SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
ARDENT CAPITAL GP III LLC
A Delaware Limited Liability Company
Effective as of February 28, 2024
This Second Amended and Restated Limited Liability Company Agreement amends, restates, and supersedes in its entirety the prior Amended and Restated Limited Liability Company Agreement of Ardent Capital GP III LLC, dated as of June 28, 2019.
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RECITALS
WHEREAS, Ardent Capital GP III LLC, a Delaware limited liability company (the "Company"), was formed pursuant to a Certificate of Formation filed with the Secretary of State of the State of Delaware, and maintains its registered agent as Prestige Registered Agents LLC, located at 850 New Burton Road, Suite 201, Dover, DE 19904;
WHEREAS, the Company serves as the sole general partner of Ardent Capital Partners III LP, a Delaware limited partnership (the "Fund"), which was formed in 2019 with a final close on April 15, 2019, and an investment period that commenced on June 30, 2019;
WHEREAS, the Fund has received total capital commitments of approximately Two Billion Eight Hundred Million Dollars ($2,800,000,000) from forty-seven (47) limited partners;
WHEREAS, the original members of the Company were Marcus Aldridge, Priya Narayanan, David Kellner, Joanna Trask, and Robert Hsiao (collectively, the "Original Members"), each of whom held a direct membership interest in the Company;
WHEREAS, the Company previously entered into an Amended and Restated Limited Liability Company Agreement, dated as of June 28, 2019 (the "Prior Agreement"), which governed the rights, obligations, and interests of the Original Members;
WHEREAS, in connection with a restructuring of the management company platform (the "Restructuring"), the parties hereto desire to amend and restate the Prior Agreement in its entirety to reflect the following:
(a) The withdrawal of David Kellner as a member of the Company effective as of March 31, 2024, in connection with Mr. Kellner's retirement from the Ardent Capital platform;
(b) The withdrawal of Joanna Trask as a member of the Company effective as of April 15, 2024, in connection with Ms. Trask's voluntary departure from the Ardent Capital platform;
(c) The admission of Ardent GP Intermediate LLC, a Delaware limited liability company ("GP Intermediate," Delaware File No. 7948237, EIN 93-1847231), as the sole member of the Company;
(d) The formation of GP Intermediate as a wholly owned subsidiary of Ardent Capital Holdings LLC, a Delaware limited liability company ("HoldCo," Delaware File No. 7948231, EIN 93-1847225), which was formed on March 1, 2024 as the successor holding entity for the indirect membership interests of the remaining principals;
(e) Updated general partner commitment allocations reflecting the assumption of the unfunded general partner commitment obligations of the Departing Members by the remaining principals through GP Intermediate and HoldCo;
(f) Conforming changes to the governance, transfer, removal, and indemnification provisions of the Company to reflect the new organizational structure implemented by the Restructuring;
WHEREAS, the Limited Partner Advisory Committee of the Fund (the "LPAC") consented to the Restructuring on February 14, 2024, pursuant to Section 9.4 of the Amended and Restated Agreement of Limited Partnership of Ardent Capital Partners III LP, dated as of June 28, 2019, as amended by Amendment No. 1 effective February 28, 2024 (as so amended, the "LPA");
WHEREAS, all Original Members have approved this Agreement and the transactions contemplated hereby pursuant to Member Consent Resolutions, each dated February 28, 2024; and
WHEREAS, each of the parties hereto desires to set forth the terms and conditions governing the Company following the Restructuring.
NOW, THEREFORE, in consideration of the mutual covenants, agreements, and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Accrued Carry" means the carried interest accrued by the Company in respect of the Fund as of any given date of determination. As of September 30, 2023, the Accrued Carry was approximately Eighty-Seven Million Six Hundred Thousand Dollars ($87,600,000).
"Agreement" means this Second Amended and Restated Limited Liability Company Agreement of the Company, effective as of February 28, 2024, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Ardent Capital Holdings" or "HoldCo" means Ardent Capital Holdings LLC, a Delaware limited liability company, EIN 93-1847225, Delaware File No. 7948231, which is the sole member of GP Intermediate.
"Ardent Capital Management" or "ManCo" means Ardent Capital Management LLC, a Delaware limited liability company, EIN 84-3291070, CRD #298417, which is the investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended, and which serves as the manager of the Fund.
"Authorized Person" means any officer, agent, or other person authorized by the Managing Officers or by resolution of the Member to act on behalf of the Company.
"Capital Contribution" means the aggregate capital contributions made by the Member (or, as applicable, its predecessors in interest) to the Company as of any date of determination.
"Carried Interest" means twenty percent (20%) of the net profits of the Fund allocated to the Company in its capacity as General Partner, subject to an eight percent (8%) preferred return to the limited partners and a full catch-up allocation, as more particularly set forth in Article VII of the LPA.
