AGREEMENT OF LIMITED PARTNERSHIP
OF
HARROWGATE FUND V PARALLEL LP
A Delaware Limited Partnership
Effective as of August 15, 2025
CONFIDENTIAL — This Agreement is confidential and may not be reproduced or distributed without the prior written consent of the General Partner. This document contains proprietary and confidential information of Harrowgate Fund V GP LLC and Harrowgate Capital Partners LLC. Any unauthorized reproduction, distribution, or disclosure of this Agreement, in whole or in part, is strictly prohibited. Receipt and retention of this Agreement constitutes acceptance of the foregoing confidentiality restrictions.
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AGREEMENT OF LIMITED PARTNERSHIP OF HARROWGATE FUND V PARALLEL LP
This Agreement of Limited Partnership (this "Agreement") of Harrowgate Fund V Parallel LP, a Delaware limited partnership (the "Partnership" or the "Parallel Fund"), is entered into as of August 15, 2025, by and among:
Harrowgate Fund V GP LLC, a Delaware limited liability company, as general partner (the "General Partner"); and
Each of the Limited Partners (as defined herein) who execute a Subscription Agreement and are admitted to the Partnership in accordance with the terms and conditions set forth herein.
The General Partner and the Limited Partners are collectively referred to herein as the "Partners" and individually as a "Partner."
RECITALS
WHEREAS, Harrowgate Capital Partners LLC ("HCP" or the "Sponsor"), a Delaware limited liability company headquartered at 1200 Concord Pike, Suite 600, Wilmington, Delaware 19803, is the sole member of the General Partner and serves as the sponsor of the Parallel Fund and the broader fund complex described herein;
WHEREAS, the General Partner has caused the filing of the Certificate of Limited Partnership of the Partnership with the Secretary of State of the State of Delaware pursuant to the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101 et seq. (the "Act"), and such Certificate of Limited Partnership remains in full force and effect;
WHEREAS, Harrowgate Fund V Parallel LP is structured as a parallel investment vehicle designed to invest alongside Harrowgate Private Equity Fund V LP, a Delaware limited partnership (the "Main Fund"), on a pro rata basis in accordance with the terms and conditions set forth herein and in the Agreement of Limited Partnership of the Main Fund (the "Main Fund LPA");
WHEREAS, the Parallel Fund is principally designed for certain tax-exempt investors, non-U.S. investors, and other limited partners requiring structural separation from the Main Fund for tax, regulatory, legal, or other reasons, including, without limitation, the mitigation of unrelated business taxable income for tax-exempt investors and the accommodation of non-U.S. regulatory requirements;
WHEREAS, the Main Fund, together with the Parallel Fund, Harrowgate Fund V Offshore SLP, a Cayman Islands exempted limited partnership (the "Offshore Feeder"), and HGF V blocker Corp., a Delaware C corporation (the "blocker"), collectively constitute the "Fund Complex," and the General Partner intends to manage the Fund Complex as an integrated investment program;
WHEREAS, the General Partner, the Sponsor, and their affiliates possess the expertise, resources, and investment acumen necessary to identify, evaluate, negotiate, acquire, manage, and dispose of investments on behalf of the Partnership and the Fund Complex; and
WHEREAS, the parties hereto desire to set forth their respective rights, duties, obligations, and liabilities with respect to the Partnership upon the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations, and warranties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Act" means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101 et seq., as amended from time to time.
"Aggregate Commitments" means the total Capital Commitments made to the Main Fund, the Parallel Fund, and the Offshore Feeder (and, for purposes of certain calculations specified herein, including commitments made through the blocker), collectively. The target for Aggregate Commitments is Two Billion United States Dollars ($2,000,000,000), which amount constitutes the hard cap for the Fund Complex.
"blocker" means HGF V blocker Corp., a Delaware C corporation formed to hold investments on behalf of certain tax-exempt investors in order to mitigate exposure to unrelated business taxable income ("UBTI") under Sections 511 through 514 of the Code.
"Capital Account" means the separate capital account maintained for each Partner in accordance with the provisions of this Agreement, Section 704(b) of the Code, and the Treasury Regulations promulgated thereunder. The Capital Account of each Partner shall be (a) increased by the amount of such Partner's capital contributions to the Partnership, by allocations of net income and gain to such Partner, and by the amount of Partnership liabilities assumed by such Partner or that are secured by any Partnership property distributed to such Partner; and (b) decreased by the amount of cash and the fair market value of property distributed to such Partner, by allocations of net loss and deduction to such Partner, and by the amount of liabilities of such Partner assumed by the Partnership or that are secured by any property contributed by such Partner to the Partnership.
"Capital Call" means a written notice issued by the General Partner to the Partners requiring such Partners to fund a portion of their respective Unfunded Commitments in accordance with Section 4.1 hereof.
"Capital Commitment" means, with respect to each Partner, the aggregate amount such Partner has committed to contribute to the Partnership as set forth in such Partner's Subscription Agreement or, in the case of the General Partner, as set forth in Schedule B hereto, as such amount may be adjusted from time to time in accordance with this Agreement.
"Carried Interest" means an amount equal to twenty percent (20%) of the net profits of the Partnership distributed to the General Partner above the Preferred Return, calculated and distributed in accordance with the distribution waterfall set forth in Section 6.2 hereof, and as further described by cross-reference to the corresponding provisions of the Main Fund LPA.
