatest borrowing flexibility. However, it introduces cross-collateralization and cross-default risks between the vehicles, and it requires the involvement of Cayman Islands counsel with respect to the Offshore Feeder (including analysis of CIMA registration requirements, Cayman law security interest perfection, and the enforceability of security interests over Cayman LP commitments under Cayman law). Separate parallel facilities would preserve the structural independence of each vehicle but would result in lower borrowing capacity for the Main Fund standing alone and would add documentation complexity and cost.
Impact on Tidewater Sovereign Investment Authority. Tidewater's $175,000,000 commitment will be made through the Offshore Feeder (the Cayman-domiciled vehicle), as Tidewater has indicated a preference for investing through a non-U.S. structure for tax and regulatory reasons. If the Offshore Feeder is not a party to the Facility — either as a co-borrower or as a pledgor/guarantor — Tidewater's $175,000,000 commitment will not be included in the Main Fund's borrowing base. This would reduce the estimated borrowing base at First Close by approximately $157,500,000 (90% of $175,000,000), a material reduction that would meaningfully limit the Fund's borrowing capacity during the early stages of the investment period when Facility availability is most critical.
Impact on Kingsbridge Endowment Fund. We understand that Kingsbridge is evaluating two potential investment structures: direct investment into the Parallel Fund, or investment through HGF V blocker Corp., a Delaware C corporation that would in turn hold an LP interest in the Fund (or the Parallel Fund). If Kingsbridge invests through the blocker, the relevant LP commitment for borrowing base purposes would be the blocker's commitment to the Fund (or the Parallel Fund), not Kingsbridge's equity investment in the blocker. This distinction has practical implications: the blocker entity itself may or may not satisfy the Included Investor criteria (as a newly formed special-purpose Delaware C corporation, the blocker is unlikely to be rated by any NRSRO and is not a government plan). Ashford may require separate credit support from the blocker or direct analysis of the blocker's sole source of funding (i.e., Kingsbridge's endowment). This structural question should be raised with Ashford early in the negotiation process.
Recommendation. We recommend scheduling a call with Lisa M. Osterberg at Ashford to discuss the preferred approach to the parallel vehicle and Offshore Feeder borrowing base question. The decision should be informed by the relative costs and benefits of a multi-borrower structure versus separate parallel facilities, taking into account (i) the impact on aggregate borrowing capacity, (ii) the additional legal costs associated with Cayman Islands counsel involvement, (iii) the structural preferences of the Sponsor, and (iv) Ashford's willingness to accept cross-vehicle security. If a multi-borrower structure is pursued, we will need to coordinate with Cayman counsel (we recommend engaging Broadwell & Associates, with whom we have worked on prior Harrowgate fund formations) for advice on Cayman law security interest perfection and CIMA implications.
IV. LPA Consistency Analysis
We have reviewed the draft LPA circulated on May 9, 2025 for consistency with the terms of the indicative term sheet. Set forth below is our analysis of the key areas where the LPA and the Facility terms interact, along with our assessment of whether any inconsistencies exist and our recommendations for resolution.
A. Fund-Level Leverage Limit
The draft LPA includes an investment restriction (in the "Investment Restrictions" section, the specific section number of which has not yet been finalized) providing that subscription facility borrowings outstanding at any time shall not exceed 25% of the aggregate uncalled capital commitments of the Fund's limited partners. This 25% cap is an investor-protection provision commonly included in PE fund limited partnership agreements, and is consistent with institutional LP expectations and ILPA guidance.
At the Fund's target hard cap of $2,000,000,000 in aggregate commitments, 25% of uncalled commitments equals $500,000,000 — exactly equal to the Facility's maximum commitment amount. The Facility size is therefore calibrated to the LPA leverage limit at the hard cap, and no inconsistency exists at full fundraise.
At the First Close minimum of $750,000,000 in aggregate commitments, 25% of uncalled commitments equals $187,500,000. At First Close, the Facility availability will be constrained by both the LPA leverage limit and the borrowing base calculation, with the more restrictive of the two constraints governing. If the estimated borrowing base at First Close is approximately $472,500,000 (as calculated in Section II.E above, assuming Tidewater is included), the binding constraint at First Close will be the LPA leverage limit of $187,500,000, not the borrowing base. This means that the Fund will have access to significantly less than the full $500,000,000 Facility commitment during the early stages of the investment period, with availability increasing as additional LPs are admitted in subsequent closings.
