CO-INVESTMENT AGREEMENT
Dated as of March 27, 2025
between
HARROWGATE PRIVATE EQUITY FUND IV LP a Delaware limited partnership
and
ASHFORD GROWTH PARTNERS LP a Delaware limited partnership
Relating to the Acquisition of
PENNFIELD HOLDINGS, INC. (Nasdaq: PNFD)
a Delaware corporation
Project Summit
HARROWGATE PRIVATE EQUITY FUND IV LP 1200 Market Street, Suite 3100 Wilmington, Delaware 19801
ASHFORD GROWTH PARTNERS LP 150 North Riverside Plaza, Suite 2200 Chicago, Illinois 60606
This Co-Investment Agreement (this "Agreement") is entered into as of March 27, 2025 (the "Effective Date"), by and between Harrowgate Private Equity Fund IV LP, a Delaware limited partnership (the "Lead Investor" or "HPE Fund IV"), and Ashford Growth Partners LP, a Delaware limited partnership (the "Co-Investor" or "Ashford"). HPE Fund IV and Ashford are each referred to herein as a "Party" and collectively as the "Parties."
This Agreement relates to the proposed take-private acquisition of Pennfield Holdings, Inc., a Delaware corporation (Nasdaq: PNFD) (the "Target" or the "Company"), pursuant to the Agreement and Plan of Merger (the "Merger Agreement") to be entered into among HPE Fund IV, Pinnacle Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of HPE Fund IV ("Merger Sub"), and the Company, pursuant to which Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of HPE Fund IV.
RECITALS
WHEREAS, HPE Fund IV intends to acquire all of the outstanding shares of common stock of Pennfield Holdings, Inc., a Delaware corporation listed on the Nasdaq Global Select Market under the ticker symbol "PNFD," through a reverse triangular merger in which Merger Sub, a Delaware corporation and a direct wholly owned subsidiary of HPE Fund IV, will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of HPE Fund IV (the "Merger");
WHEREAS, the Merger will be effected pursuant to the Agreement and Plan of Merger to be dated on or about April 7, 2025 (the "Merger Agreement"), among HPE Fund IV, Merger Sub, and the Company, in accordance with the Delaware General Corporation Law ("DGCL");
WHEREAS, the aggregate merger consideration payable to the stockholders of the Company in connection with the Merger is $980,000,000, representing $15.95 per share of the Company's common stock on a fully diluted basis (based on 61,450,000 fully diluted shares outstanding), which represents a premium of approximately 30.95% to the Company's 30-day volume-weighted average price of $12.18 per share;
WHEREAS, the total equity required to fund the Merger is $340,000,000, comprised of $318,500,000 of sponsor equity (net of $21,500,000 in management rollover equity contributed by certain members of the Company's management team) and $21,500,000 of management rollover equity (the "Management Rollover"), with such Management Rollover consisting of equity rollover contributions by Catherine Langford ($12,500,000), Derek Simmons ($5,000,000), and Maxwell Dunn ($4,000,000);
WHEREAS, the balance of the merger consideration will be funded by (a) $490,000,000 in Senior Secured Term Loan B borrowings and $150,000,000 in Senior Secured Revolving Credit Facility commitments, in each case pursuant to the debt commitment letter dated March 24, 2025 (the "Debt Commitment Letter"), from Falconer National Bank, N.A. and Dunmore Capital Markets LLC, and (b) $90,000,000 of unrestricted cash on the Company's balance sheet available at the time of the Closing;
WHEREAS, HPE Fund IV desires to offer Ashford the opportunity to co-invest $60,000,000 of the $318,500,000 sponsor equity required to consummate the Merger, and Ashford desires to participate in such co-investment on the terms and conditions set forth herein, such that Ashford will hold approximately 18.84% of the total sponsor equity in the post-closing holding structure;
WHEREAS, Harrowgate Capital Partners LLC ("HCP"), a Delaware limited liability company, is the investment manager of HPE Fund IV, and Harrowgate Capital Partners IV GP LLC ("HPE IV GP"), a Delaware limited liability company, is the general partner of HPE Fund IV; and
WHEREAS, the Parties desire to set forth the terms and conditions governing Ashford's co-investment in the Acquisition, including the funding mechanics, governance arrangements, distribution rights, and other matters related thereto.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings ascribed to them below:
"Acquisition" means the acquisition of Pennfield Holdings, Inc. by HPE Fund IV through the Merger, together with all related transactions contemplated by the Merger Agreement and this Agreement.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" (including the terms "controlling," "controlled by," and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. For the avoidance of doubt, (a) with respect to HPE Fund IV, the term "Affiliate" includes HCP, HPE IV GP, any fund managed by HCP, and any portfolio company of HPE Fund IV, and (b) with respect to Ashford, the term "Affiliate" includes any fund, vehicle, or managed account controlled by or under common control with Ashford Growth Partners LP or its general partner.
"Agreement" means this Co-Investment Agreement, including all exhibits and schedules hereto, as the same may be amended, supplemented, or otherwise modified from time to time in accordance with Section 12.6.
"Business Day" means any day that is not a Saturday, Sunday, or a day on which commercial banks are authorized or required by law to be closed in New York, New York.
"Capital Call Notice" has the meaning set forth in Section 2.3.
"Closing" means the closing of the Merger as defined in, and in accordance with the terms of, the Merger Agreement.
"Closing Date" means the date on which the Closing occurs, which is currently estimated to occur on or about June 30, 2025, subject to the satisfaction or waiver of all conditions to the Closing set forth in the Merger Agreement.
"Co-Investment Amount" means the sum of $60,000,000, as such amount may be adjusted in accordance with Section 2.4.
"Co-Investment Percentage" means the Co-Investor's pro rata share of the total Sponsor Equity, expressed as a percentage, which as of the Effective Date is equal to approximately 18.84%, calculated as the Co-Investment Amount ($60,000,000) divided by the total Sponsor Equity ($318,500,000). The Co-Investment Percentage shall be adjusted proportionately in the event of any adjustment to the Co-Investment Amount pursuant to Section 2.4.