"Closing" means each date on which one or more Limited Partners are admitted to the Partnership in accordance with Section 3.3 hereof, including the First Close and each subsequent closing thereafter through and including the Final Close.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute thereto. References to specific sections of the Code shall include corresponding successor provisions.
"Covered Person" means (a) the General Partner; (b) Harrowgate Capital Partners LLC; (c) their respective partners, members, managers, officers, directors, employees, agents, and affiliates; and (d) any Person serving at the request of the General Partner on the board of directors, board of managers, advisory board, or in any other similar capacity of any portfolio company or other entity in which the Partnership has an investment.
"Default" means the failure by a Limited Partner to fund all or any portion of a Capital Call within the time period prescribed in such Capital Call and Section 4.4 hereof.
"Defaulting Partner" means any Limited Partner that has committed a Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute thereto.
"Final Close" means the last Closing of the Partnership, which shall occur no later than the Final Close Deadline.
"Final Close Deadline" means February 15, 2027, being the date that is eighteen (18) months after the targeted date of the First Close.
"First Close" means the initial Closing of the Partnership, targeted for August 15, 2025.
"Fund Complex" means, collectively, the Main Fund, the Parallel Fund, the Offshore Feeder, and the blocker, together with any additional parallel vehicles, alternative investment vehicles, or other vehicles formed in connection therewith and managed by the General Partner or its affiliates.
"General Partner" means Harrowgate Fund V GP LLC, a Delaware limited liability company, the sole member of which is Harrowgate Capital Partners LLC, or any successor general partner admitted to the Partnership in accordance with this Agreement.
"GP Commitment" means the Capital Commitment of the General Partner and its affiliates to the Fund Complex, which shall be equal to two and one-half percent (2.5%) of Aggregate Commitments. At the hard cap of Two Billion United States Dollars ($2,000,000,000), the GP Commitment shall equal Fifty Million United States Dollars ($50,000,000) in the aggregate, allocated proportionally between the Main Fund and the Parallel Fund based on their respective Capital Commitments as a percentage of Aggregate Commitments.
"Included Investors" means those Limited Partners whose uncalled Capital Commitments are eligible for inclusion in the borrowing base under the Subscription Facility, as determined by the lender thereunder, which generally includes investment-grade-rated institutional investors and government-plan investors.
"Investment Period" means the period commencing on the date of the Final Close and ending on the fifth (5th) anniversary thereof, subject to earlier termination or suspension as provided herein.
"Key Persons" means Marcus J. Harrowgate (Founder, Managing Partner, and Chief Investment Officer of Harrowgate Capital Partners LLC) and Diana R. Castellano (Partner and Co-Head of Investments of Harrowgate Capital Partners LLC).
"Limited Partner" means each Person who has been admitted to the Partnership as a limited partner in accordance with the terms of this Agreement, and "Limited Partners" means all such Persons collectively.
"Limited Partner Advisory Committee" or "LPAC" means the advisory committee established pursuant to Article X hereof.
"Main Fund" means Harrowgate Private Equity Fund V LP, a Delaware limited partnership, the principal investment vehicle of the Fund Complex.
"Main Fund LPA" means the Agreement of Limited Partnership of Harrowgate Private Equity Fund V LP, as amended, restated, supplemented, or otherwise modified from time to time.
"Management Fee" means the fee payable by the Partnership to the General Partner or its designee as described in Section 7.1 hereof.
"Minimum LP Commitment" means Ten Million United States Dollars ($10,000,000), subject to waiver by the General Partner in its sole discretion.
"Net Asset Value" or "NAV" means the net asset value of the Partnership or any Partner's interest therein, as the case may be, as determined by the General Partner in accordance with the valuation policies and procedures of the Fund Complex, which shall be consistent with generally accepted accounting principles in the United States and the valuation methodologies set forth in the Main Fund LPA.
"Offshore Feeder" means Harrowgate Fund V Offshore SLP, a Cayman Islands exempted limited partnership, organized under the laws of the Cayman Islands for the benefit of certain non-U.S. investors in the Fund Complex.
"Organizational Expenses" means all expenses incurred in connection with the formation, organization, and establishment of the Fund Complex, including, without limitation, legal fees, accounting fees, filing fees, regulatory fees, travel expenses related to organizational matters, and the costs of preparing the Partnership's governing documents and offering materials. Organizational Expenses are capped at Three Million Five Hundred Thousand United States Dollars ($3,500,000) in the aggregate across all vehicles in the Fund Complex; any amounts in excess of such cap shall be borne by the Sponsor.
"Parallel Fund" means Harrowgate Fund V Parallel LP, the limited partnership formed pursuant to this Agreement.
"Partner" means the General Partner or any Limited Partner, and "Partners" means all of them collectively.
"Person" means any individual, partnership, limited liability company, corporation, trust, estate, association, governmental authority, or other entity.
"Preferred Return" means a cumulative, compounded annual return of eight percent (8%) per annum on each Partner's unreturned capital contributions, calculated from the date each such contribution is made (or, in the case of contributions deemed made through the Subscription Facility, from the date the corresponding Subscription Facility drawdown is made) to the date of the applicable distribution.
"Pro Rata Basis" means, with respect to each Partner, such Partner's proportionate share of investments, expenses, distributions, and other items, calculated based on such Partner's Capital Commitment relative to the Aggregate Commitments, or, where the context so requires, relative to the total Capital Commitments of all Partners in the Partnership, subject to adjustment for the timing of admissions at subsequent Closings and for excused investments.