We have not identified any inconsistency between the LPA leverage limit and the Facility terms. However, we recommend confirming that the LPA leverage limit is measured against "aggregate uncalled commitments" across all Fund vehicles — including the Main Fund, the Parallel Fund, and the Offshore Feeder — rather than Main Fund commitments only. If the leverage limit is measured on a Main Fund-only basis, the available leverage headroom will be significantly lower than if it is measured on an aggregate cross-vehicle basis. The LPA drafting should clarify this point.
B. Bridge Financing Duration
The draft LPA provides that bridge financing for portfolio investments is limited to 180 calendar days. This provision restricts the maximum duration for which Facility borrowings used to fund investments may remain outstanding before being repaid with capital contributions from LPs. The 180-day limitation is a common provision in PE fund LPAs and reflects LP expectations that subscription credit facilities will be used as short-term bridge financing rather than as a means of permanently leveraging the Fund.
The Facility's 364-day revolving tenor permits borrowings to remain outstanding for up to 364 days. This creates a potential inconsistency: while the Facility permits revolving borrowings of up to 364 days' duration, the LPA limits investment-related bridge borrowings to 180 days. The resolution is straightforward — the LPA bridge limit is an internal governance constraint on the Fund's use of Facility proceeds for investment purposes, and the Fund must comply with the LPA bridge limit regardless of the Facility's longer contractual tenor. Borrowings used for purposes other than bridge financing of investments (e.g., management fee payments, organizational expenses, and general working capital) are not subject to the 180-day bridge limit.
Nevertheless, we recommend the following measures to ensure compliance:
(a) The definitive credit agreement should include a specific covenant requiring the Borrower to certify that any borrowing used to fund a portfolio investment will be repaid from LP capital contributions within 180 calendar days of the applicable draw date.
(b) The Fund's capital call notice procedures should be designed to allow timely capital calls following investment-related draws, so that capital contributions are received in sufficient time to repay the Facility within the 180-day window.
(c) The LPA should clarify whether the 180-day limitation runs from (i) the date of the initial Facility draw, or (ii) the date of the closing of the portfolio investment funded by such draw. If the Fund draws on the Facility in advance of an investment closing (e.g., to fund a deposit or an escrow), the measurement date has practical significance.
C. No-Fault GP Removal and For-Cause Removal
The draft LPA provides for two mechanisms by which the General Partner may be removed: (i) no-fault removal, which requires the affirmative vote of 75% in interest of the LPs (excluding GP-affiliated commitments); and (ii) for-cause removal, which requires the affirmative vote of a majority in interest of the LPs. These provisions are customary in PE fund limited partnership agreements and provide LPs with governance rights to replace a general partner that is underperforming, engaged in misconduct, or otherwise failing to serve the interests of the Fund.
The indicative term sheet treats GP removal — whether for cause or without cause — as an event of default under the Facility. Upon the occurrence of an event of default, Ashford would have the right to accelerate the Facility (i.e., declare all outstanding borrowings immediately due and payable), exercise its enforcement remedies under the security agreement (including the right to issue capital calls directly to LPs and direct capital contributions to a lender-controlled account), and cease making further advances under the Facility.
This treatment is standard in the subscription credit facility market, as the removal of the GP represents a fundamental change in the management of the Fund and may affect the lender's willingness to continue extending credit. However, we note that the existence of the Facility and the GP removal event-of-default trigger create a practical impediment to LPs exercising their removal rights. LPs considering a vote to remove the GP must weigh the consequences of triggering a Facility event of default, which could result in immediate acceleration and the forced calling of capital to repay the Facility — a result that is likely undesirable from the LPs' perspective and that may effectively deter LPs from exercising their removal rights.
We recommend the following:
(a) The existence of the Facility, and the fact that GP removal constitutes an event of default, should be clearly disclosed to LPs in the Private Placement Memorandum ("PPM") as part of the Fund's risk factors and operational disclosures.
(b) We should negotiate with Ashford to include a standstill or cure period in the credit agreement following a GP removal event. We recommend a standstill period of at least 90 days, during which Ashford would refrain from exercising acceleration or enforcement remedies, to provide the Fund with an orderly period in which to transition to a successor GP or to refinance or repay the Facility. This is discussed further in Section XI (Negotiation Point No. 6) below.
D. Transfer Restrictions
The draft LPA restricts transfers of LP interests without the prior written consent of the General Partner. The form of Transfer (Assignment) Agreement appended to the LPA requires any transferee to assume all obligations of the transferor LP, including the obligation to fund future capital calls in respect of the transferred interest.