"Carry Recipients" means the individuals entitled to participate in the economic benefits of the Carried Interest, including Marcus Aldridge, Priya Narayanan, Robert Hsiao, Elena Marchetti, and Samuel Okonkwo, and, to the extent of their retained vested carry interests, the Departing Members, in each case as set forth in the Amended and Restated Carried Interest Allocation Agreement dated February 28, 2024.
"Certificate" means the Certificate of Formation of the Company, as originally filed with the Secretary of State of the State of Delaware and as amended from time to time.
"Clawback Obligation" means the obligation of the Company, and indirectly of the Carry Recipients, to return carried interest distributions previously received from the Fund to the extent required by Section 7.6 of the LPA, so that on a cumulative basis the limited partners receive their preferred return and return of capital before the Company retains any carried interest.
"Code" means the Internal Revenue Code of 1986, as amended, and any successor statute thereto, together with all Treasury Regulations promulgated thereunder.
"Company" means Ardent Capital GP III LLC, a Delaware limited liability company, EIN 84-3291063.
"Covered Person" has the meaning set forth in Section 9.1.
"Delaware Act" means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq., as amended from time to time.
"Departing Members" means David Kellner and Joanna Trask, each of whom has withdrawn or will withdraw as a member of the Company as described in Section 3.2.
"Effective Date" means February 28, 2024.
"Fund" means Ardent Capital Partners III LP, a Delaware limited partnership, EIN 84-3291057.
"Fund Term" means the term of the Fund, which expires on December 31, 2029, subject to two successive one-year extensions at the discretion of the General Partner (each, a "GP Extension"), as set forth in Section 2.4 of the LPA.
"GP Commitment" means the aggregate general partner commitment of the Company to the Fund in the amount of Forty-Two Million Dollars ($42,000,000), representing one and one-half percent (1.5%) of the total capital commitments to the Fund of Two Billion Eight Hundred Million Dollars ($2,800,000,000).
"GP Intermediate" means Ardent GP Intermediate LLC, a Delaware limited liability company, EIN 93-1847231, Delaware File No. 7948237, which has been admitted as the sole Member of the Company as of the Effective Date.
"Investment Period" means the period commencing on June 30, 2019 and ending on June 30, 2025, during which the Fund may make new investments, as set forth in Section 5.1 of the LPA.
"Key Persons" means Marcus Aldridge and Priya Narayanan, as designated in Section 5.2 of the LPA.
"LPA" means the Amended and Restated Agreement of Limited Partnership of Ardent Capital Partners III LP, dated as of June 28, 2019, as amended by Amendment No. 1 effective February 28, 2024, and as the same may be further amended, restated, supplemented, or otherwise modified from time to time.
"LPAC" means the Limited Partner Advisory Committee of the Fund, as constituted from time to time pursuant to Section 9.4 of the LPA.
"Managing Officers" means Marcus Aldridge and Priya Narayanan, each serving as a Managing Officer of the Company, and any successor Managing Officers appointed in accordance with this Agreement.
"Member" means GP Intermediate, as the sole member of the Company as of the Effective Date, and any successor or additional member admitted in accordance with this Agreement.
"Original Members" means Marcus Aldridge, Priya Narayanan, David Kellner, Joanna Trask, and Robert Hsiao, the individuals who were the original members of the Company under the Prior Agreement.
"Person" means any individual, corporation, limited liability company, partnership, limited partnership, trust, estate, association, joint venture, governmental authority, or other entity.
"Prior Agreement" means the Amended and Restated Limited Liability Company Agreement of the Company, dated as of June 28, 2019, which was in effect immediately prior to the effectiveness of this Agreement.
"Restructuring" means the management company restructuring and economics realignment described in the Recitals to this Agreement, pursuant to which, among other things, the Original Members ceased to hold direct membership interests in the Company and GP Intermediate was admitted as the sole Member.
"Treasury Regulations" means the regulations promulgated under the Code by the United States Department of the Treasury, as amended from time to time (including corresponding provisions of succeeding regulations).
"Withdrawal Date" means (a) with respect to David Kellner, March 31, 2024, and (b) with respect to Joanna Trask, April 15, 2024.
Section 1.2 — Interpretation
In this Agreement, unless the context otherwise requires:
(a) The terms "hereof," "herein," "hereunder," "hereby," and words of similar import refer to this Agreement as a whole and not to any particular Article, Section, or provision hereof.
(b) References to any Article, Section, Exhibit, or Schedule are to the Article, Section, Exhibit, or Schedule of this Agreement unless otherwise specified.
(c) Headings and captions used in this Agreement are included for convenience of reference only and shall not affect the construction or interpretation of any provision.
