1027-00002 · Pellegrino Capital Group · Analysis & Advice

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CALDERWOOD & HARKNESS LLP 200 South Biscayne Boulevard, Suite 4100 Miami, FL 33131

PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

MEMORANDUM

TO: Marco A. Pellegrino, Founder & Managing Member, Pellegrino Capital Group LLC Adriana Voss, Vice President & General Counsel, Pellegrino Capital Group LLC

FROM: Nicholas Stern, Partner, Funds & Asset Management Practice, Calderwood & Harkness LLP Owen Fischer, Associate, Funds & Asset Management Practice, Calderwood & Harkness LLP

DATE: December 18, 2025 (initial draft); updated through January 24, 2026 (reflecting final agreed forms)

RE: Summary of Key Negotiated Terms and Issues — Limited Partnership Agreement of Ridgeline-Clarion Co-Invest, L.P. and Related Side Letter Agreement

MATTER NO.: 1027-00002

CONFIDENTIALITY NOTICE: This memorandum is protected by attorney-client privilege and the work product doctrine. It has been prepared for the sole use of Pellegrino Capital Group LLC and its authorized representatives. This memorandum contains confidential legal advice and analysis and should not be disclosed to, shared with, or relied upon by any third party without the prior written consent of Calderwood & Harkness LLP. Any inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.

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I. Executive Summary and Purpose

The purpose of this memorandum is to provide Pellegrino Capital Group LLC ("Pellegrino" or "PCG") with a comprehensive summary of the key terms negotiated in the Amended and Restated Limited Partnership Agreement (the "LPA") of Ridgeline-Clarion Co-Invest, L.P. (the "Co-Invest Vehicle" or "Co-Invest LP") and the Side Letter Agreement dated as of the date of the initial closing (the "Side Letter") entered into between Ridgeline-Clarion Co-Invest GP LLC (the "General Partner" or "Co-Invest GP") and Pellegrino. This memorandum is intended to serve as a reference document for Pellegrino's management team and internal counsel, highlighting the material economic, governance, and protective provisions contained in the final agreed forms of the transaction documentation, together with our assessment of how the negotiated terms compare to prevailing market standards for sponsor-led co-investment vehicles.

Transaction Context. Pellegrino proposes to co-invest Twenty-Five Million Dollars ($25,000,000) alongside Ridgeline Equity Partners Fund IV, L.P. ("Fund IV") in connection with the acquisition of one hundred percent (100%) of the outstanding equity interests of Clarion Hospitality Holdings, Inc. ("Clarion" or the "Target") through Clarion Holdings Acquisition Corp. ("AcquisitionCo"), a Delaware corporation formed as a special purpose acquisition vehicle for purposes of the transaction.

Transaction Size and Capitalization. The acquisition is being consummated at an enterprise value of approximately $555,000,000. The capital structure consists of $305,000,000 in net debt in the form of a Term Loan B facility provided by Pinnacle National Bank, N.A. (the "Senior Lender"), together with a $40,000,000 undrawn revolving credit facility, and $250,000,000 in total equity capitalization. Of the $250,000,000 in equity, Fund IV is contributing $175,000,000, representing 70% of total equity, and the Co-Invest Vehicle is contributing $75,000,000, representing 30% of total equity. Pellegrino's $25,000,000 commitment represents 33.33% of the Co-Invest Vehicle's aggregate commitments and, accordingly, an indirect ownership interest of approximately 10.0% of AcquisitionCo's equity.

Management Rollover. We note that Ted Barrington, the Chief Executive Officer of Clarion, and Lisa Kwon, the Chief Financial Officer of Clarion, are rolling over approximately $30,000,000 in aggregate equity value into AcquisitionCo through a separate management rollover structure. The management rollover equity will dilute all other equity holders proportionally following the closing of the acquisition. The mechanics of the management rollover are governed by a separate Management Stockholders' Agreement and are not addressed in detail in this memorandum, although we have reviewed that agreement for any provisions that could adversely affect Pellegrino's interests.

Status and Timeline. All co-investment transaction documents are in final agreed form as of January 24, 2026. The target signing and closing date is January 30, 2026, with simultaneous signing and closing of the acquisition. Pellegrino should be prepared to fund its full capital commitment of $25,000,000 on or before that date.

Drafting History and Negotiation Process. This memorandum was initially drafted on December 18, 2025, following our delivery of an initial markup of the LPA and Side Letter on December 6, 2025. The memorandum has been updated to reflect the resolution of all open negotiation points through a series of negotiation calls conducted between January 6 and January 17, 2026 with Hartwell Velmoran & Pratt LLP (Douglas W. Cheng, Partner, and Meredith L. Tanaka, Associate), counsel to Ridgeline Equity Management LLC ("Ridgeline"), the sponsor of Fund IV and the Co-Invest Vehicle. A summary of resolved negotiation issues is set forth in Section XII below.

Governing Law. All co-investment transaction documents, including the LPA and the Side Letter, are governed by the laws of the State of Delaware, without regard to conflicts of law principles.

II. Transaction Structure Overview

This Section provides an overview of the transaction structure, the parties involved, and the organizational relationships among the various entities relevant to Pellegrino's co-investment.

Target Company. Clarion Hospitality Holdings, Inc. is a Delaware corporation headquartered in Nashville, Tennessee. Clarion operates as an integrated hospitality asset management platform managing approximately 14,200 hotel rooms across 62 properties located primarily in the southeastern and midwestern United States. Clarion's portfolio is concentrated in the select-service and extended-stay hotel segments, with properties flagged under several major hospitality brands. In addition to its core asset management operations, Clarion provides third-party hotel management services to institutional real estate owners and operates a proprietary revenue management technology platform that is licensed to both managed and non-managed properties.

Clarion Financial Summary (LTM as of September 30, 2025):

The foregoing financial information has been derived from the Confidential Information Memorandum and the quality of earnings report prepared by the seller's financial advisor, and has been confirmed through Ridgeline's independent due diligence. Pellegrino has had the opportunity to review the data room materials and has conducted its own independent assessment of the Target's financial profile.

Seller. The seller of the Target is Brindoval Growth Capital Fund II, L.P., which holds approximately 82% of the outstanding equity of Clarion, together with certain management rollover shareholders who collectively hold the remaining approximately 18% of Clarion's equity. The management rollover shareholders are rolling a portion of their equity into AcquisitionCo as described in Section I above.

Acquisition Structure. AcquisitionCo, a newly formed Delaware corporation, will acquire 100% of the outstanding equity of Clarion through a stock purchase transaction. AcquisitionCo will be capitalized with $250,000,000 in equity from Fund IV and the Co-Invest Vehicle, together with $305,000,000 in Term Loan B indebtedness provided by Pinnacle National Bank, N.A. as administrative agent and lead arranger. A $40,000,000 revolving credit facility from the same lender group will remain undrawn at closing but will be available for working capital and general corporate purposes.

Co-Invest Vehicle Structure. The Co-Invest Vehicle is organized as Ridgeline-Clarion Co-Invest, L.P., a Delaware limited partnership formed under the Delaware Revised Uniform Limited Partnership Act. The sole general partner of the Co-Invest Vehicle is Ridgeline-Clarion Co-Invest GP LLC, a Delaware limited liability company that is wholly owned by Ridgeline Equity Management LLC, the sponsor's management company and the entity that manages Fund IV. The Co-Invest Vehicle is a single-asset vehicle formed for the sole purpose of making and holding the co-investment in AcquisitionCo alongside Fund IV.

Post-Closing Ownership Summary:

The foregoing ownership percentages are presented on a pre-dilution basis and do not give effect to the approximately $30,000,000 management rollover from Barrington and Kwon, which will dilute all equity holders proportionally following closing. A simplified ownership chart illustrating the flow of equity from Fund IV and the Co-Invest Vehicle into AcquisitionCo, and from AcquisitionCo into Clarion, has been provided separately for reference and is attached to the final transaction binder.

III. Economics

A. Capital Commitments and Funding

The aggregate capital commitments to the Co-Invest Vehicle total $75,000,000. Pellegrino has committed $25,000,000 to the Co-Invest Vehicle, representing 33.33% of the aggregate capital commitments. The identities of the other co-investors in the vehicle have not been disclosed to us, although based on the aggregate commitment size and Pellegrino's pro rata share, we understand there are at least two additional co-investors.

The LPA provides for an initial capital call of 100% of each limited partner's total committed capital, to be funded at the closing of the acquisition. Accordingly, Pellegrino's entire $25,000,000 commitment will be called and must be funded on or before the closing date of January 30, 2026. The General Partner is required to provide no less than 10 business days' prior written notice of the capital call, together with wire instructions for the escrow account maintained by Continental Fiduciary Services, Inc. as the designated escrow agent.

The Co-Invest Vehicle's investment period is co-terminous with that of Fund IV. Importantly, since this is a single-asset co-investment vehicle structured to hold a direct investment in AcquisitionCo, there is no follow-on commitment obligation. Pellegrino will not be required to fund any additional capital beyond the initial $25,000,000 closing capital call, except in the limited circumstance of organizational expenses as described in Section III.D below, which are effectively pre-funded from the closing capital contribution.

Market Comparison. The structure of a 100% capital call at closing with no ongoing commitment obligation is the market standard for single-asset co-investment vehicles. This structure provides certainty of funding for all parties and eliminates the contingent liability associated with unfunded commitments. Pellegrino will not face the risk of future capital calls, which is a meaningful advantage compared to a commitment to a blind-pool fund.

B. Carried Interest

The Co-Invest GP is entitled to a carried interest equal to 10% of the net profits generated by the Co-Invest Vehicle above the preferred return hurdle. The carried interest is structured as a traditional promote allocation in the distribution waterfall rather than as a separate fee arrangement.

The preferred return hurdle rate is 8% per annum, compounded on a quarterly basis. The 8% preferred return functions as a gating mechanism — the General Partner is not entitled to any carried interest allocation or distribution until each limited partner has received: (i) a full return of its contributed capital and (ii) a cumulative preferred return of 8% per annum, compounded quarterly, on its contributed capital.

The full distribution waterfall is structured as follows:

(1) Return of Capital: First, 100% to the limited partners until each limited partner has received an amount equal to its aggregate capital contributions;

(2) Preferred Return: Second, 100% to the limited partners until each limited partner has received a cumulative preferred return of 8% per annum, compounded quarterly, on its unreturned capital contributions;

(3) GP Catch-Up: Third, 100% to the General Partner (as carried interest) until the General Partner has received an amount equal to 10% of the cumulative amounts distributed under clauses (2) and (3);

(4) Residual Split: Thereafter, 90% to the limited partners and 10% to the General Partner (as carried interest).

Market Comparison. The 10% carried interest rate is favorable to Pellegrino compared to the 20% standard carried interest charged by Fund IV to its limited partners. This reduced carry is one of the primary economic benefits of co-investing alongside a sponsor rather than investing solely through the main fund vehicle. In our experience, the market range for carried interest on sponsor-led co-investment vehicles spans from 0% (no carry) on the low end to 15% on the high end, with 10% representing a mid-market rate that is common for co-invest vehicles where the sponsor is providing meaningful deal sourcing, structuring, and ongoing portfolio management value. The 8% preferred return is market standard; preferred returns in co-invest vehicles typically range from 7% to 8%, with compounding on either an annual or quarterly basis. Quarterly compounding, as negotiated here, is incrementally more favorable to the limited partners than annual compounding.

Negotiation Note. During the initial markup phase, Pellegrino requested 0% carried interest on the Co-Invest Vehicle, consistent with the position that co-investors who commit capital on a deal-by-deal basis and bear the same risk as the main fund should not be subject to additional promoted economics. Ridgeline countered at 15%, citing the value of deal sourcing, due diligence, negotiation, and post-closing oversight provided by the sponsor team. Following negotiation, the parties resolved the carried interest at 10%, with the additional concession of quarterly compounding on the 8% preferred return (replacing Ridgeline's initial position of annual compounding). We consider this outcome to be a reasonable and market-competitive compromise.

C. Management Fee

The Co-Invest Vehicle does not charge any management fee to the limited partners. Section 5.3 of the LPA expressly provides that the General Partner shall not be entitled to any management fee, advisory fee, monitoring fee, or similar recurring fee in connection with the Co-Invest Vehicle's investment.

Market Comparison. A 0% management fee is the prevailing market standard for single-asset co-investment vehicles. The rationale is that co-investors are participating in a specific identified investment alongside the main fund, and the sponsor is already receiving management fees from the main fund's limited partners for providing portfolio management services. Charging an additional management fee on co-invested capital would, in effect, result in double-dipping and is generally viewed as inconsistent with the co-investment value proposition.

Observation. The absence of a management fee represents a significant economic benefit to Pellegrino compared to limited partners in Fund IV, who pay a standard management fee (typically 1.5% to 2.0% of committed capital during the investment period, stepping down to invested capital thereafter). Over a ten-year hold period, the management fee savings on a $25,000,000 commitment could amount to $2,500,000 to $5,000,000 depending on Fund IV's fee structure, making the co-investment an attractive vehicle for deploying capital into the Clarion transaction.

D. Organizational Expenses

Organizational and formation expenses of the Co-Invest Vehicle, including legal, accounting, regulatory filing, and other expenses incurred in connection with the formation, structuring, and establishment of the Co-Invest Vehicle, are capped at $150,000 in the aggregate. Organizational expenses are borne pro rata by the co-investors based on their respective capital commitments as a percentage of the Co-Invest Vehicle's aggregate capital commitments. Pellegrino's pro rata share of organizational expenses is 33.33%, or approximately $50,000, of the $150,000 cap.

The organizational expense cap is set forth in Section 7.1 of the LPA. Any organizational expenses incurred in excess of $150,000 will be borne by the General Partner and will not be charged to the limited partners.

Market Comparison. An organizational expense cap of $150,000 is reasonable and within the typical range for single-asset co-investment vehicles, which generally range from $100,000 to $250,000 depending on the complexity of the vehicle structure and the number of co-investors. The cap provides Pellegrino with cost certainty and limits the erosion of invested capital by formation-related expenses.

E. GP Clawback

The LPA includes a full GP clawback provision, requiring the General Partner to return 100% of any excess carried interest distributions at the time of liquidation of the Co-Invest Vehicle. Specifically, upon final liquidation and dissolution of the Co-Invest Vehicle, if the General Partner has received cumulative carried interest distributions in excess of the amount to which it would be entitled on a cumulative, life-of-vehicle basis under the distribution waterfall described in Section III.B above, the General Partner is obligated to return such excess amount to the limited partners.

The clawback obligation is secured by a personal guarantee from Ridgeline Equity Management LLC, the sponsor entity. The clawback is subject to a tax benefit provision that limits the amount the General Partner is required to return by the amount of taxes actually paid by the General Partner or its beneficial owners on the carried interest distributions being clawed back, provided that the General Partner uses commercially reasonable efforts to claim and recover any available tax benefits associated with the clawback repayment.

Market Comparison. A full GP clawback at liquidation is market standard for co-investment vehicles and is consistent with the clawback provisions found in Fund IV's limited partnership agreement. During negotiations, Pellegrino initially requested interim clawback testing — that is, an obligation for the General Partner to test the clawback obligation at periodic intervals (e.g., annually or upon each distribution) rather than solely at final liquidation. This request was not agreed to by Ridgeline. However, the interim clawback concern is substantially mitigated in the context of a single-asset co-invest vehicle. Unlike a multi-asset fund, where early exits from profitable investments may result in carried interest distributions that are subsequently offset by losses on later investments (creating "netting risk"), a single-asset vehicle has only one investment. The final carried interest entitlement is definitively determined at the time of the single exit event, which is also the time at which the clawback is tested. Accordingly, the risk of a timing mismatch between carried interest distributions and the ultimate clawback obligation is minimal.

Recommendation. We consider the GP clawback provision to be acceptable given the single-asset nature of the Co-Invest Vehicle, which effectively eliminates netting risk. The sponsor guarantee from Ridgeline Equity Management LLC provides a creditworthy backstop for the clawback obligation.

IV. Term and Extensions

The initial term of the Co-Invest Vehicle is 10 years, commencing on the date of the initial closing (expected to be January 30, 2026) and expiring on January 30, 2036, unless earlier terminated or extended in accordance with the terms of the LPA.

The General Partner has the right, exercisable at its sole discretion, to extend the term of the Co-Invest Vehicle for up to two additional one-year periods. If both extension rights are exercised, the term would expire on January 30, 2038. The extension rights may be exercised sequentially, and no limited partner consent or advisory committee approval is required for the General Partner to exercise either extension.

The LPA provides that the term of the Co-Invest Vehicle is co-terminous with the term of Fund IV, meaning that the Co-Invest Vehicle and Fund IV are intended to hold and dispose of their respective interests in AcquisitionCo on the same timeline. This co-terminous provision provides structural alignment between the main fund and the co-invest vehicle and reduces the risk of divergent exit timelines.

Market Comparison. A 10-year initial term with two one-year extension periods is standard for private equity fund co-investment vehicles, which typically have initial terms ranging from 8 to 12 years with one to three extension periods. Some co-invest LPAs include a provision requiring LP advisory committee approval or consultation before extensions are exercised. The current LPA does not require LPAC approval for extensions, although the LPAC has a consultative role on the extension decision.

Recommendation. During the December 6, 2025 markup, we raised the issue of LP consent or LPAC approval for extensions. Ridgeline declined to include a consent or approval mechanism, citing the co-terminous structure with Fund IV as providing sufficient alignment of interests. In the January negotiation calls, Ridgeline's counsel confirmed, on the record, that the extension rights would only be exercised in connection with corresponding extensions of Fund IV's term, and that Ridgeline does not intend to extend the Co-Invest Vehicle independently of the main fund. This confirmation is documented in our negotiation record and in correspondence with Hartwell Velmoran & Pratt LLP, but it is not reflected in the LPA itself and therefore is not contractually binding. We consider this to be an acceptable risk given the co-terminous provision in the LPA, which provides a structural safeguard against independent extension of the Co-Invest Vehicle, and given the practical reality that an extension of the Co-Invest Vehicle without a corresponding extension of Fund IV would serve no commercial purpose.

V. Governance

A. Limited Partner Advisory Committee (LPAC)

The LPA establishes a three-member Limited Partner Advisory Committee (the "LPAC" or the "Advisory Committee"). The LPAC is composed of representatives of the Co-Invest Vehicle's limited partners, selected based on commitment size and investment profile.

Pursuant to Section 3.1 of the Side Letter, Pellegrino is entitled to one seat on the LPAC. The Pellegrino representative on the LPAC shall be designated by Pellegrino and may be replaced at any time upon written notice to the General Partner. The LPAC seat right is personal to Pellegrino and is not transferable with Pellegrino's limited partnership interest without the prior written consent of the General Partner.

The LPAC has a consultative role with respect to the following matters:

(a) Conflicts of interest involving the General Partner, Ridgeline Equity Management LLC, or any of their respective affiliates;

(b) Valuation matters relating to the Co-Invest Vehicle's investment in AcquisitionCo, including the methodology and assumptions used in determining the fair value of the investment for reporting purposes;

(d) Such other matters as the General Partner may refer to the LPAC from time to time.

It is important to note that the LPAC's role is consultative rather than approval-based. The General Partner is obligated to consult with the LPAC on the foregoing matters and to consider the LPAC's input in good faith, but the LPAC does not have the authority to approve, disapprove, or veto any action by the General Partner. The General Partner retains sole decision-making authority on all matters within its purview under the LPA.

The LPAC is required to meet at least annually. Additional meetings may be convened upon the request of any LPAC member or by the General Partner. Meetings may be held in person or by teleconference, and the General Partner is responsible for providing the LPAC with reasonable advance notice and supporting materials for each meeting.

Market Comparison. An LPAC seat for a co-investor holding a 33.33% interest in the vehicle is appropriate and consistent with market practice. In our experience, LPAC seats are typically offered to co-investors holding 25% or more of the vehicle's aggregate commitments. The consultative (rather than approval) authority is typical for co-invest vehicles, where the General Partner's ability to act quickly and decisively on behalf of the co-investors is an important structural feature.

B. Key Person Provision

The LPA contains a Key Person provision identifying two individuals as "Key Persons" for purposes of the Co-Invest Vehicle:

(i) Julian T. Whitmore, Co-Founder and Managing Partner of Ridgeline Equity Management LLC; and

(ii) Connor M. Rafferty, Partner and Head of Hospitality at Ridgeline Equity Management LLC.

The Key Person Trigger is activated if both Whitmore and Rafferty cease to be actively involved in the management, oversight, and monitoring of the Co-Invest Vehicle's investment in AcquisitionCo. For purposes of this provision, "active involvement" means that the Key Person continues to devote a substantial majority of his or her professional time and attention to the affairs of Ridgeline Equity Management LLC and the management and oversight of Ridgeline-sponsored investments, including the Co-Invest Vehicle's investment.

The departure of either Whitmore or Rafferty individually, while the other remains actively involved, does not trigger the Key Person provision. The provision is a "dual trigger" — both designated Key Persons must cease active involvement for the provision to be activated.

Upon the occurrence of a Key Person Trigger, the following consequences apply:

(a) Notification: The General Partner must notify all limited partners in writing within 15 business days of the occurrence of the Key Person Trigger, describing the circumstances giving rise to the trigger and the General Partner's proposed course of action;

(b) Suspension: The General Partner must suspend any additional investments or commitments on behalf of the Co-Invest Vehicle (a provision that is largely academic in the context of this single-asset vehicle, since the Co-Invest Vehicle has already made its sole investment at closing);

(c) LP Wind-Down Election: Limited partners representing a majority-in-interest (measured by capital commitments) may elect to commence the orderly wind-down and dissolution of the Co-Invest Vehicle. Such election must be made within 90 days of receipt of the Key Person Trigger notification from the General Partner.

Market Comparison. A dual Key Person trigger — requiring both designated individuals to cease active involvement — is the prevailing standard in co-investment vehicles sponsored by established private equity firms with deep teams. During our December 6, 2025 markup, Pellegrino requested a single-person trigger on Connor M. Rafferty alone, given Rafferty's role as the lead deal professional on the Clarion transaction and his expected day-to-day oversight of the investment post-closing. Ridgeline resisted this request, citing organizational depth within the hospitality team and the risk that a single-person trigger could create unnecessary disruption in the event of a temporary absence or role change. The agreed dual trigger is consistent with market practice.

Recommendation. We consider the dual Key Person trigger to be adequate protection for Pellegrino's interests. Rafferty's operational role as Head of Hospitality and the lead deal professional on the Clarion transaction makes his continued involvement the more critical element of the provision. Whitmore, as Co-Founder and Managing Partner, provides strategic oversight and reputational alignment. The risk of both individuals simultaneously departing is low. Additionally, the fact that Clarion has a standalone management team — led by CEO Ted Barrington and CFO Lisa Kwon, both of whom are rolling over equity and therefore have a significant personal financial interest in the success of the company — provides an additional layer of continuity and mitigates the operational impact of any Key Person Trigger event.

C. LP Consent Rights

The LPA reserves certain fundamental matters for limited partner consent, generally requiring either a supermajority vote (66⅔% or more of capital commitments) or a majority-in-interest vote (more than 50% of capital commitments), depending on the nature of the action. The following matters require limited partner consent:

(a) Amendments to the LPA that materially and adversely affect the economic rights of the limited partners (including changes to the distribution waterfall, carried interest rate, preferred return, or management fee) — requires supermajority consent;

(b) Admission of new limited partners to the Co-Invest Vehicle after the initial closing — requires supermajority consent;

(c) Voluntary dissolution of the Co-Invest Vehicle other than in accordance with its stated term — requires majority-in-interest consent;

(d) Any merger, consolidation, or conversion of the Co-Invest Vehicle — requires supermajority consent;

(e) Removal of the General Partner for cause — requires supermajority consent;

(f) Any transaction between the Co-Invest Vehicle and the General Partner or its affiliates (other than transactions expressly contemplated by the LPA) — requires majority-in-interest consent.

As noted in Section IV above, extension of the Co-Invest Vehicle's term does not require limited partner consent under the final agreed form of the LPA; the LPAC has a consultative role only with respect to extensions.

Subject to the foregoing consent requirements, the General Partner retains broad discretion over the day-to-day management, investment decisions (to the extent applicable in a single-asset vehicle), and disposition of the Co-Invest Vehicle's investment in AcquisitionCo. The limited partners do not have the right to participate in or direct the management of the Co-Invest Vehicle's business or affairs, consistent with the fundamental limited partnership structure under the Delaware Revised Uniform Limited Partnership Act.

VI. Liquidity, Transfers, and Exit

A. Transfer Restrictions

The LPA imposes strict restrictions on the transfer, sale, assignment, pledge, or other disposition of limited partnership interests. No limited partner may transfer, sell, assign, pledge, hypothecate, or otherwise dispose of all or any portion of its limited partnership interest in the Co-Invest Vehicle without the prior written consent of the General Partner, which consent may be granted, conditioned, or withheld in the General Partner's sole and absolute discretion.

In connection with any proposed transfer, the LPA provides for a Right of First Refusal ("ROFR") in favor of the General Partner and the other co-investors. Specifically, before effecting any transfer to a third party, the transferring limited partner must deliver written notice to the General Partner and all other limited partners identifying the proposed transferee, the proposed terms and conditions of the transfer (including price), and any other material terms. The General Partner and the other co-investors have 30 days from receipt of such notice to exercise their ROFR to acquire the transferring limited partner's interest (or any portion thereof) on the same terms and conditions as those offered by the proposed third-party transferee. If the ROFR is exercised, the General Partner and the other co-investors may acquire the interest pro rata or in such other proportions as they may agree among themselves.

Notwithstanding the foregoing restrictions, the LPA permits certain "permitted transfers" without triggering the ROFR or requiring General Partner consent in its sole discretion (although General Partner notice and consent, not to be unreasonably withheld, is still required). Permitted transfers include:

(a) Transfers to controlled affiliates of the transferring limited partner (i.e., entities that are directly or indirectly controlled by, controlling, or under common control with the transferring limited partner);

(b) Transfers for estate planning purposes, including transfers to family trusts, family limited partnerships, or other estate planning vehicles established for the benefit of the transferring limited partner or its beneficial owners and their family members;

provided, in each case, that the transferee executes a joinder agreement in the form attached to the LPA, delivers any required legal opinions and tax certifications, and assumes all obligations of the transferring limited partner under the LPA and the Side Letter.

Market Comparison. Strict transfer restrictions with a ROFR mechanism are standard for co-investment vehicles. Co-invest LP interests are illiquid by nature, and Pellegrino should not expect any secondary market liquidity for its interest in the Co-Invest Vehicle. The ROFR mechanics and the permitted transfer exceptions are consistent with customary market practice. The 30-day ROFR exercise period is within the typical range of 20 to 45 days.

B. Tag-Along Rights

Pellegrino (through the Co-Invest Vehicle) has full tag-along rights in connection with any sale by Fund IV of its interest in AcquisitionCo. The tag-along rights operate at two levels:

(a) AcquisitionCo Level Tag-Along: If Ridgeline Equity Partners Fund IV, L.P. proposes to sell all or any portion of its equity interest in AcquisitionCo to a third-party purchaser, the Co-Invest Vehicle has the right to participate in such sale on the same terms and conditions as Fund IV, on a pro rata basis (based on the Co-Invest Vehicle's ownership of AcquisitionCo relative to Fund IV's ownership). The Co-Invest Vehicle is required to deliver notice of its election to tag along within 15 business days of receiving the tag-along notice from Fund IV.

(b) Co-Invest Vehicle Level Tag-Along: If the General Partner initiates any transfer or sale of the Co-Invest Vehicle's interest in AcquisitionCo, each limited partner (including Pellegrino) has the right to participate in such transaction on a pro rata basis, receiving its proportionate share of the proceeds based on its percentage interest in the Co-Invest Vehicle.

The tag-along right ensures that Pellegrino cannot be left behind in a sale transaction and will receive the benefit of the same economic terms negotiated by Fund IV with any third-party purchaser.

Market Comparison. Full tag-along protection is a critical right for co-investors and is considered market standard. Notably, we successfully negotiated tag-along rights at both the Co-Invest Vehicle level and the AcquisitionCo level. In many co-invest structures, tag-along rights operate only at the vehicle level — the addition of tag-along rights at the AcquisitionCo level provides Pellegrino with enhanced protection against scenarios where Fund IV might sell its direct interest in AcquisitionCo without necessarily involving the Co-Invest Vehicle in the transaction. This dual-level tag-along protection is above market and represents a meaningful negotiation win.

C. Drag-Along Rights

The General Partner has the right to exercise drag-along rights to compel all limited partners in the Co-Invest Vehicle to participate in a sale of 100% of AcquisitionCo's equity to a third-party purchaser. The drag-along mechanism operates as follows:

(a) The General Partner may exercise the drag-along right only in connection with a sale of 100% of the equity interests of AcquisitionCo (or all or substantially all of the assets of Clarion through AcquisitionCo);

(b) The drag-along sale must be on terms no less favorable to the Co-Invest Vehicle's limited partners than those applicable to Fund IV's interest in the transaction;

(c) Each co-investor, including Pellegrino, must receive the same per-unit consideration as Fund IV for its proportionate share of the equity being sold;

(d) The General Partner must provide the limited partners with at least 20 business days' prior written notice of the proposed drag-along sale, together with a summary of the material terms of the proposed transaction;

(e) Each limited partner is obligated to execute and deliver such documents and instruments as may be reasonably necessary to consummate the drag-along sale, including customary representations, warranties, and indemnification obligations (subject to appropriate limitations).

Market Comparison. A drag-along right on a 100% sale of the target is standard and necessary for exit flexibility. Without the drag-along, minority co-investors could potentially hold up or block a sale transaction that the sponsor and its main fund have determined is in the best interest of all investors. The "same terms" protection — requiring that the co-investors receive the same per-unit consideration as Fund IV — is an important safeguard and was successfully negotiated. This protection ensures that Pellegrino's economic interest is fully aligned with Fund IV's interest in any drag-along sale.

D. Exit Mechanics

The Co-Invest Vehicle is a single-asset vehicle, and the primary exit from the investment is expected to occur through one of the following mechanisms: (i) a sale of 100% of the equity of AcquisitionCo (or Clarion directly) to a strategic or financial buyer; (ii) a secondary sale of Clarion to another private equity sponsor; (iii) a recapitalization or refinancing event that enables a return of capital to equity holders; or (iv) an initial public offering of Clarion or a successor entity, although the current market environment and Clarion's size suggest that an IPO exit is unlikely in the near term.

The LPA does not provide the limited partners with any put or call rights, and Pellegrino does not have a contractual right to demand or force a liquidity event at any time during the term of the Co-Invest Vehicle. Pellegrino's liquidity is dependent on the General Partner's determination, in its sole discretion, to initiate an exit transaction. The General Partner is required to act in a manner consistent with its duties under the LPA and applicable law, but the timing and manner of exit are within the General Partner's discretion.

Recommendation. Pellegrino should be aware that there is no contractual mechanism to force a liquidity event. The LPAC seat secured through the Side Letter, combined with the monthly reporting rights described in Section VIII below and ongoing communication with the Ridgeline team, provides Pellegrino with informal influence on exit timing and strategy. We recommend that Pellegrino use the LPAC platform and the relationship with Connor Rafferty to stay actively engaged in exit planning discussions as they develop over the course of the hold period. The co-terminous term provision with Fund IV also provides assurance that exit timing will be driven by Fund IV's lifecycle, creating alignment between Pellegrino's exit expectations and the sponsor's fund-level considerations.

VII. Default and Remedies

The LPA includes default provisions that impose significant penalties on any limited partner that fails to meet its capital call obligations. Given the structure of this co-investment — a single capital call at closing with no follow-on obligations — the default provisions have limited practical applicability but are worth understanding.

Default Trigger. A limited partner is deemed to be in "default" under the LPA if it fails to fund any capital call within 10 business days of receiving written notice of such capital call from the General Partner. The 10-business-day period serves as both the notice period and the funding deadline.

Default Remedies. Upon a default, the General Partner may, at its election, impose the following penalties on the defaulting limited partner:

(a) Forfeiture: Forfeiture of 50% of the defaulting limited partner's partnership interest. The forfeited interest is reallocated pro rata among the non-defaulting limited partners or is otherwise disposed of as determined by the General Partner in its discretion.

(b) Subordination: The remaining 50% of the defaulting limited partner's interest is subordinated to all non-defaulting limited partners in the distribution waterfall. The defaulting limited partner does not receive any distributions until all non-defaulting limited partners have received (i) a return of their contributed capital, (ii) the full preferred return, and (iii) their allocable share of profits under the waterfall.

Cure Period. The LPA does not provide for an explicit cure period following a default. The 10-business-day funding window established by the capital call notice serves as the combined notice, funding, and cure period. If a limited partner fails to fund within that 10-business-day window, the default is triggered and the General Partner may exercise the remedies described above immediately.

Negotiation Note. During the December 6, 2025 markup, Pellegrino requested a 5-business-day cure period following a default — i.e., an additional 5-business-day window after the expiration of the initial 10-business-day funding deadline during which the limited partner could cure the default without penalty. Ridgeline declined this request, taking the position that the 10-business-day funding period provides adequate time for limited partners to arrange funding, and that a separate cure period would create uncertainty around closing mechanics. The final agreed form maintains the 10-business-day funding period as the single deadline, with no additional cure period.

Market Comparison. The 50% forfeiture penalty is at the more punitive end of market practice. In our experience, default remedies in co-invest vehicles typically involve either (i) a forfeiture or dilution of 25% to 50% of the defaulting limited partner's interest, (ii) loss of voting rights and LPAC participation, or (iii) a combination of the foregoing. The 50% forfeiture rate is within the market range but at the high end. However, the practical significance of this provision is minimal in the context of Pellegrino's co-investment. Since 100% of committed capital is called at closing and there are no follow-on commitment obligations, the default provision would only be triggered if Pellegrino fails to fund the initial $25,000,000 closing capital call. If Pellegrino funds at closing — as expected — the default provision will never be invoked.

Recommendation. The practical risk posed by the default provision is low given the single funding event at closing. Pellegrino should ensure that wire instructions, internal funding approvals, board or managing member authorizations, and banking arrangements are finalized well in advance of the January 30, 2026 closing date. We recommend that Pellegrino initiate the wire transfer at least two business days before the closing date to allow for processing time and to avoid any risk of a missed deadline due to banking delays.

VIII. Information and Reporting Rights

A. LPA Reporting Obligations (All LPs)

The LPA establishes the following minimum reporting obligations that apply to all limited partners in the Co-Invest Vehicle:

Annual Audited Financial Statements. The General Partner is required to deliver to each limited partner annual audited financial statements of the Co-Invest Vehicle, prepared in accordance with generally accepted accounting principles (GAAP), within 120 days following the end of each fiscal year. The annual financial statements must include a balance sheet, income statement, statement of cash flows, and statement of changes in partners' capital. The annual audit must be performed by an independent registered public accounting firm selected by the General Partner.

Quarterly Unaudited Financial Statements. The General Partner is required to deliver quarterly unaudited financial statements within 60 days following the end of each fiscal quarter. The quarterly financial statements must include a balance sheet and income statement and may include a brief narrative summary of material developments during the quarter.

Annual Tax Reporting (Schedule K-1). The General Partner is required to provide each limited partner with its Schedule K-1 (Partner's Share of Income, Deductions, Credits, etc.) for each fiscal year no later than March 15 of the following year. The March 15 delivery deadline is aligned with IRS filing deadlines and allows limited partners sufficient time to incorporate the K-1 information into their own annual tax filings.

Market Comparison. The reporting obligations set forth in the LPA are consistent with market standards for co-investment vehicles. The 120-day period for annual audited financial statements is the prevailing standard, as is the 60-day period for quarterly unaudited financial statements. The March 15 K-1 delivery deadline is aligned with IRS filing deadlines and is standard practice.

B. Enhanced Reporting (Side Letter — Pellegrino Only)

In addition to the reporting obligations applicable to all limited partners under the LPA, the Side Letter provides Pellegrino with the following enhanced reporting rights:

Monthly Operating Dashboards for Clarion. The General Partner (or its designee) is obligated to provide Pellegrino with monthly operating dashboards for Clarion within 30 days following the end of each calendar month. The monthly dashboards are required to include, at a minimum, the following key operating metrics:

• Revenue (consolidated and by property segment)

• Occupancy rates (system-wide and by region/brand)

• Revenue per available room (RevPAR)

• EBITDA (consolidated, with reconciliation from revenue)

• Key operating variances from budget

• Other key operating metrics as reasonably agreed between the parties

The monthly dashboards are intended to provide Pellegrino with ongoing, real-time visibility into Clarion's operating performance, enabling Pellegrino to monitor the health and trajectory of the investment on a granular basis throughout the hold period.

Annual ESG Summary. The General Partner (or its designee) is obligated to provide Pellegrino with an annual ESG (environmental, social, and governance) summary for Clarion's managed portfolio, consistent with Pellegrino's internal ESG policy framework. The content, format, and methodology of the annual ESG summary are to be agreed between the General Partner and Pellegrino in good faith. The ESG summary is expected to cover, at a minimum, the following areas:

• Environmental metrics (energy consumption, carbon emissions, water usage, waste management)

• Social metrics (employee satisfaction, diversity and inclusion, community engagement, labor practices)

• Governance metrics (board composition, compliance programs, related-party transactions, cybersecurity)

Market Comparison. Monthly operating dashboards are not standard for co-investment vehicles and represent a significant concession by Ridgeline. In our experience, monthly reporting is increasingly common for larger co-investors and family offices with sector expertise, particularly where the co-investor has a thematic focus and wishes to maintain close visibility into the portfolio company's operations. The ESG reporting commitment reflects a growing trend in institutional co-investment documentation, driven by the increasing importance of ESG considerations in investment decision-making and portfolio monitoring.

Recommendation. The enhanced reporting rights secured through the Side Letter are significant value-adds that will enable Pellegrino to maintain a high degree of visibility into Clarion's operations and performance. We recommend that Pellegrino share its internal ESG policy framework with Ridgeline promptly after closing to ensure that the annual ESG summary is meaningful, aligned with Pellegrino's reporting standards, and consistent with any frameworks or standards (such as SASB, GRI, or TCFD) that Pellegrino uses for its broader portfolio.

IX. Side Letter Protections — Summary

The Side Letter Agreement between the General Partner and Pellegrino contains a number of additional protective provisions beyond those set forth in the LPA. The Side Letter is binding on the General Partner and its successors and assigns, and the rights granted thereunder are in addition to (and not in limitation of) Pellegrino's rights under the LPA. The key Side Letter provisions are summarized below.

A. Most-Favored-Nation (MFN) Rights

The Side Letter grants Pellegrino full MFN protection. If the General Partner enters into any side letter, supplemental agreement, or amendment with any other co-investor in the Co-Invest Vehicle that contains terms or provisions more favorable to such other co-investor than the terms and provisions applicable to Pellegrino under the LPA and the Side Letter, Pellegrino is entitled to elect to receive the benefit of any such more favorable term or provision.

The MFN mechanics operate as follows:

(a) Notification: The General Partner is obligated to notify Pellegrino in writing within 10 business days of entering into any side letter, supplemental agreement, or amendment with any other co-investor that contains terms or provisions that differ from (and are more favorable than) the terms applicable to Pellegrino.

(b) Disclosure: The notification must include a description of the more favorable terms or provisions granted to the other co-investor, together with a copy of the relevant side letter or amendment (with commercially sensitive information of the other co-investor redacted as appropriate).

(c) Election: Pellegrino has 15 business days from receipt of the notification to deliver written notice to the General Partner electing to receive the benefit of any or all of the more favorable terms. Upon such election, the Side Letter and/or the LPA are deemed amended to incorporate the elected terms as if they had been originally included.

Market Comparison. Full MFN protection is the standard for co-investors at Pellegrino's commitment level. The notification and election mechanics are well-documented in the Side Letter and provide Pellegrino with a clear, time-bound process for exercising its MFN rights. The 10-business-day notification period and 15-business-day election period are within the typical market range.

B. LPAC Seat

As described in Section V.A above, the Side Letter guarantees Pellegrino one seat on the three-member LPAC. This right is personal to Pellegrino and is not transferable with Pellegrino's limited partnership interest without the prior written consent of the General Partner.

Market Comparison. An LPAC seat for a co-investor holding a 33.33% interest in the vehicle is consistent with market practice. LPAC seats are typically offered to co-investors holding 25% or more of aggregate commitments.

C. Future Co-Investment Allocation Rights

The Side Letter provides that Pellegrino will receive a pro rata allocation in any future co-investment opportunities sponsored by Ridgeline in the hospitality sector, subject to availability. Specifically, the General Partner and Ridgeline Equity Management LLC agree to include Pellegrino in the allocation process for any future hospitality-focused co-investment opportunity on a pro rata basis, taking into account Pellegrino's commitment to the Co-Invest Vehicle relative to the commitments of other co-investors who have received similar allocation rights.

This is a "soft" right — it is not a binding commitment by Ridgeline to offer co-investments to Pellegrino, nor is it a guarantee that co-investment opportunities will be available in the hospitality sector. Rather, it is an agreement by Ridgeline to include Pellegrino in the allocation process and to provide Pellegrino with a fair and pro rata opportunity to participate in any such future co-investments, subject to capacity constraints, legal and regulatory considerations, and the General Partner's discretion in managing the allocation process. The allocation right is limited to the hospitality sector, reflecting Pellegrino's thematic investment focus and sector expertise.

Market Comparison. Future co-investment allocation rights are a valuable provision that is becoming increasingly common in side letters negotiated by strategic co-investors with demonstrated sector expertise. The non-binding nature of the provision is typical — binding allocation commitments are rare and would create significant practical difficulties for sponsors in managing allocation across multiple investors. The limitation to the hospitality sector aligns with Pellegrino's investment strategy and provides a framework for an ongoing, sector-specific deal flow relationship with Ridgeline.

Recommendation. Pellegrino should understand that this provision is aspirational rather than contractually binding, and that Ridgeline is not obligated to source, structure, or offer any particular co-investment opportunity. However, the provision establishes a clear framework and expectation for ongoing deal flow from Ridgeline in the hospitality space, and it creates a professional relationship dynamic in which Ridgeline is incentivized to continue including Pellegrino in future hospitality co-investment opportunities. We recommend that Pellegrino proactively maintain the relationship with the Ridgeline hospitality team — particularly with Connor Rafferty — to maximize the likelihood of receiving future co-investment allocations.

D. ESG Reporting

As described in Section VIII.B above, the Side Letter provides Pellegrino with the right to receive an annual ESG summary for Clarion's managed portfolio, consistent with Pellegrino's internal ESG policy. The content, format, and methodology of the annual ESG summary are to be agreed between the parties in good faith following closing.

E. No Excuse/Exclusion Without Consent

The Side Letter provides that the General Partner may not excuse or exclude Pellegrino from the Co-Invest Vehicle's investment without Pellegrino's prior written consent. This provision overrides the standard LPA language that permits the General Partner to excuse or exclude limited partners from all or any portion of a particular investment in certain circumstances, including where the General Partner determines in good faith that a limited partner's participation could give rise to a legal or regulatory conflict, result in adverse tax consequences to the partnership, or otherwise be detrimental to the Co-Invest Vehicle.

The Side Letter's "no excuse/exclusion" provision effectively ensures that Pellegrino cannot be involuntarily removed from the investment or denied its pro rata share of the Co-Invest Vehicle's interest in AcquisitionCo, regardless of any determination by the General Partner that Pellegrino's participation could give rise to a conflict or other adverse circumstance.

Market Comparison. This is a strong protective provision that goes beyond market standard. The typical LPA permits the General Partner to exercise excuse/exclusion authority in good faith for legitimate legal or regulatory reasons. The Side Letter override ensures that Pellegrino's participation is protected against any unilateral action by the General Partner, including actions that might otherwise be taken in good faith but that would result in Pellegrino being excluded from all or a portion of the investment.

Recommendation. This provision was a key negotiation objective for Pellegrino and was successfully secured. It provides Pellegrino with certainty that its $25,000,000 commitment will be deployed as intended and that it will not be involuntarily removed from the investment during the hold period. We consider this to be one of the most important protections in the Side Letter.

F. Excuse Rights (LPA Provision, Cross-Referenced)

Under the LPA, Pellegrino has the right to request to be excused from the investment, but only on the basis of a bona fide legal or regulatory conflict. The LPA provides that any such request is subject to the General Partner's approval, which shall not be unreasonably withheld. The excuse right is narrow and limited to circumstances where Pellegrino's continued participation in the investment would violate applicable law, regulation, or a binding court or regulatory order.

Market Comparison. A narrow excuse right limited to legal or regulatory conflicts is the market standard for single-asset co-invest vehicles. Broader excuse rights — including excuse for business, strategic, or portfolio construction reasons — are more commonly found in blind-pool fund LPAs, where limited partners may wish to opt out of specific investments that do not align with their investment criteria or that present conflicts with their existing portfolio holdings. In a single-asset co-invest vehicle, the limited partner has already made the affirmative decision to invest in the specific asset, and broader excuse rights would undermine the certainty of funding that the sponsor and other co-investors rely upon.

X. Tax Considerations — Summary

A detailed analysis of the tax considerations applicable to Pellegrino's co-investment has been prepared under separate cover in our memorandum dated January 3, 2026, prepared by Owen Fischer and Stephen Adler of Calderwood & Harkness LLP, in coordination with Robert K. Anand, CPA, of Whitfield Greer & Associates LLP, Pellegrino's tax advisor. This Section provides a high-level summary of the key tax considerations; Pellegrino should refer to the January 3, 2026 tax analysis memo for a more comprehensive discussion.

Entity Classification. The Co-Invest Vehicle is organized as a Delaware limited partnership and will be treated as a partnership for U.S. federal income tax purposes. A partnership is generally not subject to entity-level federal income tax. Instead, each partner is required to report and pay taxes on its allocable share of the partnership's income, gain, loss, deduction, and credit, regardless of whether such amounts are actually distributed to the partner during the taxable year. Pellegrino, as a Delaware limited liability company, will receive its allocable share of these tax items via a Schedule K-1 issued by the Co-Invest Vehicle.

UBTI Risk. Unrelated business taxable income ("UBTI") is a concern for tax-exempt investors (such as pension funds, endowments, and foundations) that invest in partnerships that generate income from debt-financed property or an active trade or business. UBTI is not a material concern for Pellegrino, as Pellegrino is a non-exempt, for-profit limited liability company. Accordingly, the UBTI provisions of the Internal Revenue Code (Sections 511 through 514) do not apply to Pellegrino's investment.

FIRPTA. The Foreign Investment in Real Property Tax Act ("FIRPTA") imposes special withholding and tax obligations on dispositions of U.S. real property interests ("USRPIs") by foreign persons. While Pellegrino is a domestic entity and therefore not directly subject to FIRPTA withholding, the FIRPTA analysis is relevant to the extent that certain foreign co-investors in the vehicle may be affected, which could in turn affect the timing or mechanics of exit transactions. More importantly, the FIRPTA analysis is relevant to the characterization of the Co-Invest Vehicle's investment. Clarion's primary business is hotel management and asset management services, rather than direct ownership of U.S. real property. Based on the current business model, the Co-Invest Vehicle's interest in AcquisitionCo is not expected to constitute a USRPI. However, this conclusion is fact-dependent and could change if Clarion's business model shifts toward direct ownership of hotel real estate assets (as opposed to management of third-party-owned properties). Pellegrino should monitor this risk on an ongoing basis through the monthly reporting and LPAC participation.

Allocations — Sections 704(b) and 704(c). The LPA's alloca

CALDERWOOD & HARKNESS LLP 200 South Biscayne Boulevard, Suite 4100 Miami, FL 33131
PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
MEMORANDUM
TO: Marco A. Pellegrino, Founder & Managing Member, Pellegrino Capital Group LLC Adriana Voss, Vice President & General Counsel, Pellegrino Capital Group LLC
FROM: Nicholas Stern, Partner, Funds & Asset Management Practice, Calderwood & Harkness LLP Owen Fischer, Associate, Funds & Asset Management Practice, Calderwood & Harkness LLP
DATE: December 18, 2025 (initial draft); updated through January 24, 2026 (reflecting final agreed forms)
RE: Summary of Key Negotiated Terms and Issues — Limited Partnership Agreement of Ridgeline-Clarion Co-Invest, L.P. and Related Side Letter Agreement
MATTER NO.: 1027-00002
CONFIDENTIALITY NOTICE: This memorandum is protected by attorney-client privilege and the work product doctrine. It has been prepared for the sole use of Pellegrino Capital Group LLC and its authorized representatives. This memorandum contains confidential legal advice and analysis and should not be disclosed to, shared with, or relied upon by any third party without the prior written consent of Calderwood & Harkness LLP. Any inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.
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I. Executive Summary and Purpose
The purpose of this memorandum is to provide Pellegrino Capital Group LLC ("Pellegrino" or "PCG") with a comprehensive summary of the key terms negotiated in the Amended and Restated Limited Partnership Agreement (the "LPA") of Ridgeline-Clarion Co-Invest, L.P. (the "Co-Invest Vehicle" or "Co-Invest LP") and the Side Letter Agreement dated as of the date of the initial closing (the "Side Letter") entered into between Ridgeline-Clarion Co-Invest GP LLC (the "General Partner" or "Co-Invest GP") and Pellegrino. This memorandum is intended to serve as a reference document for Pellegrino's management team and internal counsel, highlighting the material economic, governance, and protective provisions contained in the final agreed forms of the transaction documentation, together with our assessment of how the negotiated terms compare to prevailing market standards for sponsor-led co-investment vehicles.
Transaction Context. Pellegrino proposes to co-invest Twenty-Five Million Dollars ($25,000,000) alongside Ridgeline Equity Partners Fund IV, L.P. ("Fund IV") in connection with the acquisition of one hundred percent (100%) of the outstanding equity interests of Clarion Hospitality Holdings, Inc. ("Clarion" or the "Target") through Clarion Holdings Acquisition Corp. ("AcquisitionCo"), a Delaware corporation formed as a special purpose acquisition vehicle for purposes of the transaction.
Transaction Size and Capitalization. The acquisition is being consummated at an enterprise value of approximately $555,000,000. The capital structure consists of $305,000,000 in net debt in the form of a Term Loan B facility provided by Pinnacle National Bank, N.A. (the "Senior Lender"), together with a $40,000,000 undrawn revolving credit facility, and $250,000,000 in total equity capitalization. Of the $250,000,000 in equity, Fund IV is contributing $175,000,000, representing 70% of total equity, and the Co-Invest Vehicle is contributing $75,000,000, representing 30% of total equity. Pellegrino's $25,000,000 commitment represents 33.33% of the Co-Invest Vehicle's aggregate commitments and, accordingly, an indirect ownership interest of approximately 10.0% of AcquisitionCo's equity.
Management Rollover. We note that Ted Barrington, the Chief Executive Officer of Clarion, and Lisa Kwon, the Chief Financial Officer of Clarion, are rolling over approximately $30,000,000 in aggregate equity value into AcquisitionCo through a separate management rollover structure. The management rollover equity will dilute all other equity holders proportionally following the closing of the acquisition. The mechanics of the management rollover are governed by a separate Management Stockholders' Agreement and are not addressed in detail in this memorandum, although we have reviewed that agreement for any provisions that could adversely affect Pellegrino's interests.
Status and Timeline. All co-investment transaction documents are in final agreed form as of January 24, 2026. The target signing and closing date is January 30, 2026, with simultaneous signing and closing of the acquisition. Pellegrino should be prepared to fund its full capital commitment of $25,000,000 on or before that date.
Drafting History and Negotiation Process. This memorandum was initially drafted on December 18, 2025, following our delivery of an initial markup of the LPA and Side Letter on December 6, 2025. The memorandum has been updated to reflect the resolution of all open negotiation points through a series of negotiation calls conducted between January 6 and January 17, 2026 with Hartwell Velmoran & Pratt LLP (Douglas W. Cheng, Partner, and Meredith L. Tanaka, Associate), counsel to Ridgeline Equity Management LLC ("Ridgeline"), the sponsor of Fund IV and the Co-Invest Vehicle. A summary of resolved negotiation issues is set forth in Section XII below.
Governing Law. All co-investment transaction documents, including the LPA and the Side Letter, are governed by the laws of the State of Delaware, without regard to conflicts of law principles.
II. Transaction Structure Overview
This Section provides an overview of the transaction structure, the parties involved, and the organizational relationships among the various entities relevant to Pellegrino's co-investment.
Target Company. Clarion Hospitality Holdings, Inc. is a Delaware corporation headquartered in Nashville, Tennessee. Clarion operates as an integrated hospitality asset management platform managing approximately 14,200 hotel rooms across 62 properties located primarily in the southeastern and midwestern United States. Clarion's portfolio is concentrated in the select-service and extended-stay hotel segments, with properties flagged under several major hospitality brands. In addition to its core asset management operations, Clarion provides third-party hotel management services to institutional real estate owners and operates a proprietary revenue management technology platform that is licensed to both managed and non-managed properties.
Clarion Financial Summary (LTM as of September 30, 2025):
The foregoing financial information has been derived from the Confidential Information Memorandum and the quality of earnings report prepared by the seller's financial advisor, and has been confirmed through Ridgeline's independent due diligence. Pellegrino has had the opportunity to review the data room materials and has conducted its own independent assessment of the Target's financial profile.
Seller. The seller of the Target is Brindoval Growth Capital Fund II, L.P., which holds approximately 82% of the outstanding equity of Clarion, together with certain management rollover shareholders who collectively hold the remaining approximately 18% of Clarion's equity. The management rollover shareholders are rolling a portion of their equity into AcquisitionCo as described in Section I above.
Acquisition Structure. AcquisitionCo, a newly formed Delaware corporation, will acquire 100% of the outstanding equity of Clarion through a stock purchase transaction. AcquisitionCo will be capitalized with $250,000,000 in equity from Fund IV and the Co-Invest Vehicle, together with $305,000,000 in Term Loan B indebtedness provided by Pinnacle National Bank, N.A. as administrative agent and lead arranger. A $40,000,000 revolving credit facility from the same lender group will remain undrawn at closing but will be available for working capital and general corporate purposes.
Co-Invest Vehicle Structure. The Co-Invest Vehicle is organized as Ridgeline-Clarion Co-Invest, L.P., a Delaware limited partnership formed under the Delaware Revised Uniform Limited Partnership Act. The sole general partner of the Co-Invest Vehicle is Ridgeline-Clarion Co-Invest GP LLC, a Delaware limited liability company that is wholly owned by Ridgeline Equity Management LLC, the sponsor's management company and the entity that manages Fund IV. The Co-Invest Vehicle is a single-asset vehicle formed for the sole purpose of making and holding the co-investment in AcquisitionCo alongside Fund IV.
Post-Closing Ownership Summary:
The foregoing ownership percentages are presented on a pre-dilution basis and do not give effect to the approximately $30,000,000 management rollover from Barrington and Kwon, which will dilute all equity holders proportionally following closing. A simplified ownership chart illustrating the flow of equity from Fund IV and the Co-Invest Vehicle into AcquisitionCo, and from AcquisitionCo into Clarion, has been provided separately for reference and is attached to the final transaction binder.
III. Economics
A. Capital Commitments and Funding
The aggregate capital commitments to the Co-Invest Vehicle total $75,000,000. Pellegrino has committed $25,000,000 to the Co-Invest Vehicle, representing 33.33% of the aggregate capital commitments. The identities of the other co-investors in the vehicle have not been disclosed to us, although based on the aggregate commitment size and Pellegrino's pro rata share, we understand there are at least two additional co-investors.
The LPA provides for an initial capital call of 100% of each limited partner's total committed capital, to be funded at the closing of the acquisition. Accordingly, Pellegrino's entire $25,000,000 commitment will be called and must be funded on or before the closing date of January 30, 2026. The General Partner is required to provide no less than 10 business days' prior written notice of the capital call, together with wire instructions for the escrow account maintained by Continental Fiduciary Services, Inc. as the designated escrow agent.
The Co-Invest Vehicle's investment period is co-terminous with that of Fund IV. Importantly, since this is a single-asset co-investment vehicle structured to hold a direct investment in AcquisitionCo, there is no follow-on commitment obligation. Pellegrino will not be required to fund any additional capital beyond the initial $25,000,000 closing capital call, except in the limited circumstance of organizational expenses as described in Section III.D below, which are effectively pre-funded from the closing capital contribution.
Market Comparison. The structure of a 100% capital call at closing with no ongoing commitment obligation is the market standard for single-asset co-investment vehicles. This structure provides certainty of funding for all parties and eliminates the contingent liability associated with unfunded commitments. Pellegrino will not face the risk of future capital calls, which is a meaningful advantage compared to a commitment to a blind-pool fund.
B. Carried Interest
The Co-Invest GP is entitled to a carried interest equal to 10% of the net profits generated by the Co-Invest Vehicle above the preferred return hurdle. The carried interest is structured as a traditional promote allocation in the distribution waterfall rather than as a separate fee arrangement.
The preferred return hurdle rate is 8% per annum, compounded on a quarterly basis. The 8% preferred return functions as a gating mechanism — the General Partner is not entitled to any carried interest allocation or distribution until each limited partner has received: (i) a full return of its contributed capital and (ii) a cumulative preferred return of 8% per annum, compounded quarterly, on its contributed capital.
The full distribution waterfall is structured as follows:
(1) Return of Capital: First, 100% to the limited partners until each limited partner has received an amount equal to its aggregate capital contributions;
(2) Preferred Return: Second, 100% to the limited partners until each limited partner has received a cumulative preferred return of 8% per annum, compounded quarterly, on its unreturned capital contributions;
(3) GP Catch-Up: Third, 100% to the General Partner (as carried interest) until the General Partner has received an amount equal to 10% of the cumulative amounts distributed under clauses (2) and (3);
(4) Residual Split: Thereafter, 90% to the limited partners and 10% to the General Partner (as carried interest).
Market Comparison. The 10% carried interest rate is favorable to Pellegrino compared to the 20% standard carried interest charged by Fund IV to its limited partners. This reduced carry is one of the primary economic benefits of co-investing alongside a sponsor rather than investing solely through the main fund vehicle. In our experience, the market range for carried interest on sponsor-led co-investment vehicles spans from 0% (no carry) on the low end to 15% on the high end, with 10% representing a mid-market rate that is common for co-invest vehicles where the sponsor is providing meaningful deal sourcing, structuring, and ongoing portfolio management value. The 8% preferred return is market standard; preferred returns in co-invest vehicles typically range from 7% to 8%, with compounding on either an annual or quarterly basis. Quarterly compounding, as negotiated here, is incrementally more favorable to the limited partners than annual compounding.
Negotiation Note. During the initial markup phase, Pellegrino requested 0% carried interest on the Co-Invest Vehicle, consistent with the position that co-investors who commit capital on a deal-by-deal basis and bear the same risk as the main fund should not be subject to additional promoted economics. Ridgeline countered at 15%, citing the value of deal sourcing, due diligence, negotiation, and post-closing oversight provided by the sponsor team. Following negotiation, the parties resolved the carried interest at 10%, with the additional concession of quarterly compounding on the 8% preferred return (replacing Ridgeline's initial position of annual compounding). We consider this outcome to be a reasonable and market-competitive compromise.
C. Management Fee
The Co-Invest Vehicle does not charge any management fee to the limited partners. Section 5.3 of the LPA expressly provides that the General Partner shall not be entitled to any management fee, advisory fee, monitoring fee, or similar recurring fee in connection with the Co-Invest Vehicle's investment.
Market Comparison. A 0% management fee is the prevailing market standard for single-asset co-investment vehicles. The rationale is that co-investors are participating in a specific identified investment alongside the main fund, and the sponsor is already receiving management fees from the main fund's limited partners for providing portfolio management services. Charging an additional management fee on co-invested capital would, in effect, result in double-dipping and is generally viewed as inconsistent with the co-investment value proposition.
Observation. The absence of a management fee represents a significant economic benefit to Pellegrino compared to limited partners in Fund IV, who pay a standard management fee (typically 1.5% to 2.0% of committed capital during the investment period, stepping down to invested capital thereafter). Over a ten-year hold period, the management fee savings on a $25,000,000 commitment could amount to $2,500,000 to $5,000,000 depending on Fund IV's fee structure, making the co-investment an attractive vehicle for deploying capital into the Clarion transaction.
D. Organizational Expenses
Organizational and formation expenses of the Co-Invest Vehicle, including legal, accounting, regulatory filing, and other expenses incurred in connection with the formation, structuring, and establishment of the Co-Invest Vehicle, are capped at $150,000 in the aggregate. Organizational expenses are borne pro rata by the co-investors based on their respective capital commitments as a percentage of the Co-Invest Vehicle's aggregate capital commitments. Pellegrino's pro rata share of organizational expenses is 33.33%, or approximately $50,000, of the $150,000 cap.
The organizational expense cap is set forth in Section 7.1 of the LPA. Any organizational expenses incurred in excess of $150,000 will be borne by the General Partner and will not be charged to the limited partners.
Market Comparison. An organizational expense cap of $150,000 is reasonable and within the typical range for single-asset co-investment vehicles, which generally range from $100,000 to $250,000 depending on the complexity of the vehicle structure and the number of co-investors. The cap provides Pellegrino with cost certainty and limits the erosion of invested capital by formation-related expenses.
E. GP Clawback
The LPA includes a full GP clawback provision, requiring the General Partner to return 100% of any excess carried interest distributions at the time of liquidation of the Co-Invest Vehicle. Specifically, upon final liquidation and dissolution of the Co-Invest Vehicle, if the General Partner has received cumulative carried interest distributions in excess of the amount to which it would be entitled on a cumulative, life-of-vehicle basis under the distribution waterfall described in Section III.B above, the General Partner is obligated to return such excess amount to the limited partners.
The clawback obligation is secured by a personal guarantee from Ridgeline Equity Management LLC, the sponsor entity. The clawback is subject to a tax benefit provision that limits the amount the General Partner is required to return by the amount of taxes actually paid by the General Partner or its beneficial owners on the carried interest distributions being clawed back, provided that the General Partner uses commercially reasonable efforts to claim and recover any available tax benefits associated with the clawback repayment.
Market Comparison. A full GP clawback at liquidation is market standard for co-investment vehicles and is consistent with the clawback provisions found in Fund IV's limited partnership agreement. During negotiations, Pellegrino initially requested interim clawback testing — that is, an obligation for the General Partner to test the clawback obligation at periodic intervals (e.g., annually or upon each distribution) rather than solely at final liquidation. This request was not agreed to by Ridgeline. However, the interim clawback concern is substantially mitigated in the context of a single-asset co-invest vehicle. Unlike a multi-asset fund, where early exits from profitable investments may result in carried interest distributions that are subsequently offset by losses on later investments (creating "netting risk"), a single-asset vehicle has only one investment. The final carried interest entitlement is definitively determined at the time of the single exit event, which is also the time at which the clawback is tested. Accordingly, the risk of a timing mismatch between carried interest distributions and the ultimate clawback obligation is minimal.
Recommendation. We consider the GP clawback provision to be acceptable given the single-asset nature of the Co-Invest Vehicle, which effectively eliminates netting risk. The sponsor guarantee from Ridgeline Equity Management LLC provides a creditworthy backstop for the clawback obligation.
IV. Term and Extensions
The initial term of the Co-Invest Vehicle is 10 years, commencing on the date of the initial closing (expected to be January 30, 2026) and expiring on January 30, 2036, unless earlier terminated or extended in accordance with the terms of the LPA.
The General Partner has the right, exercisable at its sole discretion, to extend the term of the Co-Invest Vehicle for up to two additional one-year periods. If both extension rights are exercised, the term would expire on January 30, 2038. The extension rights may be exercised sequentially, and no limited partner consent or advisory committee approval is required for the General Partner to exercise either extension.
The LPA provides that the term of the Co-Invest Vehicle is co-terminous with the term of Fund IV, meaning that the Co-Invest Vehicle and Fund IV are intended to hold and dispose of their respective interests in AcquisitionCo on the same timeline. This co-terminous provision provides structural alignment between the main fund and the co-invest vehicle and reduces the risk of divergent exit timelines.
Market Comparison. A 10-year initial term with two one-year extension periods is standard for private equity fund co-investment vehicles, which typically have initial terms ranging from 8 to 12 years with one to three extension periods. Some co-invest LPAs include a provision requiring LP advisory committee approval or consultation before extensions are exercised. The current LPA does not require LPAC approval for extensions, although the LPAC has a consultative role on the extension decision.
Recommendation. During the December 6, 2025 markup, we raised the issue of LP consent or LPAC approval for extensions. Ridgeline declined to include a consent or approval mechanism, citing the co-terminous structure with Fund IV as providing sufficient alignment of interests. In the January negotiation calls, Ridgeline's counsel confirmed, on the record, that the extension rights would only be exercised in connection with corresponding extensions of Fund IV's term, and that Ridgeline does not intend to extend the Co-Invest Vehicle independently of the main fund. This confirmation is documented in our negotiation record and in correspondence with Hartwell Velmoran & Pratt LLP, but it is not reflected in the LPA itself and therefore is not contractually binding. We consider this to be an acceptable risk given the co-terminous provision in the LPA, which provides a structural safeguard against independent extension of the Co-Invest Vehicle, and given the practical reality that an extension of the Co-Invest Vehicle without a corresponding extension of Fund IV would serve no commercial purpose.
V. Governance
A. Limited Partner Advisory Committee (LPAC)
The LPA establishes a three-member Limited Partner Advisory Committee (the "LPAC" or the "Advisory Committee"). The LPAC is composed of representatives of the Co-Invest Vehicle's limited partners, selected based on commitment size and investment profile.
Pursuant to Section 3.1 of the Side Letter, Pellegrino is entitled to one seat on the LPAC. The Pellegrino representative on the LPAC shall be designated by Pellegrino and may be replaced at any time upon written notice to the General Partner. The LPAC seat right is personal to Pellegrino and is not transferable with Pellegrino's limited partnership interest without the prior written consent of the General Partner.
The LPAC has a consultative role with respect to the following matters:
(a) Conflicts of interest involving the General Partner, Ridgeline Equity Management LLC, or any of their respective affiliates;
(b) Valuation matters relating to the Co-Invest Vehicle's investment in AcquisitionCo, including the methodology and assumptions used in determining the fair value of the investment for reporting purposes;
(c) Extension decisions relating to the term of the Co-Invest Vehicle; and
(d) Such other matters as the General Partner may refer to the LPAC from time to time.
It is important to note that the LPAC's role is consultative rather than approval-based. The General Partner is obligated to consult with the LPAC on the foregoing matters and to consider the LPAC's input in good faith, but the LPAC does not have the authority to approve, disapprove, or veto any action by the General Partner. The General Partner retains sole decision-making authority on all matters within its purview under the LPA.
The LPAC is required to meet at least annually. Additional meetings may be convened upon the request of any LPAC member or by the General Partner. Meetings may be held in person or by teleconference, and the General Partner is responsible for providing the LPAC with reasonable advance notice and supporting materials for each meeting.
Market Comparison. An LPAC seat for a co-investor holding a 33.33% interest in the vehicle is appropriate and consistent with market practice. In our experience, LPAC seats are typically offered to co-investors holding 25% or more of the vehicle's aggregate commitments. The consultative (rather than approval) authority is typical for co-invest vehicles, where the General Partner's ability to act quickly and decisively on behalf of the co-investors is an important structural feature.
B. Key Person Provision
The LPA contains a Key Person provision identifying two individuals as "Key Persons" for purposes of the Co-Invest Vehicle:
(i) Julian T. Whitmore, Co-Founder and Managing Partner of Ridgeline Equity Management LLC; and
(ii) Connor M. Rafferty, Partner and Head of Hospitality at Ridgeline Equity Management LLC.
The Key Person Trigger is activated if both Whitmore and Rafferty cease to be actively involved in the management, oversight, and monitoring of the Co-Invest Vehicle's investment in AcquisitionCo. For purposes of this provision, "active involvement" means that the Key Person continues to devote a substantial majority of his or her professional time and attention to the affairs of Ridgeline Equity Management LLC and the management and oversight of Ridgeline-sponsored investments, including the Co-Invest Vehicle's investment.
The departure of either Whitmore or Rafferty individually, while the other remains actively involved, does not trigger the Key Person provision. The provision is a "dual trigger" — both designated Key Persons must cease active involvement for the provision to be activated.
Upon the occurrence of a Key Person Trigger, the following consequences apply:
(a) Notification: The General Partner must notify all limited partners in writing within 15 business days of the occurrence of the Key Person Trigger, describing the circumstances giving rise to the trigger and the General Partner's proposed course of action;
(b) Suspension: The General Partner must suspend any additional investments or commitments on behalf of the Co-Invest Vehicle (a provision that is largely academic in the context of this single-asset vehicle, since the Co-Invest Vehicle has already made its sole investment at closing);
(c) LP Wind-Down Election: Limited partners representing a majority-in-interest (measured by capital commitments) may elect to commence the orderly wind-down and dissolution of the Co-Invest Vehicle. Such election must be made within 90 days of receipt of the Key Person Trigger notification from the General Partner.
Market Comparison. A dual Key Person trigger — requiring both designated individuals to cease active involvement — is the prevailing standard in co-investment vehicles sponsored by established private equity firms with deep teams. During our December 6, 2025 markup, Pellegrino requested a single-person trigger on Connor M. Rafferty alone, given Rafferty's role as the lead deal professional on the Clarion transaction and his expected day-to-day oversight of the investment post-closing. Ridgeline resisted this request, citing organizational depth within the hospitality team and the risk that a single-person trigger could create unnecessary disruption in the event of a temporary absence or role change. The agreed dual trigger is consistent with market practice.
Recommendation. We consider the dual Key Person trigger to be adequate protection for Pellegrino's interests. Rafferty's operational role as Head of Hospitality and the lead deal professional on the Clarion transaction makes his continued involvement the more critical element of the provision. Whitmore, as Co-Founder and Managing Partner, provides strategic oversight and reputational alignment. The risk of both individuals simultaneously departing is low. Additionally, the fact that Clarion has a standalone management team — led by CEO Ted Barrington and CFO Lisa Kwon, both of whom are rolling over equity and therefore have a significant personal financial interest in the success of the company — provides an additional layer of continuity and mitigates the operational impact of any Key Person Trigger event.
C. LP Consent Rights
The LPA reserves certain fundamental matters for limited partner consent, generally requiring either a supermajority vote (66⅔% or more of capital commitments) or a majority-in-interest vote (more than 50% of capital commitments), depending on the nature of the action. The following matters require limited partner consent:
(a) Amendments to the LPA that materially and adversely affect the economic rights of the limited partners (including changes to the distribution waterfall, carried interest rate, preferred return, or management fee) — requires supermajority consent;
(b) Admission of new limited partners to the Co-Invest Vehicle after the initial closing — requires supermajority consent;
(c) Voluntary dissolution of the Co-Invest Vehicle other than in accordance with its stated term — requires majority-in-interest consent;
(d) Any merger, consolidation, or conversion of the Co-Invest Vehicle — requires supermajority consent;
(e) Removal of the General Partner for cause — requires supermajority consent;
(f) Any transaction between the Co-Invest Vehicle and the General Partner or its affiliates (other than transactions expressly contemplated by the LPA) — requires majority-in-interest consent.
As noted in Section IV above, extension of the Co-Invest Vehicle's term does not require limited partner consent under the final agreed form of the LPA; the LPAC has a consultative role only with respect to extensions.
Subject to the foregoing consent requirements, the General Partner retains broad discretion over the day-to-day management, investment decisions (to the extent applicable in a single-asset vehicle), and disposition of the Co-Invest Vehicle's investment in AcquisitionCo. The limited partners do not have the right to participate in or direct the management of the Co-Invest Vehicle's business or affairs, consistent with the fundamental limited partnership structure under the Delaware Revised Uniform Limited Partnership Act.
VI. Liquidity, Transfers, and Exit
A. Transfer Restrictions
The LPA imposes strict restrictions on the transfer, sale, assignment, pledge, or other disposition of limited partnership interests. No limited partner may transfer, sell, assign, pledge, hypothecate, or otherwise dispose of all or any portion of its limited partnership interest in the Co-Invest Vehicle without the prior written consent of the General Partner, which consent may be granted, conditioned, or withheld in the General Partner's sole and absolute discretion.
In connection with any proposed transfer, the LPA provides for a Right of First Refusal ("ROFR") in favor of the General Partner and the other co-investors. Specifically, before effecting any transfer to a third party, the transferring limited partner must deliver written notice to the General Partner and all other limited partners identifying the proposed transferee, the proposed terms and conditions of the transfer (including price), and any other material terms. The General Partner and the other co-investors have 30 days from receipt of such notice to exercise their ROFR to acquire the transferring limited partner's interest (or any portion thereof) on the same terms and conditions as those offered by the proposed third-party transferee. If the ROFR is exercised, the General Partner and the other co-investors may acquire the interest pro rata or in such other proportions as they may agree among themselves.
Notwithstanding the foregoing restrictions, the LPA permits certain "permitted transfers" without triggering the ROFR or requiring General Partner consent in its sole discretion (although General Partner notice and consent, not to be unreasonably withheld, is still required). Permitted transfers include:
(a) Transfers to controlled affiliates of the transferring limited partner (i.e., entities that are directly or indirectly controlled by, controlling, or under common control with the transferring limited partner);
(b) Transfers for estate planning purposes, including transfers to family trusts, family limited partnerships, or other estate planning vehicles established for the benefit of the transferring limited partner or its beneficial owners and their family members;
provided, in each case, that the transferee executes a joinder agreement in the form attached to the LPA, delivers any required legal opinions and tax certifications, and assumes all obligations of the transferring limited partner under the LPA and the Side Letter.
Market Comparison. Strict transfer restrictions with a ROFR mechanism are standard for co-investment vehicles. Co-invest LP interests are illiquid by nature, and Pellegrino should not expect any secondary market liquidity for its interest in the Co-Invest Vehicle. The ROFR mechanics and the permitted transfer exceptions are consistent with customary market practice. The 30-day ROFR exercise period is within the typical range of 20 to 45 days.
B. Tag-Along Rights
Pellegrino (through the Co-Invest Vehicle) has full tag-along rights in connection with any sale by Fund IV of its interest in AcquisitionCo. The tag-along rights operate at two levels:
(a) AcquisitionCo Level Tag-Along: If Ridgeline Equity Partners Fund IV, L.P. proposes to sell all or any portion of its equity interest in AcquisitionCo to a third-party purchaser, the Co-Invest Vehicle has the right to participate in such sale on the same terms and conditions as Fund IV, on a pro rata basis (based on the Co-Invest Vehicle's ownership of AcquisitionCo relative to Fund IV's ownership). The Co-Invest Vehicle is required to deliver notice of its election to tag along within 15 business days of receiving the tag-along notice from Fund IV.
(b) Co-Invest Vehicle Level Tag-Along: If the General Partner initiates any transfer or sale of the Co-Invest Vehicle's interest in AcquisitionCo, each limited partner (including Pellegrino) has the right to participate in such transaction on a pro rata basis, receiving its proportionate share of the proceeds based on its percentage interest in the Co-Invest Vehicle.
The tag-along right ensures that Pellegrino cannot be left behind in a sale transaction and will receive the benefit of the same economic terms negotiated by Fund IV with any third-party purchaser.
Market Comparison. Full tag-along protection is a critical right for co-investors and is considered market standard. Notably, we successfully negotiated tag-along rights at both the Co-Invest Vehicle level and the AcquisitionCo level. In many co-invest structures, tag-along rights operate only at the vehicle level — the addition of tag-along rights at the AcquisitionCo level provides Pellegrino with enhanced protection against scenarios where Fund IV might sell its direct interest in AcquisitionCo without necessarily involving the Co-Invest Vehicle in the transaction. This dual-level tag-along protection is above market and represents a meaningful negotiation win.
C. Drag-Along Rights
The General Partner has the right to exercise drag-along rights to compel all limited partners in the Co-Invest Vehicle to participate in a sale of 100% of AcquisitionCo's equity to a third-party purchaser. The drag-along mechanism operates as follows:
(a) The General Partner may exercise the drag-along right only in connection with a sale of 100% of the equity interests of AcquisitionCo (or all or substantially all of the assets of Clarion through AcquisitionCo);
(b) The drag-along sale must be on terms no less favorable to the Co-Invest Vehicle's limited partners than those applicable to Fund IV's interest in the transaction;
(c) Each co-investor, including Pellegrino, must receive the same per-unit consideration as Fund IV for its proportionate share of the equity being sold;
(d) The General Partner must provide the limited partners with at least 20 business days' prior written notice of the proposed drag-along sale, together with a summary of the material terms of the proposed transaction;
(e) Each limited partner is obligated to execute and deliver such documents and instruments as may be reasonably necessary to consummate the drag-along sale, including customary representations, warranties, and indemnification obligations (subject to appropriate limitations).
Market Comparison. A drag-along right on a 100% sale of the target is standard and necessary for exit flexibility. Without the drag-along, minority co-investors could potentially hold up or block a sale transaction that the sponsor and its main fund have determined is in the best interest of all investors. The "same terms" protection — requiring that the co-investors receive the same per-unit consideration as Fund IV — is an important safeguard and was successfully negotiated. This protection ensures that Pellegrino's economic interest is fully aligned with Fund IV's interest in any drag-along sale.
D. Exit Mechanics
The Co-Invest Vehicle is a single-asset vehicle, and the primary exit from the investment is expected to occur through one of the following mechanisms: (i) a sale of 100% of the equity of AcquisitionCo (or Clarion directly) to a strategic or financial buyer; (ii) a secondary sale of Clarion to another private equity sponsor; (iii) a recapitalization or refinancing event that enables a return of capital to equity holders; or (iv) an initial public offering of Clarion or a successor entity, although the current market environment and Clarion's size suggest that an IPO exit is unlikely in the near term.
The LPA does not provide the limited partners with any put or call rights, and Pellegrino does not have a contractual right to demand or force a liquidity event at any time during the term of the Co-Invest Vehicle. Pellegrino's liquidity is dependent on the General Partner's determination, in its sole discretion, to initiate an exit transaction. The General Partner is required to act in a manner consistent with its duties under the LPA and applicable law, but the timing and manner of exit are within the General Partner's discretion.
Recommendation. Pellegrino should be aware that there is no contractual mechanism to force a liquidity event. The LPAC seat secured through the Side Letter, combined with the monthly reporting rights described in Section VIII below and ongoing communication with the Ridgeline team, provides Pellegrino with informal influence on exit timing and strategy. We recommend that Pellegrino use the LPAC platform and the relationship with Connor Rafferty to stay actively engaged in exit planning discussions as they develop over the course of the hold period. The co-terminous term provision with Fund IV also provides assurance that exit timing will be driven by Fund IV's lifecycle, creating alignment between Pellegrino's exit expectations and the sponsor's fund-level considerations.
VII. Default and Remedies
The LPA includes default provisions that impose significant penalties on any limited partner that fails to meet its capital call obligations. Given the structure of this co-investment — a single capital call at closing with no follow-on obligations — the default provisions have limited practical applicability but are worth understanding.
Default Trigger. A limited partner is deemed to be in "default" under the LPA if it fails to fund any capital call within 10 business days of receiving written notice of such capital call from the General Partner. The 10-business-day period serves as both the notice period and the funding deadline.
Default Remedies. Upon a default, the General Partner may, at its election, impose the following penalties on the defaulting limited partner:
(a) Forfeiture: Forfeiture of 50% of the defaulting limited partner's partnership interest. The forfeited interest is reallocated pro rata among the non-defaulting limited partners or is otherwise disposed of as determined by the General Partner in its discretion.
(b) Subordination: The remaining 50% of the defaulting limited partner's interest is subordinated to all non-defaulting limited partners in the distribution waterfall. The defaulting limited partner does not receive any distributions until all non-defaulting limited partners have received (i) a return of their contributed capital, (ii) the full preferred return, and (iii) their allocable share of profits under the waterfall.
Cure Period. The LPA does not provide for an explicit cure period following a default. The 10-business-day funding window established by the capital call notice serves as the combined notice, funding, and cure period. If a limited partner fails to fund within that 10-business-day window, the default is triggered and the General Partner may exercise the remedies described above immediately.
Negotiation Note. During the December 6, 2025 markup, Pellegrino requested a 5-business-day cure period following a default — i.e., an additional 5-business-day window after the expiration of the initial 10-business-day funding deadline during which the limited partner could cure the default without penalty. Ridgeline declined this request, taking the position that the 10-business-day funding period provides adequate time for limited partners to arrange funding, and that a separate cure period would create uncertainty around closing mechanics. The final agreed form maintains the 10-business-day funding period as the single deadline, with no additional cure period.
Market Comparison. The 50% forfeiture penalty is at the more punitive end of market practice. In our experience, default remedies in co-invest vehicles typically involve either (i) a forfeiture or dilution of 25% to 50% of the defaulting limited partner's interest, (ii) loss of voting rights and LPAC participation, or (iii) a combination of the foregoing. The 50% forfeiture rate is within the market range but at the high end. However, the practical significance of this provision is minimal in the context of Pellegrino's co-investment. Since 100% of committed capital is called at closing and there are no follow-on commitment obligations, the default provision would only be triggered if Pellegrino fails to fund the initial $25,000,000 closing capital call. If Pellegrino funds at closing — as expected — the default provision will never be invoked.
Recommendation. The practical risk posed by the default provision is low given the single funding event at closing. Pellegrino should ensure that wire instructions, internal funding approvals, board or managing member authorizations, and banking arrangements are finalized well in advance of the January 30, 2026 closing date. We recommend that Pellegrino initiate the wire transfer at least two business days before the closing date to allow for processing time and to avoid any risk of a missed deadline due to banking delays.
VIII. Information and Reporting Rights
A. LPA Reporting Obligations (All LPs)
The LPA establishes the following minimum reporting obligations that apply to all limited partners in the Co-Invest Vehicle:
Annual Audited Financial Statements. The General Partner is required to deliver to each limited partner annual audited financial statements of the Co-Invest Vehicle, prepared in accordance with generally accepted accounting principles (GAAP), within 120 days following the end of each fiscal year. The annual financial statements must include a balance sheet, income statement, statement of cash flows, and statement of changes in partners' capital. The annual audit must be performed by an independent registered public accounting firm selected by the General Partner.
Quarterly Unaudited Financial Statements. The General Partner is required to deliver quarterly unaudited financial statements within 60 days following the end of each fiscal quarter. The quarterly financial statements must include a balance sheet and income statement and may include a brief narrative summary of material developments during the quarter.
Annual Tax Reporting (Schedule K-1). The General Partner is required to provide each limited partner with its Schedule K-1 (Partner's Share of Income, Deductions, Credits, etc.) for each fiscal year no later than March 15 of the following year. The March 15 delivery deadline is aligned with IRS filing deadlines and allows limited partners sufficient time to incorporate the K-1 information into their own annual tax filings.
Market Comparison. The reporting obligations set forth in the LPA are consistent with market standards for co-investment vehicles. The 120-day period for annual audited financial statements is the prevailing standard, as is the 60-day period for quarterly unaudited financial statements. The March 15 K-1 delivery deadline is aligned with IRS filing deadlines and is standard practice.
B. Enhanced Reporting (Side Letter — Pellegrino Only)
In addition to the reporting obligations applicable to all limited partners under the LPA, the Side Letter provides Pellegrino with the following enhanced reporting rights:
Monthly Operating Dashboards for Clarion. The General Partner (or its designee) is obligated to provide Pellegrino with monthly operating dashboards for Clarion within 30 days following the end of each calendar month. The monthly dashboards are required to include, at a minimum, the following key operating metrics:
• Revenue (consolidated and by property segment)
• Occupancy rates (system-wide and by region/brand)
• Revenue per available room (RevPAR)
• EBITDA (consolidated, with reconciliation from revenue)
• Key operating variances from budget
• Other key operating metrics as reasonably agreed between the parties
The monthly dashboards are intended to provide Pellegrino with ongoing, real-time visibility into Clarion's operating performance, enabling Pellegrino to monitor the health and trajectory of the investment on a granular basis throughout the hold period.
Annual ESG Summary. The General Partner (or its designee) is obligated to provide Pellegrino with an annual ESG (environmental, social, and governance) summary for Clarion's managed portfolio, consistent with Pellegrino's internal ESG policy framework. The content, format, and methodology of the annual ESG summary are to be agreed between the General Partner and Pellegrino in good faith. The ESG summary is expected to cover, at a minimum, the following areas:
• Environmental metrics (energy consumption, carbon emissions, water usage, waste management)
• Social metrics (employee satisfaction, diversity and inclusion, community engagement, labor practices)
• Governance metrics (board composition, compliance programs, related-party transactions, cybersecurity)
Market Comparison. Monthly operating dashboards are not standard for co-investment vehicles and represent a significant concession by Ridgeline. In our experience, monthly reporting is increasingly common for larger co-investors and family offices with sector expertise, particularly where the co-investor has a thematic focus and wishes to maintain close visibility into the portfolio company's operations. The ESG reporting commitment reflects a growing trend in institutional co-investment documentation, driven by the increasing importance of ESG considerations in investment decision-making and portfolio monitoring.
Recommendation. The enhanced reporting rights secured through the Side Letter are significant value-adds that will enable Pellegrino to maintain a high degree of visibility into Clarion's operations and performance. We recommend that Pellegrino share its internal ESG policy framework with Ridgeline promptly after closing to ensure that the annual ESG summary is meaningful, aligned with Pellegrino's reporting standards, and consistent with any frameworks or standards (such as SASB, GRI, or TCFD) that Pellegrino uses for its broader portfolio.
IX. Side Letter Protections — Summary
The Side Letter Agreement between the General Partner and Pellegrino contains a number of additional protective provisions beyond those set forth in the LPA. The Side Letter is binding on the General Partner and its successors and assigns, and the rights granted thereunder are in addition to (and not in limitation of) Pellegrino's rights under the LPA. The key Side Letter provisions are summarized below.
A. Most-Favored-Nation (MFN) Rights
The Side Letter grants Pellegrino full MFN protection. If the General Partner enters into any side letter, supplemental agreement, or amendment with any other co-investor in the Co-Invest Vehicle that contains terms or provisions more favorable to such other co-investor than the terms and provisions applicable to Pellegrino under the LPA and the Side Letter, Pellegrino is entitled to elect to receive the benefit of any such more favorable term or provision.
The MFN mechanics operate as follows:
(a) Notification: The General Partner is obligated to notify Pellegrino in writing within 10 business days of entering into any side letter, supplemental agreement, or amendment with any other co-investor that contains terms or provisions that differ from (and are more favorable than) the terms applicable to Pellegrino.
(b) Disclosure: The notification must include a description of the more favorable terms or provisions granted to the other co-investor, together with a copy of the relevant side letter or amendment (with commercially sensitive information of the other co-investor redacted as appropriate).
(c) Election: Pellegrino has 15 business days from receipt of the notification to deliver written notice to the General Partner electing to receive the benefit of any or all of the more favorable terms. Upon such election, the Side Letter and/or the LPA are deemed amended to incorporate the elected terms as if they had been originally included.
Market Comparison. Full MFN protection is the standard for co-investors at Pellegrino's commitment level. The notification and election mechanics are well-documented in the Side Letter and provide Pellegrino with a clear, time-bound process for exercising its MFN rights. The 10-business-day notification period and 15-business-day election period are within the typical market range.
B. LPAC Seat
As described in Section V.A above, the Side Letter guarantees Pellegrino one seat on the three-member LPAC. This right is personal to Pellegrino and is not transferable with Pellegrino's limited partnership interest without the prior written consent of the General Partner.
Market Comparison. An LPAC seat for a co-investor holding a 33.33% interest in the vehicle is consistent with market practice. LPAC seats are typically offered to co-investors holding 25% or more of aggregate commitments.
C. Future Co-Investment Allocation Rights
The Side Letter provides that Pellegrino will receive a pro rata allocation in any future co-investment opportunities sponsored by Ridgeline in the hospitality sector, subject to availability. Specifically, the General Partner and Ridgeline Equity Management LLC agree to include Pellegrino in the allocation process for any future hospitality-focused co-investment opportunity on a pro rata basis, taking into account Pellegrino's commitment to the Co-Invest Vehicle relative to the commitments of other co-investors who have received similar allocation rights.
This is a "soft" right — it is not a binding commitment by Ridgeline to offer co-investments to Pellegrino, nor is it a guarantee that co-investment opportunities will be available in the hospitality sector. Rather, it is an agreement by Ridgeline to include Pellegrino in the allocation process and to provide Pellegrino with a fair and pro rata opportunity to participate in any such future co-investments, subject to capacity constraints, legal and regulatory considerations, and the General Partner's discretion in managing the allocation process. The allocation right is limited to the hospitality sector, reflecting Pellegrino's thematic investment focus and sector expertise.
Market Comparison. Future co-investment allocation rights are a valuable provision that is becoming increasingly common in side letters negotiated by strategic co-investors with demonstrated sector expertise. The non-binding nature of the provision is typical — binding allocation commitments are rare and would create significant practical difficulties for sponsors in managing allocation across multiple investors. The limitation to the hospitality sector aligns with Pellegrino's investment strategy and provides a framework for an ongoing, sector-specific deal flow relationship with Ridgeline.
Recommendation. Pellegrino should understand that this provision is aspirational rather than contractually binding, and that Ridgeline is not obligated to source, structure, or offer any particular co-investment opportunity. However, the provision establishes a clear framework and expectation for ongoing deal flow from Ridgeline in the hospitality space, and it creates a professional relationship dynamic in which Ridgeline is incentivized to continue including Pellegrino in future hospitality co-investment opportunities. We recommend that Pellegrino proactively maintain the relationship with the Ridgeline hospitality team — particularly with Connor Rafferty — to maximize the likelihood of receiving future co-investment allocations.
D. ESG Reporting
As described in Section VIII.B above, the Side Letter provides Pellegrino with the right to receive an annual ESG summary for Clarion's managed portfolio, consistent with Pellegrino's internal ESG policy. The content, format, and methodology of the annual ESG summary are to be agreed between the parties in good faith following closing.
E. No Excuse/Exclusion Without Consent
The Side Letter provides that the General Partner may not excuse or exclude Pellegrino from the Co-Invest Vehicle's investment without Pellegrino's prior written consent. This provision overrides the standard LPA language that permits the General Partner to excuse or exclude limited partners from all or any portion of a particular investment in certain circumstances, including where the General Partner determines in good faith that a limited partner's participation could give rise to a legal or regulatory conflict, result in adverse tax consequences to the partnership, or otherwise be detrimental to the Co-Invest Vehicle.
The Side Letter's "no excuse/exclusion" provision effectively ensures that Pellegrino cannot be involuntarily removed from the investment or denied its pro rata share of the Co-Invest Vehicle's interest in AcquisitionCo, regardless of any determination by the General Partner that Pellegrino's participation could give rise to a conflict or other adverse circumstance.
Market Comparison. This is a strong protective provision that goes beyond market standard. The typical LPA permits the General Partner to exercise excuse/exclusion authority in good faith for legitimate legal or regulatory reasons. The Side Letter override ensures that Pellegrino's participation is protected against any unilateral action by the General Partner, including actions that might otherwise be taken in good faith but that would result in Pellegrino being excluded from all or a portion of the investment.
Recommendation. This provision was a key negotiation objective for Pellegrino and was successfully secured. It provides Pellegrino with certainty that its $25,000,000 commitment will be deployed as intended and that it will not be involuntarily removed from the investment during the hold period. We consider this to be one of the most important protections in the Side Letter.
F. Excuse Rights (LPA Provision, Cross-Referenced)
Under the LPA, Pellegrino has the right to request to be excused from the investment, but only on the basis of a bona fide legal or regulatory conflict. The LPA provides that any such request is subject to the General Partner's approval, which shall not be unreasonably withheld. The excuse right is narrow and limited to circumstances where Pellegrino's continued participation in the investment would violate applicable law, regulation, or a binding court or regulatory order.
Market Comparison. A narrow excuse right limited to legal or regulatory conflicts is the market standard for single-asset co-invest vehicles. Broader excuse rights — including excuse for business, strategic, or portfolio construction reasons — are more commonly found in blind-pool fund LPAs, where limited partners may wish to opt out of specific investments that do not align with their investment criteria or that present conflicts with their existing portfolio holdings. In a single-asset co-invest vehicle, the limited partner has already made the affirmative decision to invest in the specific asset, and broader excuse rights would undermine the certainty of funding that the sponsor and other co-investors rely upon.
X. Tax Considerations — Summary
A detailed analysis of the tax considerations applicable to Pellegrino's co-investment has been prepared under separate cover in our memorandum dated January 3, 2026, prepared by Owen Fischer and Stephen Adler of Calderwood & Harkness LLP, in coordination with Robert K. Anand, CPA, of Whitfield Greer & Associates LLP, Pellegrino's tax advisor. This Section provides a high-level summary of the key tax considerations; Pellegrino should refer to the January 3, 2026 tax analysis memo for a more comprehensive discussion.
Entity Classification. The Co-Invest Vehicle is organized as a Delaware limited partnership and will be treated as a partnership for U.S. federal income tax purposes. A partnership is generally not subject to entity-level federal income tax. Instead, each partner is required to report and pay taxes on its allocable share of the partnership's income, gain, loss, deduction, and credit, regardless of whether such amounts are actually distributed to the partner during the taxable year. Pellegrino, as a Delaware limited liability company, will receive its allocable share of these tax items via a Schedule K-1 issued by the Co-Invest Vehicle.
UBTI Risk. Unrelated business taxable income ("UBTI") is a concern for tax-exempt investors (such as pension funds, endowments, and foundations) that invest in partnerships that generate income from debt-financed property or an active trade or business. UBTI is not a material concern for Pellegrino, as Pellegrino is a non-exempt, for-profit limited liability company. Accordingly, the UBTI provisions of the Internal Revenue Code (Sections 511 through 514) do not apply to Pellegrino's investment.
FIRPTA. The Foreign Investment in Real Property Tax Act ("FIRPTA") imposes special withholding and tax obligations on dispositions of U.S. real property interests ("USRPIs") by foreign persons. While Pellegrino is a domestic entity and therefore not directly subject to FIRPTA withholding, the FIRPTA analysis is relevant to the extent that certain foreign co-investors in the vehicle may be affected, which could in turn affect the timing or mechanics of exit transactions. More importantly, the FIRPTA analysis is relevant to the characterization of the Co-Invest Vehicle's investment. Clarion's primary business is hotel management and asset management services, rather than direct ownership of U.S. real property. Based on the current business model, the Co-Invest Vehicle's interest in AcquisitionCo is not expected to constitute a USRPI. However, this conclusion is fact-dependent and could change if Clarion's business model shifts toward direct ownership of hotel real estate assets (as opposed to management of third-party-owned properties). Pellegrino should monitor this risk on an ongoing basis through the monthly reporting and LPAC participation.
Allocations — Sections 704(b) and 704(c). The LPA's alloca

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