Contract analysis

I. EXECUTIVE SUMMARY Calderwood & Harkness LLP has been engaged, pursuant to an engagement letter dated October 9, 2023, to advise the General Partner of Ardent Capital Partners III LP (the "Fund") on a comprehensive restructuring of its management company platform and the realignment of economics among the Fund's principals. This memorandum sets forth our analysis of the available structural alternatives for accompl

II. BACKGROUND AND CURRENT STRUCTURE A. The Fund Ardent Capital Partners III LP (the "Fund") is a Delaware limited partnership formed in 2019. The Fund held its final close on April 15, 2019, and its investment period commenced on June 30, 2019. The Fund's investment strategy focuses on control and significant minority investments in middle-market companies across the technology-enabled services, healthcare services,

1. David Kellner David Kellner, age 61, is a Senior Partner of the Ardent platform. He joined Ardent in 2010 and has served as a key member of the investment team across multiple fund cycles. Mr. Kellner has announced his intention to retire from active investment management, effective March 31, 2024. Mr. Kellner's current economic position is as follows: • GP/Carry share: 15% • GP commitment: $6.3 million total ($42

2. Joanna Trask Joanna Trask, age 48, is a Partner of the Ardent platform. She joined Ardent in 2013 and has been responsible for origination and execution of transactions primarily in the healthcare services sector. Ms. Trask has announced her intention to depart voluntarily, effective April 15, 2024, to join another private equity firm. Ms. Trask's current economic position is as follows: • GP/Carry share: 12% • GP

3. Departing Principals' Counsel Both Kellner and Trask have retained Whitford & Chase LLP as their legal counsel in connection with the restructuring and their respective separations. Their engagement team consists of Richard Beaulieu, a partner specializing in executive compensation and private fund matters, and Hannah Polk, an associate. Whitford & Chase LLP is located at 200 Park Avenue, Suite 4200, New York, NY

1. Remaining Principals Marcus Aldridge (age 56), Co-Founder and Managing Partner, will remain as the senior leader of the Ardent platform. Mr. Aldridge's post-restructuring target economics are 42% of carry and ManCo profit share, representing an increase of 7 percentage points from his current 35% allocation. Priya Narayanan (age 53), Co-Founder and Managing Partner, will remain as the co-senior leader of the Arden

2. Next-Generation Principals Elena Marchetti (age 38), currently a Principal at Ardent, joined the firm in 2017. Ms. Marchetti has been a key contributor to the Fund's technology-enabled services investments and is being promoted to the ownership group as part of the restructuring. She will receive a 4% carry allocation from the restructured pool. Samuel Okonkwo (age 36), currently a Principal at Ardent, joined the

III. OBJECTIVES OF THE RESTRUCTURING A. Primary Objectives The restructuring is designed to accomplish the following primary objectives:

1. Accommodate the departures of Kellner and Trask with clean separation of their economic interests from the go-forward platform. The restructuring must provide for the orderly exit of both departing principals, including the settlement of their carried interest entitlements, the assumption or release of their unfunded GP commitment obligations, the imposition of appropriate restrictive covenants, and the eliminatio

2. Reallocate the aggregate 27% carry share and corresponding ManCo profit share among remaining and next-generation principals. The 15% previously held by Kellner and the 12% previously held by Trask — totaling 27% of the Fund's carried interest — must be redistributed to the continuing principal group in a manner that reflects each principal's relative contribution, seniority, and role within the go-forward platfor

3. Integrate next-generation principals (Marchetti and Okonkwo) into the ownership structure with appropriate vesting and governance rights. The restructuring presents an opportunity to bring Marchetti and Okonkwo into the ownership framework in a manner that incentivizes their continued commitment to the platform, aligns their economic interests with those of the Managing Partners, and provides appropriate protectio

4. Establish a scalable governance and ownership framework for succession planning across future funds. The restructuring should not be designed solely for the current Fund. The resulting structure should be durable and extensible, capable of accommodating the formation and operation of future funds (Fund IV, Fund V, and beyond) without requiring a further reorganization of the platform's core governance architecture

5. Maintain continuity of the Fund's operations, investment strategy, and LP relationships. Above all, the restructuring must be implemented in a manner that preserves the Fund's operational continuity, avoids disruption to portfolio company management, and maintains the trust and confidence of the Fund's 47 limited partners. Any structural changes must be communicated to LPs in a manner that reinforces the stability

1. Compliance with the existing LPA. The Fund's Limited Partnership Agreement contains several provisions directly relevant to the restructuring, including LPAC consent requirements under Section 9.4, key-person provisions under Section 5.2, and GP transfer restrictions under Section 8.3. Any structural alternative must be evaluated for compliance with these provisions and any others that may be implicated by the con

2. Compliance with 14 side letters. The Fund has entered into 14 side letters with various limited partners, several of which impose additional requirements or restrictions relevant to the restructuring. In particular: • Four side letters (with Ridgeline Public Employees' Retirement System, Pinnacle Insurance Group, Crestwood Endowment Partners, and Haverford Capital Partners) require prior written notice and, in cer

3. Preservation of SEC registration. The ManCo's registration with the SEC under CRD Number 298417 must be preserved without interruption. Any structural alternative that would require withdrawal and re-registration of the advisory entity is strongly disfavored.