"Qualified Purchaser" has the meaning set forth in Section 2(a)(51) of the Investment Company Act of 1940, as amended.
"Sponsor" means Harrowgate Capital Partners LLC, a Delaware limited liability company, the sole member of the General Partner.
"Subscription Agreement" means the subscription agreement executed by each Limited Partner in the form attached hereto as Exhibit A (or such other form as may be prescribed by the General Partner), evidencing such Limited Partner's Capital Commitment to the Partnership and containing such Limited Partner's representations, warranties, and covenants.
"Subscription Facility" means the revolving credit facility secured by uncalled Capital Commitments of the Partners, as more fully described in Section 5.6 hereof.
"Term" has the meaning set forth in Section 2.5 hereof.
"Transaction Fees" means all transaction, monitoring, directors', advisory, consulting, break-up, and similar fees received by the General Partner, the Sponsor, or any of their respective affiliates from portfolio companies or in connection with investments or prospective investments of the Partnership or the Fund Complex.
"Treasury Regulations" means the regulations promulgated under the Code by the United States Department of the Treasury, as amended from time to time.
"Unfunded Commitment" means, with respect to each Partner, the amount of such Partner's Capital Commitment that has not yet been called for contribution or contributed to the Partnership, as adjusted for any return of capital that reinstates the Unfunded Commitment pursuant to Section 4.5 hereof.
Section 1.2 — Interpretation and Cross-References
Unless otherwise defined herein, all capitalized terms used in this Agreement shall have the meanings ascribed to them in the Main Fund LPA. The economic terms, investment restrictions, and governance provisions of this Agreement are intended to mirror, to the greatest extent practicable, the corresponding terms and provisions of the Main Fund LPA. In the event of any conflict or inconsistency between this Agreement and the Main Fund LPA, (a) the Main Fund LPA shall govern with respect to investment-level decisions and matters relating to the overall investment program of the Fund Complex, and (b) this Agreement shall govern with respect to Partner-level matters, rights, and obligations specific to the Parallel Fund and its Partners.
Unless the context otherwise requires: (i) the terms "hereof," "herein," "hereby," "hereto," and "hereunder" refer to this Agreement as a whole; (ii) the terms "include," "includes," and "including" are deemed to be followed by the phrase "without limitation"; (iii) references to "Sections," "Articles," "Schedules," and "Exhibits" are references to the Sections, Articles, Schedules, and Exhibits of this Agreement; (iv) words importing the singular include the plural and vice versa; (v) words importing gender include all genders; (vi) references to statutes are references to such statutes as amended from time to time and include any successor legislation; and (vii) references to any agreement, instrument, or document shall be deemed to include all exhibits, schedules, and annexes thereto and all amendments, restatements, supplements, and other modifications thereof.
ARTICLE II — ORGANIZATION
Section 2.1 — Formation
The Partnership was formed as a Delaware limited partnership upon the filing of the Certificate of Limited Partnership of the Partnership (the "Certificate") with the Secretary of State of the State of Delaware pursuant to the Act. The Certificate remains on file with the Secretary of State and has not been amended, modified, or cancelled. The General Partner shall take all actions necessary to maintain the Partnership's status as a limited partnership under the Act, including the filing of all required amendments to the Certificate and all other documents or instruments as may be necessary or appropriate under the Act.
The registered agent of the Partnership in the State of Delaware is Calderwood & Harkness LLP, located at 400 South Ashbury Asset Advisors, Suite 3000, Wilmington, Delaware 19801. The General Partner may, in its discretion, change the registered agent and registered office of the Partnership in accordance with the Act, and shall provide notice thereof to the Limited Partners.
The principal office of the Partnership is located at 1200 Concord Pike, Suite 600, Wilmington, Delaware 19803, co-located with the offices of Harrowgate Capital Partners LLC. The General Partner may change the principal office of the Partnership from time to time, and shall provide notice thereof to the Limited Partners within thirty (30) days of any such change.
Section 2.2 — Name
The legal name of the Partnership is "Harrowgate Fund V Parallel LP." The business of the Partnership shall be conducted under such name or under such other trade names or fictitious names as the General Partner may from time to time determine to be appropriate or advisable. The General Partner shall take all actions necessary to comply with any applicable assumed name or fictitious name statutes.
Section 2.3 — Purpose
The purpose of the Partnership is to:
(a) invest alongside the Main Fund on a Pro Rata Basis in North American mid-market and upper-mid-market leveraged buyout and growth equity transactions, principally focused in the sectors of industrials, business services, healthcare services, and technology-enabled services, with equity investment amounts ranging from Seventy-Five Million United States Dollars ($75,000,000) to Two Hundred Fifty Million United States Dollars ($250,000,000) per transaction (measured across the Fund Complex);
(b) acquire, hold, manage, and dispose of equity, equity-linked, and debt securities of portfolio companies, and to engage in such follow-on investments and related transactions as the General Partner deems appropriate;
(c) enter into, execute, and deliver all agreements, contracts, instruments, and other documents, and to take all actions, as the General Partner deems necessary, advisable, or incidental to the foregoing purposes, including, without limitation, borrowing money, granting liens and security interests, guaranteeing obligations, and entering into hedging and derivative transactions; and
(d) engage in any other lawful activities that are incidental or ancillary to the foregoing.