(d) Words importing the singular number shall include the plural, and vice versa, and words importing gender shall include each of the masculine, feminine, and neuter genders.
(e) The word "including" (and correlative words such as "include" and "includes") shall mean including without limitation.
(f) References to any statute shall include all rules and regulations promulgated thereunder and shall be deemed to refer to such statute, rules, and regulations as the same may be amended, modified, supplemented, or replaced from time to time.
(g) References to "days" mean calendar days unless "business days" is expressly specified.
(h) All monetary amounts are expressed in United States Dollars unless otherwise stated.
(i) This Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware without regard to conflict-of-laws principles that would require the application of the laws of any other jurisdiction.
ARTICLE II — ORGANIZATION
Section 2.1 — Formation
The Company was formed as a limited liability company under the Delaware Act pursuant to the Certificate of Formation filed with the Secretary of State of the State of Delaware. The rights, powers, duties, obligations, and liabilities of the Member and the Managing Officers shall be as provided in the Delaware Act, except as otherwise provided in this Agreement. To the extent that any provision of this Agreement is inconsistent with any non-mandatory provision of the Delaware Act, this Agreement shall control.
Section 2.2 — Name
The name of the Company is "Ardent Capital GP III LLC." The business of the Company shall be conducted under such name or such other name or names as the Managing Officers may from time to time determine, provided that any change of name shall comply with the requirements of the Delaware Act and shall be reflected in an appropriate amendment to the Certificate.
Section 2.3 — Registered Office and Agent
The registered office of the Company in the State of Delaware is located at 850 New Burton Road, Suite 201, Dover, Delaware 19904, and the registered agent of the Company for service of process at such address is Prestige Registered Agents LLC. The Managing Officers may change the registered office and the registered agent of the Company from time to time in accordance with the Delaware Act. The principal office of the Company is located at 590 Madison Avenue, 28th Floor, New York, New York 10022, or such other location as the Managing Officers may from time to time designate by written notice to the Member.
Section 2.4 — Purpose
The purpose of the Company is:
(a) To serve as the sole general partner of the Fund;
(b) To make and manage investments in middle-market industrial and business-services companies on behalf of the Fund, in accordance with the investment strategy, objectives, and guidelines set forth in the LPA and the Private Placement Memorandum of the Fund;
(c) To make capital contributions to the Fund in the amount of the GP Commitment;
(d) To exercise all rights, powers, and authority of a general partner under the LPA and under the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101 et seq.;
(e) To engage in any and all lawful activities incidental, ancillary, or related to the foregoing, including the execution of agreements, the maintenance of bank accounts, the retention of advisors and service providers, and the taking of all actions as may be necessary, advisable, or convenient in furtherance of the Company's purpose.
Section 2.5 — Term
The Company shall continue in existence until dissolved in accordance with Article X of this Agreement. The Company's continued existence is anticipated at least through the Fund Term, which expires on December 31, 2029, subject to two successive one-year extensions at the discretion of the Company acting as General Partner of the Fund. Nothing in this Section 2.5 shall be construed to limit the right of the Member to dissolve the Company in accordance with Section 10.1 of this Agreement, subject to the terms and conditions of the LPA.
Section 2.6 — Title to Property
All property owned by the Company, whether real or personal, tangible or intangible, shall be owned by the Company as an entity, and no Member shall have any individual ownership interest in any Company property by reason of being a Member of the Company. The Member's interest in the Company shall constitute personal property of the Member.
ARTICLE III — MEMBER; ADMISSION AND WITHDRAWAL
Section 3.1 — Sole Member
As of the Effective Date, the sole member of the Company is Ardent GP Intermediate LLC. GP Intermediate holds one hundred percent (100%) of the membership interests in the Company. GP Intermediate was admitted as the sole Member of the Company upon the withdrawal of all Original Members as direct members and the execution of this Agreement. The Member Schedule attached hereto as Exhibit A sets forth the identity, membership interest percentage, and effective date of admission of the sole Member.
Section 3.2 — Withdrawal of Departing Members
(a) David Kellner. David Kellner withdrew as a member of the Company effective as of March 31, 2024, in connection with his retirement from the Ardent Capital platform. The rights and obligations of Mr. Kellner in respect of his withdrawal are governed by (i) the Separation and Release Agreement, dated as of February 28, 2024, by and between Mr. Kellner and the Company, and (ii) the Carry Retention and Clawback Side Letter, dated as of February 28, 2024, by and among Mr. Kellner, the Company, and HoldCo. Mr. Kellner's retained vested carry interest and related clawback obligations are described in Section 5.2 of this Agreement.