"Company" means Pennfield Holdings, Inc., a Delaware corporation (Nasdaq: PNFD; EIN: 82-4917305), headquartered at 4500 Commerce Boulevard, Suite 800, Charlotte, North Carolina 28202, and, following the Closing, the Surviving Company.
"Debt Commitment Letter" means the debt commitment letter dated March 24, 2025, executed and delivered by Falconer National Bank, N.A. (as Lead Arranger and Administrative Agent) and Dunmore Capital Markets LLC (as Co-Arranger and Joint Bookrunner), committing to provide (a) a $490,000,000 Senior Secured Term Loan B facility and (b) a $150,000,000 Senior Secured Revolving Credit Facility, in each case on the terms and subject to the conditions set forth therein, for a total committed debt amount of $640,000,000.
"DGCL" means the Delaware General Corporation Law, 8 Del. C. § 101 et seq., as amended from time to time.
"Drag-Along Notice" has the meaning set forth in Section 7.2.
"Drag-Along Sale" has the meaning set forth in Section 7.2.
"Effective Date" means March 27, 2025.
"Equity Commitment Letter" means the equity commitment letter dated March 27, 2025, from HPE Fund IV to Merger Sub, pursuant to which HPE Fund IV has committed to contribute $340,000,000 in equity to Merger Sub in connection with the Merger, of which the Co-Investment Amount forms a portion.
"Funding Date" means the date on which the Co-Investor is required to fund the Co-Investment Amount, which shall be no later than two (2) Business Days prior to the Closing Date, as specified in the Capital Call Notice.
"Funding Default" has the meaning set forth in Section 2.5.
"HCP" means Harrowgate Capital Partners LLC, a Delaware limited liability company, in its capacity as the investment manager of HPE Fund IV.
"HPE Fund IV" means Harrowgate Private Equity Fund IV LP, a Delaware limited partnership.
"HPE IV GP" means Harrowgate Capital Partners IV GP LLC, a Delaware limited liability company, in its capacity as the general partner of HPE Fund IV.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Lead Investor" means Harrowgate Private Equity Fund IV LP.
"Management Rollover" means the aggregate $21,500,000 in equity rollover to be contributed by certain members of the Company's management team in connection with the Merger, consisting of contributions by Catherine Langford, Chief Executive Officer ($12,500,000), Derek Simmons, Chief Financial Officer ($5,000,000), and Maxwell Dunn, Chief Operating Officer ($4,000,000), in each case on terms to be set forth in the applicable rollover agreements.
"Merger" means the merger of Merger Sub with and into the Company, with the Company surviving as a wholly owned subsidiary of HPE Fund IV, in accordance with the DGCL and the terms of the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger to be dated on or about April 7, 2025, among HPE Fund IV, Merger Sub, and the Company, together with all exhibits, schedules, and annexes thereto, as the same may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"Merger Sub" means Pinnacle Merger Sub, Inc., a Delaware corporation (EIN: 93-4081562), with its registered office at 1200 Market Street, Suite 3100, Wilmington, Delaware 19801, which is a direct wholly owned subsidiary of HPE Fund IV formed solely for the purpose of effectuating the Merger.
"Outside Date" means September 30, 2025, as defined in the Merger Agreement, which is the date by which the Closing must occur or either party to the Merger Agreement may terminate the Merger Agreement in accordance with its terms.
"Person" means any natural person, corporation, limited liability company, partnership, joint venture, trust, estate, unincorporated association, governmental authority, or any other entity or organization, whether or not having a separate legal personality.
"Proceeds" means any and all cash, securities, or other consideration received by HPE Fund IV or its Affiliates in respect of the equity interests in the Surviving Company, whether by way of dividends, distributions, return of capital, sale, exchange, merger, liquidation, or otherwise.
"Project Summit" means the code name for the Acquisition and the related data room hosted on the Thackeray Solutions platform.
"R&W Insurance Policy" means the buyer-side representations and warranty insurance policy bound by HPE Fund IV with Meridian Specialty Insurance Company in connection with the Acquisition, having a policy limit of $100,000,000 and a retention of $9,800,000.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Sponsor Equity" means the total sponsor equity of $318,500,000, calculated as the total equity of $340,000,000 less the Management Rollover of $21,500,000.
"Surviving Company" means the Company as the surviving entity following the consummation of the Merger.
"Tag-Along Notice" has the meaning set forth in Section 7.1.
"Tag-Along Sale" has the meaning set forth in Section 7.1.
"Transaction Costs" means all fees, costs, and expenses incurred by or on behalf of HPE Fund IV, Merger Sub, or any of their respective Affiliates in connection with the Acquisition, including without limitation legal fees, financial advisory fees, accounting fees, due diligence costs, financing fees (including commitment fees, arrangement fees, and underwriting fees in connection with the Debt Commitment Letter), insurance premiums (including the premium for the R&W Insurance Policy), regulatory filing fees (including the HSR Act filing fee), proxy solicitation costs, printing and mailing costs, and all other costs and expenses directly related to the negotiation, documentation, and consummation of the Acquisition. Transaction Costs are estimated at approximately $60,000,000 as of the Effective Date.
Section 1.2 — Interpretation
Unless the context otherwise requires, the following rules of construction shall apply to this Agreement:
(a) The headings and captions of the articles, sections, and subsections of this Agreement are inserted for convenience of reference only and shall not affect the interpretation or construction of this Agreement.
(b) Words in the singular shall include the plural and vice versa, and words in one gender shall include all genders, in each case as the context requires.
(c) References to any statute, law, or regulation shall include all rules and regulations promulgated thereunder and any successor statute, law, or regulation, in each case as amended from time to time.