The Partnership is structured as a parallel investment vehicle principally for the benefit of certain tax-exempt investors, non-U.S. investors, and other limited partners requiring structural separation from the Main Fund for tax, regulatory, legal, or operational reasons. The General Partner shall use commercially reasonable efforts to coordinate the investment activities of the Parallel Fund with those of the Main Fund and the other vehicles in the Fund Complex so that each vehicle participates in each investment on a Pro Rata Basis, subject to the terms and conditions set forth herein.
Section 2.4 — Principal Office; Registered Agent
The principal office of the Partnership shall be located at the headquarters of the Sponsor at 1200 Concord Pike, Suite 600, Wilmington, Delaware 19803, or at such other location as the General Partner may from time to time designate by written notice to the Limited Partners.
The registered agent and registered office of the Partnership in the State of Delaware shall be Calderwood & Harkness LLP, 400 South Ashbury Asset Advisors, Suite 3000, Wilmington, Delaware 19801, or such other registered agent and registered office as the General Partner may from time to time designate in accordance with the Act.
Section 2.5 — Term
The term of the Partnership (the "Term") shall commence on the date of the filing of the Certificate with the Secretary of State of the State of Delaware and shall continue until the earliest of:
(a) the date that is ten (10) years from the date of the Final Close, as such date may be extended pursuant to this Section 2.5;
(b) the date on which the Partnership is dissolved and wound up in accordance with Article XII hereof; or
(c) any earlier date upon which the Partnership is terminated by operation of law.
The General Partner shall have the right, in its sole discretion, to extend the base term of the Partnership for up to two (2) additional consecutive one-year periods, upon not less than ninety (90) days' prior written notice to the Limited Partners prior to the scheduled expiration of the then-current term. In addition, the General Partner may extend the Term for one (1) further consecutive one-year period beyond the two GP-discretionary extensions, subject to the prior approval of the LPAC. Each such extension shall be for the purpose of facilitating the orderly disposition of the Partnership's remaining investments and the distribution of proceeds to the Partners.
Section 2.6 — Fiscal Year
The fiscal year of the Partnership (the "Fiscal Year") shall be the calendar year, commencing on January 1 and ending on December 31 of each year, except that the first Fiscal Year shall commence on the date of the First Close and end on December 31 of the calendar year in which the First Close occurs, and the final Fiscal Year shall end on the date on which the Partnership is terminated and dissolved in accordance with this Agreement.
Section 2.7 — Tax Classification
The Partnership shall at all times be classified and treated as a partnership for United States federal income tax purposes. The General Partner shall not make any election, and shall not take or permit any action, that would cause the Partnership to be treated as an association taxable as a corporation or as a "publicly traded partnership" (within the meaning of Section 7704 of the Code) for United States federal income tax purposes. The Partnership shall file an annual United States federal partnership income tax return on Internal Revenue Service Form 1065, and shall issue Schedule K-1s (or successor forms) to all Partners reflecting each Partner's allocable share of the Partnership's items of income, gain, loss, deduction, and credit for each Fiscal Year.
ARTICLE III — PARTNERS; CAPITAL COMMITMENTS; CLOSINGS
Section 3.1 — General Partner
The General Partner of the Partnership is Harrowgate Fund V GP LLC, a Delaware limited liability company. The sole member of the General Partner is Harrowgate Capital Partners LLC, a Delaware limited liability company. The General Partner shall serve as general partner of the Partnership until its removal, withdrawal, or dissolution in accordance with the provisions of this Agreement.
The General Partner shall make a Capital Commitment to the Partnership in an amount equal to its proportionate share of the GP Commitment. The GP Commitment across the Fund Complex shall equal two and one-half percent (2.5%) of Aggregate Commitments. At the hard cap of Two Billion United States Dollars ($2,000,000,000), the GP Commitment shall total Fifty Million United States Dollars ($50,000,000) in the aggregate, allocated pro rata between the Main Fund and the Parallel Fund based on their respective Capital Commitments as a percentage of Aggregate Commitments. The GP Commitment to the Parallel Fund is set forth in Schedule B hereto. The GP Commitment may be funded by the General Partner directly or through one or more of its affiliates. The General Partner's Capital Commitment shall be subject to the same Capital Call and funding mechanics as those applicable to the Limited Partners, and shall be invested on the same terms and conditions as the Limited Partners' Capital Commitments (other than with respect to the receipt of Carried Interest).
Section 3.2 — Admission of Limited Partners
Limited Partners shall be admitted to the Partnership upon (a) the execution and delivery by such Person of a Subscription Agreement in the form prescribed by the General Partner, (b) the acceptance of such Subscription Agreement by the General Partner, and (c) the occurrence of a Closing at which such Person is admitted. The General Partner shall have the right, in its sole discretion, to accept or reject any proposed Limited Partner's Subscription Agreement, in whole or in part, and to reduce any proposed Capital Commitment, for any reason or no reason.
Each Limited Partner admitted to the Partnership must qualify as (i) a "qualified purchaser" within the meaning of Section 2(a)(51) of the Investment Company Act of 1940, as amended, in reliance upon the exclusion from registration set forth in Section 3(c)(7) of such Act, and (ii) an "accredited investor" within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended. Each Limited Partner shall make the representations, warranties, and covenants set forth in its Subscription Agreement, and the accuracy and completeness of such representations, warranties, and covenants shall be a condition to such Limited Partner's admission and continued participation in the Partnership.