(b) Joanna Trask. Joanna Trask withdrew as a member of the Company effective as of April 15, 2024, in connection with her voluntary departure from the Ardent Capital platform. The rights and obligations of Ms. Trask in respect of her withdrawal are governed by (i) the Separation and Release Agreement, dated as of February 28, 2024, by and between Ms. Trask and the Company, and (ii) the Carry Retention and Clawback Side Letter, dated as of February 28, 2024, by and among Ms. Trask, the Company, and HoldCo. Ms. Trask's retained vested carry interest and related clawback obligations are described in Section 5.2 of this Agreement.
(c) Cancellation of Interests. Upon the withdrawal of each Departing Member, all of such Departing Member's membership interests in the Company were cancelled and rendered of no further force or effect, except to the extent that specific rights and obligations are expressly preserved in the applicable Separation and Release Agreement and Carry Retention and Clawback Side Letter. For the avoidance of doubt, neither Departing Member shall have any further right to vote, consent to, or participate in the management of the Company following his or her respective Withdrawal Date.
Section 3.3 — Withdrawal of Remaining Original Members
Marcus Aldridge, Priya Narayanan, and Robert Hsiao each withdrew as a direct member of the Company on the Effective Date. In connection with their withdrawal, each such individual contributed his or her respective membership interest in the Company to HoldCo, which holds such interests indirectly through GP Intermediate. The economic rights of each such individual are now held indirectly through their respective membership interests in HoldCo, allocated as follows:
Elena Marchetti and Samuel Okonkwo are next-generation principals of the Ardent Capital platform who were admitted as members of HoldCo in connection with the Restructuring. Neither Ms. Marchetti nor Mr. Okonkwo was an Original Member of the Company. The allocation of interests in HoldCo among the foregoing individuals is governed by the Limited Liability Company Agreement of Ardent Capital Holdings LLC, dated as of March 1, 2024.
Section 3.4 — Admission of Additional Members
No additional members shall be admitted to the Company without the prior written consent of the Member and compliance with the LPA, including, without limitation, Section 8.3 of the LPA regarding Transfer of the GP Interest, and any applicable requirements for LPAC consent under Section 9.4 of the LPA. Any Person admitted as an additional member shall execute a Joinder Agreement in substantially the form attached hereto as Exhibit D and shall agree to be bound by all of the terms and conditions of this Agreement.
Section 3.5 — No Resignation
The Member may not resign or withdraw from the Company except (a) as provided in Article X of this Agreement in connection with the dissolution of the Company, or (b) with the prior written consent of the LPAC pursuant to Section 9.4 of the LPA. Any purported resignation or withdrawal by the Member in violation of this Section 3.5 shall be void and of no force or effect.
ARTICLE IV — CAPITAL CONTRIBUTIONS AND GP COMMITMENT
Section 4.1 — GP Commitment
The Company has committed to contribute Forty-Two Million Dollars ($42,000,000) to the Fund as the GP Commitment, representing one and one-half percent (1.5%) of the total capital commitments to the Fund of Two Billion Eight Hundred Million Dollars ($2,800,000,000). As of the Effective Date, Twenty-Nine Million Four Hundred Thousand Dollars ($29,400,000) of the GP Commitment has been funded, representing seventy percent (70%) of the total GP Commitment, consistent with the Fund having called approximately seventy percent (70%) of total capital commitments (i.e., One Billion Nine Hundred Sixty Million Dollars ($1,960,000,000) of the total Two Billion Eight Hundred Million Dollars ($2,800,000,000) in aggregate commitments). For the avoidance of doubt, the funded amount includes the portions attributable to the Departing Members prior to their respective Withdrawal Dates.
Section 4.2 — Funded Amounts Attributable to Departing Members
The GP Commitment allocation attributable to each Departing Member, and the funded and unfunded portions thereof, are as follows:
(a) David Kellner. Mr. Kellner's total GP Commitment share was Six Million Three Hundred Thousand Dollars ($6,300,000), representing fifteen percent (15%) of the aggregate GP Commitment of Forty-Two Million Dollars ($42,000,000). As of the Effective Date, Mr. Kellner's funded portion was Four Million Four Hundred Ten Thousand Dollars ($4,410,000), calculated as $6,300,000 multiplied by seventy percent (70%). Mr. Kellner's unfunded portion was One Million Eight Hundred Ninety Thousand Dollars ($1,890,000).
(b) Joanna Trask. Ms. Trask's total GP Commitment share was Five Million Forty Thousand Dollars ($5,040,000), representing twelve percent (12%) of the aggregate GP Commitment of Forty-Two Million Dollars ($42,000,000). As of the Effective Date, Ms. Trask's funded portion was Three Million Five Hundred Twenty-Eight Thousand Dollars ($3,528,000), calculated as $5,040,000 multiplied by seventy percent (70%). Ms. Trask's unfunded portion was One Million Five Hundred Twelve Thousand Dollars ($1,512,000).
