PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT DRAFT — FOR DISCUSSION PURPOSES ONLY — SUBJECT TO FURTHER NEGOTIATION
SIDE LETTER
March 7, 2024
SECOND DRAFT — Prepared by Calderwood & Harkness LLP on behalf of Briarwood Family Office LLC Transmitted to Ashford Crane & Hewitt LLP
SIDE LETTER TO THE AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF MERIDIAN PEAK CAPITAL PARTNERS FUND IV, L.P.
This Side Letter (this "Side Letter") is entered into as of ___, 2024 (the "Effective Date"), by and between:
(1) Meridian Peak Capital Partners Fund IV, L.P., a Delaware limited partnership (the "Fund" or "Fund IV"), acting by and through its general partner, Meridian Peak Capital Partners GP IV LLC, a Delaware limited liability company (the "General Partner" or "Fund IV GP"), whose sole member is Meridian Peak Capital Advisors LLC, a Delaware limited liability company ("MPCA" or the "Sponsor"); and
(2) Briarwood Family Office LLC, a Delaware limited liability company (the "Investor" or "BFO"), with its principal office at 780 Park Avenue, Suite 3200, New York, NY 10021.
The Fund (acting through the General Partner) and the Investor are each referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, the Fund was formed as a Delaware limited partnership pursuant to a Certificate of Limited Partnership filed with the Secretary of State of the State of Delaware on or about August 14, 2023 (Certificate No. LP-2023-08841), and the Fund is currently in good standing under the laws of the State of Delaware;
WHEREAS, the General Partner, the Fund, and certain limited partners (each, a "Limited Partner" and collectively, the "Limited Partners") are parties to that certain Amended and Restated Agreement of Limited Partnership of Meridian Peak Capital Partners Fund IV, L.P., dated as of December 20, 2023 (as may be amended, restated, supplemented, or otherwise modified from time to time, the "Partnership Agreement" or the "LPA");
WHEREAS, the Fund has been offered to prospective investors pursuant to a Private Placement Memorandum dated December 15, 2023 (the "PPM"), and a notice on Form D was filed with the U.S. Securities and Exchange Commission (the "SEC") on January 2, 2024, in reliance upon the exemption from registration provided by Rule 506(b) of Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, the Fund has a target aggregate capital commitment of One Billion Five Hundred Million Dollars ($1,500,000,000) (the "Target Size") and a hard cap of One Billion Seven Hundred Fifty Million Dollars ($1,750,000,000) (the "Hard Cap");
WHEREAS, the Investor proposes to make a capital commitment to the Fund in the amount of Seventy-Five Million Dollars ($75,000,000) (the "Commitment"), representing approximately five percent (5.0%) of the Fund's Target Size;
WHEREAS, Pinnacle Capital Markets LLC, a Delaware limited liability company and a broker-dealer registered with the SEC and a member of the Financial Industry Regulatory Authority ("FINRA"), serves as placement agent for the Fund (the "Placement Agent");
WHEREAS, the Parties desire to set forth certain supplemental terms and conditions applicable to the Investor's investment in the Fund, which shall modify, supplement, or, in certain cases, supersede certain provisions of the Partnership Agreement solely with respect to the Investor, and which are intended to constitute "side letter" arrangements as contemplated by Section 12.15 of the Partnership Agreement;
WHEREAS, this Side Letter is entered into in connection with the Investor's execution of a Subscription Agreement and an Investor Questionnaire for the Fund, each of even date herewith or of a date proximate thereto (collectively, together with this Side Letter, the "Subscription Documents"); and
WHEREAS, capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
SECTION 1: DEFINITIONS AND INTERPRETATION
1.1 Defined Terms
In addition to the terms defined elsewhere in this Side Letter, the following terms shall have the meanings set forth below when used herein:
"Anchor Investor" means any Limited Partner with a Capital Commitment to the Fund of Two Hundred Million Dollars ($200,000,000) or more, representing approximately thirteen and one-third percent (13.33%) of the Fund's Target Size.
"Commitment" means the Investor's capital commitment to the Fund in the aggregate amount of Seventy-Five Million Dollars ($75,000,000), as set forth in the Investor's Subscription Agreement.
"Co-Investment Opportunity" has the meaning set forth in Section 5.1.
"Excused Investment" has the meaning set forth in Section 3.1.
"Excuse Election Period" has the meaning set forth in Section 3.1.
"Fund Term" means the period commencing on the date of the Final Close and ending on the tenth (10th) anniversary thereof, subject to two (2) consecutive one-year extensions at the discretion of the General Partner, as more fully described in the Partnership Agreement.
"Hargrove Family Entity" has the meaning set forth in Section 8.1.
"Investment Period" means the four (4) year period commencing on the date of the Final Close.
"Key Person Event" has the meaning set forth in Section 7.1.
"Key Person Suspension Period" has the meaning set forth in Section 7.2.
"Key Persons" means Conrad J. Ellsworth and Priya Narayan.
"MFN Election Period" has the meaning set forth in Section 2.2.
"MFN Summary" has the meaning set forth in Section 2.2.