The Minimum LP Commitment to the Partnership is Ten Million United States Dollars ($10,000,000), provided that the General Partner may, in its sole discretion, waive or reduce the Minimum LP Commitment for any particular Limited Partner. The offering and sale of interests in the Partnership is being conducted pursuant to the exemption from registration provided by Rule 506(b) of Regulation D promulgated under the Securities Act of 1933, as amended, and the Partnership shall not engage in any general solicitation or general advertising in connection therewith.
Section 3.3 — Closings
The First Close is targeted for August 15, 2025. The General Partner may hold additional Closings from time to time on a rolling basis following the First Close, and shall hold a final Closing (the "Final Close") no later than February 15, 2027, which is the date that is eighteen (18) months after the targeted date of the First Close (the "Final Close Deadline"). The General Partner may extend the Final Close Deadline by up to six (6) months with the consent of the LPAC.
Each Limited Partner admitted at a Closing subsequent to the First Close shall be required to fund its pro rata share of all capital contributions that have been called and funded by previously admitted Limited Partners (the "Equalization Contribution"), together with interest on such amount at the rate of eight percent (8%) per annum, calculated from the date of each applicable prior Capital Call through the date of such Limited Partner's admission. Equalization Contributions and the related interest thereon shall be distributed to the previously admitted Limited Partners on a pro rata basis as a return of capital (or, in the case of the interest component, as current income). The equalization mechanism is designed to place all Limited Partners in the same economic position as if they had been admitted at the First Close.
Section 3.4 — Schedule of Partners
The General Partner shall maintain a Schedule of Partners (attached hereto as Schedule A, as amended from time to time) reflecting the name, Capital Commitment, Unfunded Commitment, and Capital Account balance of each Partner, together with the date of such Partner's admission and the Closing at which such Partner was admitted. The Schedule of Partners shall be updated upon each Closing, each Capital Call, each distribution, and each other event affecting a Partner's Capital Account or Capital Commitment. The Schedule of Partners, as amended from time to time by the General Partner, shall be deemed part of this Agreement and shall be binding upon all Partners, without the necessity of obtaining the signature or consent of any Partner.
Section 3.5 — ERISA Matters
The Partnership intends to limit the participation of "benefit plan investors" (as defined under 29 C.F.R. § 2510.3-101(f), as modified by Section 3(42) of ERISA) to less than twenty-five percent (25%) of each class of equity interests in the Partnership, in order to avoid the assets of the Partnership being treated as "plan assets" of any benefit plan investor under ERISA and the Department of Labor regulations promulgated thereunder. For purposes of this limitation, the term "benefit plan investors" includes (a) employee benefit plans subject to Title I of ERISA, (b) plans or accounts subject to Section 4975 of the Code (including individual retirement accounts), and (c) entities whose underlying assets include "plan assets" by reason of the investment in such entity by benefit plan investors.
The General Partner shall monitor the benefit plan investor percentage on an ongoing basis and may, in its sole discretion, decline the admission of any proposed Limited Partner or decline to approve the transfer of any interest that would cause the benefit plan investor threshold to be exceeded. Governmental plans (as defined in Section 3(32) of ERISA), including, without limitation, the Northmoor State Pension System, are not considered "benefit plan investors" for purposes of the foregoing limitation but shall be tracked by the General Partner for purposes of determining whether the Partnership qualifies as a "venture capital operating company" (VCOC) within the meaning of 29 C.F.R. § 2510.3-101(d).
Each Limited Partner that is or includes a benefit plan investor shall so represent in its Subscription Agreement and shall promptly notify the General Partner of any change in its status as a benefit plan investor or of any other change that could affect the Partnership's compliance with the benefit plan investor limitation.
ARTICLE IV — CAPITAL CONTRIBUTIONS
Section 4.1 — Capital Calls
The General Partner may issue Capital Calls from time to time requiring the Partners to fund a portion of their respective Unfunded Commitments. Each Capital Call shall be made upon not less than ten (10) business days' prior written notice to each Partner (a "Capital Call Notice"), delivered in accordance with Section 18.4 hereof. Each Capital Call Notice shall specify:
(a) the aggregate amount of capital being called from all Partners;
(b) the amount being called from each individual Partner;
(c) the purpose for which the called capital will be used (e.g., funding investments, payment of Management Fees, payment of Organizational Expenses or other Partnership expenses, funding Subscription Facility reserves or repayments, or any other proper Partnership purpose);
(d) the date by which the contribution must be funded (the "Funding Date"), which shall be no earlier than ten (10) business days after the date of the Capital Call Notice; and
(e) the wire transfer instructions for the account to which such contribution is to be made.
Capital Calls shall be drawn on a Pro Rata Basis from all Partners based on their respective Unfunded Commitments at the time of such Capital Call, unless otherwise provided in this Agreement (including with respect to excused investments pursuant to Section 5.5 hereof or Defaults pursuant to Section 4.4 hereof).
Section 4.2 — Purpose of Capital Calls
Capital contributions may be called by the General Partner for any of the following purposes:
(a) funding investments by the Partnership (alongside the Main Fund and the other vehicles in the Fund Complex);
(b) payment of Management Fees;
(c) payment of Organizational Expenses and other Partnership expenses;
(d) funding reserves, repayments, or other amounts owing under the Subscription Facility;
(e) funding indemnification obligations of the Partnership; and
(f) any other proper Partnership purpose as determined by the General Partner.