(d) The words "hereof," "herein," "hereunder," "hereby," and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement.
(e) The words "include," "includes," and "including" shall be deemed to be followed by the words "without limitation."
(f) All references to "$" or "dollars" shall mean United States dollars.
(g) All references to "days" shall mean calendar days unless "Business Days" is expressly specified.
(h) The Parties have participated jointly in the negotiation and drafting of this Agreement, and no rule of strict construction shall be applied against either Party.
(i) All exhibits and schedules attached hereto or referred to herein are incorporated in and made a part of this Agreement as if set forth in full herein.
(j) References to any agreement or contract mean such agreement or contract as amended, modified, supplemented, or restated from time to time in accordance with its terms.
ARTICLE II — CO-INVESTMENT COMMITMENT
Section 2.1 — Co-Investment Commitment
(a) Subject to the terms and conditions of this Agreement, Ashford hereby irrevocably commits to contribute $60,000,000 (the "Co-Investment Amount") in cash to fund a portion of the equity required for the Acquisition. The Co-Investment Amount represents approximately 18.84% of the total Sponsor Equity ($318,500,000) and approximately 6.12% of the total funding required for the Acquisition ($980,000,000).
(b) The Co-Investment Amount shall be contributed in immediately available funds on the Funding Date by wire transfer to the account designated by HPE Fund IV (or its designee) in the funds flow memorandum to be prepared and distributed by HPE Fund IV in connection with the Closing. Ashford's obligation to fund the Co-Investment Amount is a binding, irrevocable commitment and shall not be subject to any condition other than those expressly set forth in Article V of this Agreement.
(c) Upon contribution of the Co-Investment Amount, Ashford shall receive equity interests in the post-closing holding structure of the Surviving Company on a pro rata basis reflecting its Co-Investment Percentage. The specific form and terms of such equity interests shall be as set forth in the definitive operating agreement, limited partnership agreement, or stockholders' agreement of the post-closing holding entity, to which Ashford shall become a party at or promptly following the Closing by executing and delivering a joinder agreement substantially in the form attached hereto as Exhibit C.
(d) For the avoidance of doubt, Ashford's Co-Investment Amount shall be invested alongside and pari passu with HPE Fund IV's own equity contribution with respect to economic rights (subject to Section 8.2), and Ashford shall bear the same risk of loss on a pro rata basis as HPE Fund IV with respect to the Sponsor Equity.
Section 2.2 — Use of Proceeds
HPE Fund IV shall use the Co-Investment Amount solely to fund, directly or indirectly, (a) the aggregate merger consideration payable to the stockholders of the Company under the Merger Agreement, (b) Transaction Costs incurred in connection with the Acquisition, and (c) amounts required to repay or refinance outstanding indebtedness of the Company at the Closing, in each case in accordance with the funds flow memorandum to be prepared and distributed by HPE Fund IV in connection with the Closing. HPE Fund IV shall not use the Co-Investment Amount for any purpose other than those set forth in this Section 2.2 without the prior written consent of Ashford.
Section 2.3 — Funding Mechanics
(a) HPE Fund IV shall deliver written notice to Ashford (a "Capital Call Notice") in substantially the form attached hereto as Exhibit A no later than five (5) Business Days prior to the anticipated Closing Date. The Capital Call Notice shall specify (i) the Funding Date, (ii) the Co-Investment Amount (as may have been adjusted pursuant to Section 2.4), (iii) complete wire instructions for the designated account (including bank name, ABA routing number, account name, account number, and reference information), and (iv) the anticipated Closing Date.
(b) Ashford shall fund the Co-Investment Amount in immediately available funds to the designated account specified in the Capital Call Notice by no later than 12:00 p.m. (Eastern Time) on the Funding Date. Time is of the essence with respect to Ashford's funding obligation under this Section 2.3(b).
(c) If the Closing does not occur within five (5) Business Days after the Funding Date for any reason, HPE Fund IV shall promptly (and in any event within two (2) Business Days after the expiration of such five (5) Business Day period) return the Co-Investment Amount to Ashford, without interest, by wire transfer of immediately available funds to the account specified by Ashford in writing. If a subsequent Capital Call Notice is delivered in accordance with Section 2.3(a), Ashford's obligation to fund shall be renewed in accordance with the terms of such subsequent Capital Call Notice.
(d) HPE Fund IV shall maintain the Co-Investment Amount, pending application thereof at the Closing, in a segregated account at Falconer National Bank, N.A. and shall not commingle such funds with HPE Fund IV's other assets prior to the Closing.
Section 2.4 — Adjustment to Co-Investment Amount
(a) HPE Fund IV shall have the right, in its sole discretion, to reduce the Co-Investment Amount by up to twenty-five percent (25%) (i.e., to not less than $45,000,000) upon not less than fifteen (15) Business Days' prior written notice to Ashford; provided that any such reduction shall be made on a pro rata basis with any corresponding reduction in HPE Fund IV's own equity contribution to the Acquisition. Any such reduction shall be reflected in the Capital Call Notice and shall result in a corresponding adjustment to the Co-Investment Percentage.
(b) HPE Fund IV shall not increase the Co-Investment Amount above $60,000,000 without the prior written consent of Ashford. In the event that the aggregate merger consideration under the Merger Agreement is increased subsequent to the Effective Date, Ashford shall have the right (but not the obligation) to increase its Co-Investment Amount on a pro rata basis by delivering written notice to HPE Fund IV within five (5) Business Days after receipt of notice of such increase.
(c) If the aggregate merger consideration under the Merger Agreement is reduced subsequent to the Effective Date, HPE Fund IV may, in its sole discretion, reduce the Co-Investment Amount proportionately, and any such reduction shall not require the fifteen (15) Business Days' prior written notice otherwise required under Section 2.4(a).