"Partnership Agreement" or "LPA" means the Amended and Restated Agreement of Limited Partnership of Meridian Peak Capital Partners Fund IV, L.P., dated as of December 20, 2023, as may be further amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
"Placement Agent" means Pinnacle Capital Markets LLC, a Delaware limited liability company and registered broker-dealer.
"Placement Fee" has the meaning set forth in Section 11.1.
"PPM" means the Private Placement Memorandum of the Fund, dated December 15, 2023, as may be amended or supplemented from time to time.
1.2 Interpretation. (a) Conflicts with Partnership Agreement. In the event of any conflict or inconsistency between the terms and provisions of this Side Letter and the terms and provisions of the Partnership Agreement, the terms and provisions of this Side Letter shall control and govern solely with respect to the Investor and the Investor's rights, obligations, and interests in and with respect to the Fund. For the avoidance of doubt, this Side Letter shall not affect the rights, obligations, or interests of any other Limited Partner.
(b) Supplemental Nature. This Side Letter supplements, and does not replace, the Partnership Agreement, except to the extent that specific provisions of the Partnership Agreement are expressly modified or superseded by the terms of this Side Letter. All provisions of the Partnership Agreement that are not expressly modified or superseded by this Side Letter shall remain in full force and effect with respect to the Investor.
(c) Governing Law. This Side Letter shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflict of laws thereof that would require or permit the application of the laws of another jurisdiction.
(d) Calendar Days. All references to "days" herein shall mean calendar days, unless the term "business days" is specifically used, in which case "business days" shall mean any day other than a Saturday, Sunday, or any day on which commercial banks in New York, New York or Boston, Massachusetts are authorized or required by law to close.
(e) Headings. The section headings and captions contained in this Side Letter are for convenience of reference only and shall not affect the interpretation or construction of this Side Letter.
(f) Gender; Number. Unless the context otherwise requires, words importing the singular shall include the plural and vice versa, and words importing any gender shall include all genders.
SECTION 2: MOST FAVORED NATION RIGHTS
2.1 Grant of MFN Rights
The General Partner hereby agrees that the Investor shall be entitled to the benefit of any economic, governance, reporting, or other material term or right (each, an "Additional Term") that the General Partner or the Fund grants, agrees to, or otherwise makes available to any other Limited Partner whose Capital Commitment to the Fund is equal to or greater than Fifty Million Dollars ($50,000,000), whether such Additional Term is set forth in a side letter, supplemental agreement, amendment to the Partnership Agreement, or any other written arrangement between or among the General Partner, the Fund, and such other Limited Partner. This provision constitutes a "most favored nation" right in favor of the Investor. The foregoing right shall apply to any side letter, supplemental agreement, or other written arrangement entered into at any closing at which the Investor is admitted to the Fund (the "Initial Close") or at any subsequent closing of the Fund (including the Final Close and any interim closings occurring between the Initial Close and the Final Close).
2.2 MFN Delivery and Election Mechanics
(a) Within fifteen (15) business days following (i) the close at which the Investor is admitted to the Fund and (ii) each subsequent close of the Fund (including the Final Close), the General Partner shall deliver to the Investor a written summary of all material side-letter terms and Additional Terms granted to other Limited Partners whose Capital Commitments equal or exceed Fifty Million Dollars ($50,000,000) (the "MFN Summary"). The MFN Summary may be redacted to remove the identity of the applicable Limited Partner or Limited Partners, provided that such redactions shall not obscure the substance of the Additional Terms described therein.
(b) Within twenty (20) business days following the Investor's receipt of the MFN Summary (the "MFN Election Period"), the Investor may deliver written notice to the General Partner (an "MFN Election Notice") electing to receive and adopt any one or more Additional Terms described in the MFN Summary. Such election shall be made by identifying the specific Additional Terms the Investor elects to adopt.
(c) Any Additional Terms duly elected by the Investor in accordance with this Section 2.2 shall be deemed incorporated into this Side Letter as of the date of the applicable MFN Election Notice and shall be binding upon the Parties as though originally set forth herein. The General Partner shall promptly execute and deliver any amendment or supplement to this Side Letter reasonably requested by the Investor to memorialize such elected Additional Terms.
2.3 MFN Exclusions
Notwithstanding the foregoing provisions of this Section 2, the Investor's most favored nation rights under Section 2.1 shall not apply to:
(i) Any Additional Terms granted to Anchor Investors (i.e., Limited Partners with Capital Commitments to the Fund of Two Hundred Million Dollars ($200,000,000) or more), it being understood that the Investor acknowledges that Anchor Investors may receive enhanced economic or governance terms by virtue of the size of their respective Capital Commitments;
(ii) Any Additional Terms that constitute regulatory accommodations specifically required for, or applicable exclusively to, investors that are (A) "employee benefit plans" or other plans subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (B) tax-exempt organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), (C) governmental plan investors (including state and local public pension plans, whether or not subject to provisions similar to ERISA), (D) sovereign wealth funds, or (E) other investors subject to specific regulatory requirements that necessitate tailored accommodations (e.g., foreign governmental entities, insurance company separate accounts, or investors subject to the Freedom of Information Act or analogous state open records laws);
(iii) Any Additional Terms made available to persons or entities that are affiliates of, or are directly or indirectly controlled by, common with, or under common control with, the General Partner, MPCA, or any portfolio manager or principal of MPCA; and
(iv) Any Additional Terms that are personal to the applicable Limited Partner and would not be meaningful or applicable to the Investor, including, without limitation, specific tax structuring arrangements designed to address the particular tax status, domicile, or regulatory position of a foreign investor or a tax-exempt investor.
For purposes of this Section 2.3, the General Partner shall make a good faith determination as to whether any particular Additional Term falls within one or more of the foregoing exclusions. In the event of any dispute regarding the applicability of an exclusion, the Parties shall seek to resolve such dispute through good faith consultation.
SECTION 3: EXCUSE AND EXCLUSION RIGHTS
3.1 Right to Be Excused
Upon receipt of a capital call notice, drawdown notice, or investment notice from the General Partner identifying a proposed investment by the Fund (including, where applicable, a summary description of such investment and the industry sector or asset class to which it relates), the Investor may, by delivering written notice (an "Excuse Election Notice") to the General Partner within fifteen (15) business days of receipt of such notice (the "Excuse Election Period"), elect to be excused from participating in such investment (any such investment from which the Investor is so excused, an "Excused Investment"), if such investment involves any of the following:
(a) Cannabis or Cannabis-Related Assets. Any business, platform, or enterprise that is primarily engaged in the cultivation, processing, manufacturing, distribution, dispensing, or sale of cannabis, marijuana, hemp-derived cannabinoid products, or cannabis-derived products, or any ancillary business that derives a majority of its revenues from the provision of goods or services to cannabis-related businesses, in each case regardless of whether such activities are legal under applicable state law.
(b) Gaming or Casino Properties. Any business, platform, or enterprise that is primarily engaged in the ownership, development, management, or operation of casinos, gaming facilities, racetracks, sports wagering operations, or online gambling platforms, or that derives a majority of its revenues from gaming-related activities.
(c) Sanctioned Jurisdictions. Any investment in, or relating to, jurisdictions that are subject to comprehensive economic or trade sanctions administered by the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), the U.S. Department of State, or any other applicable U.S. governmental authority, including, as of the date hereof, Cuba, Iran, North Korea, Syria, and the Crimea, Donetsk People's Republic, and Luhansk People's Republic regions of Ukraine, as well as any jurisdiction that may become subject to such comprehensive sanctions after the date hereof.
(d) ERISA Plan Asset Investments. Any investment that would, or would reasonably be expected to, cause the Investor to be treated as holding "plan assets" within the meaning of Section 3(42) of ERISA or the regulations promulgated thereunder by the U.S. Department of Labor at 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, or that would otherwise cause the Investor to become subject to the fiduciary responsibility provisions of Title I of ERISA or the prohibited transaction provisions of Section 4975 of the Code.
3.2 Effect of Excuse Election
If the Investor delivers a valid and timely Excuse Election Notice in accordance with Section 3.1 above, the following provisions shall apply:
(a) The Investor's unfunded Commitment shall be reduced on a dollar-for-dollar basis by the amount of the capital call attributable to the Excused Investment that would have otherwise been allocated to the Investor had the Investor participated in such investment.
(b) The Investor shall not be entitled to any distributions, returns, or other proceeds attributable to, or arising from, any Excused Investment, and the Investor shall have no economic interest in any Excused Investment.
(c) For purposes of computing the Investor's management fee obligations under Section 4 of this Side Letter and the Partnership Agreement, the Investor's Commitment and invested capital, as applicable, shall be adjusted to reflect any reductions resulting from Excused Investments.
3.3 Cap on Excused Investments
The aggregate amount of Excused Investments (measured by the aggregate capital calls from which the Investor has been excused) shall not exceed [twenty-five percent (25%)] of the Investor's aggregate Commitment (i.e., [$18,750,000]). Once the aggregate amount of Excused Investments reaches such cap, the Investor shall have no further right to be excused from any investment pursuant to this Section 3, irrespective of whether such investment falls within one or more of the categories described in Section 3.1(a) through (d) above.
Note to GP Counsel: The brackets in this Section 3.3 reflect the Investor's counter-proposal. The General Partner's position as stated in the Ashford Crane & Hewitt markup of the first draft dated March 4, 2024 is a cap of fifteen percent (15%) of the Investor's aggregate Commitment ($11,250,000). The Investor maintains its twenty-five percent (25%) position in this second draft. The brackets are intended to signal that this point remains open for negotiation.
3.4 Investor's Excuse Right Is Affirmative
The excuse right set forth in Section 3.1 is an affirmative election that must be exercised by the Investor through the timely delivery of a written Excuse Election Notice to the General Partner within the applicable Excuse Election Period. If the Investor fails to deliver an Excuse Election Notice within the Excuse Election Period, the Investor shall be deemed to have irrevocably waived its excuse right with respect to the applicable investment, and the Investor shall be obligated to fund its pro rata share of the capital call in respect of such investment in accordance with the Partnership Agreement.
SECTION 4: MANAGEMENT FEE REDUCTION
4.1 Reduced Management Fee During the Investment Period
Notwithstanding the management fee provisions set forth in the Partnership Agreement (including, without limitation, Section 7.01 thereof and any related provisions), the Investor shall pay a management fee to the General Partner (or, at the direction of the General Partner, to MPCA) at the rate of one and one-half percent (1.50%) per annum on the Investor's Commitment during the Investment Period, in lieu of the standard management fee rate of one and three-quarters percent (1.75%) per annum otherwise applicable under the Partnership Agreement. Based on the Investor's Commitment of $75,000,000, the Investor's annual management fee during the Investment Period at the reduced rate of 1.50% shall be $1,125,000, compared to $1,312,500 at the standard rate, representing annual savings of $187,500 to the Investor.
4.2 Reduced Management Fee Post-Investment Period
Following the expiration or earlier termination of the Investment Period, the Investor shall pay a management fee at the rate of one and one-quarter percent (1.25%) per annum on the Investor's invested capital (as determined in accordance with the Partnership Agreement), in lieu of the standard management fee rate of one and one-half percent (1.50%) per annum otherwise applicable to the post-Investment Period under the Partnership Agreement. This represents a reduction of twenty-five (25) basis points from the standard post-Investment Period management fee rate.
4.3 Cumulative Fee Savings
Over the four (4) year Investment Period, the management fee reduction described in Section 4.1 is expected to yield cumulative savings to the Investor of approximately Seven Hundred Fifty Thousand Dollars ($750,000) ($187,500 in annual savings multiplied by four (4) years). Additional savings will accrue to the Investor during the post-Investment Period as a result of the reduced rate described in Section 4.2, the precise amount of which will depend upon the Investor's invested capital outstanding during such period.
4.4 Fee Calculation Mechanics
Except as expressly modified by Sections 4.1 and 4.2 above, all management fees payable by the Investor shall be calculated, accrued, and payable in accordance with the terms and procedures set forth in the Partnership Agreement, including, without limitation, the timing and frequency of management fee payments, the method of calculation of the applicable fee base, and any provisions for the proration of management fees for partial periods. For the avoidance of doubt, the carried interest (or "performance allocation") provisions of the Partnership Agreement — including, without limitation, the General Partner's entitlement to a carried interest allocation equal to twenty percent (20%) of the Fund's net profits, calculated on a whole-fund (European-style) waterfall basis, subject to a preferred return to the Limited Partners of eight percent (8%) per annum, compounded annually — shall not be modified, altered, or otherwise affected by this Side Letter.
SECTION 5: CO-INVESTMENT RIGHTS
5.1 Grant of Co-Investment Rights
The General Partner hereby agrees that the Investor shall be offered the opportunity to co-invest alongside the Fund in any investment where the aggregate equity investment by the Fund and any co-investors in such transaction exceeds One Hundred Million Dollars ($100,000,000) (each such investment, a "Co-Investment Opportunity"). The Investor's allocation in any Co-Investment Opportunity shall be up to the Investor's pro rata share of such Co-Investment Opportunity, calculated based on the ratio of the Investor's Commitment to the aggregate Capital Commitments of all Limited Partners in the Fund.
5.2 Terms of Co-Investment
All co-investments offered to the Investor pursuant to this Section 5 shall be offered on a no-management-fee, no-carried-interest basis, such that the Investor shall not be required to pay any management fee, performance allocation, or carried interest on amounts invested through co-investment vehicles or co-investment arrangements alongside the Fund. Co-investments shall be made through a special purpose co-investment vehicle organized and structured by the General Partner for such purpose, or directly alongside the Fund, as determined by the General Partner in its reasonable discretion. The General Partner shall bear (or cause the co-investment vehicle to bear) the organizational, legal, and administrative costs of establishing any co-investment vehicle, provided that the Investor and other co-investors shall bear their pro rata share of any ongoing operating expenses and transaction costs associated with the applicable co-investment.
5.3 Co-Investment Election Mechanics
(a) The General Partner shall provide the Investor with written notice of a Co-Investment Opportunity within a commercially reasonable time prior to the anticipated closing of the applicable investment transaction. Such notice shall include a summary description of the investment, the expected aggregate equity requirement, and the Investor's proposed allocation.
(b) The Investor shall have ten (10) business days from receipt of such notice (the "Co-Investment Response Period") to deliver to the General Partner written notice of the Investor's election to participate in the Co-Investment Opportunity and the amount of the Investor's desired co-investment.
(c) If the Investor elects not to participate in a Co-Investment Opportunity, or if the Investor fails to respond within the Co-Investment Response Period, the General Partner shall be free to offer the Co-Investment Opportunity (including the portion that would have been allocated to the Investor) to other Limited Partners, affiliates of the General Partner, or third parties, on such terms as the General Partner may determine in its discretion.
Note to GP Counsel: The ten (10) business day response window and the "commercially reasonable time" notice period reflect the revisions incorporated from the General Partner's markup of the first draft. The first draft had provided for fifteen (15) business days for the Investor's response and required "prompt" notice from the General Partner. The Investor accepts these revisions in this second draft.
5.4 GP Discretion
The General Partner retains sole and absolute discretion over the structuring, sizing, timing, and allocation of Co-Investment Opportunities, including, without limitation, the determination of whether a particular investment constitutes a Co-Investment Opportunity, the form and structure of any co-investment vehicle, and the allocation of co-investment among multiple participating Limited Partners, subject at all times to its obligation to offer the Investor its pro rata share as set forth in Section 5.1 above. The General Partner shall exercise such discretion in good faith and in a manner consistent with its fiduciary obligations to the Fund and the Limited Partners.
SECTION 6: ENHANCED REPORTING
6.1 Quarterly Reports
The General Partner shall deliver, or cause the Fund's third-party fund administrator, Granite Ledger Fund Services LLC (the "Fund Administrator"), to deliver, to the Investor quarterly portfolio-level reports within forty-five (45) days following the end of each fiscal quarter of the Fund. Each such quarterly report shall include, at a minimum:
(a) A summary of the Fund's investment portfolio, including a list of all portfolio investments, a description of the industry sector and geographic location of each portfolio company or asset, and the date and size of the initial investment and any follow-on investments;
(b) Fair market value estimates for each portfolio investment, prepared in accordance with the Fund's valuation policies as described in the Partnership Agreement and the PPM;
(c) Portfolio-level and fund-level performance metrics, including gross and net internal rates of return (IRR), gross and net multiples on invested capital (MOIC), total value to paid-in capital (TVPI), and distributions to paid-in capital (DPI); and
(d) A capital account statement for the Investor, reflecting the Investor's capital contributions, distributions, allocations of net income or net loss, and ending capital account balance for the applicable quarter.
6.2 Annual Financial Statements
The General Partner shall deliver, or cause the Fund's independent auditor, Brockton Marsh & Associates LLP (the "Fund Auditor"), to deliver, to the Investor audited annual financial statements of the Fund within ninety (90) days following the end of each fiscal year of the Fund. Such audited financial statements shall be prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and shall be accompanied by an unqualified opinion of the Fund Auditor.
Note to GP Counsel: This ninety (90) day delivery period for annual audited financial statements is updated from the Investor's initial proposal of seventy-five (75) days in the first draft. The General Partner's markup proposed ninety (90) days as consistent with the terms of the Partnership Agreement and the Fund Auditor's standard timeline. The Investor accepts this compromise in this second draft.
6.3 ESG Reporting
The General Partner shall deliver, or cause to be delivered, to the Investor an annual report addressing environmental, social, and governance ("ESG") matters in connection with the Fund's investment portfolio (the "ESG Report"). The ESG Report shall be provided concurrently with, or promptly following, the delivery of the annual audited financial statements described in Section 6.2 above, and shall address, to the extent reasonably practicable, the Fund's approach to ESG risk assessment, any material ESG-related incidents or developments affecting portfolio companies, and the General Partner's integration of ESG factors into its investment process.
6.4 Ad Hoc Reporting
The General Partner shall use commercially reasonable efforts to respond to reasonable ad hoc information requests from the Investor on a timely basis, subject to (i) the confidentiality obligations set forth in the Partnership Agreement and this Side Letter, (ii) applicable law, (iii) any contractual restrictions on the disclosure of information relating to portfolio companies, and (iv) the General Partner's good faith determination that responding to such request would not impose an undue administrative burden on the General Partner or the Fund. The Investor agrees that it shall not make ad hoc information requests that are unreasonable in frequency or scope, and the Parties shall cooperate in good faith to address any information needs of the Investor.
SECTION 7: KEY PERSON PROVISIONS
7.1 Key Person Event
In addition to, and without limiting, any key person provisions set forth in the Partnership Agreement (including, without limitation, Section 9.03 thereof), a "Key Person Event" shall be deemed to have occurred under this Side Letter if either Conrad J. Ellsworth or Priya Narayan (collectively, the "Key Persons") ceases to devote substantially all of his or her professional business time and attention to the investment activities of the Fund and to the business and affairs of MPCA, other than due to temporary illness or disability (including physical or mental incapacity) not exceeding ninety (90) consecutive days. For purposes of this Section 7.1, "substantially all" shall be deemed to mean at least eighty percent (80%) of such Key Person's professional business time over any rolling six (6) month period (excluding reasonable vacation and personal time).
7.2 Suspension of Investment Period
Upon the occurrence of a Key Person Event, the Investment Period shall be automatically suspended for a period of [sixty (60)] days (the "Key Person Suspension Period"), commencing on the date on which the General Partner delivers written notice to the Investor of the occurrence of such Key Person Event (or, if earlier, the date on which the Investor otherwise becomes aware of such Key Person Event and delivers written notice to the General Partner requesting confirmation thereof).
Note to GP Counsel: The sixty (60) day Key Person Suspension Period reflects a compromise from the Investor's initial proposal of ninety (90) days. The General Partner's markup of the first draft rejected the ninety (90) day suspension and proposed limiting the Investor's rights to the existing key person provisions of the Partnership Agreement (which provide for an LPAC-driven process under Section 9.03 of the LPA). The Investor has narrowed its request to sixty (60) days in this second draft as a compromise. The brackets signal that this point remains subject to further discussion.
During the Key Person Suspension Period, the General Partner shall not make any new capital calls for new portfolio investments by the Fund, but shall retain the right to make capital calls (a) for follow-on investments in existing portfolio companies or assets of the Fund, (b) for the payment of Fund expenses (including management fees, organizational expenses, and operating expenses), and (c) to satisfy any existing binding investment commitments of the Fund entered into prior to the commencement of the Key Person Suspension Period.
7.3 Investor Election
During or upon the expiration of the Key Person Suspension Period, the Investor may elect, by delivering written notice to the General Partner (a "Key Person Opt-Out Notice"), to cease participation in future capital calls for new investments by the Fund. If the Investor delivers a valid Key Person Opt-Out Notice:
(a) The Investor's unfunded Commitment shall be reduced to zero, except to the extent required for (i) follow-on investments in existing portfolio companies or assets of the Fund, (ii) Fund expenses (including management fees and operating expenses), and (iii) the satisfaction of existing binding investment commitments of the Fund entered into prior to the delivery of the Key Person Opt-Out Notice;
(b) The Investor shall remain entitled to receive all distributions attributable to, or arising from, investments made by the Fund prior to the date of the Key Person Opt-Out Notice, in accordance with the distribution waterfall provisions of the Partnership Agreement; and
(c) The Investor shall continue to be bound by the confidentiality, indemnification, and other continuing obligations set forth in the Partnership Agreement and this Side Letter.
7.4 Interaction with LPA Key Person Provisions
The provisions of this Section 7 are in addition to, and shall not be construed as limiting, modifying, or superseding, any key person provisions set forth in the Partnership Agreement. In the event that the key person provisions of the Partnership Agreement provide a remedy or right that is more favorable to the Investor than the rights set forth in this Section 7 (including, without limitation, any right to vote to terminate or suspend the Investment Period through the Limited Partner Advisory Committee or otherwise), the Investor may elect to exercise such more favorable remedy in lieu of, or in addition to, the rights set forth herein. The Investor's exercise of any right under this Section 7 shall not preclude or waive the Investor's ability to exercise any right available to it under the Partnership Agreement.
SECTION 8: TRANSFER RIGHTS
8.1 Permitted Transfers
Notwithstanding any transfer restrictions set forth in the Partnership Agreement (including, without limitation, Section 10.01 thereof), the Investor shall have the right to transfer all or any portion of its limited partnership interest in the Fund (including its Commitment, capital contributions, and right to receive distributions) to any entity that is directly or indirectly owned or controlled by one or more members of the Hargrove family (each, a "Hargrove Family Entity") without the prior written consent of the General Partner, provided that all of the following conditions are satisfied:
(a) Such transfer complies with all applicable federal and state securities laws, including, without limitation, the Securities Act and any applicable state "blue sky" laws, and does not require the registration of any securities under the Securities Act or any such state laws;
(b) The transferee executes and delivers a written instrument, in form and substance reasonably satisfactory to the General Partner, pursuant to which the transferee assumes all of the obligations of the Investor under the Partnership Agreement and this Side Letter with respect to the transferred interest;
(c) Such transfer would not result in a termination of the Fund under Section 708 of the Internal Revenue Code of 1986, as amended (or any successor provision thereto), or otherwise cause any adverse tax consequence to the Fund or any other Limited Partner;
(d) The Investor provides the General Partner with at least fifteen (15) business days' prior written notice of such proposed transfer, together with such documentation as the General Partner may reasonably request, including evidence of the transferee's status as a Hargrove Family Entity, representations as to the transferee's qualification as a "qualified purchaser" and "accredited investor," and any information reasonably necessary for the General Partner to comply with applicable anti-money laundering, know-your-customer, and other regulatory requirements; and
(e) The Investor shall bear all reasonable, documented out-of-pocket costs and expenses incurred by the General Partner or the Fund in connection with any such transfer, including legal fees and transfer agent costs.
8.2 Continued Liability
Following any permitted transfer under Section 8.1, the transferring Investor shall remain jointly and severally liable with the transferee for any unfunded Commitment to the extent not assumed by the transferee, unless the General Partner agrees in writing to release the Investor from such liability. Any such release shall be in the sole discretion of the General Partner. Notwithstanding the foregoing, in the event that the transferee fully assumes the Investor's Commitment and all obligations under the Partnership Agreement and this Side Letter to the General Partner's reasonable satisfaction, the General Partner shall not unreasonably withhold its consent to a release of the Investor from further liability with respect to the transferred interest.
SECTION 9: CONFIDENTIALITY
9.1 Confidentiality Obligations
The Investor acknowledges and agrees that it is, and shall remain, bound by the confidentiality provisions set forth in the Partnership Agreement (including, without limitation, Section 12.08 thereof), as supplemented by this Section 9. The Investor recognizes that information relating to the Fund, its investments, its financial condition, the terms of the Partnership Agreement and this Side Letter, and the identity and terms applicable to other Limited Partners constitutes confidential and proprietary information of the Fund and the General Partner.
9.2 Permitted Disclosures
Notwithstanding the confidentiality provisions of the Partnership Agreement, the Investor shall be permitted to disclose Confidential Information (as defined in the Partnership Agreement) to the following persons and entities, solely to the extent reasonably necessary or appropriate for the purposes described below:
(a) The Investor's legal counsel, including Calderwood & Harkness LLP, or any successor legal counsel engaged by the Investor, for the purpose of obtaining legal advice in connection with the Investor's investment in the Fund;
(b) The Investor's tax advisors, accountants, and auditors, for the purpose of tax compliance, financial reporting, and related advisory services;
(c) Members of the Hargrove family (whether or not they hold direct or indirect interests in the Investor) and the employees, officers, directors, and agents of any Hargrove Family Entity, to the extent reasonably necessary for the management and administration of the Investor's investment in the Fund and the oversight of the Investor's investment portfolio;
(d) Any regulatory authority, governmental body, self-regulatory organization, or other official body having jurisdiction over the Investor or any Hargrove Family Entity, to the extent that such disclosure is required by applicable law, regulation, or regulatory examination or inquiry; and
(e) Any bona fide potential transferee of the Investor's limited partnership interest in the Fund (or any portion thereof), subject to such potential transferee entering into a confidentiality agreement on terms reasonably acceptable to the General Partner prior to the disclosure of any Confidential Information.
9.3 Notice of Compelled Disclosure
If the Investor is required by applicable law, regulation, subpoena, civil investigative demand, judicial or administrative order, or other legal process to disclose any Confidential Information, the Investor shall, to the extent legally permitted, provide the General Partner with prompt written notice of such requirement prior to making any such disclosure, in order to afford the General Partner a reasonable opportunity to seek a protective order or other appropriate remedy. The Investor shall cooperate with the General Partner in any efforts to obtain such protective order or other remedy. If, notwithstanding such efforts, the Investor is legally compelled to make such disclosure, the Investor shall disclose only such Confidential Information as is legally required and shall use commercially reasonable efforts to obtain assurances that confidential treatment will be accorded to the disclosed information.
SECTION 10: TAX REPORTING
10.1 Schedule K-1 Delivery
The General Partner shall use commercially reasonable efforts to deliver, or cause to be delivered, to the Investor IRS Schedule K-1 (Form 1065, Partner's Share of Income, Deductions, Credits, etc.) within seventy-five (75) days following the end of each fiscal year of the Fund. The Parties acknowledge that the standard provision of the Partnership Agreement provides for the delivery of Schedule K-1s within one hundred twenty (120) days of the end of each fiscal year. The General Partner agrees to make good faith efforts to expedite the preparation and delivery of the Investor's Schedule K-1, recognizing the Investor's interest in timely receipt of such information for tax planning and compliance purposes.
10.2 Tax Estimates
The General Partner shall use commercially reasonable efforts to provide the Investor with preliminary tax estimate information, including estimated allocations of taxable income, gain, loss, deduction, and credit, within thirty (30) days following the end of each fiscal quarter of the Fund, to assist the Investor in calculating and making estimated federal and state income tax payments. Such tax estimates shall be provided on a reasonable efforts basis and shall not constitute a guarantee or representation by the General Partner as to the accuracy or completeness of such information. The Investor acknowledges that final tax allocations may differ materially from quarterly estimates.
10.3 Cooperation. The General Partner and the Investor shall cooperate in good faith with respect to any tax audit, examination, inquiry, or proceeding involving the Fund, the General Partner, or any Related Person that may directly or indirectly affect the Investor, including by sharing relevant information, providing access to records, and coordinating responses to taxing authorities to the extent reasonably practicable and legally permissible.
SECTION 11: PLACEMENT AGENT FEE OFFSET
11.1 Fee Offset
The Parties acknowledge that Pinnacle Capital Markets LLC, serving as the Placement Agent for the Fund, is entitled to a placement fee in connection with the Investor's subscription to the Fund equal to one percent (1.0%) of the Investor's Commitment ($75,000,000 × 1.0% = $750,000) (the "Placement Fee"). The General Partner hereby agrees that one hundred percent (100%) of the Placement Fee attributable to the Investor's Commitment shall be offset against management fees payable by the Investor under the Partnership Agreement (as modified by Section 4 of this Side Letter). Such offset shall be applied on a ratable basis over the first [four (4)] years of the Fund Term, resulting in an annual management fee offset of approximately $187,500 per year during such period ($750,000 ÷ 4 years = $187,500). For the avoidance of doubt, the offset contemplated by this Section 11.1 shall be applied after giving effect to the reduced management fee rate set forth in Section 4.1 above.
11.2 Disclosure. The General Partner confirms that the engagement of Pinnacle Capital Markets LLC as placement agent for the Fund, including the material terms of such engagement, is disclosed in the PPM and that the engagement letter between the General Partner (or MPCA) and Pinnacle Capital Markets LLC is dated November 1, 2023. The General Partner further confirms that the Placement Agent is registered as a broker-dealer with the SEC and is a member of FINRA, and that the Placement Agent has not been involved in any of the events described in Rule 506(d)(1) of Regulation D under the Securities Act.
SECTION 12: REPRESENTATIONS AND WARRANTIES
12.1 Representations and Warranties of the General Partner
The General Partner represents and warrants to the Investor, as of the date hereof and as of the Effective Date, as follows:
(a) Power and Authority. The General Partner has full power, authority, and legal right to enter into this Side Letter and to perform all of its obligations hereunder. The General Partner is duly organized, validly existing, and in good standing under the laws of the State of Delaware.
(b) Due Authorization. The execution, delivery, and performance of this Side Letter by the General Partner have been duly authorized by all necessary limited liability company action on the part of the General Partner and MPCA, and no further approval, consent, or authorization of any person or entity is required in connection therewith.
(c) Valid and Binding Obligation. This Side Letter constitutes the valid and legally binding obligation of the General Partner and the Fund, enforceable against the General Partner and the Fund in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general applicability relating to or affecting creditors' rights, and to general equity principles.
(d) No Conflict. The execution, delivery, and performance of this Side Letter by the General Partner do not and will not (i) violate, conflict with, or result in a breach of any provision of the Partnership Agreement, the certificate of formation or operating agreement of the General Partner or MPCA, or any other agreement, instrument, or obligation to which the Fund, the General Partner, or MPCA is a party or by which any of them is bound, or (ii) violate any applicable law, regulation, order, judgment, or decree.
12.2 Representations and Warranties of the Investor
The Investor represents and warrants to the General Partner, as of the date hereof and as of the Effective Date, as follows:
(a) Organization and Good Standing. The Investor is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware.
(b) Power and Authority. The Investor has full power, authority, and legal right to enter into this Side Letter and to make the Commitment to the Fund as contemplated hereby.
(c) Due Authorization. The execution, delivery, and performance of this Side Letter by the Investor have been duly authorized by all necessary limited liability company action on the part of the Investor, including approval by the Investment Committee of Briarwood Family Office LLC, and no further approval, consent, or authorization of any person or entity is required in connection therewith.
(d) Qualified Purchaser. The Investor is a "qualified purchaser" as defined in Section 2(a)(51) of the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.
(e) Accredited Investor. The Investor is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
(f) Non-ERISA Status. The Investor is not a "benefit plan investor" as defined in Section 3(42) of ERISA and does not hold, and is not investing, "plan assets" subject to Title I of ERISA or Section 4975 of the Code. The Investor's investment in the Fund does not constitute and will not result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.
(g) No Bad Actor Disqualification. Neither the Investor nor any person covered by Rule 506(d)(1) of Regulation D with respect to the Investor is subject to any of the "bad actor" disqualifying events described in Rule 506(d)(1)(i) through (viii) of Regulation D, and the Investor has not participated in any events that would require disclosure under Rule 506(e) of Regulation D.
SECTION 13: GENERAL PROVISIONS
13.1 Governing Law
This Side Letter shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to the conflict of laws principles thereof that would require or permit the application of the laws of any other jurisdiction. Each of the Parties irrevocably submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware declines to accept jurisdiction, any state or federal court sitting in Wilmington, Delaware) for the adjudication of any dispute arising out of or relating to this Side Letter, and each Party hereby irrevocably waives any objection it may have to the laying of venue of any such proceeding in any such court and any claim that any such proceeding has been brought in an inconvenient forum.
13.2 Entire Agreement
This Side Letter, together with the Partnership Agreement and the Subscription Documents, constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations, representations, and warranties, whether written or oral, relating to such subject matter.
13.3 Amendment. This Side Letter may not be amended, modified, supplemented, or waived except by a written instrument duly executed by each of the Parties hereto. No waiver of any provision of this Side Letter shall be effective unless set forth in a written instrument signed by the Party granting such waiver, and no such waiver shall constitute a waiver of any other provision or a continuing waiver of the same provision.
13.4 Severability. If any provision of this Side Letter, or the application of any such provision to any person or circumstance, is held by a court of competent jurisdiction or other tribunal to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Side Letter or the application of such provision to any other person or circumstance. In such event, the remaining provisions of this Side Letter shall remain in full force and effect, and the Parties shall negotiate in good faith to replace the invalid, illegal, or unenforceable provision with a valid, legal, and enforceable provision that gives effect to the original intent of the Parties as closely as practicable.
13.5 Notices. All notices, requests, demands, consents, waivers, and other communications required or permitted under this Side Letter shall be in writing and shall be deemed to have been duly given when (i) delivered in person, (ii) sent by registered or certified mail, return receipt requested, postage prepaid, (iii) sent by nationally recognized overnight courier service, or (iv) transmitted by email (with confirmation of receipt), in each case addressed to the applicable Party at the following addresses (or to such other address as a Party may designate by notice to the other Party in accordance with this Section 13.5):
If to the Fund or the General Partner:
Meridian Peak Capital Partners GP IV LLC c/o Meridian Peak Capital Advisors LLC 200 Clarendon Street, 42nd Floor Boston, MA 02116
Attention: Tamara Fujimoto, General Counsel & Chief Compliance Officer
Email: [Intentionally omitted from draft]
with a copy (which shall not constitute notice) to:
Ashford Crane & Hewitt LLP 1 Federal Street, Suite 3600 Boston, MA 02110
Attention: Harrison K. Drummond
Email: [Intentionally omitted from draft]
If to the Investor:
Briarwood Family Office LLC 780 Park Avenue, Suite 3200 New York, NY 10021
Attention: Sandra M. Whitfield, General Counsel
Email: [Intentionally omitted from draft]
with a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP 425 Lexington Avenue New York, NY 10017
Attention: Pamela Cross
Email: [Intentionally omitted from draft]
13.6 Counterparts. This Side Letter may be executed in one or more counterparts, each of which shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of this Side Letter by facsimile or electronic transmission (including by .pdf) shall be equally effective as delivery of a manually executed counterpart.
13.7 No Third-Party Beneficiaries