(c) Combined Unfunded Departing Commitment. The combined unfunded GP Commitment attributable to the Departing Members is Three Million Four Hundred Two Thousand Dollars ($3,402,000), being the sum of Mr. Kellner's unfunded portion of $1,890,000 and Ms. Trask's unfunded portion of $1,512,000.
Section 4.3 — Assumption of Unfunded Departing Commitment
The aggregate unfunded GP Commitment of the Departing Members in the amount of Three Million Four Hundred Two Thousand Dollars ($3,402,000) shall be assumed by the remaining HoldCo members through GP Intermediate. Such unfunded commitment shall be allocated among the HoldCo members pro rata based on their respective HoldCo membership percentages as follows:
Any rounding adjustments resulting from the above calculations shall be allocated to Marcus Aldridge. GP Intermediate shall be responsible for funding the remaining GP Commitment on behalf of the Company when and as capital calls are made by the Fund. The details of the pre-Restructuring and post-Restructuring GP Commitment allocations are set forth in Exhibit B attached hereto.
Section 4.4 — Capital Accounts
A capital account shall be maintained for the Member in accordance with the applicable provisions of the Code and the Treasury Regulations, including Sections 704(b) and 704(c) thereof and the Treasury Regulations promulgated thereunder. The capital account of the Member shall reflect all capital contributions made by the Member to the Company, all allocations of income, gain, loss, deduction, and credit to the Member, and all distributions made by the Company to the Member. The capital account shall be adjusted in a manner consistent with the requirements set forth in Treasury Regulation Section 1.704-1(b)(2)(iv).
Section 4.5 — No Interest on Capital
No interest shall be paid on any capital contributions made by the Member to the Company. Nothing in this Agreement shall be construed to create an obligation of the Company to pay interest on any amount held in or credited to the capital account of the Member.
Section 4.6 — Return of Capital
No Member shall have the right to demand or receive the return of all or any portion of its capital contributions to the Company, except upon dissolution and winding up of the Company in accordance with Article X or as otherwise expressly provided in this Agreement. No Member shall have priority over any other Member with respect to the return of capital contributions, it being understood that as of the Effective Date there is only a single Member.
ARTICLE V — ALLOCATIONS AND DISTRIBUTIONS
Section 5.1 — Allocations of Net Income and Net Loss
All items of income, gain, loss, deduction, and credit of the Company for each fiscal year (or other applicable period) shall be allocated to the Member in accordance with its membership interest, which, as of the Effective Date, is one hundred percent (100%) to GP Intermediate. All such allocations shall be made in a manner consistent with Sections 704(b) and 704(c) of the Code and the Treasury Regulations promulgated thereunder. In the event additional members are admitted to the Company in the future, allocations shall be made in accordance with such members' respective membership interests and in a manner consistent with the requirements of the Code.
Section 5.2 — Carried Interest Allocations
(a) Entitlement. The Company, in its capacity as the sole general partner of the Fund, is entitled to receive carried interest from the Fund equal to twenty percent (20%) of net profits of the Fund, subject to an eight percent (8%) preferred return to the limited partners and a full catch-up allocation to the Company, as set forth in Article VII of the LPA.
(b) Distribution to Member. All carried interest received by the Company from the Fund shall be distributed to the Member (GP Intermediate) for further allocation through HoldCo to the Carry Recipients pursuant to the terms and conditions of the Amended and Restated Carried Interest Allocation Agreement, dated as of February 28, 2024, by and among HoldCo, GP Intermediate, the Company, and the Carry Recipients.
(c) Post-Restructuring Carry Allocations. Following the Restructuring, the carried interest shall be allocated at the HoldCo level among the Carry Recipients as follows:
The foregoing allocation percentages are subject to carve-outs for the retained vested carry interests of the Departing Members, as described below.
(d) Departing Member Retained Carry. Notwithstanding the foregoing, the Departing Members retain vested carry interests as follows:
(i) David Kellner. Mr. Kellner's retained vested carry interest is Thirteen Million One Hundred Forty Thousand Dollars ($13,140,000), calculated as fifteen percent (15%) of the Accrued Carry of Eighty-Seven Million Six Hundred Thousand Dollars ($87,600,000) as of September 30, 2023. Mr. Kellner's retained vested carry is subject to clawback for a period of three (3) years following his retirement (i.e., through March 31, 2027). In connection therewith, Mr. Kellner is required to maintain in escrow an amount equal to Three Million Nine Hundred Forty-Two Thousand Dollars ($3,942,000), representing thirty percent (30%) of his retained vested carry of $13,140,000, which escrow amount shall be released upon the expiration of the clawback period, subject to reduction for any amounts actually clawed back.