Section 2.5 — Failure to Fund
(a) If Ashford fails to fund all or any portion of the Co-Investment Amount on or before the Funding Date and such failure is not cured within one (1) Business Day after the Funding Date (a "Funding Default"), HPE Fund IV shall have the right, in addition to any other remedies available at law or in equity (including the right to seek specific performance pursuant to Section 12.10), to take any or all of the following actions:
(i) fund the shortfall from HPE Fund IV's own capital, from the capital of its limited partners, or from other sources on such terms as HPE Fund IV may determine in its sole discretion, without any obligation to Ashford;
(ii) reduce Ashford's equity interests in the Surviving Company proportionately to reflect only the amount actually funded by Ashford, if any, such that Ashford's Co-Investment Percentage shall be recalculated based on the amount actually funded;
(iii) charge Ashford a default premium equal to ten percent (10%) of the unfunded portion of the Co-Investment Amount (the "Default Premium"), which shall be payable by Ashford within five (5) Business Days after written demand by HPE Fund IV; and
(iv) terminate this Agreement with respect to the defaulting amounts by delivering written notice to Ashford, in which case all of Ashford's rights and obligations hereunder with respect to the unfunded portion of the Co-Investment Amount shall terminate, subject to Ashford's surviving obligations under this Section 2.5.
(b) The remedies set forth in Section 2.5(a) are cumulative and not exclusive of any other remedies available to HPE Fund IV. A Funding Default shall constitute a material breach of this Agreement.
(c) Ashford shall indemnify, defend, and hold harmless HPE Fund IV, its Affiliates, and their respective partners, members, managers, officers, directors, employees, agents, and representatives from and against all losses, costs, damages, liabilities, and expenses (including reasonable attorneys' fees and disbursements) arising from or related to a Funding Default, including without limitation any break-up costs, delay damages, bridge financing costs, additional financing costs, penalty interest, or any other costs incurred by HPE Fund IV as a result of Ashford's failure to fund. This indemnification obligation shall survive the termination of this Agreement.
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF CO-INVESTOR
Ashford hereby represents and warrants to HPE Fund IV as of the Effective Date and as of the Funding Date (except where a specific date is specified) as follows:
Section 3.1 — Organization and Good Standing
Ashford is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware. Ashford has all requisite limited partnership power and authority to own, lease, and operate its assets and properties and to carry on its business as currently conducted. Ashford is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not reasonably be expected to have a material adverse effect on Ashford's ability to perform its obligations hereunder.
Section 3.2 — Authority; Binding Effect
Ashford has all requisite limited partnership power and authority to execute, deliver, and perform this Agreement and to consummate the transactions contemplated hereby. The execution, delivery, and performance of this Agreement by Ashford and the consummation by Ashford of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of Ashford, including the approval of Ashford's general partner and, to the extent required, Ashford's limited partners and advisory committee. This Agreement has been duly executed and delivered by Ashford and constitutes the legal, valid, and binding obligation of Ashford, enforceable against Ashford in accordance with its terms, subject to (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other similar laws of general applicability relating to or affecting creditors' rights generally and (b) general equitable principles (whether considered in a proceeding in equity or at law).
Section 3.3 — No Conflicts
The execution, delivery, and performance of this Agreement by Ashford do not and will not (a) violate, conflict with, or result in a breach of any provision of Ashford's certificate of limited partnership, limited partnership agreement, or other organizational documents, (b) violate, conflict with, or result in a breach of any applicable law, statute, ordinance, rule, regulation, judgment, order, writ, injunction, or decree of any governmental authority applicable to Ashford or any of its properties or assets, or (c) conflict with, result in a breach of, constitute (with or without notice or lapse of time or both) a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any contract, agreement, lease, license, instrument, or other arrangement to which Ashford is a party or by which Ashford or any of its properties or assets is bound, except in the case of clauses (b) and (c), where such violation, conflict, breach, default, or failure would not reasonably be expected to have a material adverse effect on Ashford's ability to perform its obligations hereunder.
Section 3.4 — Financial Capacity
(a) Ashford has, and will have on the Funding Date, sufficient cash, liquid assets, or uncalled capital commitments available to pay the Co-Investment Amount in full when due and to perform all of its obligations under this Agreement. Ashford has not incurred, and will not incur prior to the Funding Date, any obligation, commitment, or liability that would impair or adversely affect its ability to fund the Co-Investment Amount in full when due.
(b) Ashford's obligation to fund the Co-Investment Amount is not subject to or contingent upon the receipt of financing from any third party, the satisfaction of any financing condition, or any condition other than those expressly set forth in Article V of this Agreement. Ashford acknowledges that its commitment to fund the Co-Investment Amount is unconditional (subject only to the conditions set forth in Article V) and that HPE Fund IV is relying on such commitment in entering into the Merger Agreement and the Equity Commitment Letter.
Section 3.5 — Accredited Investor; Qualified Purchaser
(a) Ashford is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended.
(b) Ashford is a "qualified purchaser" as defined in Section 2(a)(51) of the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.
(c) Ashford is a sophisticated investor with substantial experience in evaluating and investing in private equity transactions of the type contemplated by this Agreement and is capable of evaluating the merits and risks of the co-investment contemplated hereby.
Section 3.6 — Investment Intent
Ashford is acquiring the equity interests in the post-closing holding structure of the Surviving Company for its own account for investment purposes only and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or any other applicable securities laws. Ashford acknowledges that the equity interests have not been and will not be registered under the Securities Act or the securities laws of any state and cannot be sold, transferred, or otherwise disposed of except in compliance with the Securities Act and applicable state securities laws.