The credit agreement will likely require that any transfer of an LP interest be subject to prior written notice to Ashford and, in certain circumstances, Ashford's prior written consent. Specifically, if a transfer would result in an Included Investor transferring its interest to a transferee that does not qualify as an Included Investor, the transfer could reduce the borrowing base and potentially cause a borrowing base deficiency if the Facility is drawn close to its borrowing base limit.
We recommend that the LPA's transfer provisions be revised to include an express acknowledgment that transfers of LP interests are subject to the notification and consent requirements of any outstanding subscription credit facility. This can be accomplished by adding a proviso to the transfer restriction section stating that the GP shall not consent to any transfer of an LP interest if such transfer would cause a borrowing base deficiency under any outstanding credit facility, unless the lender under such credit facility has consented to such transfer.
E. LP Default Provisions
The draft LPA contains customary default provisions for LPs that fail to fund capital calls when due. The consequences of an LP default include: (i) reduction of the defaulting LP's percentage interest in the Fund by 50%; (ii) the GP's right to force a sale of the defaulting LP's interest at a discount of not less than 25% to the net asset value of such interest; and (iii) the GP's right to pursue legal remedies against the defaulting LP for damages arising from the default, including the amount of the unfunded capital call and any costs or losses incurred by the Fund as a result of the default.
The credit agreement will require (a) prompt written notice to Ashford of any LP default, (b) automatic exclusion of the defaulting LP's unfunded commitment from the borrowing base (whether or not the LP is cured), and (c) the GP's cooperation with Ashford in pursuing remedies against the defaulting LP if necessary to protect the lender's security interest.
We recommend that the LPA's default provisions be reviewed for consistency with these credit agreement requirements. In particular, the LPA should confirm that the GP has the authority to share information regarding LP defaults with the lender, including the identity of the defaulting LP, the amount of the defaulted capital call, and the status of any cure or enforcement actions. LP default information is typically subject to confidentiality provisions in the LPA and subscription agreements, and the lender's right to receive such information should be carved out from these confidentiality restrictions.
V. Recommended LPA Provisions — Lender Accommodation Language
Based on our review of the indicative term sheet and our analysis of the draft LPA, we recommend that the following "lender accommodation" provisions be incorporated into the LPA before the LPA is finalized and distributed to prospective LPs. These provisions are essential to support the Facility and are expected by Ashford as a condition precedent to closing. We have prepared draft language for each provision, which is attached as Attachment C (Draft Lender Accommodation Provisions for LPA — Redline Insert). Set forth below is a summary of the recommended provisions.
A. Authorization to Grant Security Interests
The LPA should include an express authorization for the General Partner, acting on behalf of the Fund, to enter into one or more credit facilities and to grant security interests in the Fund's capital call rights as collateral for the Fund's obligations under such facilities. Without this express authorization, there is a risk that an LP could challenge the enforceability of the security interest on the grounds that the GP exceeded its authority under the LPA.
We recommend the following specific language:
"The General Partner is authorized, on behalf of the Partnership, to enter into one or more credit facilities, including subscription credit facilities or capital call facilities, and to grant security interests in the Partnership's right to make Capital Calls and to receive Capital Contributions from the Limited Partners, and in the Partnership's accounts and proceeds thereof, as collateral for obligations under such credit facilities. Each Limited Partner acknowledges and agrees that the General Partner may exercise such authority without further approval of or consent from the Limited Partners."
This provision should be located in the LPA section addressing the GP's powers and authority and should be cross-referenced in the section governing capital calls and capital contributions.
B. LP Obligation to Fund Capital Calls Notwithstanding Assignment
The LPA should include a provision confirming that each LP's obligation to fund capital calls is absolute, unconditional, and irrevocable, and that such obligation shall not be subject to any defense, set-off, counterclaim, or reduction of any kind, including by reason of any dispute with the GP, any other LP, or any third party. This provision is critical for the enforceability of the lender's security interest. If an LP could assert defenses or set-offs against its obligation to fund capital calls, the value of the lender's collateral would be uncertain and the borrowing base calculation would be unreliable.
We recommend the following language:
"Each Limited Partner's obligation to make Capital Contributions in response to Capital Calls shall be absolute, unconditional, and irrevocable, and shall not be subject to any defense, set-off, counterclaim, reduction, or termination for any reason whatsoever, including without limitation (i) any dispute between such Limited Partner and the General Partner, any other Limited Partner, or any third party, (ii) any claim of breach of any agreement or obligation by the General Partner or the Partnership, (iii) any change in the financial condition of such Limited Partner, or (iv) any assignment of the Partnership's right to receive such Capital Contributions to a lender or other secured party pursuant to Section [_] hereof."