(ii) Joanna Trask. Ms. Trask's retained vested carry interest is Six Million Three Hundred Seven Thousand Two Hundred Dollars ($6,307,200), calculated as sixty percent (60%) of the carry attributable to her allocation of the Accrued Carry of Ten Million Five Hundred Twelve Thousand Dollars ($10,512,000), being twelve percent (12%) of the Accrued Carry of $87,600,000, with a sixty percent (60%) vesting factor applied in accordance with the vesting schedule set forth in the Prior Agreement. Ms. Trask's retained vested carry is subject to clawback for a period of two (2) years following her departure (i.e., through April 15, 2026). In connection therewith, Ms. Trask is required to maintain in escrow an amount equal to One Million Eight Hundred Ninety-Two Thousand One Hundred Sixty Dollars ($1,892,160), representing thirty percent (30%) of her retained vested carry of $6,307,200, which escrow amount shall be released upon the expiration of the clawback period, subject to reduction for any amounts actually clawed back.
The terms and conditions governing the retained vested carry of each Departing Member, including the applicable vesting schedules, clawback obligations, escrow requirements, forfeiture provisions, and non-competition and non-solicitation covenants, are set forth in the respective Carry Retention and Clawback Side Letters entered into by each Departing Member.
Section 5.3 — Clawback Obligations
(a) The Company's clawback obligation under Section 7.6 of the LPA is one hundred percent (100%) of carried interest distributions received by the Company, and such obligation is joint and several among the Carry Recipients to the extent of their respective carried interest allocations.
(b) Each Carry Recipient shall maintain an individual escrow account in an amount equal to thirty percent (30%) of carried interest distributions received by such Carry Recipient, which escrow shall be maintained until the earlier of (i) the final liquidation and dissolution of the Fund, (ii) the third anniversary of the final distribution of carried interest by the Fund, or (iii) such earlier date as the clawback obligation is fully satisfied or released.
(c) The clawback obligations of the Departing Members are governed exclusively by their respective Carry Retention and Clawback Side Letters, and the Company shall not have any obligation to pursue clawback from a Departing Member except in accordance with the terms thereof.
Section 5.4 — Distributions
Cash distributions shall be made to the Member at such times and in such amounts as determined by the Managing Officers in their sole discretion, subject to applicable law, the terms of the LPA, and the maintenance of adequate reserves for the Company's operations, obligations, and liabilities (including the Clawback Obligation). Distributions in respect of carried interest shall be made promptly following receipt of carried interest distributions from the Fund, net of any amounts required to be retained in escrow or reserved for tax obligations or other purposes.
Section 5.5 — Tax Distributions
The Company shall make tax distributions to the Member in amounts sufficient to cover the estimated federal, state, and local income tax liability of the Member (and, indirectly, the members of HoldCo) arising from allocations of taxable income by the Company, computed using the highest applicable combined marginal rate for individuals resident in New York, New York. Tax distributions shall be made on a quarterly basis or at such other intervals as the Managing Officers determine to be appropriate, and shall be treated as advances against and shall reduce subsequent distributions otherwise payable to the Member under Section 5.4. The obligation to make tax distributions is subject to the Company's having sufficient cash available and to compliance with the LPA.
ARTICLE VI — MANAGEMENT AND GOVERNANCE
Section 6.1 — Management by Managing Officers
The business and affairs of the Company shall be managed by the Managing Officers. As of the Effective Date, the Managing Officers are:
(a) Marcus Aldridge, Co-Founder and Managing Partner; and
(b) Priya Narayanan, Co-Founder and Managing Partner.
The Managing Officers shall have full power and authority to manage and control the business and affairs of the Company and to take all actions necessary, advisable, or convenient to carry out the Company's purpose as the sole general partner of the Fund, including, without limitation, the authority to make investment decisions, to execute and deliver agreements and other documents on behalf of the Company, to manage the day-to-day operations of the Company, and to exercise all rights, powers, and authority vested in the general partner under the LPA. The Managing Officers are appointed by, and serve at the direction of, the Member (GP Intermediate, acting at the direction of HoldCo). The Managing Officers identified herein are also set forth in Exhibit C attached hereto.
Section 6.2 — Authority of Managing Officers
(a) General Authority. Each Managing Officer shall have the authority to bind the Company and to execute and deliver any documents, agreements, instruments, certificates, and other writings on behalf of the Company, including, without limitation, subscription agreements, side letters, portfolio company acquisition and disposition documents, financing agreements, service provider agreements, and regulatory filings.