Section 3.7 — Independent Investigation
Ashford has conducted its own independent investigation, review, and analysis of the business, operations, assets, liabilities, results of operations, financial condition, and prospects of the Company. In making its decision to enter into this Agreement and to make the co-investment contemplated hereby, Ashford has relied solely on its own investigation and analysis and on the representations and warranties of HPE Fund IV expressly set forth in Article IV of this Agreement. Ashford acknowledges that (a) it has had access to the data room maintained under the code name "Project Summit" on the Thackeray Solutions platform, (b) it has reviewed such documents, records, and information as it has deemed necessary or appropriate in connection with its decision to co-invest, and (c) it has had the opportunity to ask questions of, and receive answers from, representatives of HPE Fund IV and the Company concerning the terms and conditions of the Acquisition and the business and financial condition of the Company. Ashford is not relying on any representation or warranty of HPE Fund IV, HCP, HPE IV GP, or any of their respective Affiliates, partners, members, managers, officers, directors, employees, agents, or representatives, other than the representations and warranties expressly set forth in Article IV of this Agreement.
Section 3.8 — No Brokers
No broker, finder, investment bank, financial advisor, or other intermediary (other than Ridgepoint Partners LLC, which serves as HPE Fund IV's financial advisor in connection with the Acquisition) is entitled to any brokerage commission, finder's fee, financial advisory fee, or similar compensation from Ashford or any of its Affiliates in connection with the transactions contemplated by this Agreement. Ashford shall indemnify and hold harmless HPE Fund IV from and against any claims, losses, costs, or expenses arising from or related to any claim by any broker, finder, or intermediary claiming to have acted on behalf of Ashford.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF LEAD INVESTOR
HPE Fund IV hereby represents and warrants to Ashford as of the Effective Date and as of the Funding Date (except where a specific date is specified) as follows:
Section 4.1 — Organization and Good Standing
HPE Fund IV is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware. HPE Fund IV has all requisite limited partnership power and authority to own, lease, and operate its assets and properties and to carry on its business as currently conducted. The general partner of HPE Fund IV is Harrowgate Capital Partners IV GP LLC, a Delaware limited liability company, and the investment manager of HPE Fund IV is Harrowgate Capital Partners LLC, a Delaware limited liability company. Merger Sub is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and is a direct wholly owned subsidiary of HPE Fund IV, formed solely for the purpose of effectuating the Merger.
Section 4.2 — Authority; Binding Effect
HPE Fund IV has all requisite limited partnership power and authority to execute, deliver, and perform this Agreement and to consummate the transactions contemplated hereby. The execution, delivery, and performance of this Agreement by HPE Fund IV and the consummation by HPE Fund IV of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of HPE Fund IV, including the approval of HPE IV GP, as general partner of HPE Fund IV, and, to the extent required, the investment committee of HCP. This Agreement has been duly executed and delivered by HPE Fund IV and constitutes the legal, valid, and binding obligation of HPE Fund IV, enforceable against HPE Fund IV in accordance with its terms, subject to (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other similar laws of general applicability relating to or affecting creditors' rights generally and (b) general equitable principles (whether considered in a proceeding in equity or at law).
Section 4.3 — No Conflicts
The execution, delivery, and performance of this Agreement by HPE Fund IV do not and will not (a) violate, conflict with, or result in a breach of any provision of HPE Fund IV's certificate of limited partnership, limited partnership agreement, or other organizational documents, (b) violate, conflict with, or result in a breach of any applicable law, statute, ordinance, rule, regulation, judgment, order, writ, injunction, or decree of any governmental authority applicable to HPE Fund IV or any of its properties or assets, or (c) conflict with, result in a breach of, constitute (with or without notice or lapse of time or both) a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any contract, agreement, lease, license, instrument, or other arrangement to which HPE Fund IV is a party or by which HPE Fund IV or any of its properties or assets is bound, except in the case of clauses (b) and (c), where such violation, conflict, breach, default, or failure would not reasonably be expected to have a material adverse effect on HPE Fund IV's ability to perform its obligations hereunder.
Section 4.4 — Merger Agreement
(a) HPE Fund IV shall provide Ashford with a complete, true, and correct copy of the Merger Agreement (including all exhibits, schedules, annexes, and disclosure schedules thereto) and all material amendments, waivers, and supplements thereto, promptly (and in any event within two (2) Business Days) following the execution and delivery thereof by the parties to the Merger Agreement.
(b) HPE Fund IV represents and warrants that the Merger Agreement is, and will be at the time of its execution, in all material respects consistent with the term sheet and summary of principal terms previously provided to Ashford (dated March 15, 2025), including the following key terms:
(i) aggregate merger consideration of $980,000,000, payable in cash;
(ii) per-share merger consideration of $15.95 per share of common stock of the Company on a fully diluted basis;
(iii) reverse triangular merger structure in which Merger Sub merges with and into the Company, with the Company surviving as a wholly owned subsidiary of HPE Fund IV, in accordance with Section 251 of the DGCL;
(iv) Outside Date of September 30, 2025;
(v) Company termination fee of $34,300,000 (representing approximately 3.5% of the aggregate merger consideration); and
(vi) reverse termination fee payable by HPE Fund IV of $58,800,000 (representing approximately 6.0% of the aggregate merger consideration).
Section 4.5 — Equity Commitment Letter
HPE Fund IV has executed and delivered to Merger Sub the Equity Commitment Letter dated March 27, 2025, pursuant to which HPE Fund IV has committed to contribute $340,000,000 in equity to Merger Sub in connection with the consummation of the Merger. The Equity Commitment Letter is in full force and effect and has not been amended, modified, or terminated. The Co-Investment Amount constitutes a portion of the equity commitment set forth in the Equity Commitment Letter, and HPE Fund IV's remaining equity commitment (net of the Co-Investment Amount and the Management Rollover) is $258,500,000.
Section 4.6 — Debt Financing
The Debt Commitment Letter has been duly executed and delivered by Falconer National Bank, N.A., as Lead Arranger and Administrative Agent, and Dunmore Capital Markets LLC, as Co-Arranger and Joint Bookrunner, and is in full force and effect as of the Effective Date. The Debt Commitment Letter provides for aggregate committed debt financing of $640,000,000, consisting of (a) a $490,000,000 Senior Secured Term Loan B facility and (b) a $150,000,000 Senior Secured Revolving Credit Facility, in each case on the terms and subject to the conditions set forth therein. HPE Fund IV is not aware of any facts or circumstances that would reasonably be expected to prevent the satisfaction of any condition to the funding of the debt financing contemplated by the Debt Commitment Letter.