C. Lender Direction Rights
The LPA should permit the lender, upon the occurrence and during the continuance of an event of default under the credit facility, to exercise certain direction rights with respect to capital calls and capital contributions. Specifically, the lender should have the right to:
(a) Issue capital call notices directly to LPs, or direct the GP to issue capital call notices, in amounts sufficient to repay the outstanding Facility obligations;
(b) Direct that capital contributions made by LPs in response to such capital calls be paid directly into a lender-controlled account (rather than the Fund's regular Capital Call Collection Account) for application against the outstanding Facility obligations; and
(c) Exercise any and all rights and remedies available to it under the pledge and security agreement, the credit agreement, and applicable law.
The effectiveness of these direction rights depends upon the execution and delivery of an account control agreement with Ridgeway Trust Company, the Fund's custodian, which will give Ashford control over the Capital Call Collection Account. Upon the occurrence of an event of default, Ashford would instruct Ridgeway Trust Company to redirect incoming capital contributions to a lender-designated account or to hold such funds for the lender's benefit, rather than releasing them to the Fund for general use.
D. LP Acknowledgment and Consent
Each LP's subscription agreement should include a specific acknowledgment and consent provision addressing the Fund's subscription credit facility. The subscription agreement should include, at a minimum, the following:
(a) An acknowledgment that the Fund may enter into one or more subscription credit facilities secured by the Fund's right to call and receive capital contributions from the LPs;
(b) An acknowledgment that the LP's commitment may be pledged as security for the Fund's obligations under such facilities;
(c) A consent to the sharing of the LP's identity, commitment amount, unfunded commitment balance, and contact information with the lender, the administrative agent, and any syndication participants under such facilities; and
(d) An agreement that the LP's obligation to fund capital calls shall be enforceable by the lender directly, and that capital contributions may be required to be paid into a lender-controlled account, upon the occurrence and during the continuance of an event of default under the credit facility.
This consent is essential for several reasons. First, the delivery of quarterly borrowing base certificates to Ashford requires the disclosure of LP-specific commitment and unfunded balance information. Second, the lender must have the ability to contact LPs directly in an enforcement scenario. Third, if Ashford exercises its syndication rights, LP data will need to be shared with prospective syndication participants. Without this consent, the Fund's confidentiality obligations to its LPs could impede the operation of the Facility.
E. No Amendment Without Lender Consent
The LPA should provide that certain enumerated provisions may not be amended, modified, supplemented, or waived without the prior written consent of any subscription facility lender whose facility is then outstanding. The protected provisions should include, at a minimum:
(a) Provisions governing LP capital commitment obligations and the obligation to fund capital calls;
(b) Capital call mechanics, including notice periods, payment procedures, and the consequences of failure to fund;
(c) LP default provisions;
(d) Fund-level leverage limits;
(e) The authorization to grant security interests (Section V.A above); and
(f) LP acknowledgment and consent provisions (Section V.D above).
This is a standard lender accommodation provision and is necessary to protect the lender against amendments to the LPA that could impair the value of its collateral or the enforceability of its security interest. However, we recommend that this provision be narrowly tailored to the specific provisions listed above, in order to avoid giving the lender an effective veto over general LPA amendments that are unrelated to the Facility. Overbroad no-amendment provisions can create governance difficulties and may be resisted by sophisticated LPs during the subscription process.
F. Restriction on Release of LP Commitments
The LPA should include a restriction on the GP's ability to excuse, release, or reduce an LP's unfunded commitment, or to permit an LP withdrawal, if such action would cause a borrowing base deficiency under any outstanding subscription credit facility. A "borrowing base deficiency" would exist if, after giving effect to the release or reduction, the aggregate outstanding borrowings under the Facility would exceed the borrowing base.
This provision has particular relevance in the context of the excuse provisions contained in several negotiated side letters. As discussed in Section VII below, certain LPs have negotiated excuse rights that permit them to be excused from funding capital contributions for specific investments that conflict with their investment policies or regulatory requirements. These include:
• Tidewater Sovereign Investment Authority: Sharia compliance excuse rights
• Northmoor State Pension System: restricted jurisdiction excuse rights
• The Kingsbridge Endowment Fund: UBTI excuse rights
• Edgecombe Insurance Group Ltd.: insurance regulatory concentration limit excuse rights
If a large Included Investor exercises its excuse rights with respect to a significant investment, its unfunded commitment attributable to that investment would effectively be unavailable to support the borrowing base. While the exercise of excuse rights does not typically release the LP from its overall commitment to the Fund (the LP remains obligated to fund future capital calls for non-excused investments), the practical effect may be a temporary reduction in the lender's collateral coverage.
