CALDERWOOD & HARKNESS LLP Attorneys at Law 425 Lexington Avenue New York, NY 10017 Tel: (212) 554-7800
Fax: (212) 554-7801
www.calderwoodharkness.com
April 4, 2024
Via Email and First Class Mail
Harrison K. Drummond, Esq. Partner, Investment Funds Group Ashford Crane & Hewitt LLP 1 Federal Street, Suite 3600 Boston, MA 02110
Gavin R. Lockhart Partner, Head of Investor Relations Meridian Peak Capital Advisors LLC 200 Clarendon Street, 42nd Floor Boston, MA 02116
Re: Briarwood Family Office LLC — Withdrawal of Proposed Commitment to Meridian Peak Capital Partners Fund IV, L.P.
Dear Mr. Drummond and Mr. Lockhart:
This firm represents Briarwood Family Office LLC ("BFO"), a Delaware limited liability company, in connection with BFO's evaluation of, and negotiations relating to, a proposed limited partnership commitment to Meridian Peak Capital Partners Fund IV, L.P. ("Fund IV"), a Delaware limited partnership whose general partner is Meridian Peak Capital Partners GP IV LLC (the "General Partner"), and whose investment adviser is Meridian Peak Capital Advisors LLC ("Meridian Peak" or the "Adviser"). The purpose of this letter is to formally notify Ashford Crane & Hewitt LLP, as counsel to Meridian Peak and Fund IV, and to notify Meridian Peak directly, that BFO has decided not to proceed with its proposed Seventy-Five Million Dollar ($75,000,000) capital commitment to Fund IV and is hereby withdrawing from further negotiations in connection therewith. The balance of this letter sets forth the relevant background, the basis and scope of BFO's withdrawal, and the parties' respective obligations going forward.
Background and Summary of Negotiations
By way of background, BFO received the Fund IV Confidential Private Placement Memorandum, dated December 15, 2023 (the "PPM"), and the Amended and Restated Agreement of Limited Partnership of Fund IV, dated December 20, 2023 (the "LPA"), on or about January 8, 2024. These materials were transmitted electronically via Meridian Peak's secure data room, together with related subscription documents, investor questionnaire forms, and ancillary fund documentation.
Following an initial internal review of the PPM, the LPA, and related materials by BFO's investment professionals and in-house legal team, BFO engaged Calderwood & Harkness LLP on January 24, 2024 to advise BFO in connection with the proposed commitment and, specifically, to negotiate a side letter to the LPA (the "Side Letter") on BFO's behalf with respect to certain economic, governance, reporting, and regulatory terms.
Between February 7, 2024 and March 18, 2024, the parties engaged in extensive negotiations regarding the proposed Side Letter. The negotiation history is summarized as follows:
• On February 7, 2024, Calderwood & Harkness transmitted an initial side-letter term sheet to Ashford Crane & Hewitt LLP on behalf of BFO, setting forth BFO's principal requests across twelve subject-matter categories.
• On February 14, 2024, Ashford Crane & Hewitt LLP, on behalf of the General Partner and Meridian Peak, returned a markup of the initial term sheet reflecting the General Partner's responses, counterproposals, and comments on each category.
• On February 21, 2024, Calderwood & Harkness delivered a revised term sheet incorporating certain of the General Partner's counterproposals and providing further detail on BFO's remaining requests.
• On February 28, 2024, Calderwood & Harkness circulated the first full draft of the Side Letter, reflecting the substantially agreed term-sheet provisions and presenting the remaining open points in long-form contractual language.
• On March 4, 2024, Ashford Crane & Hewitt LLP returned a markup of the first draft Side Letter on behalf of the General Partner, which included revisions to a number of substantive provisions and counter-drafting on several material terms.
• On March 7, 2024, Calderwood & Harkness circulated a second draft of the Side Letter, which responded to the General Partner's March 4 markup and proposed compromise language on certain of the disputed provisions.
• On March 11, 2024, a four-party conference call was held among representatives of Calderwood & Harkness, BFO, Ashford Crane & Hewitt LLP, and Meridian Peak to discuss the remaining open negotiation points. That call addressed, among other things, the scope of excuse and exclusion rights, the structure of the most favored nation election mechanism, and certain aspects of the proposed management fee reduction.
• On March 14, 2024, Calderwood & Harkness circulated a third draft of the Side Letter, reflecting the discussion points from the March 11 call and proposing revised language on the open items.
• On March 18, 2024, Ashford Crane & Hewitt LLP returned a markup of the third draft Side Letter on behalf of the General Partner.
At the time negotiations were paused on March 28, 2024, certain material terms remained in brackets in the most recent draft of the Side Letter, including, without limitation, the excuse and exclusion cap percentage, the precise scope of the co-investment allocation methodology, and other items that had not been resolved to both parties' mutual satisfaction. No final, execution-ready version of the Side Letter was produced.
Notification of Withdrawal
We write to inform you that BFO's investment committee convened on April 2, 2024 and, following deliberation and consideration of the matter, voted to decline the proposed Seventy-Five Million Dollar ($75,000,000) capital commitment to Fund IV. This decision was reached after a thorough review of BFO's current portfolio allocation, liquidity requirements, and broader investment strategy, and reflects BFO's internal investment considerations at this time. BFO wishes to emphasize that this decision is not a reflection on the merits of Fund IV, its investment strategy, the quality of its management team, or the capabilities of Meridian Peak as an investment adviser. Rather, BFO has concluded that a commitment to Fund IV does not align with BFO's current investment priorities and allocation targets.
Accordingly, BFO will not be subscribing for a limited partnership interest in Fund IV and will not be participating in Fund IV's anticipated initial closing, which we understand is expected to occur on or about April 30, 2024, or in any subsequent closing of Fund IV.
Lapse of Negotiated Provisions
As a direct result of BFO's decision not to proceed with the proposed commitment, all draft Side Letter provisions negotiated between the parties are of no further force or effect and have lapsed in their entirety, effective as of the date of this letter. For clarity and completeness, the lapsed provisions include, without limitation, the following:
(a) Most Favored Nation Rights. All provisions relating to most favored nation ("MFN") protections for BFO, including the MFN election mechanism, the Fifty Million Dollar ($50,000,000) limited partner commitment threshold for MFN eligibility, the Two Hundred Million Dollar ($200,000,000) anchor investor carve-out from MFN disclosure, and the twenty (20) business day election period following delivery of MFN disclosure materials.
(b) Excuse and Exclusion Rights. All provisions granting BFO the right to be excused or excluded from participation in, or the obligation to fund capital contributions with respect to, certain categories of investments, including investments in cannabis-related assets, gaming and casino properties, investments in jurisdictions subject to U.S. sanctions administered by the Office of Foreign Assets Control ("OFAC"), and investments that would cause Fund IV assets to constitute "plan assets" within the meaning of Section 3(42) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the regulations promulgated thereunder.
(c) Management Fee Reductions. All provisions providing for reduced management fees payable by BFO, including a management fee of one and one-half percent (1.50%) per annum on committed capital during the investment period and a management fee of one and one-quarter percent (1.25%) per annum on invested capital (net of write-downs and write-offs) following the expiration or termination of the investment period.
(d) Co-Investment Rights. All provisions granting BFO pro rata co-investment participation rights with respect to equity investments by Fund IV exceeding One Hundred Million Dollars ($100,000,000) in aggregate transaction value, including the terms providing that such co-investment interests would be offered at no management fee and no carried interest to the General Partner or the Adviser.
(e) Enhanced Reporting Obligations. All provisions imposing enhanced quarterly and annual reporting obligations on the General Partner or the Adviser with respect to BFO, including the delivery of supplemental portfolio and valuation reports on a quarterly basis and annual audited financial statements in enhanced form, as well as periodic environmental, social, and governance ("ESG") reporting in a format reasonably satisfactory to BFO.
(f) Key Person Event Enhancements. All provisions modifying the key person provisions set forth in the LPA with respect to BFO, including the provision requiring a ninety (90) day automatic suspension of the investment period upon the departure, death, disability, or material reduction in involvement of either Conrad J. Ellsworth or Priya Narayan from Fund IV investment activities, and the related cure and notice mechanisms negotiated in connection therewith.
(g) Transfer Rights. All provisions granting BFO the right to transfer all or a portion of its limited partnership interest in Fund IV to Hargrove family entities (as defined in the draft Side Letter) without the prior consent of the General Partner, subject to compliance with applicable securities laws and the delivery of customary transfer documentation.
(h) Confidentiality Carve-Outs. All provisions expanding or modifying the confidentiality obligations set forth in the LPA as applied to BFO, including carve-outs permitting disclosure to BFO's affiliates, advisors, auditors, and regulatory authorities in the ordinary course.
(i) Accelerated Schedule K-1 Delivery. All provisions requiring the General Partner to deliver, or cause to be delivered, Schedule K-1 (IRS Form 1065) and related tax information to BFO within seventy-five (75) days following the end of each fiscal year of Fund IV, in advance of the delivery timeline set forth in the LPA.
(j) Placement Agent Fee Offset. All provisions requiring a one hundred percent (100%) offset of any placement agent fees, commissions, or other compensation paid or payable by Fund IV, the General Partner, the Adviser, or any of their affiliates to Pinnacle Capital Markets LLC (the "Placement Agent") in connection with BFO's commitment, against management fees otherwise payable by BFO.
All of the foregoing provisions, whether reflected in the initial term sheet dated February 7, 2024, the revised term sheet dated February 21, 2024, any of the three successive drafts of the Side Letter dated February 28, March 7, and March 14, 2024, any of the General Partner's markups received on February 14, March 4, and March 18, 2024, or discussed orally during the March 11, 2024 conference call or in any other communication between the parties, have lapsed in their entirety and are of no further force or effect as of the date hereof.
No Executed Agreements; No Binding Obligations
For the avoidance of doubt, we confirm the following:
(i) No subscription agreement or subscription booklet was executed by or on behalf of BFO in connection with Fund IV at any time during the course of negotiations.
(ii) No capital commitment — whether binding, conditional, or otherwise — has been made by BFO to Fund IV, the General Partner, or the Adviser, whether pursuant to the LPA, any Side Letter, or any other agreement or instrument.
(iii) No investor questionnaire, investor certification, or similar document was submitted by or on behalf of BFO to Fund IV, the General Partner, the Adviser, or any placement agent or other intermediary in connection with the proposed commitment.
(iv) No binding obligations of any kind exist between BFO, on the one hand, and Fund IV, Meridian Peak Capital Partners GP IV LLC, Meridian Peak Capital Advisors LLC, or any of their respective affiliates, on the other hand, in connection with the proposed commitment to Fund IV, and no party has any claim against BFO arising out of or related to the negotiations described herein.
Confidentiality
BFO acknowledges and expects that the terms of the parties' negotiations, including all draft Side Letter provisions, term sheets, markups, and related communications (whether written or oral), will be treated as confidential by Ashford Crane & Hewitt LLP, Meridian Peak, the General Partner, and Fund IV in accordance with customary practice applicable to fund subscription negotiations. BFO similarly will maintain the confidentiality of all Fund IV materials received by BFO and its advisors in connection with this process, including the PPM, the LPA, subscription documents, data room materials, and all related fund documentation, and will not disclose the terms thereof to any third party except as may be required by applicable law, regulation, or legal process, or to BFO's professional advisors on a need-to-know basis subject to customary confidentiality undertakings.
Return and Retention of Materials
We note that BFO and Calderwood & Harkness LLP will retain copies of Fund IV documents received during the course of this process — including the PPM, the LPA, subscription documents, and related materials — in their respective files, as required by applicable law, professional responsibility obligations, and firm and institutional document-retention policies. Neither BFO nor Calderwood & Harkness LLP will use or disclose such materials for any purpose other than as may be required by applicable law, regulation, or legal process, or in connection with BFO's internal recordkeeping. Should Meridian Peak or its counsel wish to discuss further arrangements regarding the retention or return of specific materials, we are happy to accommodate any reasonable request.
Professional Courtesy
In closing, on behalf of BFO and this firm, we wish to express our sincere appreciation for the professionalism, responsiveness, and constructive engagement demonstrated by Ashford Crane & Hewitt LLP and the Meridian Peak team throughout the negotiation process. The negotiations were conducted in good faith and in a manner reflecting well on all parties involved. We reiterate that BFO's decision to decline the proposed commitment should not be taken as a negative assessment of Fund IV, its investment thesis, or the capabilities of Meridian Peak and its principals. BFO values the relationship it has developed with Meridian Peak during this process and does not foreclose the possibility of future engagement on matters of mutual interest.
Please do not hesitate to contact me if you have any questions regarding the foregoing or if there is anything further we can address in connection with this matter.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Pamela Cross Partner, Funds & Asset Management Calderwood & Harkness LLP 425 Lexington Avenue New York, NY 10017 Tel: (212) 554-7846
Email: pcross@calderwoodharkness.com
cc:
Sandra M. Whitfield, Esq., General Counsel, Briarwood Family Office LLC, 780 Park Avenue, Suite 3200, New York, NY 10021
Derek T. Calloway, Director of External Investments, Briarwood Family Office LLC
Tamara Fujimoto, Esq., General Counsel & Chief Compliance Officer, Meridian Peak Capital Advisors LLC
Elaine C. Woodbury, Esq., Senior Associate, Ashford Crane & Hewitt LLP
Theresa Kim, Esq., Senior Associate, Calderwood & Harkness LLP (internal)