Section 4.7 — R&W Insurance
HPE Fund IV has bound a buyer-side representations and warranty insurance policy (the "R&W Insurance Policy") with Meridian Specialty Insurance Company in connection with the Acquisition. The R&W Insurance Policy has a total policy limit of $100,000,000 and a retention (self-insured amount) of $9,800,000. The R&W Insurance Policy is in full force and effect as of the Effective Date and has been bound on terms and conditions consistent with customary market practice for transactions of this size and nature. Ashford shall be named as an additional insured under the R&W Insurance Policy, and HPE Fund IV shall deliver to Ashford a copy of the R&W Insurance Policy promptly following binding.
ARTICLE V — CONDITIONS TO CO-INVESTOR'S OBLIGATION TO FUND
Section 5.1 — Conditions Precedent
Ashford's obligation to fund the Co-Investment Amount on the Funding Date is subject to the satisfaction (or waiver by Ashford in writing) of each of the following conditions:
(a) Execution of Merger Agreement. The Merger Agreement shall have been duly executed and delivered by all parties thereto (HPE Fund IV, Merger Sub, and the Company) and shall be in full force and effect and shall not have been terminated, amended, or modified in any manner that is material and adverse to Ashford's interests (without Ashford's prior written consent in accordance with Section 6.2).
(b) Satisfaction of Merger Conditions. All conditions to the Closing set forth in the Merger Agreement (other than conditions that by their nature are to be satisfied at the Closing itself, including the delivery of closing certificates, officer's certificates, and other documents required to be delivered at the Closing) shall have been satisfied or waived by the applicable party to the Merger Agreement.
(c) HSR Act Clearance. The applicable waiting period (and any extension thereof) under the HSR Act with respect to the Merger shall have expired or been terminated by the Federal Trade Commission and the Antitrust Division of the United States Department of Justice. The HSR Act filing is estimated to be made on or about April 8, 2025, with an estimated expiration of the initial waiting period on or about May 8, 2025, assuming no second request is issued.
(d) Stockholder Approval. The stockholders of the Company shall have duly approved and adopted the Merger Agreement and the Merger by the affirmative vote of the holders of a majority of the outstanding shares of common stock of the Company entitled to vote thereon, in accordance with Section 251 of the DGCL and the Company's certificate of incorporation and bylaws.
(e) Capital Call Notice. HPE Fund IV shall have delivered the Capital Call Notice to Ashford in accordance with Section 2.3, specifying the Funding Date, the Co-Investment Amount (as may have been adjusted), wire instructions, and the anticipated Closing Date.
(f) Accuracy of Representations and Warranties. The representations and warranties of HPE Fund IV set forth in Article IV of this Agreement shall be true and correct in all material respects (or, to the extent qualified by materiality or material adverse effect, in all respects) as of the Effective Date and as of the Funding Date (or, in the case of representations and warranties that by their terms speak as of a specific date, as of such date).
(g) No Material Adverse Amendments. HPE Fund IV shall not have made any material amendment to, or waiver of any material provision under, the Merger Agreement that is adverse to Ashford's interests without Ashford's prior written consent (such consent not to be unreasonably withheld, conditioned, or delayed), including any amendment or waiver affecting the aggregate merger consideration, per-share consideration, termination fee, reverse termination fee, indemnification cap, or Outside Date.
(h) No Legal Impediment. No law, statute, ordinance, rule, regulation, order, judgment, writ, injunction, decree, or other legal restraint issued or enacted by any governmental authority of competent jurisdiction shall be in effect that prohibits, restrains, or makes illegal the consummation of the Merger or the Co-Investor's funding of the Co-Investment Amount.
Section 5.2 — Waiver of Conditions
Ashford may waive any or all of the conditions set forth in Section 5.1 at any time, in whole or in part, by delivering a written waiver to HPE Fund IV. Any such waiver shall be effective only if set forth in a written instrument signed by Ashford. No waiver of any condition shall be deemed a waiver of any other condition, whether or not similar, and no waiver shall constitute a continuing waiver unless the written instrument executing such waiver expressly provides otherwise.
ARTICLE VI — COVENANTS
Section 6.1 — Information Rights
(a) From the Effective Date until the earlier of the Closing Date or the termination of this Agreement, HPE Fund IV shall provide Ashford with:
(i) copies of all material notices, correspondence, filings, and communications under or relating to the Merger Agreement, including without limitation any filings with the Securities and Exchange Commission (including Schedule 13E-3, the preliminary and definitive proxy statement on Schedule 14A, and any Current Reports on Form 8-K), promptly (and in any event within two (2) Business Days) following the delivery, receipt, or filing thereof;
(ii) prompt written notice of any material amendment, waiver, supplement, or modification to the Merger Agreement, the Equity Commitment Letter, or the Debt Commitment Letter, together with a copy of the applicable instrument;
(iii) periodic updates (no less frequently than bi-weekly, and more frequently upon reasonable request by Ashford) on the status of the Acquisition, including the status of the HSR Act filing (estimated April 8, 2025), the proxy solicitation process and expected stockholder meeting date, the progress of debt financing syndication, and any material developments relating to the Closing; and
(iv) continued access to the data room maintained under the code name "Project Summit" on the Thackeray Solutions platform throughout the pendency of the Acquisition, including access to any supplemental materials added to the data room following the Effective Date.