(b) Major Decisions. Notwithstanding the foregoing, the following decisions shall require the joint approval of both Managing Officers, acting together:
(i) The admission of new portfolio company investments, or follow-on investments in existing portfolio companies, involving aggregate consideration in excess of One Hundred Million Dollars ($100,000,000);
(ii) The incurrence of indebtedness by the Company, whether by loan, guarantee, or otherwise, in an aggregate amount in excess of Five Hundred Thousand Dollars ($500,000);
(iii) Any amendment, modification, or waiver of any provision of the LPA;
(iv) Any capital call to the limited partners of the Fund;
(v) Any distribution to the limited partners of the Fund;
(vi) The execution of any side letter or amendment to an existing side letter with a limited partner of the Fund;
(vii) Any action or matter requiring the consent of the LPAC under Section 9.4 of the LPA;
(viii) The appointment or removal of any officer of the Company;
(ix) The commencement or settlement of any litigation, arbitration, or other proceeding involving the Company, the Fund, or any portfolio company in which the amount in controversy exceeds One Million Dollars ($1,000,000); and
(x) Any other action or matter designated by the Member as requiring joint approval of the Managing Officers.
(c) Delegation. The Managing Officers may delegate authority to officers or agents of Ardent Capital Management LLC (CRD #298417) or to such other Persons as the Managing Officers may determine, provided that no such delegation shall relieve the Managing Officers of their responsibilities hereunder or under the LPA.
Section 6.3 — Officers
The Managing Officers may appoint officers of the Company, including a President, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers as the Managing Officers may from time to time determine. Each officer shall hold office until his or her successor is appointed or until his or her earlier resignation, removal, or death. As of the Effective Date, the officers of the Company are:
The officers shall have such duties, powers, and authority as may be assigned to them from time to time by the Managing Officers, consistent with the terms of this Agreement and the LPA.
Section 6.4 — Role of Member
As the sole member of the Company, GP Intermediate (acting at the direction of HoldCo) shall have the following rights:
(a) To appoint and remove the Managing Officers of the Company;
(b) To approve any amendment, modification, or restatement of this Agreement;
(c) To approve the dissolution of the Company in accordance with Article X;
(d) To approve the admission of any additional member to the Company in accordance with Section 3.4;
(e) To approve any transfer, assignment, sale, or other disposition of the Company's general partner interest in the Fund in accordance with Article VII; and
(f) To exercise such other rights and powers as may be reserved to the Member under this Agreement, the Delaware Act, or applicable law.
Except as expressly set forth in this Section 6.4, the Member shall not participate in the day-to-day management of the business and affairs of the Company, which shall be the exclusive province of the Managing Officers.
Section 6.5 — Key Persons
(a) The Key Persons of the Fund are Marcus Aldridge and Priya Narayanan, as designated in Section 5.2 of the LPA. The Key Persons are required to devote substantially all of their business time and attention to the affairs of the Fund during the Investment Period and, thereafter, to the management and disposition of the Fund's portfolio and the winding up of the Fund's affairs.
(b) A "Key Person Event" under Section 5.2 of the LPA shall be triggered if either (i) both Key Persons cease to devote substantially all of their business time and attention to the Fund, or (ii) one Key Person ceases to devote substantially all of his or her business time and attention to the Fund and a replacement Key Person acceptable to the LPAC is not appointed within one hundred twenty (120) days following such cessation.
(c) The parties acknowledge and agree that the departures of David Kellner and Joanna Trask do not constitute a Key Person Event under Section 5.2 of the LPA, as neither Mr. Kellner nor Ms. Trask is a designated Key Person under the LPA.
(d) Notwithstanding the foregoing, the parties acknowledge that six (6) of the fourteen (14) side letters entered into by the Fund with certain limited partners name David Kellner as a "Contributing Person" under supplemental key-person provisions. In connection with the Restructuring, the Company has delivered written notifications to each such limited partner within fifteen (15) business days of the date of Mr. Kellner's notice of retirement, in accordance with the applicable side letter provisions. Three (3) of such side letters (specifically, those with Ridgeline Public Employees' Retirement System, Pinnacle Insurance Group, and Crestwood Endowment Partners) grant the applicable limited partner the right to suspend the investment period for a period of up to ninety (90) days following receipt of such notification, during which time such limited partner may evaluate the impact of Mr. Kellner's departure. As of the Effective Date, none of such limited partners has elected to exercise such suspension right.
Section 6.6 — Reliance on Ardent Capital Management LLC
The Company shall be entitled to rely on the investment recommendations, due diligence analyses, portfolio monitoring, operational support, and administrative services of Ardent Capital Management LLC (CRD #298417) in fulfilling its duties and obligations as the sole general partner of the Fund. The Company may enter into management, advisory, or services agreements with ManCo on such terms as the Managing Officers may determine, subject to the requirements of the LPA and any applicable LPAC consent requirements. Nothing in this Section 6.6 shall relieve the Company of its fiduciary duties, if any, to the limited partners of the Fund under the LPA or applicable law.