4. Tax efficiency. The restructuring should be structured to avoid taxable events at the entity or principal level to the greatest extent possible. In particular, the transfer or contribution of existing membership interests should be structured to qualify for tax-free treatment under applicable provisions of the Internal Revenue Code, and the allocation of built-in gain should be managed to minimize adverse tax cons

5. Coordination with other advisors. The restructuring must be coordinated with the Fund's existing professional advisors, including fund formation counsel Pemberton Hale LLP (Victoria Langford), auditor and tax advisor Heathrow Whitman & Co. (Paul Devereux), and the departing principals' counsel Whitford & Chase LLP (Richard Beaulieu and Hannah Polk). Appropriate scope delineation among counsel is essential to avoid

6. Preservation of placement agent tail-fee obligations. The Fund's remaining tail-fee obligations to Lockwood Placement Partners LLC (Sarah Fontaine) must not be disrupted or rendered ambiguous by any structural changes. The restructuring should be transparent to the placement agent arrangement and should not create any basis for a claim that the tail-fee obligations have been modified, terminated, or otherwise affe

IV. OPTION A: SIMPLE REALLOCATION OF EXISTING ManCo AND GP INTERESTS A. Description Under Option A, the restructuring would be accomplished through direct transfers and reallocations of the five principals' existing membership interests in both the GP (Ardent Capital GP III LLC) and the ManCo (Ardent Capital Management LLC), without the formation of any new entities. Upon the effective dates of their respective depar

1. Simplicity. Option A is the simplest of the three alternatives from a structural and documentary standpoint. It requires the fewest documents, no new entity formations, and no new organizational layers. The restructuring is accomplished through amendments to two existing LLC agreements (GP and ManCo), separation agreements with Kellner and Trask, and related ancillary documents.

2. Lower transaction costs. Because no new entities are formed and no new LLC agreements are drafted from scratch, Option A would entail the lowest legal, accounting, and filing costs among the three alternatives. The primary cost drivers would be the negotiation of separation agreements and the drafting of amended and restated LLC agreements.

3. Preservation of existing entity structure. The GP and ManCo remain as currently organized. There is no change to the GP's identity as the sole general partner of the Fund, and there are no new entities interposed in the organizational chain. From a structural perspective, the Fund's governance framework remains unchanged.

4. Potentially simpler LP communication. Because the GP entity itself does not change — and no new entities are introduced into the GP chain — the restructuring may be communicated to LPs as a straightforward adjustment to the internal economics and personnel of the existing management team. The GP's legal identity and role as general partner of the Fund remain the same. C. Disadvantages

1. Governance limitations. Under Option A, all principals — including the next-generation principals Marchetti and Okonkwo — would hold direct membership interests in both the GP and the ManCo. This flat ownership structure means that any future change in the principal group — whether a departure, promotion, addition, or adjustment to economics — would require amendments to two separate LLC agreements (GP and ManCo)

2. No structural separation between economics and governance. The Managing Partners would lack a parent-level entity through which to manage carry and fee allocations, implement vesting schedules, and exercise governance control over the platform. All governance and economic decisions would need to be made at the GP and ManCo level, with each principal holding direct voting and economic rights in both entities. This

3. Scalability concerns. Option A does not create a platform structure capable of supporting future funds. When Ardent raises Fund IV, for example, a new GP entity (Ardent Capital GP IV LLC) would be required. Under Option A's flat structure, each principal would need to be admitted as a direct member of the new GP entity, with separate LLC agreements, separate membership interests, and separate economic allocations

4. LP consent complexity. Although Option A does not involve the formation of new entities, the direct transfer of GP membership interests may trigger heightened scrutiny under LPA Section 8.3 (Transfer of GP Interest). The four side letters requiring consent for "material changes in management structure" may view direct transfers of GP membership interests — particularly to principals who were not original members o

5. Tax concerns. The direct transfer of membership interests from departing principals to remaining and new principals could potentially be characterized as a sale or exchange for federal income tax purposes, triggering gain recognition at the individual level. Even if structured as a redemption and reissuance, the transactions would need to be carefully analyzed to ensure that Section 704(c) layers attach properly t