(b) HPE Fund IV shall promptly notify Ashford in writing upon becoming aware of (i) any material breach or default by any party under the Merger Agreement, (ii) the occurrence of any event or condition that would reasonably be expected to give rise to a termination right under the Merger Agreement, (iii) the receipt of any communication from any governmental authority regarding the Merger (including any second request under the HSR Act), or (iv) any material litigation, proceeding, or claim commenced or threatened in connection with the Merger.
Section 6.2 — Consent Rights
HPE Fund IV shall not, without Ashford's prior written consent (which consent shall not be unreasonably withheld, conditioned, or delayed), take any of the following actions:
(a) Amend or waive any material provision of the Merger Agreement, including without limitation (i) the aggregate merger consideration of $980,000,000, (ii) the per-share merger consideration of $15.95, (iii) the indemnification cap of $117,600,000 (representing 12% of the aggregate merger consideration), (iv) the Company termination fee of $34,300,000 (representing approximately 3.5% of the aggregate merger consideration), (v) the reverse termination fee of $58,800,000 (representing approximately 6.0% of the aggregate merger consideration), (vi) the Outside Date of September 30, 2025, or (vii) any material closing condition;
(b) Increase the Co-Investment Amount above $60,000,000 or alter the Co-Investment Percentage in a manner adverse to Ashford;
(c) Settle any claims under the R&W Insurance Policy in a manner that would materially and adversely affect Ashford's interests, including any settlement that would reduce the available policy limits below $50,000,000 or that would impair Ashford's rights as an additional insured;
(d) Terminate the Merger Agreement, other than in accordance with the express termination provisions set forth therein (including termination upon the failure to close by the Outside Date, a material breach by the Company, or the occurrence of a Company material adverse effect), unless such termination is required by applicable law or order of a court of competent jurisdiction; or
(e) Enter into any side letter, amendment, or agreement with the Company's management or stockholders relating to the Merger or the post-closing operations of the Company that would materially and adversely affect Ashford's economic interests hereunder.
Section 6.3 — Confidentiality
(a) Each Party shall maintain in strict confidence and shall not disclose, publish, or disseminate to any Person (other than as expressly permitted herein) any non-public information regarding (i) the Acquisition (including the terms and conditions of the Merger Agreement, the Debt Commitment Letter, and the Equity Commitment Letter), (ii) this Agreement (including the existence, terms, and conditions hereof), (iii) the other Party's business, financial condition, operations, assets, liabilities, or prospects, and (iv) any non-public information regarding the Company obtained through the data room or otherwise in connection with the Acquisition (collectively, "Confidential Information").
(b) The obligations set forth in Section 6.3(a) shall not apply to Confidential Information that (i) is or becomes generally available to the public other than as a result of a breach of this Section 6.3 by the receiving Party, (ii) was available to the receiving Party on a non-confidential basis prior to its disclosure hereunder, (iii) becomes available to the receiving Party on a non-confidential basis from a source other than the disclosing Party or its representatives, provided that such source is not, to the knowledge of the receiving Party, subject to a confidentiality obligation with respect to such information, or (iv) is independently developed by the receiving Party without reference to or use of the Confidential Information.
(c) Notwithstanding the foregoing, each Party may disclose Confidential Information (i) to the extent required by applicable law, regulation, legal process, or governmental order or request (including any SEC filing or regulatory examination), provided that the disclosing Party shall, to the extent legally permissible, provide the other Party with prompt written notice of such requirement so that the other Party may seek a protective order or other appropriate remedy, (ii) to its Affiliates, partners, members, managers, officers, directors, employees, agents, advisors (including legal counsel, accountants, financial advisors, and consultants), and existing and prospective limited partners or investors, in each case who have a need to know such information and who are bound by confidentiality obligations no less restrictive than those set forth herein, and (iii) to the extent necessary in connection with the enforcement of this Agreement or any dispute arising hereunder.
(d) Ashford acknowledges that it may receive material non-public information regarding the Company (Nasdaq: PNFD, CUSIP: 708234109) in connection with the Acquisition and this Agreement. Ashford agrees to comply with all applicable federal and state securities laws, including Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, and shall not trade in the securities of the Company (or disclose such information to any Person who may trade in such securities) while in possession of material non-public information regarding the Company. Ashford shall implement and maintain appropriate information barriers and compliance procedures to prevent any unauthorized use or disclosure of material non-public information.
Section 6.4 — Exclusivity; Restrictions on Transfer
(a) Ashford shall not, directly or indirectly, transfer, assign, pledge, hypothecate, encumber, or otherwise dispose of any of its rights or obligations under this Agreement to any Person without the prior written consent of HPE Fund IV, which consent may be withheld in HPE Fund IV's sole discretion; provided, however, that Ashford may assign its rights and delegate its obligations under this Agreement to an Affiliate of Ashford upon prior written notice to HPE Fund IV, subject to the condition that (i) such Affiliate executes a written assumption agreement in form and substance reasonably satisfactory to HPE Fund IV, (ii) Ashford remains jointly and severally liable for the performance of all obligations under this Agreement notwithstanding such assignment, and (iii) such assignment does not violate any applicable law or regulation.
(b) Any purported transfer, assignment, or other disposition in violation of this Section 6.4 shall be null and void and of no force or effect.
Section 6.5 — Cooperation
Each Party shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper, or advisable under applicable laws, regulations, and agreements to consummate and make effective the transactions contemplated by this Agreement, including (a) executing and delivering such additional instruments, documents, and agreements as may be reasonably requested by the other Party, (b) cooperating in the preparation and filing of all regulatory filings and applications required in connection with the Acquisition (including HSR Act filings), (c) furnishing to the other Party such information and assistance as may be reasonably requested in connection with the foregoing, and (d) not taking any action that would reasonably be expected to delay, impair, or impede the consummation of the transactions contemplated hereby.