ARTICLE VII — TRANSFER OF INTERESTS
Section 7.1 — Restrictions on Transfer
The Member may not transfer, sell, assign, pledge, hypothecate, encumber, or otherwise dispose of (each, a "Transfer") all or any portion of its membership interest in the Company without:
(a) The prior written consent of both Managing Officers;
(b) Compliance with Section 8.3 of the LPA regarding Transfer of the GP Interest, including any requirement for the consent of limited partners or the LPAC;
(c) Compliance with all applicable federal, state, and foreign securities laws, including, without limitation, the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder; and
(d) Receipt of any LPAC consent required under Section 9.4 of the LPA in connection with such Transfer.
Any purported Transfer in violation of this Section 7.1 shall be null and void and shall not be recognized by the Company for any purpose.
Section 7.2 — Permitted Transfers
Notwithstanding Section 7.1, Transfers by the Member to HoldCo or to any entity that is a direct or indirect wholly owned subsidiary of HoldCo shall be permitted without further consent of the Managing Officers, provided that (a) such Transfer does not trigger a Key Person Event under Section 5.2 of the LPA, (b) such Transfer does not violate any provision of the LPA or any applicable side letter, and (c) the transferee agrees to be bound by all terms and conditions of this Agreement. The Managing Officers shall notify the LPAC of any Permitted Transfer within fifteen (15) business days of the consummation thereof.
Section 7.3 — Conditions to Transfer
(a) As a condition to any proposed Transfer (other than a Permitted Transfer under Section 7.2), the proposed transferee must execute and deliver to the Company a written Joinder Agreement in substantially the form attached hereto as Exhibit D, pursuant to which such transferee agrees to be bound by all of the terms, conditions, and obligations of this Agreement.
(b) The Managing Officers may require the delivery of a written legal opinion of counsel (which counsel shall be reasonably satisfactory to the Managing Officers) as to compliance with applicable securities laws and the absence of any adverse tax consequences to the Company or the Fund as a result of such Transfer.
(c) The Company shall promptly notify the LPAC and all limited partners of the Fund of any Transfer of a membership interest in the Company, as required under the LPA and applicable side letters. The parties acknowledge that four (4) side letters — specifically, those with Ridgeline Public Employees' Retirement System, Pinnacle Insurance Group, Crestwood Endowment Partners, and Haverford Capital Partners — require prior written notice to the applicable limited partner, and, in the case of the Ridgeline, Pinnacle, and Crestwood side letters, affirmative consent of the applicable limited partner, for any "material change in the management structure" of the Company or the general partner of the Fund. The Managing Officers shall ensure that all such notice and consent requirements are satisfied prior to the consummation of any Transfer that constitutes a "material change in the management structure."
Section 7.4 — Effect of Transfer
Upon the consummation of a permitted Transfer and the satisfaction of all conditions set forth in this Article VII, the transferee shall be admitted to the Company as a substitute member, and the transferor's membership interest (or the portion thereof so transferred) shall be assigned to and held by the transferee, who shall succeed to all of the rights and obligations of the transferor with respect to the transferred interest. The Company shall update its books and records and the Member Schedule attached hereto as Exhibit A to reflect the admission of the transferee as a substitute member.
ARTICLE VIII — REMOVAL OF GENERAL PARTNER
Section 8.1 — Removal Provisions
The Company may be removed as the sole general partner of the Fund only in accordance with Section 9.7 of the LPA. The removal provisions of Section 9.7 of the LPA are hereby incorporated by reference into this Agreement as if set forth in full herein. Without limiting the generality of the foregoing, the parties acknowledge that Section 9.7 of the LPA provides for removal of the general partner (a) for "Cause" (as defined in the LPA) upon the vote of limited partners holding at least sixty-six and two-thirds percent (66 2/3%) of the aggregate capital commitments of the limited partners, or (b) without "Cause" upon the vote of limited partners holding at least eighty percent (80%) of the aggregate capital commitments of the limited partners, in each case subject to the procedures and conditions set forth in the LPA.
Section 8.2 — Effect of Removal
Upon the removal of the Company as the sole general partner of the Fund in accordance with Section 9.7 of the LPA, the Company shall cooperate fully with any successor general partner and shall promptly deliver to such successor general partner all books, records, documents, and Fund property in the Company's possession or control. The Company shall execute and deliver such documents and instruments as may be reasonably necessary to effectuate an orderly transition of management responsibility to the successor general partner. The Company's obligations under this Section 8.2 shall survive the removal of the Company as general partner.
Section 8.3 — No Voluntary Withdrawal