6. Vesting limitations. Implementing tiered vesting schedules for Marchetti and Okonkwo within the existing GP and ManCo LLC agreements would be difficult. Standard LLC agreement provisions are not well-suited to multi-year vesting with forfeiture conditions, and accommodating such provisions would likely require the use of layered side letters, complex profits-interest mechanics, or special allocation provisions — a

7. SEC considerations. Multiple simultaneous changes to the direct ownership of the ManCo — including the withdrawal of two existing members, the admission of two new members, and the adjustment of all remaining members' percentage interests — may require more extensive amendments to the ManCo's Form ADV than would be necessary under Option B's approach. The SEC may view these changes as raising questions about the c

V. OPTION B: FORMATION OF HOLDING COMPANY (HoldCo) WITH INTERMEDIATE ENTITY — RECOMMENDED — A. Description Under Option B, the restructuring would be accomplished through the formation of two new Delaware limited liability companies and the reorganization of the Ardent platform's ownership chain into a two-tier holding company structure. The two new entities are: • Ardent Capital Holdings LLC ("HoldCo"): A new Delawa

1. Centralized governance. Option B consolidates all principal-level economics and governance decisions at the HoldCo level. Changes in principal composition — whether arising from future departures, promotions, lateral hires, or adjustments to economics — require amendments only to the HoldCo LLC Agreement, not to the GP or ManCo agreements. This centralization dramatically simplifies the ongoing governance of the p

2. Scalability. HoldCo can serve as the parent entity for future fund general partners and management companies without any further restructuring. When Ardent forms Fund IV, for example, a new GP entity (Ardent Capital GP IV LLC) can be established as a subsidiary of HoldCo (through a new intermediate entity, if desired), with all principal-level economics continuing to be governed at the HoldCo level. This extensibi

3. Clean separation for departing principals. Under Option B, Kellner and Trask withdraw as direct members of the GP and ManCo, and their membership interests are extinguished. They retain no residual membership interests in any operating entity. Their go-forward economics (retained vested carry, clawback obligations, escrow release schedules) are governed exclusively by separate carry retention side letters and sepa

4. Next-generation integration. Marchetti and Okonkwo hold interests only at the HoldCo level, with appropriate vesting schedules, tag-along and drag-along protections, forfeiture provisions, and buy-sell provisions — all documented in a single HoldCo LLC Agreement. This approach provides the next-generation principals with meaningful economic participation and a clear path to increased ownership, while preserving th

5. GP Intermediate as liability buffer. The interposition of GP Intermediate between HoldCo and the GP provides an additional structural layer that insulates HoldCo members from direct GP-level liabilities. While the LLC structure already provides limited liability protection, the intermediate entity creates an additional barrier and simplifies the GP's organizational structure (single member = GP Intermediate, rathe

6. Tax efficiency. The contribution of existing GP and ManCo interests by the remaining principals into HoldCo can be structured as a tax-free contribution under IRC Section 721, which provides that no gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership. Because HoldCo will be classified

7. LP/LPAC perception. Option B is likely to be perceived favorably by the Fund's limited partners and the LPAC. The formation of a holding company to centralize governance and facilitate succession planning is a widely recognized and accepted practice among institutional private equity platforms. The transaction can be communicated to LPs as a governance enhancement and succession-planning measure, rather than a fun

8. SEC continuity. Ardent Capital Management LLC remains the registered investment adviser under CRD Number 298417. The ManCo's legal identity is not changed; only its ownership changes (from five individual members to HoldCo as sole member). A Form ADV amendment will be required to reflect the updated ownership structure, the removal of Kellner and Trask as control persons, and the addition of Marchetti and Okonkwo

1. Complexity. Option B involves the formation and ongoing maintenance of two new entities (HoldCo and GP Intermediate), each requiring its own LLC agreement, Delaware Certificate of Formation, registered agent, EIN, and annual franchise tax payment. This creates a more complex organizational structure than Option A, with additional layers of documentation and ongoing administrative requirements.