Section 6.6 — Expense Sharing
(a) Ashford shall bear its pro rata share (based on the Co-Investment Percentage) of the Transaction Costs, which are estimated at approximately $60,000,000 as of the Effective Date. Transaction Costs include, without limitation, legal fees, financial advisory fees, accounting and auditing fees, due diligence costs, debt financing fees (including commitment fees, arrangement fees, and underwriting fees), insurance premiums (including the premium for the R&W Insurance Policy), regulatory filing fees (including HSR Act filing fees), proxy solicitation costs, printing and mailing costs, transfer agent fees, and all other costs and expenses directly related to the negotiation, documentation, and consummation of the Acquisition, to the extent allocated to Ashford by HPE Fund IV in its reasonable discretion.
(b) Without limiting the generality of Section 6.6(a), Ashford's pro rata share of the HSR Act filing fee (currently estimated at $280,000 based on the applicable fee schedule) shall be allocated to Ashford proportionately based on the Co-Investment Percentage.
(c) HPE Fund IV shall provide Ashford with a reasonably detailed accounting of Transaction Costs promptly following the Closing Date (or, if the Closing does not occur, promptly following the termination of this Agreement), together with such supporting documentation as Ashford may reasonably request.
(d) For the avoidance of doubt, each Party shall bear its own internal costs and expenses (including the fees and expenses of its own legal counsel, financial advisors, and other professional advisors) in connection with the negotiation and execution of this Agreement, except to the extent such costs are included in the Transaction Costs as described in this Section 6.6.
ARTICLE VII — TAG-ALONG AND DRAG-ALONG RIGHTS
Section 7.1 — Tag-Along Rights
(a) If, at any time following the Closing, HPE Fund IV or any of its Affiliates proposes to transfer, sell, assign, or otherwise dispose of all or any portion of its equity interests in the Surviving Company (or in any holding entity through which HPE Fund IV holds its equity interests in the Surviving Company) to a third party that is not an Affiliate of HPE Fund IV (a "Tag-Along Sale"), Ashford shall have the right (but not the obligation) to participate in such Tag-Along Sale on a pro rata basis, at the same price per unit of equity interest and on the same terms and conditions as HPE Fund IV (including as to representations, warranties, indemnification obligations, escrows, holdbacks, and expense sharing).
(b) HPE Fund IV shall provide Ashford with written notice (a "Tag-Along Notice") at least twenty (20) Business Days prior to the anticipated closing date of any Tag-Along Sale. The Tag-Along Notice shall specify (i) the identity of the proposed transferee, (ii) the aggregate number and type of equity interests proposed to be transferred, (iii) the price per unit of equity interest (or the methodology for determining such price), (iv) the material terms and conditions of the proposed transfer (including representations, warranties, indemnification, escrows, and expense sharing), and (v) the anticipated closing date of the Tag-Along Sale.
(c) Ashford shall have ten (10) Business Days from receipt of the Tag-Along Notice to exercise its tag-along right by delivering written notice to HPE Fund IV (a "Tag-Along Election Notice") specifying the number of equity interests Ashford desires to include in the Tag-Along Sale. If Ashford delivers a timely Tag-Along Election Notice, HPE Fund IV shall reduce the number of equity interests to be sold by HPE Fund IV in the Tag-Along Sale by the number of equity interests to be sold by Ashford, such that the aggregate number of equity interests sold in the Tag-Along Sale equals the number specified in the Tag-Along Notice (unless the proposed transferee agrees to purchase additional equity interests). If Ashford fails to deliver a Tag-Along Election Notice within such ten (10) Business Day period, Ashford shall be deemed to have waived its tag-along right with respect to such Tag-Along Sale.
(d) Notwithstanding the foregoing, the tag-along rights set forth in this Section 7.1 shall not apply to (i) transfers by HPE Fund IV to any Affiliate of HPE Fund IV, provided that such Affiliate agrees to be bound by the terms of this Agreement (including the tag-along and drag-along provisions hereof), (ii) transfers by HPE Fund IV to existing limited partners of HPE Fund IV in connection with in-kind distributions, (iii) transfers in connection with any internal restructuring or reorganization of HPE Fund IV or its portfolio companies, or (iv) pledges or encumbrances of equity interests in connection with bona fide financing arrangements, provided that the underlying lender agrees to be bound by the terms of this Article VII upon any foreclosure or other exercise of remedies.
Section 7.2 — Drag-Along Rights
(a) If, at any time following the Closing, HPE Fund IV proposes to sell, transfer, or otherwise dispose of one hundred percent (100%) of its equity interests in the Surviving Company (or in any holding entity through which HPE Fund IV holds its equity interests in the Surviving Company) to a bona fide third-party buyer in an arm's-length transaction (a "Drag-Along Sale"), HPE Fund IV shall have the right (but not the obligation) to require Ashford to sell all (but not less than all) of its equity interests in the Surviving Company on the same terms and conditions as HPE Fund IV.
(b) HPE Fund IV shall provide Ashford with written notice (a "Drag-Along Notice") at least twenty (20) Business Days prior to the anticipated closing date of any Drag-Along Sale. The Drag-Along Notice shall specify (i) the identity of the proposed buyer, (ii) the aggregate purchase price and the consideration per unit of equity interest, (iii) the material terms and conditions of the proposed sale (including representations, warranties, indemnification, escrows, and expense sharing), and (iv) the anticipated closing date of the Drag-Along Sale.
(c) Upon receipt of the Drag-Along Notice, Ashford shall be obligated to (i) sell all of its equity interests in the Surviving Company in the Drag-Along Sale, (ii) execute and deliver all agreements, instruments, and documents required in connection with the Drag-Along Sale (including the purchase agreement, escrow agreement, and any ancillary documents), (iii) deliver all required transfer documents (including stock certificates or membership interest certificates, if any, duly endorsed for transfer), and (iv) take all other actions reasonably necessary to consummate the Drag-Along Sale, in each case at or prior to the closing of the Drag-Along Sale.
(d) Notwithstanding the foregoing, the drag-along obligations of Ashford under this Section 7.2 are subject to each of the following conditions: