1026-00001 · Briarwood Family Office LLC · Side-Letter Negotiation

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MEMORANDUM

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

TO: Pamela Cross, Partner, Funds & Asset Management

FROM: Theresa Kim, Senior Associate, Funds & Asset Management

DATE: February 15, 2024

RE: Analysis of GP Markup of Initial Side-Letter Term Sheet — Briarwood Family Office LLC / Meridian Peak Capital Partners Fund IV, L.P.

MATTER NO.: 1026-00001

CC: Nicholas Stern (Billing Partner); Owen Fischer (Working Associate)

I. Executive Summary

On February 7, 2024, we transmitted the initial side-letter term sheet (the "Initial Term Sheet") on behalf of our client, Briarwood Family Office LLC ("BFO"), to Ashford Crane & Hewitt LLP ("Ashford Crane"), specifically to the attention of Harrison K. Drummond and Elaine C. Woodbury, in their capacity as counsel to Meridian Peak Capital Partners GP IV LLC (the "General Partner" or "GP"), the general partner of Meridian Peak Capital Partners Fund IV, L.P. (the "Fund" or "Fund IV"). The Initial Term Sheet set forth BFO's proposed side-letter terms in connection with BFO's contemplated commitment of $75,000,000 to Fund IV.

On February 14, 2024, Ashford Crane returned the GP's markup of the Initial Term Sheet (the "GP Markup") on behalf of Meridian Peak Capital Advisors LLC (the "Adviser"), acting through its Co-Founders and Managing Partners, Conrad J. Ellsworth and Priya Narayan. The GP Markup reflects the GP's and the Adviser's consolidated positions on each of the provisions contained in the Initial Term Sheet.

This memorandum serves three purposes: first, it summarizes the GP's positions on each proposed side-letter provision; second, it identifies the key areas of disagreement and assesses the significance of each open point; and third, it recommends counter-positions and negotiation strategies for discussion with BFO's internal team, specifically Sandra M. Whitfield, General Counsel of BFO, and Derek T. Calloway, Director of External Investments.

High-Level Takeaway. The overall tenor of the GP Markup is constructive and reflects a willingness to engage substantively with the side-letter protections sought by BFO. The GP has accepted several core concepts — including MFN rights, management fee reduction, co-investment rights, and enhanced reporting — in each case with modifications that range from minor to significant. However, the GP has pushed back meaningfully on two provisions of particular importance to BFO: (a) the excuse/exclusion rights, where the GP has imposed an aggregate cap of 15% of commitment that is below market norms; and (b) the key person suspension right, which the GP has rejected in its entirety as drafted, offering only enhanced notice rights as a compromise. Additionally, the GP has sought to narrow the scope of the MFN clause through the addition of a broad and subjectively defined "strategic investor" carve-out that could materially diminish the protective value of the MFN provision.

Context on Commitment Size. BFO's proposed commitment of $75,000,000 represents approximately 5.0% of Fund IV's target fund size of $1,500,000,000 and approximately 4.29% of the Fund's hard cap of $1,750,000,000. While this commitment is meaningful and positions BFO as a significant limited partner, it falls below the Anchor Investor threshold of $200,000,000 (representing 13.33% of target fund size) that has been established for Fund IV. This positioning is relevant to several of the GP's responses, particularly with respect to the key person provision and the MFN carve-outs. It should also be noted that the GP is approaching these negotiations with established precedent from three prior funds (Funds I, II, and III, aggregating approximately $3.2 billion in total commitments across all three vintages), which provides the Meridian Peak platform with a well-developed institutional side-letter framework and a corresponding level of firmness on certain structural points.

II. Provision-by-Provision Analysis

The following sections address each provision of the Initial Term Sheet in turn, setting forth: (1) our original proposal as transmitted on February 7, (2) the GP's markup as received on February 14, and (3) our assessment and recommendation for the counter-proposal.

A. Most Favored Nation (MFN) Rights

Our Proposal (February 7 Term Sheet):

The Initial Term Sheet proposed that BFO be entitled to elect any economic or governance term granted by the GP to any other limited partner of the Fund that has committed $50,000,000 or more to Fund IV. The MFN right was subject to three specified carve-outs:

(i) terms granted to Anchor Investors committing $200,000,000 or more (representing 13.33% of the Fund's target size of $1,500,000,000);

(ii) regulatory-driven terms granted to ERISA plan investors, tax-exempt investors, or governmental plan investors, where such terms are required or advisable by reason of the applicable investor's regulatory status; and

(iii) terms available to affiliates of the GP or the Adviser.

With respect to mechanics, the Initial Term Sheet required the GP to deliver to BFO a redacted summary of all material side-letter terms granted to qualifying limited partners within 15 business days of the applicable closing at which BFO is admitted to the Fund (the "MFN Summary"). BFO would then have a period of 20 business days following receipt of the MFN Summary (the "MFN Election Period") during which to elect any terms disclosed in the MFN Summary.

GP Markup:

The GP accepted the MFN concept in principle and did not object to the fundamental architecture of the provision. Specifically, the GP maintained the Anchor Investor carve-out at the $200,000,000 threshold originally proposed, accepted the regulatory-driven carve-out for ERISA, tax-exempt, and governmental plan investors, and accepted the GP affiliate carve-out, all without modification. The GP also accepted the 20 business day MFN Election Period as proposed.

However, the GP introduced three modifications of varying significance:

First, the GP added a fourth carve-out category encompassing terms granted to "strategic investors" that provide "operational or sourcing value" to the Fund, as determined by the GP in its "reasonable discretion." No objective criteria or definition of "strategic investor" was provided. The GP Markup does not specify the types of operational or sourcing value that would qualify an investor for strategic status, nor does it impose any cap on the number of limited partners that could be designated as strategic investors under this carve-out. As a result, the provision as drafted confers broad subjective authority on the GP to exempt potentially significant side-letter concessions from the MFN disclosure and election process.

Second, the GP proposed extending the MFN Summary delivery period from 15 business days to 20 business days following the applicable closing. The GP's counsel indicated informally that this extension reflects the administrative burden of preparing redacted summaries across multiple side letters, particularly in connection with final closings where the volume of side letters may be substantial.

Third, the GP added language at the end of the MFN provision requiring that any term elected by BFO pursuant to the MFN clause "be read in the context of the electing LP's overall side letter" and providing that the GP "may decline to apply an elected term if it would be inconsistent with or duplicative of the electing LP's existing side-letter terms." This qualifier introduces ambiguity into the election process, as it potentially empowers the GP to refuse an MFN election on the ground that the elected term is somehow inconsistent with or redundant in light of BFO's other side-letter protections — a determination that would be made by the GP unilaterally and without clear standards.

Assessment and Recommendation:

The "strategic investor" carve-out is the most problematic element of the GP's markup of this provision. In its current form, the carve-out is defined by reference to subjective criteria ("operational or sourcing value") and is subject to the GP's "reasonable discretion," which provides insufficient constraint on the GP's ability to exempt entire categories of side-letter terms from MFN disclosure. The practical concern is that a limited partner with a large commitment and a tangential commercial relationship with one or more portfolio companies could be classified as a "strategic investor," thereby shielding that investor's potentially superior economic terms from BFO's MFN rights.

We recommend that the counter-proposal take one of two approaches: (a) resist the strategic investor carve-out entirely, on the ground that the Anchor Investor carve-out already provides the GP with sufficient flexibility to accommodate its most significant investors; or (b) if the GP insists on retaining the carve-out, require that it be defined with objective criteria. Specifically, we would propose limiting the carve-out to limited partners that (x) have committed at least $100,000,000 to Fund IV, and (y) have an existing commercial, operating, or co-investment relationship with the Fund or one or more of its portfolio companies that is documented in writing and was in existence prior to such limited partner's admission to the Fund. This formulation preserves the GP's ability to accommodate genuine strategic relationships while preventing abuse of the carve-out as a general MFN exemption.

The extension of the MFN Summary delivery period from 15 to 20 business days is a modest concession that has limited practical impact on BFO's rights. We recommend accepting this modification as a negotiating gesture if needed to secure progress on more material points.

The "inconsistency/duplicativeness" qualifier requires revision. As drafted, it creates an asymmetry in which the GP has unilateral authority to deny an MFN election based on an inherently subjective assessment of whether the elected term is "inconsistent with" or "duplicative of" BFO's existing side-letter terms. We recommend proposing alternative language that confirms BFO's right to elect any individual term on a stand-alone basis, regardless of the content of BFO's other side-letter provisions, and that any disputes regarding the applicability of an elected term be resolved through the dispute resolution mechanism set forth in the LPA.

Priority Level: HIGH — MFN is a cornerstone protection for BFO and the scope of available elections will directly affect the value of BFO's side letter as the Fund's investor base is finalized through subsequent closings.

B. Excuse/Exclusion Rights

Our Proposal (February 7 Term Sheet):

The Initial Term Sheet proposed that BFO be entitled to elect to be excused from participation in any Fund investment falling within one or more of the following four categories:

(a) investments in cannabis-related assets, including direct cultivation, processing, distribution, or ancillary cannabis businesses;

(b) investments in gaming or casino properties, including hotels, resorts, or mixed-use properties where gaming revenues constitute a material component of the property's income;

(c) investments in jurisdictions subject to comprehensive U.S. economic sanctions administered by the Office of Foreign Assets Control ("OFAC"), including, without limitation, Cuba, Iran, North Korea, Syria, and the Crimea, Donetsk, and Luhansk regions of Ukraine; and

(d) any investment that would cause BFO or its beneficial owners to be treated as holding "plan assets" within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or regulations promulgated thereunder.

The excuse right was to be exercisable within 15 business days of BFO's receipt of the applicable investment notice (i.e., the capital call notice identifying the proposed investment), and the exercise of an excuse right would result in a dollar-for-dollar reduction of BFO's unfunded commitment by the amount of the excused capital call. The Initial Term Sheet did not propose an aggregate cap on excuse rights; this point was intentionally left open for negotiation, consistent with our discussion with Sandra Whitfield prior to transmittal.

GP Markup:

The GP accepted all four specified excuse categories without modification, which is a favorable outcome and reflects the GP's acknowledgment that BFO's investment policy restrictions in these areas are reasonable and well-grounded. The GP also accepted the 15 business day election period and the dollar-for-dollar reduction of BFO's unfunded commitment upon exercise of an excuse right.

However, the GP introduced two modifications:

First, and most significantly, the GP inserted an aggregate excuse cap of 15% of BFO's total commitment. Applied to BFO's $75,000,000 commitment, this cap would limit BFO's aggregate excused investments to $11,250,000. Once BFO's cumulative excused investments reach this threshold, BFO would be required to participate in all future capital calls regardless of whether the applicable investment falls within one of the four specified excuse categories. The GP's markup does not provide for any exceptions to the cap or any mechanism for the cap to be increased during the Fund's term.

Second, the GP added a requirement that BFO provide a written explanation of the basis for each excuse election, including identification of the specific excuse category under which the election is made and a brief description of the factual basis supporting the classification of the investment within that category. This requirement is procedural in nature and is consistent with the administrative practice that most institutional fund managers follow in connection with excuse rights.

Assessment and Recommendation:

The 15% aggregate cap ($11,250,000) is the principal area of concern. Based on our review of precedent side letters across comparable private equity real estate funds in the value-add and opportunistic segments — including side letters we have negotiated in connection with Ridgeline Real Estate Partners Fund V, Catalina Capital Opportunities Fund III, and Blackwell Property Group Fund VII — excuse caps for investors at BFO's commitment level typically range from 20% to 30% of total commitment. A 15% cap is below the lower end of this range and would leave BFO with limited headroom, particularly in light of Fund IV's value-add and opportunistic investment strategy, which may encompass asset classes or geographies that intersect with BFO's excuse categories. The concern is especially acute with respect to gaming and cannabis-adjacent investments, which represent a growing share of opportunistic real estate deal flow in the current market environment.

We recommend counter-proposing an aggregate excuse cap of 25% of BFO's commitment, which would equal $18,750,000. This figure falls at the midpoint of the 20%–30% market range and provides BFO with meaningful flexibility to exercise excuse rights across the Fund's investment period without creating an undue administrative or structural burden on the GP.

If the GP rejects 25%, our fallback position should be 20% of commitment ($15,000,000), which represents the lower bound of market norms and should be presented as a firm floor for BFO.

The written explanation requirement is reasonable, consistent with market practice, and should be accepted. We note that BFO's internal investment team, led by Derek Calloway, maintains detailed records of investment policy determinations, and compliance with this requirement should not present any operational difficulty.

Priority Level: HIGH — Excuse rights are a primary investment policy concern for the Hargrove family, and Sandra Whitfield has indicated that the BFO investment committee considers robust excuse protections to be a condition to BFO's commitment to Fund IV.

C. Management Fee Reduction

Our Proposal (February 7 Term Sheet):

The Initial Term Sheet proposed a reduced management fee for BFO as follows:

• During the Investment Period: 1.50% per annum on committed capital (versus the standard management fee rate of 1.75% per annum on committed capital as set forth in Section 7.1(a) of the Fund's limited partnership agreement (the "LPA")).

• Post-Investment Period: 1.25% per annum on invested capital (versus the standard post-investment period rate of 1.50% per annum on invested capital as set forth in Section 7.1(b) of the LPA).

The proposed reduction represents a 25 basis point reduction per tier. To quantify the economic benefit during the investment period: a 25 basis point reduction on BFO's $75,000,000 commitment yields annual savings of $187,500 per year. Across the anticipated four-year investment period, cumulative savings would total $750,000, before accounting for the time value of money. Post-investment period savings would depend on the level of invested capital at the applicable measurement date but would follow a similar proportional benefit.

GP Markup:

The GP accepted the 1.50% rate during the investment period and the 1.25% rate post-investment period, both as proposed. This is a positive outcome and reflects the GP's recognition that a 25 basis point reduction is within the range customarily offered to institutional investors at BFO's commitment level.

However, the GP introduced two modifications:

First, the GP added a "step-up" provision that would cause BFO's management fee to revert to the standard rate of 1.75% per annum on all committed capital if, at any time during the investment period, BFO's actual funded commitment falls below 80% of its $75,000,000 commitment amount. By way of illustration, if BFO exercises excuse rights (or otherwise fails to fund capital calls) such that its aggregate funded amount at any point drops below $60,000,000 (i.e., 80% of $75,000,000), the reduced management fee rate would be forfeited and the standard LPA rate would apply retroactively from the beginning of the investment period. The GP Markup is silent on whether the step-up would be prospective only or whether it would apply retroactively with a true-up payment; this ambiguity would need to be resolved in the definitive side letter.

Second, the GP clarified that the fee reduction is personal to BFO and may not be transferred to any assignee or transferee of BFO's limited partnership interest, except to Hargrove family entities that are permitted transferees under the transfer rights provision discussed in Section II.H below.

Assessment and Recommendation:

The management fee step-up provision is the primary concern. While step-up mechanisms are not uncommon in fund side letters, the specific design of this provision creates an undesirable linkage between the excuse/exclusion rights (discussed in Section II.B above) and the management fee economics. Under the GP's proposed structure, if BFO exercises excuse rights that cumulatively reduce its funded commitment below the 80% threshold, BFO would not only lose the benefit of the excuse right (in terms of the aggregate cap) but would also lose the benefit of the management fee reduction — effectively penalizing BFO twice for the same action. This linkage narrows the economic benefit of both provisions and creates a disincentive for BFO to exercise excuse rights even where the underlying investment falls squarely within one of the specified excuse categories.

We recommend one of two approaches. Our preferred position is to resist the step-up provision entirely, on the ground that the management fee reduction was negotiated independently of the excuse rights and should not be conditioned on BFO's funding behavior. Alternatively, if the GP insists on some form of step-up protection, we recommend proposing a significantly higher threshold — specifically, that the step-up would apply only if BFO's funded commitment falls below 50% of the $75,000,000 commitment amount (i.e., below $37,500,000). A 50% threshold is sufficiently high that it would be triggered only in extreme circumstances and would effectively function as a protection against wholesale non-participation by BFO, rather than as a penalty for the exercise of legitimate excuse rights.

The non-transferability limitation (except to Hargrove family entities) is acceptable and is consistent with the transfer rights framework discussed in Section II.H. We recommend accepting this modification without further negotiation.

Priority Level: MEDIUM-HIGH — The step-up provision has meaningful economic implications and should be addressed in the counter-proposal, but this issue is likely resolvable through negotiation.

D. Placement Agent Fee Offset

Our Proposal (February 7 Term Sheet):

The Initial Term Sheet proposed that 100% of the placement agent fee payable in connection with BFO's commitment to Fund IV be offset against management fees payable by BFO. The placement agent for BFO's commitment is Pinnacle Capital Markets LLC, acting through Roland S. Abernathy, Managing Director. The placement fee is 1.0% of BFO's commitment, calculated as follows: $75,000,000 × 1.0% = $750,000. The Initial Term Sheet proposed that the offset be applied on a pro rata basis over the first four years of the Fund's management fee obligations (i.e., the anticipated investment period), resulting in an annual offset of $187,500 per year for four years.

GP Markup:

The GP accepted the 100% offset concept without qualification. The GP's sole modification was to propose that the offset be applied over the first three years (rather than four years) of management fee obligations. This would result in an annual offset of $250,000 per year for three years, rather than $187,500 per year for four years. No other material changes were made to this provision.

Assessment and Recommendation:

The GP's proposed acceleration of the offset schedule is affirmatively favorable to BFO. By concentrating the offset over three years rather than four, BFO would receive the benefit of the fee offset more quickly, which has a positive time-value-of-money effect. The accelerated schedule also provides BFO with greater certainty of realizing the full offset, as it would be fully applied before the end of the investment period rather than extending to the final year.

We recommend accepting this modification without further negotiation. This provision may be considered resolved.

Priority Level: LOW — Resolved in BFO's favor.

E. Co-Investment Rights

Our Proposal (February 7 Term Sheet):

The Initial Term Sheet proposed that BFO be entitled to a pro rata co-investment opportunity in connection with any Fund investment that involves equity in excess of $100,000,000. Co-investments would be made on a no-management-fee and no-carried-interest basis, meaning that BFO's co-investment capital would not be subject to the 1.50%/1.25% management fee (as reduced) or the Fund's 20% carried interest. The Initial Term Sheet further proposed that co-investments be offered to BFO on a pari passu basis with the Fund, meaning that BFO's co-investment would be made at the same entry price, on the same terms, and with the same economic profile as the Fund's direct investment.

GP Markup:

The GP accepted the $100,000,000 equity threshold for triggering the co-investment right, and accepted the no-fee/no-carry terms for co-investment capital. These are significant concessions and reflect the GP's willingness to accommodate BFO's desire for direct deal-level exposure alongside the Fund.

However, the GP introduced three modifications:

First, the GP added a "best efforts" qualifier to the co-investment obligation. As marked up, co-investment opportunities would be offered to BFO on a "commercially reasonable best efforts" basis rather than as an absolute contractual right. Under this formulation, the GP would be required to use commercially reasonable best efforts to make co-investment opportunities available to BFO, but would not be in breach of the side letter if it failed to do so for reasons that it could characterize as commercially reasonable. This is a meaningful dilution of the co-investment right and is the most significant modification to this provision.

Second, the GP added a right to allocate co-investment capacity among multiple requesting limited partners in its "reasonable discretion," provided that BFO receives at least its pro rata share of the co-investment opportunity before any over-allocation is made to other limited partners. This allocation mechanic effectively subordinates BFO's access to co-investment capacity to the GP's discretionary allocation process, but preserves BFO's pro rata entitlement as a floor.

Third, the GP deleted the "pari passu" language from the co-investment terms and replaced it with a requirement that co-investments be offered on "substantially similar economic terms" as the Fund's investment. This substitution introduces a degree of imprecision, as "substantially similar" is a more permissive standard than "pari passu" and could permit the GP to offer co-investments on terms that differ from the Fund's terms in respects that are not material in isolation but may be significant in aggregate.

Assessment and Recommendation:

The "best efforts" qualifier is the most consequential modification and should be the focus of our counter-proposal. A "commercially reasonable best efforts" standard is inherently difficult to enforce and provides the GP with substantial discretion to decline to offer co-investment opportunities to BFO on grounds that are difficult to challenge. We recommend pushing back to retain a firm contractual right, or at minimum, requiring that the GP provide BFO with written notice of each investment that meets the $100,000,000 equity threshold within five business days of the GP's commitment to such investment, together with a 10 business day window during which BFO may elect to participate in the co-investment before the GP offers co-investment capacity to other limited partners. This mechanic would effectively convert the "best efforts" qualifier into a right of first offer, which provides BFO with meaningful protection while preserving the GP's ability to allocate capacity to other investors if BFO declines.

The allocation mechanics are generally acceptable provided that BFO's pro rata share is protected as a floor. We recommend clarifying that BFO's pro rata share is calculated based on BFO's commitment as a percentage of total Fund commitments at the time of the applicable investment, and that BFO's pro rata allocation is not subject to reduction by the GP.

The replacement of "pari passu" with "substantially similar economic terms" is acceptable but should be accompanied by a definition of the terms that are required to be substantially similar, including, at a minimum: (a) identical entry pricing (i.e., BFO's co-investment is made at the same per-unit or per-share price as the Fund's investment); (b) the same holding period and exit mechanics; (c) the same governance rights with respect to the co-investment vehicle; and (d) the same distribution waterfall. This specificity would reduce the risk that "substantially similar" is interpreted to permit divergent deal terms.

Priority Level: MEDIUM — Co-investment rights are valuable to BFO but are likely to be exercised selectively; the negotiation posture should reflect the fact that BFO views co-investment as an opportunity enhancement rather than a core protection.

F. Enhanced Reporting

Our Proposal (February 7 Term Sheet):

The Initial Term Sheet proposed the following enhanced reporting obligations:

• Quarterly Reporting: Portfolio-level reports to be delivered to BFO within 45 days of the end of each fiscal quarter, including property-level performance data, NAV calculations, and a summary of material events during the quarter.

• Annual Financial Statements: Audited annual financial statements of the Fund to be delivered to BFO within 90 days of the end of each fiscal year.

• Annual ESG Reporting: An annual report on the Fund's environmental, social, and governance practices and performance, including portfolio-level ESG metrics.

For reference, the Fund administrator is Granite Ledger Fund Services LLC (Catherine J. Halloran, Client Relationship Manager), and the Fund auditor is Brockton Marsh & Associates LLP (Neil A. Strickland, Audit Partner).

GP Markup:

The GP accepted the quarterly reporting obligation within 45 days of quarter-end and the audited annual financial statement obligation within 90 days of fiscal year-end, both without modification. These acceptances confirm that the GP's existing reporting infrastructure, including its relationships with Granite Ledger and Brockton Marsh, supports the enhanced timelines proposed by BFO.

With respect to ESG reporting, the GP accepted the concept of annual ESG reporting but introduced two qualifications. First, the GP added language providing that the format, scope, and content of the annual ESG report would be determined by the GP in its "reasonable discretion." Second, the GP added a caveat that the ESG reporting obligation is subject to data availability from the Fund's portfolio companies, acknowledging that the GP cannot guarantee the completeness or granularity of ESG data across all portfolio assets, particularly in the early stages of the Fund's investment program when portfolio companies may not yet have implemented comprehensive ESG data collection systems.

The GP also added a general proviso applicable to all enhanced reporting obligations, providing that such obligations are subject to a materiality exception for non-public portfolio company information. Under this exception, the GP would not be required to disclose non-public information regarding portfolio companies if such disclosure would, in the GP's reasonable judgment, be materially adverse to the interests of the Fund or the applicable portfolio company.

Assessment and Recommendation:

The ESG reporting qualifications are expected and generally reasonable. We note that BFO may wish to specify a preferred reporting framework in the definitive side letter — for example, the GRESB framework (which is the industry standard for real estate ESG benchmarking) or the SASB Standards (which provide sector-specific ESG disclosure metrics). However, this level of specificity is more appropriately addressed in the definitive side letter rather than at the term sheet stage, and we recommend deferring this discussion to the drafting phase.

The materiality exception for non-public portfolio company information is standard in institutional private equity fund side letters and reflects legitimate concerns regarding the confidentiality of portfolio company information that may be subject to non-disclosure agreements or other contractual restrictions. We recommend accepting this provision.

Priority Level: LOW — This provision is largely agreed, and the remaining open points are matters of detail that can be resolved in the definitive side letter.

G. Key Person Event Enhancement

Our Proposal (February 7 Term Sheet):

The Initial Term Sheet proposed that, in addition to the standard key person provisions set forth in the LPA (which apply to all limited partners and provide for a suspension of the investment period and a vote of the limited partner advisory committee upon a key person event), BFO would receive a BFO-specific enhancement: the departure of either Conrad J. Ellsworth or Priya Narayan (collectively, the "Key Persons") from the GP, the Adviser, or the Fund's investment management activities would trigger a 90-day suspension of the investment period solely with respect to BFO, during which BFO could elect to cease funding future capital calls. This right was proposed as a supplemental, LP-specific protection layered on top of the fund-level key person mechanism in the LPA.

GP Markup:

The GP rejected this provision as drafted. The GP's stated rationale, as communicated by Ashford Crane, is that individual LP-level key person suspension rights are inconsistent with the Fund's structural framework and could create disparate treatment among limited partners. Specifically, the GP expressed concern that granting one limited partner the right to suspend its capital call obligations unilaterally upon a key person event would (a) undermine the collective governance mechanism established by the LPA's key person provisions, (b) create an adverse precedent that other limited partners could seek to replicate through MFN elections, and (c) potentially impair the Fund's ability to maintain deployment discipline during a key person transition.

The GP countered that the LPA's existing key person provisions are adequate to address BFO's concerns. Under the LPA, a key person event triggers an automatic suspension of the investment period and requires a vote of the limited partner advisory committee (the "LPAC") to either (x) reinstate the investment period upon the identification of a suitable replacement, or (y) terminate the investment period. The GP noted that these provisions apply to all limited partners and provide a collective governance framework that is preferable to individual LP-level rights.

As a compromise, the GP offered enhanced notice rights: BFO would receive written notice from the GP within five business days of a key person departure, and BFO would have the right to request a meeting with the remaining Key Persons within 15 business days of such notice. The purpose of this meeting would be to discuss the GP's plans for continuity of investment management and the identification of replacement personnel.

Assessment and Recommendation:

The GP's rejection of the key person suspension right is not unexpected. Individual LP-level key person suspension rights are aggressive provisions that are relatively uncommon for non-anchor investors in institutional private equity funds. Based on our precedent review, such rights are typically reserved for anchor investors committing 10% or more of a fund's target size, and even then are often subject to extensive negotiation and significant limitations. BFO's commitment of 5.0% of the Fund's target size does not, standing alone, provide the leverage typically associated with this type of provision.

That said, the BFO investment committee — on which Julian R. Hargrove holds veto authority, and which requires approval of three of its four members for any new commitment — views the continuity of Ellsworth and Narayan as critical to the investment thesis underlying BFO's commitment to Fund IV. Sandra Whitfield has communicated that the Hargrove family's confidence in the Meridian Peak platform is substantially personal to the track records and investment judgment of Ellsworth and Narayan, and that some form of enhanced key person protection is important to BFO.

We recommend the following approach:

Revised Proposal. Rather than insisting on the unilateral suspension right as originally proposed, we recommend presenting a middle-ground position: upon a key person departure, BFO would have the right to reduce its unfunded commitment by up to 50%, exercisable within 90 days of the key person event. This mechanism is less disruptive than full suspension (because BFO would remain obligated to fund at least 50% of its remaining unfunded commitment), but provides BFO with meaningful protection against the risk that a key person departure materially alters the investment thesis. The 90-day exercise period would allow BFO sufficient time to evaluate the GP's succession plan and the qualifications of any replacement personnel.

Alternative Approach. If the GP rejects the commitment reduction mechanism, we recommend that this issue be presented during a four-party conference call with Meridian Peak's senior leadership (specifically, Conrad Ellsworth and/or Priya Narayan, together with Gavin Lockhart, Head of Investor Relations, and Tamara Fujimoto, General Counsel and Chief Compliance Officer) to gauge flexibility and explore whether the GP would accept a variant, such as a right to suspend BFO's capital call obligations for a limited period (e.g., 60 days) pending an LPAC vote on the key person event. This approach would integrate BFO's enhanced protection with the fund-level governance mechanism rather than operating independently of it.

In the event that neither the commitment reduction mechanism nor a suspension variant is achievable, BFO should accept the enhanced notice rights offered by the GP, supplemented by a requirement that the GP provide BFO with a written succession plan within 30 days of a key person departure, including identification of proposed replacement Key Persons and a description of their qualifications and investment track records.

Priority Level: HIGH — This provision is important to the client and will likely require significant negotiation. The resolution of this issue may ultimately depend on the outcome of direct discussions between the principals.

H. Transfer Rights

Our Proposal (February 7 Term Sheet):

The Initial Term Sheet proposed that BFO have the right to transfer all or any portion of its limited partnership interest in the Fund to any Hargrove family entity without the prior consent of the GP, subject to compliance with applicable securities laws and tax considerations. This provision was designed to accommodate the Hargrove family's estate planning and wealth management structures, which may require the transfer of investment holdings among various family trusts, limited liability companies, and other vehicles over time.

GP Markup:

The GP accepted the concept of intra-family transfers without GP consent. However, the GP introduced three modifications to the mechanics of the transfer right:

(i) any Hargrove family transferee entity must be "controlled directly or indirectly" by Julian R. Hargrove;

(ii) any transferee must meet the "qualified purchaser" requirements under Section 2(a)(51) of the Investment Company Act of 1940, as amended, and the "accredited investor" requirements under Regulation D of the Securities Act of 1933, as amended; and

(iii) any transferee must execute a joinder or assumption agreement in form and substance reasonably satisfactory to the GP, pursuant to which the transferee assumes all of BFO's obligations under the LPA and the side letter with respect to the transferred interest.

Additionally, the GP added a requirement of 30 days' prior written notice to the GP before any such transfer, to allow the GP to verify compliance with the foregoing conditions and to update its records.

Assessment and Recommendation:

These modifications are reasonable and consistent with market practice for family office LP transfers in institutional private equity funds. The qualified purchaser and accredited investor requirements are standard investor eligibility conditions, and the joinder/assumption agreement requirement ensures that the GP has a direct contractual relationship with the transferee. The 30-day prior notice requirement is a customary administrative provision.

The one area that warrants a minor refinement is the requirement that the transferee entity be "controlled directly or indirectly by Julian R. Hargrove." While Julian Hargrove is the patriarch of the Hargrove family and the current principal of BFO, the family's estate planning structures may include entities controlled by other members of the Hargrove family — including Julian's spouse, children, or family trusts for the benefit of succeeding generations. We recommend proposing a minor tweak to the control requirement, replacing "Julian R. Hargrove" with "any member of the Hargrove family," defined to include Julian R. Hargrove, his spouse, his lineal descendants, and any trust or entity established for the primary benefit of any such individual. This broadened definition would accommodate the full range of estate planning vehicles that BFO may utilize over the life of the Fund (which, including extensions, could extend 12 to 14 years).

Priority Level: LOW — This provision is largely agreed, and the recommended refinement is minor and should not generate significant pushback from the GP.

I. Confidentiality Carve-Outs

Our Proposal (February 7 Term Sheet):

The Initial Term Sheet proposed that BFO be permitted to disclose confidential Fund information (including the terms of the side letter, the LPA, and portfolio-level information received through enhanced reporting) to the following categories of recipients:

• BFO's tax advisors, legal counsel, and accounting professionals;

• members of the Hargrove family (including family members serving on BFO's investment committee or otherwise involved in the oversight of BFO's investment program); and

• regulatory authorities, in response to a legally binding request, subpoena, or regulatory examination.

GP Markup:

The GP accepted all proposed confidentiality carve-outs without material modification. The GP added standard language requiring that any advisor or family member receiving confidential Fund information be bound by confidentiality obligations no less restrictive than those applicable to BFO under the LPA. This is a standard "flow-down" provision that ensures the confidentiality protections of the LPA extend to downstream recipients of Fund information.

Assessment and Recommendation:

Accepted. The GP's addition of the flow-down confidentiality requirement is consistent with market practice and does not impose any burden on BFO that is inconsistent with its existing practices. BFO's professional advisors are already subject to professional confidentiality obligations, and family members receiving Fund information can be required to acknowledge the confidentiality restrictions through a brief acknowledgment letter.

No further action is needed on this provision.

Priority Level: RESOLVED.

J. Tax Reporting (K-1 Delivery)

Our Proposal (February 7 Term Sheet):

The Initial Term Sheet proposed that the Fund use commercially reasonable efforts to deliver Schedule K-1s (IRS Form 1065, Schedule K-1) to BFO within 75 days of the end of each fiscal year. This accelerated timeline was proposed in contrast to the standard K-1 delivery deadline of 120 days set forth in the LPA, reflecting BFO's desire to receive tax reporting information as early as practicable to accommodate the Hargrove family's tax compliance and planning timelines.

GP Markup:

The GP proposed a K-1 delivery target of 90 days following fiscal year-end, rather than the 75 days proposed by BFO. The GP cited operational constraints associated with the Fund's reliance on Brockton Marsh & Associates LLP as auditor and Granite Ledger Fund Services LLC as administrator, noting that the preparation of K-1s for a fund of this size and complexity requires coordination among multiple service providers and the resolution of various tax allocation and reporting matters that may not be finalized within 75 days.

The GP also added two qualifications: (a) confirmation that the K-1 delivery obligation is subject to a "commercially reasonable efforts" standard (consistent with our original proposal), and (b) a statement that the 90-day timeline is a "target" and not a "guarantee," and that the GP shall not be deemed to be in default under the side letter or the LPA if K-1s are delivered after the 90-day target due to circumstances beyond the GP's reasonable control.

Assessment and Recommendation:

The GP's counter-proposal of 90 days represents a meaningful improvement over the LPA's standard 120-day timeline and is a reasonable compromise. That said, 75 days is achievable for well-administered funds with experienced service providers, and we have obtained 75-day K-1 delivery commitments in comparable fund side letters. We recommend pressing for 75 days in the counter-proposal but flagging this as a potential concession point if the GP is firm. If we are unable to secure 75 days, accepting 90 days would still represent a 30-day improvement over the LPA baseline and would provide BFO with K-1s approximately one month earlier than would otherwise be available.

The "commercially reasonable efforts" standard and the acknowledgment that the timeline is a target are consistent with market practice and should be accepted. We note that the "target, not guarantee" language does not relieve the GP of the obligation to use commercially reasonable efforts; it merely clarifies that a failure to deliver by the 90-day date is not an automatic default.

Priority Level: LOW-MEDIUM — This is a secondary issue that can be used as a concession point in the broader negotiation.

III. Summary of GP Positions — Status Matrix

The following table summarizes the status of each provision following the GP Markup:

IV. Recommended Next Steps

Based on our analysis of the GP Markup, we recommend the following course of action:

1. Internal Strategy Call with BFO. Schedule an internal call with Sandra Whitfield and Derek Calloway for the week of February 19, 2024 to discuss the GP Markup in detail and align on counter-positions for each open provision. We note that an internal strategy call has already been calendared for Monday, February 19, 2024 at 2:00 p.m. EST, and this memorandum should be circulated to Sandra and Derek in advance of that call to allow for their review and preparation. Owen Fischer will prepare a brief discussion agenda and circulate it by close of business on Friday, February 16.

2. Prioritize the Three Material Open Points. The counter-proposal should prioritize resolution of the three provisions where material disagreement exists: (a) the scope of the MFN clause, with a particular focus on eliminating or narrowing the "strategic investor" carve-out; (b) the excuse cap, where we should counter-propose 25% (with a 20% fallback); and (c) the key person enhancement, where we should present the commitment reduction mechanism as a middle-ground alternative to the rejected suspension right. These three issues are likely to consume the majority of the negotiation bandwidth and should be addressed at the outset of the counter-proposal to signal BFO's priorities clearly.

3. Prepare Revised Term Sheet. Following the internal call with BFO on February 19, prepare a revised term sheet incorporating the agreed counter-positions for transmission to Ashford Crane & Hewitt LLP, targeting delivery by Wednesday, February 21, 2024. The revised term sheet should be formatted as a redline against the GP Markup to facilitate review by the GP's counsel and the Meridian Peak team.

4. Consider Four-Party Call on Key Person Issue. Given the significance of the key person provision to BFO and the GP's outright rejection of the initial proposal, consider whether a four-party call — involving our team (Calderwood & Harkness), BFO (Sandra Whitfield and/or Derek Calloway), Ashford Crane (Harrison Drummond and/or Elaine Woodbury), and Meridian Peak (Gavin Lockhart, Head of Investor Relations, and Tamara Fujimoto, General Counsel and CCO) — would be productive to address the key person issue directly with the GP's principals. The objective of such a call would be to convey the importance of this issue to BFO and to explore potential compromise structures with the benefit of real-time dialogue. Before scheduling such a call, we should obtain BFO's approval and align on the specific proposal to be presented.

5. MFN Provision Comparison Matrix. Owen Fischer to update the firm's MFN Provision Comparison Matrix to reflect the GP's proposed "strategic investor" carve-out and to assess the market prevalence of such provisions across comparable funds. The updated matrix should include at least five recent precedent side letters involving similar carve-outs and should be completed by February 20, 2024 for use in the internal strategy call and the revised term sheet.

6. Begin Drafting Definitive Side Letter. Upon finalization of the revised term sheet and receipt of the GP's response, begin drafting the first complete side letter based on the revised term sheet. The goal is to transmit a full draft of the definitive side letter to Ashford Crane by the end of February 2024. Owen Fischer will prepare the initial draft, with review by Theresa Kim and Pamela Cross before transmission.

V. Attachments

The following documents are attached hereto for reference:

Attachment A: GP Markup of Initial Term Sheet (received February 14, 2024 from Ashford Crane & Hewitt LLP, transmitted by Elaine C. Woodbury via email at 4:47 p.m. EST)

Attachment B: Clean copy of Calderwood & Harkness Initial Term Sheet (transmitted February 7, 2024 to Harrison K. Drummond and Elaine C. Woodbury at Ashford Crane & Hewitt LLP)

Attachment C: Redline comparison of GP Markup against Initial Term Sheet (prepared by Owen Fischer on February 15, 2024)

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

This memorandum has been prepared by Calderwood & Harkness LLP and is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressee and the individuals identified in the "CC" line above. Any unauthorized review, use, disclosure, or distribution is prohibited.

Calderwood & Harkness LLP	425 Lexington Avenue, New York, NY 10017
Matter No. 1026-00001	Briarwood Family Office LLC
Provision	BFO Proposal	GP Position	Status	Priority
MFN Rights	$50M threshold; 3 carve-outs; 15-day delivery; 20-day election	Accepted with narrower scope: "strategic investor" carve-out added; delivery extended to 20 business days; "inconsistency/duplicativeness" qualifier added	Partially Agreed — Open Points	HIGH
Excuse/Exclusion Rights	4 categories; 15 business days; no aggregate cap	Categories accepted; 15% aggregate cap ($11,250,000) imposed; written explanation required	Open — Material Disagreement	HIGH
Management Fee Reduction	1.50% / 1.25% (25 bps reduction per tier)	Rates accepted; step-up to standard rate if funded commitment < 80% of $75M commitment	Partially Agreed — Open Points	MEDIUM-HIGH
Placement Fee Offset	100% offset over 4 years ($187,500/yr)	100% offset over 3 years ($250,000/yr) — accelerated; favorable to BFO	Agreed	LOW
Co-Investment Rights	Pro rata; no fee / no carry; $100M equity threshold; pari passu terms	Threshold and fee/carry terms accepted; "best efforts" qualifier added; allocation discretion added; "pari passu" replaced with "substantially similar"	Partially Agreed — Open Points	MEDIUM
Enhanced Reporting	Quarterly (45 days); Annual (90 days); ESG annually	Quarterly and annual timelines accepted; ESG format at GP discretion; materiality exception added	Substantially Agreed	LOW
Key Person Enhancement	90-day suspension; BFO right to cease capital calls upon departure of Ellsworth or Narayan	Rejected as drafted; enhanced notice rights offered (5-day notice; 15-day meeting right)	Open — Material Disagreement	HIGH
Transfer Rights	Intra-Hargrove family; no GP consent required	Accepted with conditions: control by Julian Hargrove; QP/AI requirements; joinder agreement; 30-day notice	Substantially Agreed — Minor Tweak	LOW
Confidentiality Carve-Outs	Advisors; family members; regulators	Accepted; flow-down confidentiality obligations added	Agreed	RESOLVED
K-1 Delivery	75 days (commercially reasonable efforts)	GP counter at 90 days; "target, not guarantee" language added	Open — Minor Disagreement	LOW-MEDIUM

MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Pamela Cross, Partner, Funds & Asset Management
FROM: Theresa Kim, Senior Associate, Funds & Asset Management
DATE: February 15, 2024
RE: Analysis of GP Markup of Initial Side-Letter Term Sheet — Briarwood Family Office LLC / Meridian Peak Capital Partners Fund IV, L.P.
MATTER NO.: 1026-00001
CC: Nicholas Stern (Billing Partner); Owen Fischer (Working Associate)
I. Executive Summary
On February 7, 2024, we transmitted the initial side-letter term sheet (the "Initial Term Sheet") on behalf of our client, Briarwood Family Office LLC ("BFO"), to Ashford Crane & Hewitt LLP ("Ashford Crane"), specifically to the attention of Harrison K. Drummond and Elaine C. Woodbury, in their capacity as counsel to Meridian Peak Capital Partners GP IV LLC (the "General Partner" or "GP"), the general partner of Meridian Peak Capital Partners Fund IV, L.P. (the "Fund" or "Fund IV"). The Initial Term Sheet set forth BFO's proposed side-letter terms in connection with BFO's contemplated commitment of $75,000,000 to Fund IV.
On February 14, 2024, Ashford Crane returned the GP's markup of the Initial Term Sheet (the "GP Markup") on behalf of Meridian Peak Capital Advisors LLC (the "Adviser"), acting through its Co-Founders and Managing Partners, Conrad J. Ellsworth and Priya Narayan. The GP Markup reflects the GP's and the Adviser's consolidated positions on each of the provisions contained in the Initial Term Sheet.
This memorandum serves three purposes: first, it summarizes the GP's positions on each proposed side-letter provision; second, it identifies the key areas of disagreement and assesses the significance of each open point; and third, it recommends counter-positions and negotiation strategies for discussion with BFO's internal team, specifically Sandra M. Whitfield, General Counsel of BFO, and Derek T. Calloway, Director of External Investments.
High-Level Takeaway. The overall tenor of the GP Markup is constructive and reflects a willingness to engage substantively with the side-letter protections sought by BFO. The GP has accepted several core concepts — including MFN rights, management fee reduction, co-investment rights, and enhanced reporting — in each case with modifications that range from minor to significant. However, the GP has pushed back meaningfully on two provisions of particular importance to BFO: (a) the excuse/exclusion rights, where the GP has imposed an aggregate cap of 15% of commitment that is below market norms; and (b) the key person suspension right, which the GP has rejected in its entirety as drafted, offering only enhanced notice rights as a compromise. Additionally, the GP has sought to narrow the scope of the MFN clause through the addition of a broad and subjectively defined "strategic investor" carve-out that could materially diminish the protective value of the MFN provision.
Context on Commitment Size. BFO's proposed commitment of $75,000,000 represents approximately 5.0% of Fund IV's target fund size of $1,500,000,000 and approximately 4.29% of the Fund's hard cap of $1,750,000,000. While this commitment is meaningful and positions BFO as a significant limited partner, it falls below the Anchor Investor threshold of $200,000,000 (representing 13.33% of target fund size) that has been established for Fund IV. This positioning is relevant to several of the GP's responses, particularly with respect to the key person provision and the MFN carve-outs. It should also be noted that the GP is approaching these negotiations with established precedent from three prior funds (Funds I, II, and III, aggregating approximately $3.2 billion in total commitments across all three vintages), which provides the Meridian Peak platform with a well-developed institutional side-letter framework and a corresponding level of firmness on certain structural points.
II. Provision-by-Provision Analysis
The following sections address each provision of the Initial Term Sheet in turn, setting forth: (1) our original proposal as transmitted on February 7, (2) the GP's markup as received on February 14, and (3) our assessment and recommendation for the counter-proposal.
A. Most Favored Nation (MFN) Rights
Our Proposal (February 7 Term Sheet):
The Initial Term Sheet proposed that BFO be entitled to elect any economic or governance term granted by the GP to any other limited partner of the Fund that has committed $50,000,000 or more to Fund IV. The MFN right was subject to three specified carve-outs:
(i) terms granted to Anchor Investors committing $200,000,000 or more (representing 13.33% of the Fund's target size of $1,500,000,000);
(ii) regulatory-driven terms granted to ERISA plan investors, tax-exempt investors, or governmental plan investors, where such terms are required or advisable by reason of the applicable investor's regulatory status; and
(iii) terms available to affiliates of the GP or the Adviser.
With respect to mechanics, the Initial Term Sheet required the GP to deliver to BFO a redacted summary of all material side-letter terms granted to qualifying limited partners within 15 business days of the applicable closing at which BFO is admitted to the Fund (the "MFN Summary"). BFO would then have a period of 20 business days following receipt of the MFN Summary (the "MFN Election Period") during which to elect any terms disclosed in the MFN Summary.
GP Markup:
The GP accepted the MFN concept in principle and did not object to the fundamental architecture of the provision. Specifically, the GP maintained the Anchor Investor carve-out at the $200,000,000 threshold originally proposed, accepted the regulatory-driven carve-out for ERISA, tax-exempt, and governmental plan investors, and accepted the GP affiliate carve-out, all without modification. The GP also accepted the 20 business day MFN Election Period as proposed.
However, the GP introduced three modifications of varying significance:
First, the GP added a fourth carve-out category encompassing terms granted to "strategic investors" that provide "operational or sourcing value" to the Fund, as determined by the GP in its "reasonable discretion." No objective criteria or definition of "strategic investor" was provided. The GP Markup does not specify the types of operational or sourcing value that would qualify an investor for strategic status, nor does it impose any cap on the number of limited partners that could be designated as strategic investors under this carve-out. As a result, the provision as drafted confers broad subjective authority on the GP to exempt potentially significant side-letter concessions from the MFN disclosure and election process.
Second, the GP proposed extending the MFN Summary delivery period from 15 business days to 20 business days following the applicable closing. The GP's counsel indicated informally that this extension reflects the administrative burden of preparing redacted summaries across multiple side letters, particularly in connection with final closings where the volume of side letters may be substantial.
Third, the GP added language at the end of the MFN provision requiring that any term elected by BFO pursuant to the MFN clause "be read in the context of the electing LP's overall side letter" and providing that the GP "may decline to apply an elected term if it would be inconsistent with or duplicative of the electing LP's existing side-letter terms." This qualifier introduces ambiguity into the election process, as it potentially empowers the GP to refuse an MFN election on the ground that the elected term is somehow inconsistent with or redundant in light of BFO's other side-letter protections — a determination that would be made by the GP unilaterally and without clear standards.
Assessment and Recommendation:
The "strategic investor" carve-out is the most problematic element of the GP's markup of this provision. In its current form, the carve-out is defined by reference to subjective criteria ("operational or sourcing value") and is subject to the GP's "reasonable discretion," which provides insufficient constraint on the GP's ability to exempt entire categories of side-letter terms from MFN disclosure. The practical concern is that a limited partner with a large commitment and a tangential commercial relationship with one or more portfolio companies could be classified as a "strategic investor," thereby shielding that investor's potentially superior economic terms from BFO's MFN rights.
We recommend that the counter-proposal take one of two approaches: (a) resist the strategic investor carve-out entirely, on the ground that the Anchor Investor carve-out already provides the GP with sufficient flexibility to accommodate its most significant investors; or (b) if the GP insists on retaining the carve-out, require that it be defined with objective criteria. Specifically, we would propose limiting the carve-out to limited partners that (x) have committed at least $100,000,000 to Fund IV, and (y) have an existing commercial, operating, or co-investment relationship with the Fund or one or more of its portfolio companies that is documented in writing and was in existence prior to such limited partner's admission to the Fund. This formulation preserves the GP's ability to accommodate genuine strategic relationships while preventing abuse of the carve-out as a general MFN exemption.
The extension of the MFN Summary delivery period from 15 to 20 business days is a modest concession that has limited practical impact on BFO's rights. We recommend accepting this modification as a negotiating gesture if needed to secure progress on more material points.
The "inconsistency/duplicativeness" qualifier requires revision. As drafted, it creates an asymmetry in which the GP has unilateral authority to deny an MFN election based on an inherently subjective assessment of whether the elected term is "inconsistent with" or "duplicative of" BFO's existing side-letter terms. We recommend proposing alternative language that confirms BFO's right to elect any individual term on a stand-alone basis, regardless of the content of BFO's other side-letter provisions, and that any disputes regarding the applicability of an elected term be resolved through the dispute resolution mechanism set forth in the LPA.
Priority Level: HIGH — MFN is a cornerstone protection for BFO and the scope of available elections will directly affect the value of BFO's side letter as the Fund's investor base is finalized through subsequent closings.
B. Excuse/Exclusion Rights
Our Proposal (February 7 Term Sheet):
The Initial Term Sheet proposed that BFO be entitled to elect to be excused from participation in any Fund investment falling within one or more of the following four categories:
(a) investments in cannabis-related assets, including direct cultivation, processing, distribution, or ancillary cannabis businesses;
(b) investments in gaming or casino properties, including hotels, resorts, or mixed-use properties where gaming revenues constitute a material component of the property's income;
(c) investments in jurisdictions subject to comprehensive U.S. economic sanctions administered by the Office of Foreign Assets Control ("OFAC"), including, without limitation, Cuba, Iran, North Korea, Syria, and the Crimea, Donetsk, and Luhansk regions of Ukraine; and
(d) any investment that would cause BFO or its beneficial owners to be treated as holding "plan assets" within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or regulations promulgated thereunder.
The excuse right was to be exercisable within 15 business days of BFO's receipt of the applicable investment notice (i.e., the capital call notice identifying the proposed investment), and the exercise of an excuse right would result in a dollar-for-dollar reduction of BFO's unfunded commitment by the amount of the excused capital call. The Initial Term Sheet did not propose an aggregate cap on excuse rights; this point was intentionally left open for negotiation, consistent with our discussion with Sandra Whitfield prior to transmittal.
GP Markup:
The GP accepted all four specified excuse categories without modification, which is a favorable outcome and reflects the GP's acknowledgment that BFO's investment policy restrictions in these areas are reasonable and well-grounded. The GP also accepted the 15 business day election period and the dollar-for-dollar reduction of BFO's unfunded commitment upon exercise of an excuse right.
However, the GP introduced two modifications:
First, and most significantly, the GP inserted an aggregate excuse cap of 15% of BFO's total commitment. Applied to BFO's $75,000,000 commitment, this cap would limit BFO's aggregate excused investments to $11,250,000. Once BFO's cumulative excused investments reach this threshold, BFO would be required to participate in all future capital calls regardless of whether the applicable investment falls within one of the four specified excuse categories. The GP's markup does not provide for any exceptions to the cap or any mechanism for the cap to be increased during the Fund's term.
Second, the GP added a requirement that BFO provide a written explanation of the basis for each excuse election, including identification of the specific excuse category under which the election is made and a brief description of the factual basis supporting the classification of the investment within that category. This requirement is procedural in nature and is consistent with the administrative practice that most institutional fund managers follow in connection with excuse rights.
Assessment and Recommendation:
The 15% aggregate cap ($11,250,000) is the principal area of concern. Based on our review of precedent side letters across comparable private equity real estate funds in the value-add and opportunistic segments — including side letters we have negotiated in connection with Ridgeline Real Estate Partners Fund V, Catalina Capital Opportunities Fund III, and Blackwell Property Group Fund VII — excuse caps for investors at BFO's commitment level typically range from 20% to 30% of total commitment. A 15% cap is below the lower end of this range and would leave BFO with limited headroom, particularly in light of Fund IV's value-add and opportunistic investment strategy, which may encompass asset classes or geographies that intersect with BFO's excuse categories. The concern is especially acute with respect to gaming and cannabis-adjacent investments, which represent a growing share of opportunistic real estate deal flow in the current market environment.
We recommend counter-proposing an aggregate excuse cap of 25% of BFO's commitment, which would equal $18,750,000. This figure falls at the midpoint of the 20%–30% market range and provides BFO with meaningful flexibility to exercise excuse rights across the Fund's investment period without creating an undue administrative or structural burden on the GP.
If the GP rejects 25%, our fallback position should be 20% of commitment ($15,000,000), which represents the lower bound of market norms and should be presented as a firm floor for BFO.
The written explanation requirement is reasonable, consistent with market practice, and should be accepted. We note that BFO's internal investment team, led by Derek Calloway, maintains detailed records of investment policy determinations, and compliance with this requirement should not present any operational difficulty.
Priority Level: HIGH — Excuse rights are a primary investment policy concern for the Hargrove family, and Sandra Whitfield has indicated that the BFO investment committee considers robust excuse protections to be a condition to BFO's commitment to Fund IV.
C. Management Fee Reduction
Our Proposal (February 7 Term Sheet):
The Initial Term Sheet proposed a reduced management fee for BFO as follows:
• During the Investment Period: 1.50% per annum on committed capital (versus the standard management fee rate of 1.75% per annum on committed capital as set forth in Section 7.1(a) of the Fund's limited partnership agreement (the "LPA")).
• Post-Investment Period: 1.25% per annum on invested capital (versus the standard post-investment period rate of 1.50% per annum on invested capital as set forth in Section 7.1(b) of the LPA).
The proposed reduction represents a 25 basis point reduction per tier. To quantify the economic benefit during the investment period: a 25 basis point reduction on BFO's $75,000,000 commitment yields annual savings of $187,500 per year. Across the anticipated four-year investment period, cumulative savings would total $750,000, before accounting for the time value of money. Post-investment period savings would depend on the level of invested capital at the applicable measurement date but would follow a similar proportional benefit.
GP Markup:
The GP accepted the 1.50% rate during the investment period and the 1.25% rate post-investment period, both as proposed. This is a positive outcome and reflects the GP's recognition that a 25 basis point reduction is within the range customarily offered to institutional investors at BFO's commitment level.
However, the GP introduced two modifications:
First, the GP added a "step-up" provision that would cause BFO's management fee to revert to the standard rate of 1.75% per annum on all committed capital if, at any time during the investment period, BFO's actual funded commitment falls below 80% of its $75,000,000 commitment amount. By way of illustration, if BFO exercises excuse rights (or otherwise fails to fund capital calls) such that its aggregate funded amount at any point drops below $60,000,000 (i.e., 80% of $75,000,000), the reduced management fee rate would be forfeited and the standard LPA rate would apply retroactively from the beginning of the investment period. The GP Markup is silent on whether the step-up would be prospective only or whether it would apply retroactively with a true-up payment; this ambiguity would need to be resolved in the definitive side letter.
Second, the GP clarified that the fee reduction is personal to BFO and may not be transferred to any assignee or transferee of BFO's limited partnership interest, except to Hargrove family entities that are permitted transferees under the transfer rights provision discussed in Section II.H below.
Assessment and Recommendation:
The management fee step-up provision is the primary concern. While step-up mechanisms are not uncommon in fund side letters, the specific design of this provision creates an undesirable linkage between the excuse/exclusion rights (discussed in Section II.B above) and the management fee economics. Under the GP's proposed structure, if BFO exercises excuse rights that cumulatively reduce its funded commitment below the 80% threshold, BFO would not only lose the benefit of the excuse right (in terms of the aggregate cap) but would also lose the benefit of the management fee reduction — effectively penalizing BFO twice for the same action. This linkage narrows the economic benefit of both provisions and creates a disincentive for BFO to exercise excuse rights even where the underlying investment falls squarely within one of the specified excuse categories.
We recommend one of two approaches. Our preferred position is to resist the step-up provision entirely, on the ground that the management fee reduction was negotiated independently of the excuse rights and should not be conditioned on BFO's funding behavior. Alternatively, if the GP insists on some form of step-up protection, we recommend proposing a significantly higher threshold — specifically, that the step-up would apply only if BFO's funded commitment falls below 50% of the $75,000,000 commitment amount (i.e., below $37,500,000). A 50% threshold is sufficiently high that it would be triggered only in extreme circumstances and would effectively function as a protection against wholesale non-participation by BFO, rather than as a penalty for the exercise of legitimate excuse rights.
The non-transferability limitation (except to Hargrove family entities) is acceptable and is consistent with the transfer rights framework discussed in Section II.H. We recommend accepting this modification without further negotiation.
Priority Level: MEDIUM-HIGH — The step-up provision has meaningful economic implications and should be addressed in the counter-proposal, but this issue is likely resolvable through negotiation.
D. Placement Agent Fee Offset
Our Proposal (February 7 Term Sheet):
The Initial Term Sheet proposed that 100% of the placement agent fee payable in connection with BFO's commitment to Fund IV be offset against management fees payable by BFO. The placement agent for BFO's commitment is Pinnacle Capital Markets LLC, acting through Roland S. Abernathy, Managing Director. The placement fee is 1.0% of BFO's commitment, calculated as follows: $75,000,000 × 1.0% = $750,000. The Initial Term Sheet proposed that the offset be applied on a pro rata basis over the first four years of the Fund's management fee obligations (i.e., the anticipated investment period), resulting in an annual offset of $187,500 per year for four years.
GP Markup:
The GP accepted the 100% offset concept without qualification. The GP's sole modification was to propose that the offset be applied over the first three years (rather than four years) of management fee obligations. This would result in an annual offset of $250,000 per year for three years, rather than $187,500 per year for four years. No other material changes were made to this provision.
Assessment and Recommendation:
The GP's proposed acceleration of the offset schedule is affirmatively favorable to BFO. By concentrating the offset over three years rather than four, BFO would receive the benefit of the fee offset more quickly, which has a positive time-value-of-money effect. The accelerated schedule also provides BFO with greater certainty of realizing the full offset, as it would be fully applied before the end of the investment period rather than extending to the final year.
We recommend accepting this modification without further negotiation. This provision may be considered resolved.
Priority Level: LOW — Resolved in BFO's favor.
E. Co-Investment Rights
Our Proposal (February 7 Term Sheet):
The Initial Term Sheet proposed that BFO be entitled to a pro rata co-investment opportunity in connection with any Fund investment that involves equity in excess of $100,000,000. Co-investments would be made on a no-management-fee and no-carried-interest basis, meaning that BFO's co-investment capital would not be subject to the 1.50%/1.25% management fee (as reduced) or the Fund's 20% carried interest. The Initial Term Sheet further proposed that co-investments be offered to BFO on a pari passu basis with the Fund, meaning that BFO's co-investment would be made at the same entry price, on the same terms, and with the same economic profile as the Fund's direct investment.
GP Markup:
The GP accepted the $100,000,000 equity threshold for triggering the co-investment right, and accepted the no-fee/no-carry terms for co-investment capital. These are significant concessions and reflect the GP's willingness to accommodate BFO's desire for direct deal-level exposure alongside the Fund.
However, the GP introduced three modifications:
First, the GP added a "best efforts" qualifier to the co-investment obligation. As marked up, co-investment opportunities would be offered to BFO on a "commercially reasonable best efforts" basis rather than as an absolute contractual right. Under this formulation, the GP would be required to use commercially reasonable best efforts to make co-investment opportunities available to BFO, but would not be in breach of the side letter if it failed to do so for reasons that it could characterize as commercially reasonable. This is a meaningful dilution of the co-investment right and is the most significant modification to this provision.
Second, the GP added a right to allocate co-investment capacity among multiple requesting limited partners in its "reasonable discretion," provided that BFO receives at least its pro rata share of the co-investment opportunity before any over-allocation is made to other limited partners. This allocation mechanic effectively subordinates BFO's access to co-investment capacity to the GP's discretionary allocation process, but preserves BFO's pro rata entitlement as a floor.
Third, the GP deleted the "pari passu" language from the co-investment terms and replaced it with a requirement that co-investments be offered on "substantially similar economic terms" as the Fund's investment. This substitution introduces a degree of imprecision, as "substantially similar" is a more permissive standard than "pari passu" and could permit the GP to offer co-investments on terms that differ from the Fund's terms in respects that are not material in isolation but may be significant in aggregate.
Assessment and Recommendation:
The "best efforts" qualifier is the most consequential modification and should be the focus of our counter-proposal. A "commercially reasonable best efforts" standard is inherently difficult to enforce and provides the GP with substantial discretion to decline to offer co-investment opportunities to BFO on grounds that are difficult to challenge. We recommend pushing back to retain a firm contractual right, or at minimum, requiring that the GP provide BFO with written notice of each investment that meets the $100,000,000 equity threshold within five business days of the GP's commitment to such investment, together with a 10 business day window during which BFO may elect to participate in the co-investment before the GP offers co-investment capacity to other limited partners. This mechanic would effectively convert the "best efforts" qualifier into a right of first offer, which provides BFO with meaningful protection while preserving the GP's ability to allocate capacity to other investors if BFO declines.
The allocation mechanics are generally acceptable provided that BFO's pro rata share is protected as a floor. We recommend clarifying that BFO's pro rata share is calculated based on BFO's commitment as a percentage of total Fund commitments at the time of the applicable investment, and that BFO's pro rata allocation is not subject to reduction by the GP.
The replacement of "pari passu" with "substantially similar economic terms" is acceptable but should be accompanied by a definition of the terms that are required to be substantially similar, including, at a minimum: (a) identical entry pricing (i.e., BFO's co-investment is made at the same per-unit or per-share price as the Fund's investment); (b) the same holding period and exit mechanics; (c) the same governance rights with respect to the co-investment vehicle; and (d) the same distribution waterfall. This specificity would reduce the risk that "substantially similar" is interpreted to permit divergent deal terms.
Priority Level: MEDIUM — Co-investment rights are valuable to BFO but are likely to be exercised selectively; the negotiation posture should reflect the fact that BFO views co-investment as an opportunity enhancement rather than a core protection.
F. Enhanced Reporting
Our Proposal (February 7 Term Sheet):
The Initial Term Sheet proposed the following enhanced reporting obligations:
• Quarterly Reporting: Portfolio-level reports to be delivered to BFO within 45 days of the end of each fiscal quarter, including property-level performance data, NAV calculations, and a summary of material events during the quarter.
• Annual Financial Statements: Audited annual financial statements of the Fund to be delivered to BFO within 90 days of the end of each fiscal year.
• Annual ESG Reporting: An annual report on the Fund's environmental, social, and governance practices and performance, including portfolio-level ESG metrics.
For reference, the Fund administrator is Granite Ledger Fund Services LLC (Catherine J. Halloran, Client Relationship Manager), and the Fund auditor is Brockton Marsh & Associates LLP (Neil A. Strickland, Audit Partner).
GP Markup:
The GP accepted the quarterly reporting obligation within 45 days of quarter-end and the audited annual financial statement obligation within 90 days of fiscal year-end, both without modification. These acceptances confirm that the GP's existing reporting infrastructure, including its relationships with Granite Ledger and Brockton Marsh, supports the enhanced timelines proposed by BFO.
With respect to ESG reporting, the GP accepted the concept of annual ESG reporting but introduced two qualifications. First, the GP added language providing that the format, scope, and content of the annual ESG report would be determined by the GP in its "reasonable discretion." Second, the GP added a caveat that the ESG reporting obligation is subject to data availability from the Fund's portfolio companies, acknowledging that the GP cannot guarantee the completeness or granularity of ESG data across all portfolio assets, particularly in the early stages of the Fund's investment program when portfolio companies may not yet have implemented comprehensive ESG data collection systems.
The GP also added a general proviso applicable to all enhanced reporting obligations, providing that such obligations are subject to a materiality exception for non-public portfolio company information. Under this exception, the GP would not be required to disclose non-public information regarding portfolio companies if such disclosure would, in the GP's reasonable judgment, be materially adverse to the interests of the Fund or the applicable portfolio company.
Assessment and Recommendation:
The ESG reporting qualifications are expected and generally reasonable. We note that BFO may wish to specify a preferred reporting framework in the definitive side letter — for example, the GRESB framework (which is the industry standard for real estate ESG benchmarking) or the SASB Standards (which provide sector-specific ESG disclosure metrics). However, this level of specificity is more appropriately addressed in the definitive side letter rather than at the term sheet stage, and we recommend deferring this discussion to the drafting phase.
The materiality exception for non-public portfolio company information is standard in institutional private equity fund side letters and reflects legitimate concerns regarding the confidentiality of portfolio company information that may be subject to non-disclosure agreements or other contractual restrictions. We recommend accepting this provision.
Priority Level: LOW — This provision is largely agreed, and the remaining open points are matters of detail that can be resolved in the definitive side letter.
G. Key Person Event Enhancement
Our Proposal (February 7 Term Sheet):
The Initial Term Sheet proposed that, in addition to the standard key person provisions set forth in the LPA (which apply to all limited partners and provide for a suspension of the investment period and a vote of the limited partner advisory committee upon a key person event), BFO would receive a BFO-specific enhancement: the departure of either Conrad J. Ellsworth or Priya Narayan (collectively, the "Key Persons") from the GP, the Adviser, or the Fund's investment management activities would trigger a 90-day suspension of the investment period solely with respect to BFO, during which BFO could elect to cease funding future capital calls. This right was proposed as a supplemental, LP-specific protection layered on top of the fund-level key person mechanism in the LPA.
GP Markup:
The GP rejected this provision as drafted. The GP's stated rationale, as communicated by Ashford Crane, is that individual LP-level key person suspension rights are inconsistent with the Fund's structural framework and could create disparate treatment among limited partners. Specifically, the GP expressed concern that granting one limited partner the right to suspend its capital call obligations unilaterally upon a key person event would (a) undermine the collective governance mechanism established by the LPA's key person provisions, (b) create an adverse precedent that other limited partners could seek to replicate through MFN elections, and (c) potentially impair the Fund's ability to maintain deployment discipline during a key person transition.
The GP countered that the LPA's existing key person provisions are adequate to address BFO's concerns. Under the LPA, a key person event triggers an automatic suspension of the investment period and requires a vote of the limited partner advisory committee (the "LPAC") to either (x) reinstate the investment period upon the identification of a suitable replacement, or (y) terminate the investment period. The GP noted that these provisions apply to all limited partners and provide a collective governance framework that is preferable to individual LP-level rights.
As a compromise, the GP offered enhanced notice rights: BFO would receive written notice from the GP within five business days of a key person departure, and BFO would have the right to request a meeting with the remaining Key Persons within 15 business days of such notice. The purpose of this meeting would be to discuss the GP's plans for continuity of investment management and the identification of replacement personnel.
Assessment and Recommendation:
The GP's rejection of the key person suspension right is not unexpected. Individual LP-level key person suspension rights are aggressive provisions that are relatively uncommon for non-anchor investors in institutional private equity funds. Based on our precedent review, such rights are typically reserved for anchor investors committing 10% or more of a fund's target size, and even then are often subject to extensive negotiation and significant limitations. BFO's commitment of 5.0% of the Fund's target size does not, standing alone, provide the leverage typically associated with this type of provision.
That said, the BFO investment committee — on which Julian R. Hargrove holds veto authority, and which requires approval of three of its four members for any new commitment — views the continuity of Ellsworth and Narayan as critical to the investment thesis underlying BFO's commitment to Fund IV. Sandra Whitfield has communicated that the Hargrove family's confidence in the Meridian Peak platform is substantially personal to the track records and investment judgment of Ellsworth and Narayan, and that some form of enhanced key person protection is important to BFO.
We recommend the following approach:
Revised Proposal. Rather than insisting on the unilateral suspension right as originally proposed, we recommend presenting a middle-ground position: upon a key person departure, BFO would have the right to reduce its unfunded commitment by up to 50%, exercisable within 90 days of the key person event. This mechanism is less disruptive than full suspension (because BFO would remain obligated to fund at least 50% of its remaining unfunded commitment), but provides BFO with meaningful protection against the risk that a key person departure materially alters the investment thesis. The 90-day exercise period would allow BFO sufficient time to evaluate the GP's succession plan and the qualifications of any replacement personnel.
Alternative Approach. If the GP rejects the commitment reduction mechanism, we recommend that this issue be presented during a four-party conference call with Meridian Peak's senior leadership (specifically, Conrad Ellsworth and/or Priya Narayan, together with Gavin Lockhart, Head of Investor Relations, and Tamara Fujimoto, General Counsel and Chief Compliance Officer) to gauge flexibility and explore whether the GP would accept a variant, such as a right to suspend BFO's capital call obligations for a limited period (e.g., 60 days) pending an LPAC vote on the key person event. This approach would integrate BFO's enhanced protection with the fund-level governance mechanism rather than operating independently of it.
In the event that neither the commitment reduction mechanism nor a suspension variant is achievable, BFO should accept the enhanced notice rights offered by the GP, supplemented by a requirement that the GP provide BFO with a written succession plan within 30 days of a key person departure, including identification of proposed replacement Key Persons and a description of their qualifications and investment track records.
Priority Level: HIGH — This provision is important to the client and will likely require significant negotiation. The resolution of this issue may ultimately depend on the outcome of direct discussions between the principals.
H. Transfer Rights
Our Proposal (February 7 Term Sheet):
The Initial Term Sheet proposed that BFO have the right to transfer all or any portion of its limited partnership interest in the Fund to any Hargrove family entity without the prior consent of the GP, subject to compliance with applicable securities laws and tax considerations. This provision was designed to accommodate the Hargrove family's estate planning and wealth management structures, which may require the transfer of investment holdings among various family trusts, limited liability companies, and other vehicles over time.
GP Markup:
The GP accepted the concept of intra-family transfers without GP consent. However, the GP introduced three modifications to the mechanics of the transfer right:
(i) any Hargrove family transferee entity must be "controlled directly or indirectly" by Julian R. Hargrove;
(ii) any transferee must meet the "qualified purchaser" requirements under Section 2(a)(51) of the Investment Company Act of 1940, as amended, and the "accredited investor" requirements under Regulation D of the Securities Act of 1933, as amended; and
(iii) any transferee must execute a joinder or assumption agreement in form and substance reasonably satisfactory to the GP, pursuant to which the transferee assumes all of BFO's obligations under the LPA and the side letter with respect to the transferred interest.
Additionally, the GP added a requirement of 30 days' prior written notice to the GP before any such transfer, to allow the GP to verify compliance with the foregoing conditions and to update its records.
Assessment and Recommendation:
These modifications are reasonable and consistent with market practice for family office LP transfers in institutional private equity funds. The qualified purchaser and accredited investor requirements are standard investor eligibility conditions, and the joinder/assumption agreement requirement ensures that the GP has a direct contractual relationship with the transferee. The 30-day prior notice requirement is a customary administrative provision.
The one area that warrants a minor refinement is the requirement that the transferee entity be "controlled directly or indirectly by Julian R. Hargrove." While Julian Hargrove is the patriarch of the Hargrove family and the current principal of BFO, the family's estate planning structures may include entities controlled by other members of the Hargrove family — including Julian's spouse, children, or family trusts for the benefit of succeeding generations. We recommend proposing a minor tweak to the control requirement, replacing "Julian R. Hargrove" with "any member of the Hargrove family," defined to include Julian R. Hargrove, his spouse, his lineal descendants, and any trust or entity established for the primary benefit of any such individual. This broadened definition would accommodate the full range of estate planning vehicles that BFO may utilize over the life of the Fund (which, including extensions, could extend 12 to 14 years).
Priority Level: LOW — This provision is largely agreed, and the recommended refinement is minor and should not generate significant pushback from the GP.
I. Confidentiality Carve-Outs
Our Proposal (February 7 Term Sheet):
The Initial Term Sheet proposed that BFO be permitted to disclose confidential Fund information (including the terms of the side letter, the LPA, and portfolio-level information received through enhanced reporting) to the following categories of recipients:
• BFO's tax advisors, legal counsel, and accounting professionals;
• members of the Hargrove family (including family members serving on BFO's investment committee or otherwise involved in the oversight of BFO's investment program); and
• regulatory authorities, in response to a legally binding request, subpoena, or regulatory examination.
GP Markup:
The GP accepted all proposed confidentiality carve-outs without material modification. The GP added standard language requiring that any advisor or family member receiving confidential Fund information be bound by confidentiality obligations no less restrictive than those applicable to BFO under the LPA. This is a standard "flow-down" provision that ensures the confidentiality protections of the LPA extend to downstream recipients of Fund information.
Assessment and Recommendation:
Accepted. The GP's addition of the flow-down confidentiality requirement is consistent with market practice and does not impose any burden on BFO that is inconsistent with its existing practices. BFO's professional advisors are already subject to professional confidentiality obligations, and family members receiving Fund information can be required to acknowledge the confidentiality restrictions through a brief acknowledgment letter.
No further action is needed on this provision.
Priority Level: RESOLVED.
J. Tax Reporting (K-1 Delivery)
Our Proposal (February 7 Term Sheet):
The Initial Term Sheet proposed that the Fund use commercially reasonable efforts to deliver Schedule K-1s (IRS Form 1065, Schedule K-1) to BFO within 75 days of the end of each fiscal year. This accelerated timeline was proposed in contrast to the standard K-1 delivery deadline of 120 days set forth in the LPA, reflecting BFO's desire to receive tax reporting information as early as practicable to accommodate the Hargrove family's tax compliance and planning timelines.
GP Markup:
The GP proposed a K-1 delivery target of 90 days following fiscal year-end, rather than the 75 days proposed by BFO. The GP cited operational constraints associated with the Fund's reliance on Brockton Marsh & Associates LLP as auditor and Granite Ledger Fund Services LLC as administrator, noting that the preparation of K-1s for a fund of this size and complexity requires coordination among multiple service providers and the resolution of various tax allocation and reporting matters that may not be finalized within 75 days.
The GP also added two qualifications: (a) confirmation that the K-1 delivery obligation is subject to a "commercially reasonable efforts" standard (consistent with our original proposal), and (b) a statement that the 90-day timeline is a "target" and not a "guarantee," and that the GP shall not be deemed to be in default under the side letter or the LPA if K-1s are delivered after the 90-day target due to circumstances beyond the GP's reasonable control.
Assessment and Recommendation:
The GP's counter-proposal of 90 days represents a meaningful improvement over the LPA's standard 120-day timeline and is a reasonable compromise. That said, 75 days is achievable for well-administered funds with experienced service providers, and we have obtained 75-day K-1 delivery commitments in comparable fund side letters. We recommend pressing for 75 days in the counter-proposal but flagging this as a potential concession point if the GP is firm. If we are unable to secure 75 days, accepting 90 days would still represent a 30-day improvement over the LPA baseline and would provide BFO with K-1s approximately one month earlier than would otherwise be available.
The "commercially reasonable efforts" standard and the acknowledgment that the timeline is a target are consistent with market practice and should be accepted. We note that the "target, not guarantee" language does not relieve the GP of the obligation to use commercially reasonable efforts; it merely clarifies that a failure to deliver by the 90-day date is not an automatic default.
Priority Level: LOW-MEDIUM — This is a secondary issue that can be used as a concession point in the broader negotiation.
III. Summary of GP Positions — Status Matrix
The following table summarizes the status of each provision following the GP Markup:
IV. Recommended Next Steps
Based on our analysis of the GP Markup, we recommend the following course of action:
1. Internal Strategy Call with BFO. Schedule an internal call with Sandra Whitfield and Derek Calloway for the week of February 19, 2024 to discuss the GP Markup in detail and align on counter-positions for each open provision. We note that an internal strategy call has already been calendared for Monday, February 19, 2024 at 2:00 p.m. EST, and this memorandum should be circulated to Sandra and Derek in advance of that call to allow for their review and preparation. Owen Fischer will prepare a brief discussion agenda and circulate it by close of business on Friday, February 16.
2. Prioritize the Three Material Open Points. The counter-proposal should prioritize resolution of the three provisions where material disagreement exists: (a) the scope of the MFN clause, with a particular focus on eliminating or narrowing the "strategic investor" carve-out; (b) the excuse cap, where we should counter-propose 25% (with a 20% fallback); and (c) the key person enhancement, where we should present the commitment reduction mechanism as a middle-ground alternative to the rejected suspension right. These three issues are likely to consume the majority of the negotiation bandwidth and should be addressed at the outset of the counter-proposal to signal BFO's priorities clearly.
3. Prepare Revised Term Sheet. Following the internal call with BFO on February 19, prepare a revised term sheet incorporating the agreed counter-positions for transmission to Ashford Crane & Hewitt LLP, targeting delivery by Wednesday, February 21, 2024. The revised term sheet should be formatted as a redline against the GP Markup to facilitate review by the GP's counsel and the Meridian Peak team.
4. Consider Four-Party Call on Key Person Issue. Given the significance of the key person provision to BFO and the GP's outright rejection of the initial proposal, consider whether a four-party call — involving our team (Calderwood & Harkness), BFO (Sandra Whitfield and/or Derek Calloway), Ashford Crane (Harrison Drummond and/or Elaine Woodbury), and Meridian Peak (Gavin Lockhart, Head of Investor Relations, and Tamara Fujimoto, General Counsel and CCO) — would be productive to address the key person issue directly with the GP's principals. The objective of such a call would be to convey the importance of this issue to BFO and to explore potential compromise structures with the benefit of real-time dialogue. Before scheduling such a call, we should obtain BFO's approval and align on the specific proposal to be presented.
5. MFN Provision Comparison Matrix. Owen Fischer to update the firm's MFN Provision Comparison Matrix to reflect the GP's proposed "strategic investor" carve-out and to assess the market prevalence of such provisions across comparable funds. The updated matrix should include at least five recent precedent side letters involving similar carve-outs and should be completed by February 20, 2024 for use in the internal strategy call and the revised term sheet.
6. Begin Drafting Definitive Side Letter. Upon finalization of the revised term sheet and receipt of the GP's response, begin drafting the first complete side letter based on the revised term sheet. The goal is to transmit a full draft of the definitive side letter to Ashford Crane by the end of February 2024. Owen Fischer will prepare the initial draft, with review by Theresa Kim and Pamela Cross before transmission.
V. Attachments
The following documents are attached hereto for reference:
Attachment A: GP Markup of Initial Term Sheet (received February 14, 2024 from Ashford Crane & Hewitt LLP, transmitted by Elaine C. Woodbury via email at 4:47 p.m. EST)
Attachment B: Clean copy of Calderwood & Harkness Initial Term Sheet (transmitted February 7, 2024 to Harrison K. Drummond and Elaine C. Woodbury at Ashford Crane & Hewitt LLP)
Attachment C: Redline comparison of GP Markup against Initial Term Sheet (prepared by Owen Fischer on February 15, 2024)
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
This memorandum has been prepared by Calderwood & Harkness LLP and is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressee and the individuals identified in the "CC" line above. Any unauthorized review, use, disclosure, or distribution is prohibited.
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Matter No. 1026-00001 | Briarwood Family Office LLC
Provision | BFO Proposal | GP Position | Status | Priority
MFN Rights | $50M threshold; 3 carve-outs; 15-day delivery; 20-day election | Accepted with narrower scope: "strategic investor" carve-out added; delivery extended to 20 business days; "inconsistency/duplicativeness" qualifier added | Partially Agreed — Open Points | HIGH
Excuse/Exclusion Rights | 4 categories; 15 business days; no aggregate cap | Categories accepted; 15% aggregate cap ($11,250,000) imposed; written explanation required | Open — Material Disagreement | HIGH
Management Fee Reduction | 1.50% / 1.25% (25 bps reduction per tier) | Rates accepted; step-up to standard rate if funded commitment < 80% of $75M commitment | Partially Agreed — Open Points | MEDIUM-HIGH
Placement Fee Offset | 100% offset over 4 years ($187,500/yr) | 100% offset over 3 years ($250,000/yr) — accelerated; favorable to BFO | Agreed | LOW
Co-Investment Rights | Pro rata; no fee / no carry; $100M equity threshold; pari passu terms | Threshold and fee/carry terms accepted; "best efforts" qualifier added; allocation discretion added; "pari passu" replaced with "substantially similar" | Partially Agreed — Open Points | MEDIUM
Enhanced Reporting | Quarterly (45 days); Annual (90 days); ESG annually | Quarterly and annual timelines accepted; ESG format at GP discretion; materiality exception added | Substantially Agreed | LOW
Key Person Enhancement | 90-day suspension; BFO right to cease capital calls upon departure of Ellsworth or Narayan | Rejected as drafted; enhanced notice rights offered (5-day notice; 15-day meeting right) | Open — Material Disagreement | HIGH
Transfer Rights | Intra-Hargrove family; no GP consent required | Accepted with conditions: control by Julian Hargrove; QP/AI requirements; joinder agreement; 30-day notice | Substantially Agreed — Minor Tweak | LOW
Confidentiality Carve-Outs | Advisors; family members; regulators | Accepted; flow-down confidentiality obligations added | Agreed | RESOLVED
K-1 Delivery | 75 days (commercially reasonable efforts) | GP counter at 90 days; "target, not guarantee" language added | Open — Minor Disagreement | LOW-MEDIUM

MEMORANDUM

MATTER NO.: 1026-00001

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