We recommend including a proviso in the LPA's excuse and withdrawal provisions stating that the GP shall not exercise its discretion to excuse an LP from participation in any investment if such excusal would cause a borrowing base deficiency under any outstanding credit facility, unless either (a) the lender has consented to such excusal or (b) the borrowing base deficiency is cured by a corresponding reduction in outstanding borrowings.
VI. Interaction with Capital Call Mechanics
A. Capital Call Timing
The draft LPA provides for a minimum notice period of 10 business days for capital calls. Upon receipt of a capital call notice, each LP has 10 business days to wire its pro rata share of the called amount to the Fund's Capital Call Collection Account at Ridgeway Trust Company.
The credit agreement will specify the procedures by which the Fund may draw on the Facility, including drawdown request mechanics, minimum draw amounts, and settlement timing. The critical operational question is how Facility draws and capital calls are coordinated to ensure compliance with the LPA's 180-day bridge limitation for investment-related borrowings.
The timing dynamics are as follows. If the Fund draws on the Facility to fund a portfolio investment on Day 1, the 180-day clock begins running. The GP must issue a capital call to LPs in an amount sufficient to repay the Facility borrowing. Given the 10-business-day notice period for capital calls (which translates to approximately 14 calendar days), plus an additional one to two business days for wire transfer settlement and application of proceeds to the Facility, the minimum elapsed time from issuance of a capital call to receipt and application of LP capital contributions is approximately 16 calendar days. If the GP issues the capital call promptly following the Facility draw, this leaves ample time within the 180-day window. However, if the GP delays issuing the capital call — for example, to batch multiple investments into a single capital call — the remaining time within the 180-day window may become tight.
We recommend that the Sponsor establish an internal capital call policy that coordinates Facility draws with timely capital calls. Specifically, we recommend a target repayment period of 120 calendar days for investment-related draws, which would provide a 60-day buffer against the 180-day LPA limit. The capital call policy should provide that for each Facility draw used to fund a portfolio investment, the GP will issue a corresponding capital call within 30 calendar days of the draw date, with a target collection date no later than 120 days after the draw date.
B. Capital Call Priorities
When the Fund issues a capital call to repay Facility borrowings, the capital call notice should clearly identify the purpose of the capital call as including repayment of amounts borrowed under the Facility. This identification is important for several reasons. First, certain LPs may have the right to receive information about the purposes for which their capital contributions will be used. Second, the LPA may impose different requirements on capital calls for different purposes (e.g., investment capital calls versus expense capital calls). Third, proper identification of the purpose aids in the Fund's internal accounting and reporting.
We note that the LPA's waterfall provisions — governing the distribution of investment proceeds among return of capital, preferred return, and carried interest — are not directly affected by the use of the Facility. The waterfall calculations are based on aggregate capital contributed and distributed, regardless of the timing of capital calls. However, the timing of capital calls does affect performance metric calculations, particularly internal rate of return ("IRR"). By using the Facility to bridge investments and delaying the corresponding capital calls, the Fund effectively reduces the period during which LP capital is outstanding, which mechanically increases the reported IRR. This IRR enhancement effect is well recognized in the private equity industry and has been the subject of significant commentary from institutional LP groups, including the Institutional Limited Partners Association ("ILPA").
We recommend that the PPM include appropriate disclosure regarding the impact of subscription credit facility usage on performance metrics, consistent with ILPA Guidance on Subscription Lines of Credit and Call Facilities (as updated). The disclosure should note that the use of the Facility may result in higher reported IRR compared to what would have been achieved if LP capital had been called at the time of each investment, and should describe the Fund's policy with respect to the use of the Facility, including the 180-day bridge limitation and the target repayment period.
C. Interaction with Distribution Mechanics
The LPA provides for a European-style whole-fund waterfall for the distribution of investment proceeds. Under a European-style waterfall, carried interest is not calculated or distributed on a deal-by-deal basis but is instead calculated across the entire Fund portfolio, with the GP receiving carried interest only after the LPs have received a return of all contributed capital plus their preferred return. This whole-fund approach is more conservative from an LP perspective and reduces the risk of carried interest "clawback."
The use of the Facility does not alter the mechanics of the European-style waterfall. Capital contributions called to repay Facility borrowings are treated as contributed capital in the waterfall calculation, and the timing of the capital call (whether made contemporaneously with the investment or delayed by the use of the Facility) does not affect the aggregate amount of contributed capital or the preferred return calculation.
However, as noted above, the timing of capital calls does affect the J-curve profile of t

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