The General Partner shall not be required to specify the particular investment or investments for which a Capital Call is being made, except to the extent required by applicable law or as otherwise agreed in applicable side letters.
Section 4.3 — Funding Mechanics
All capital contributions shall be made by wire transfer of immediately available funds to the account of the Partnership's custodian, Ridgeway Trust Company, located at 1100 North Market Street, Wilmington, Delaware 19801, or to such other account as the General Partner may designate from time to time in the applicable Capital Call Notice. The form of Capital Call Notice shall be substantially in the form prescribed in the Main Fund LPA, as adapted for the Parallel Fund, a copy of which is attached hereto as Exhibit B.
The General Partner may accept capital contributions in currencies other than United States dollars, subject to such exchange rate adjustments and procedures as the General Partner may establish. The General Partner shall not be liable for any losses arising from currency conversion or fluctuations in exchange rates.
Section 4.4 — Failure to Fund; Default Provisions
If a Limited Partner fails to fund all or any portion of a Capital Call by the applicable Funding Date, such Limited Partner shall be deemed to be in Default (a "Defaulting Partner") with respect to the unfunded amount. Upon the occurrence of a Default, the General Partner shall provide written notice to the Defaulting Partner specifying the nature and amount of the Default and the remedies that the General Partner intends to exercise.
The General Partner may, in its sole discretion, exercise any one or more of the following remedies against a Defaulting Partner:
(a) Default Interest. The Defaulting Partner shall be required to pay default interest on the unfunded amount at the rate of twelve percent (12%) per annum, calculated from the applicable Funding Date until the date on which the defaulted contribution is funded in full;
(b) Forfeiture. The Defaulting Partner shall forfeit up to fifty percent (50%) of its Capital Account balance as of the date of the Default, with the forfeited amount allocated among the non-defaulting Partners on a Pro Rata Basis or applied as the General Partner may otherwise determine;
(c) Forced Sale. The General Partner may cause the Defaulting Partner's interest in the Partnership to be sold to one or more non-defaulting Partners, to new investors, or to third parties at a price determined by the General Partner in its sole discretion, which price may reflect a discount of up to twenty-five percent (25%) from the Net Asset Value of such interest; and
(d) Reduction or Elimination of Future Allocations. The General Partner may reduce or eliminate the Defaulting Partner's right to receive future allocations of profits and distributions, in whole or in part, on such terms as the General Partner deems appropriate.
The foregoing remedies are cumulative and are in addition to, and not in limitation of, any other rights or remedies available to the Partnership or the General Partner under this Agreement, at law, or in equity. The exercise of any remedy shall not relieve the Defaulting Partner of its obligation to fund the defaulted Capital Call.
Non-defaulting Partners may, but shall not be required to, fund the Defaulting Partner's share of the Capital Call on a Pro Rata Basis (or on such other basis as the General Partner may determine). Any amounts funded by non-defaulting Partners in lieu of the Defaulting Partner shall be credited to the contributing Partners' Capital Accounts and shall increase their respective interests in the Partnership.
Section 4.5 — Return of Excess Capital Contributions
If any amounts called from the Partners are not applied within twelve (12) months of the date of the applicable Capital Call to the funding of investments, the payment of expenses, or any other proper Partnership purpose, the General Partner may, in its discretion, return such excess amounts to the Partners on a Pro Rata Basis. Any such return shall be treated as a return of capital, and the Unfunded Commitments of the Partners shall be reinstated by the amount of such return, and such reinstated amounts shall be available for future Capital Calls.
Section 4.6 — Recycling
During the Investment Period, the General Partner may recycle (i.e., recall and reinvest) proceeds from investments that are realized within twenty-four (24) months of the date of the applicable investment, subject to a cap of one hundred fifteen percent (115%) of Aggregate Commitments on a Fund Complex-wide basis. For the avoidance of doubt, recycled proceeds shall reinstate the Partners' Unfunded Commitments to the extent of the capital returned and recalled, and the recycling cap shall be calculated based on the cumulative amount of capital invested (including reinvested proceeds) relative to Aggregate Commitments across the Fund Complex. After the expiration of the Investment Period, the General Partner shall not have the right to recycle proceeds except to the extent necessary to fund follow-on investments in existing portfolio companies or investments committed during the Investment Period.
ARTICLE V — INVESTMENTS; PARALLEL INVESTMENT MECHANICS
Section 5.1 — Parallel Investment with the Main Fund
The Parallel Fund shall invest alongside the Main Fund in each portfolio investment on a Pro Rata Basis, determined by the ratio of the Parallel Fund's Capital Commitments to the Fund Complex's Aggregate Commitments. The General Partner shall use commercially reasonable efforts to ensure that each portfolio investment is allocated among the vehicles in the Fund Complex on a fair and equitable basis, such that each vehicle participates in each investment in proportion to its respective Capital Commitments relative to Aggregate Commitments, after giving effect to any adjustments for excused investments under Section 5.5, available capital, or other relevant factors.
The General Partner shall cause the Parallel Fund to invest in and dispose of portfolio investments at the same time, on the same terms, and at the same price as the Main Fund, except to the extent that differences in the structure, tax treatment, or regulatory status of the Parallel Fund or its Limited Partners require modifications to the terms of participation. In such cases, the General Partner shall use commercially reasonable efforts to achieve economic equivalence for the Partners.