2. Higher initial transaction costs. The formation of new entities, the preparation of additional LLC agreements (HoldCo LLC Agreement, GP Intermediate LLC Agreement, amended and restated GP LLC Agreement, amended and restated ManCo LLC Agreement), the tax analysis required for the Section 721 contribution and Section 704(c) allocations, and the additional filing fees will result in higher initial transaction costs t

3. LP consent process. While Option B is likely to be viewed more favorably by LPs than Option C, it still requires LPAC consent under LPA Section 9.4 and compliance with the side-letter consent provisions applicable to Ridgeline, Pinnacle, Crestwood, and Haverford Capital Partners. The introduction of new entities in the GP chain — even as wholly-owned subsidiaries — may draw questions from LPs regarding the purpose

4. Ongoing administrative burden. The two additional entities require separate EINs, annual Delaware franchise taxes (currently $300 per entity per year), and ongoing corporate maintenance (annual reports, registered agent fees, record-keeping). While these costs are minimal in absolute terms, they represent an incremental administrative burden that does not exist under Option A. E. LP Consent and LPA Analysis

Section 9.4 of the LPA requires LPAC consent for certain material actions by the General Partner, including structural changes to the GP's ownership or governance. The substitution of GP Intermediate as the sole member of the GP, and HoldCo as the sole member of the ManCo, constitutes a structural change to the GP's ownership chain that falls within the scope of Section 9.4. Accordingly, LPAC consent must be obtained

2. Section 5.2 — Key-Person Provisions

Section 5.2 of the LPA designates Marcus Aldridge and Priya Narayanan as "Key Persons." A Key Person Event is triggered under Section 5.2 if either (a) both Key Persons cease to devote substantially all of their business time and attention to the affairs of the Fund, or (b) one Key Person ceases to devote substantially all of his or her business time and attention, and no LPAC-approved substitute is designated within

3. Section 8.3 — Transfer of GP Interest

Section 8.3 of the LPA governs transfers of the General Partner's interest in the Fund. The interposition of GP Intermediate as the sole member of the GP — which effectively changes the ownership of the GP from five individual principals to a single-entity member (GP Intermediate, itself wholly owned by HoldCo) — constitutes a transfer of GP interest for purposes of Section 8.3. This transfer is permissible under Sec

4. Section 9.7 — Removal of GP

Section 9.7 of the LPA provides for the removal of the General Partner under specified circumstances, including a supermajority vote of the limited partners following certain triggering events. The restructuring contemplated by Option B does not involve the removal of the GP. Ardent Capital GP III LLC remains as the sole general partner of the Fund throughout the restructuring and at all times thereafter. Only the ow

5. Side-Letter Compliance A comprehensive side-letter compliance analysis is required in connection with the restructuring. Based on our preliminary review, the relevant side-letter provisions can be categorized as follows: Material-change consent provisions (4 side letters). The side letters with Ridgeline Public Employees' Retirement System, Pinnacle Insurance Group, Crestwood Endowment Partners, and Haverford Capi

Section 721 contribution. The contribution of existing GP and ManCo interests by the remaining principals (Aldridge, Narayanan, and Hsiao) into HoldCo can be structured as a tax-free contribution under IRC Section 721 if properly documented. Section 721 provides that no gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange

Section 704(b) and 704(c) allocations. The contribution of appreciated property (GP and ManCo interests with built-in gain) to HoldCo will require a Section 704(c) analysis to determine the allocation of built-in gain among the contributing partners. This analysis must address the selection of an appropriate allocation method (traditional method, traditional method with curative allocations, or remedial allocation me

I. Economics Realignment Summary The following tables summarize the pre- and post-restructuring economic allocations for each principal. A detailed version is provided in Appendix C. Carry Reallocation. Kellner retains $13.14M in vested carry pursuant to carry retention side letter; go-forward allocation ceases. *Trask retains $6.31M (60% of vested carry) pursuant to separation agreement; $4.20M (40% of vested) forfe

VI. OPTION C: DISSOLUTION AND RECONSTITUTION A. Description Under Option C, the existing GP (Ardent Capital GP III LLC) and/or ManCo (Ardent Capital Management LLC) would be dissolved, and new entities with the desired membership composition would be formed to replace them. The new GP entity would be admitted as the sole general partner of the Fund through an amendment to the LPA, and the new ManCo entity would serve

1. Clean slate. Option C provides the most complete separation from the legacy organizational structure. The new entities would be formed with only the continuing principals as members, eliminating any trace of the departing principals from the entity records, governance documents, and organizational history. There would be no need for carry retention side letters or continuing obligations embedded in entity-level do

2. Simplified governance from inception. The new GP and ManCo LLC agreements can be drafted from scratch to reflect the desired governance framework, without the need to amend and restate existing agreements that contain legacy provisions, historical recitals, or references to prior membership compositions. C. Disadvantages

1. Significant LP consent risk. The substitution of an entirely new GP entity as the sole general partner of the Fund is a far more consequential action than the structural reorganization contemplated by Option B. LPs are likely to view the dissolution and replacement of the GP as a potential change of control, triggering heightened scrutiny and potentially implicating the GP removal provisions of LPA Section 9.7. Ev