Section 5.2 — Concentration Limit
No single portfolio investment shall exceed twenty percent (20%) of Aggregate Commitments at the time of commitment, measured across the Fund Complex. At the hard cap of Two Billion United States Dollars ($2,000,000,000), the maximum single-investment concentration shall be Four Hundred Million United States Dollars ($400,000,000) across the Fund Complex. The Parallel Fund's share of any single investment shall not exceed its Pro Rata Basis share of such concentration limit. For purposes of calculating the concentration limit, follow-on investments in the same portfolio company shall be aggregated with the initial investment. Any waiver of the concentration limit shall require LPAC approval in accordance with Article X hereof.
Section 5.3 — Investment Period
The Investment Period shall commence on the date of the Final Close and shall end on the fifth (5th) anniversary thereof, unless earlier terminated or suspended in accordance with this Agreement. During the Investment Period, the General Partner may cause the Partnership to make new investments, follow-on investments, and add-on acquisitions, and to fund reserves and expenses related thereto.
After the expiration or termination of the Investment Period, the General Partner may only (a) make follow-on investments in existing portfolio companies, provided that the aggregate amount of all follow-on investments made after the Investment Period does not exceed fifteen percent (15%) of Aggregate Commitments, and (b) fund investments that were committed during the Investment Period but for which the closing or funding had not yet occurred. The General Partner may not initiate new platform investments after the expiration of the Investment Period.
Section 5.4 — Co-Investment
The General Partner may, in its discretion, offer co-investment opportunities to Limited Partners or to third parties in connection with any investment of the Fund Complex. Co-investment opportunities shall be allocated in accordance with the General Partner's co-investment allocation policy, which shall be disclosed to the Limited Partners, and shall take into account any co-investment rights or commitments set forth in applicable side letters.
Co-investments made by Limited Partners or third parties are outside the Partnership and do not count toward such investors' Capital Commitments to the Partnership. Co-investments shall generally be offered on a no-fee, no-carry basis, unless otherwise agreed in writing. The General Partner shall not be liable for any failure to offer co-investment opportunities to any particular Limited Partner, and the allocation of co-investment opportunities shall not give rise to any claim by any Limited Partner against the Partnership or the General Partner.
Section 5.5 — Excuse Rights
A Limited Partner may request to be excused from participation in a specific investment if such participation would (a) violate any applicable law, statute, rule, or regulation to which such Limited Partner is subject; (b) violate the terms of such Limited Partner's governing documents, investment policies, or other organizational restrictions; or (c) otherwise conflict with the terms of any side letter agreement between such Limited Partner and the General Partner (including, without limitation, provisions relating to Sharia compliance, restricted jurisdiction investments, or investments that would generate unrelated business taxable income for tax-exempt Limited Partners).
The General Partner shall have the sole discretion to determine whether a Limited Partner's excuse request is justified and to approve or deny such request. If a Limited Partner is excused from a specific investment, the capital that would otherwise have been called from such excused Limited Partner shall not be called, and such Partner's Unfunded Commitment shall be preserved with respect to the excused amount. The excused amount may, at the General Partner's discretion, be reallocated among the remaining Partners on a Pro Rata Basis, or the investment size may be reduced accordingly.
Frequent or excessive use of excuse rights may be taken into account by the General Partner in determining future co-investment allocations and other discretionary benefits.
Section 5.6 — Subscription Credit Facility
The General Partner may cause the Partnership, together with the Main Fund and the other vehicles in the Fund Complex, to enter into, guarantee, or otherwise support a revolving credit facility (the "Subscription Facility") with Ashford National Bank, N.A. (300 Vesey Street, New York, New York 10282), or such other financial institution or institutions as the General Partner may select.
The principal terms of the Subscription Facility are expected to be as follows:
(a) Facility Size: Up to Five Hundred Million United States Dollars ($500,000,000) in revolving commitments, made available across the Fund Complex;
(b) Tenor: Three hundred sixty-four (364) days, renewable annually at the option of the lender and the borrowers;
(c) Interest Rate: The Secured Overnight Financing Rate ("SOFR") plus one hundred seventy-five (175) basis points per annum on drawn amounts;
(d) Commitment Fee: Twenty-five (25) basis points per annum on undrawn commitments;
(e) Borrowing Base: Ninety percent (90%) of the uncalled Capital Commitments of Included Investors (i.e., Limited Partners that are investment-grade-rated institutional investors or government-plan investors, as determined by the lender);
(f) Fund-Level Leverage Limit: Borrowings under the Subscription Facility shall not exceed twenty-five percent (25%) of the uncalled Capital Commitments of all Partners; bridge financing under the Subscription Facility shall be limited to one hundred eighty (180) days in duration; and
(g) Security: The Subscription Facility shall be secured by a first-priority security interest in the General Partner's right to call and receive capital contributions from the Limited Partners, together with all related rights under this Agreement and the Subscription Agreements.
Each Limited Partner, by executing its Subscription Agreement and becoming a Partner of the Partnership, hereby consents to the pledge and assignment of its obligation to fund Capital Calls as security for the Subscription Facility, and agrees to cooperate with the General Partner and the lender in connection with any documentation, certifications, or other actions reasonably required in connection therewith. Each Limited Partner acknowledges that the Subscription Facility may be used to bridge Capital Calls, to fund investments in advance of calling capital from the Partners, and for other proper Partnership purposes, and that the use of the Subscription Facility may affect the calculation of net internal rates of return and other performance metrics.
Section 5.7 — Investment Restrictions
The Parallel Fund shall be subject to the same investment restrictions, diversification requirements, and risk parameters as the Main Fund, as set forth in the Main Fund LPA and summarized in Schedule C hereto. Such restrictions include, without limitation, the concentration limit set forth in Section 5.2, the sector and geographic focus, the equity check range, and the leverage limitations applicable to the Fund Complex.
Any waiver of or amendment to the investment restrictions shall require the prior approval of the LPAC in accordance with Article X hereof, and any such waiver or amendment approved by the LPAC with respect to the Main Fund shall be deemed to apply to the Parallel Fund on the same terms and conditions.
ARTICLE VI — ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 — Allocation of Profits and Losses
Net profits and net losses of the Partnership for each Fiscal Year (and each other applicable period) shall be allocated among the Partners in accordance with their respective Capital Accounts and the distribution waterfall set forth in Section 6.2 hereof, and in a manner consistent with Section 704(b) of the Code and the Treasury Regulations promulgated thereunder. The General Partner shall maintain Capital Accounts for each Partner in accordance with the principles set forth in Treasury Regulation § 1.704-1(b)(2)(iv), and shall make such adjustments thereto as are necessary to ensure that allocations of profits and losses have substantial economic effect within the meaning of Treasury Regulation § 1.704-1(b)(2).
The following special allocations shall be made to the extent required by the Treasury Regulations:
(a) Qualified Income Offset. If any Partner unexpectedly receives an adjustment, allocation, or distribution described in Treasury Regulation § 1.704-1(b)(2)(ii)(d)(4), (5), or (6) that causes or increases a deficit balance in such Partner's Capital Account, items of income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate such deficit balance as quickly as possible.
(b) Minimum Gain Chargeback. If there is a net decrease in partnership minimum gain (within the meaning of Treasury Regulation § 1.704-2(d)) during any Fiscal Year, each Partner shall be allocated items of income and gain for such year equal to such Partner's share of the net decrease in partnership minimum gain, subject to the exceptions set forth in Treasury Regulation § 1.704-2(f).
(c) Partner Nonrecourse Deductions. Partner nonrecourse deductions (within the meaning of Treasury Regulation § 1.704-2(i)) shall be allocated to the Partner who bears the economic risk of loss with respect to the partner nonrecourse debt to which such deductions are attributable, in accordance with Treasury Regulation § 1.704-2(i).
The foregoing special allocations shall be consistent with the corresponding provisions of the Main Fund LPA, and the General Partner shall coordinate the allocation of profits and losses across the Fund Complex to ensure equitable treatment of all investors.
Section 6.2 — Distribution Waterfall
The Partnership shall employ a European-style (whole-fund) distribution waterfall. Distributable proceeds of the Partnership (including proceeds from the disposition of investments, current income, and other amounts available for distribution after payment of expenses and establishment of reserves) shall be distributed to the Partners in the following order of priority:
First (Return of Capital): One hundred percent (100%) to the Limited Partners, on a Pro Rata Basis, until each Limited Partner has received cumulative distributions equal to such Limited Partner's aggregate capital contributions (including any Equalization Contributions and related interest thereon);
Second (Preferred Return): One hundred percent (100%) to the Limited Partners, on a Pro Rata Basis, until each Limited Partner has received cumulative distributions equal to an amount that would provide such Limited Partner with a cumulative compounded annual return of eight percent (8%) per annum on such Limited Partner's unreturned capital contributions, calculated from the date of each capital contribution (or the deemed date thereof in the case of Subscription Facility bridge financing) to the date of the applicable distribution;
Third (GP Catch-Up): Eighty percent (80%) to the General Partner and twenty percent (20%) to the Limited Partners, on a Pro Rata Basis, until the cumulative distributions to the General Partner equal twenty percent (20%) of the cumulative net profits (i.e., the aggregate amount distributed under the Second, Third, and Fourth tiers, calculated on a cumulative basis);
Fourth (Carried Interest Split): Eighty percent (80%) to the Limited Partners, on a Pro Rata Basis, and twenty percent (20%) to the General Partner, as Carried Interest.
All distributions to the Limited Partners under the foregoing waterfall shall be made on a Pro Rata Basis based on each Limited Partner's respective Capital Commitment, adjusted as appropriate for timing differences arising from admissions at subsequent Closings, excused investments, and Defaults. The General Partner's share of distributions shall include the return of the GP Commitment on the same basis as Limited Partners, in addition to the Carried Interest described above.
Section 6.3 — Timing of Distributions
The General Partner shall use commercially reasonable efforts to distribute the proceeds of realized investments and current income to the Partners within sixty (60) days following the realization of an investment or the receipt of current income, subject to (a) the General Partner's discretion regarding the establishment and maintenance of reasonable reserves for Partnership expenses, liabilities, and contingencies, and (b) the terms and conditions of the Subscription Facility and any other indebtedness of the Partnership.
Distributions may be made in cash or, with the consent of the LPAC, in kind. In the case of in-kind distributions, the fair market value of the distributed assets shall be determined by the General Partner in accordance with the valuation policies and procedures of the Fund Complex, and such distributions shall be treated as a sale of the distributed assets at fair market value for purposes of calculating allocations and the distribution waterfall.
The General Partner shall not be required to make distributions at any particular time or with any particular frequency, and the timing and amount of distributions shall be subject to the General Partner's business judgment and discretion.
Section 6.4 — Withholding