REVISED CO-INVESTMENT ALLOCATION POLICY
Ardent Capital Partners III LP
A Delaware Limited Partnership
Policy Effective Date: February 28, 2024
Adopted by Ardent Capital GP III LLC, a Delaware limited liability company, in its capacity as the General Partner of Ardent Capital Partners III LP, acting through Ardent Capital Management LLC, a Delaware limited liability company registered as an investment adviser with the U.S. Securities and Exchange Commission (CRD #298417), in its capacity as the investment manager of the Fund.
This Revised Co-Investment Allocation Policy supersedes in its entirety the prior Co-Investment Allocation Policy dated April 15, 2019, which was adopted by the General Partner at the final closing of Ardent Capital Partners III LP.
This Policy is governed by the laws of the State of Delaware, without regard to its conflicts of law principles.
Cross-References: (i) Amended and Restated Agreement of Limited Partnership of Ardent Capital Partners III LP, dated as of June 15, 2019, as amended by Amendment No. 1, effective February 28, 2024 (the "LPA"); (ii) Amended and Restated Limited Liability Company Agreement of Ardent Capital Holdings LLC, dated as of February 28, 2024; (iii) Amended and Restated Carried Interest Allocation Agreement, dated as of February 28, 2024; (iv) Management Fee Sharing and Profit Allocation Agreement, dated as of February 28, 2024; and (v) all fourteen (14) side letters currently in effect between the General Partner (or its affiliates) and the Limited Partners of the Fund.
Right-click to update Table of Contents
SECTION 1: PURPOSE AND BACKGROUND
1.1 Purpose
This Revised Co-Investment Allocation Policy (this "Policy") sets forth the policy governing the identification, allocation, and offer of co-investment opportunities arising from portfolio investments made by Ardent Capital Partners III LP, a Delaware limited partnership (EIN 84-3291057) (the "Fund"). As of the date hereof, the Fund has total capital commitments of approximately $2.8 billion from forty-seven (47) limited partners (each, a "Limited Partner" and collectively, the "Limited Partners" or "LPs"). The Fund is managed by Ardent Capital Management LLC, a Delaware limited liability company (the "ManCo"), and its general partner is Ardent Capital GP III LLC, a Delaware limited liability company (the "General Partner" or "GP").
The purposes of this Policy are as follows:
1. To establish a consistent, fair, and transparent framework for the allocation of co-investment opportunities among eligible participants, including: (a) Limited Partners of the Fund, (b) the General Partner (Ardent Capital GP III LLC), (c) members of Ardent Capital Holdings LLC ("HoldCo"), and (d) their respective affiliates.
2. To ensure that all co-investment allocation decisions are made in compliance with (i) the Amended and Restated Agreement of Limited Partnership of the Fund, as amended by Amendment No. 1, effective February 28, 2024 (the "LPA"), (ii) all applicable side-letter commitments entered into between the General Partner (or its affiliates) and the Limited Partners, and (iii) the fiduciary duties owed by the General Partner and the ManCo to the Fund and its Limited Partners under applicable law, including the Delaware Revised Uniform Limited Partnership Act and the Investment Advisers Act of 1940, as amended.
3. To provide clarity to all eligible co-investors regarding the procedures, priorities, and allocation methodology that will govern co-investment decisions for the remainder of the Fund's term, taking into account the management company restructuring described in Section 1.2 below and the resulting changes to the roster of eligible co-investors and their respective allocation percentages.
4. To serve as a reference document for the ManCo's investment professionals, compliance personnel, and outside counsel in connection with the structuring and execution of co-investment transactions.
This Policy is supplemental to, and should be read in conjunction with, the LPA, the applicable side letters, and the other governing documents referenced herein. In the event of any conflict between this Policy and the LPA or any side letter, the LPA or the applicable side letter, as the case may be, shall control, as more fully described in Section 9 hereof.
1.2 Background — Management Company Restructuring
Effective February 28, 2024, the management company structure of the Fund was reorganized through a series of transactions that resulted in the formation of two new entities and the modification of the economic and governance arrangements among the principals of the Ardent Capital platform. The key elements of the restructuring are summarized below.
Formation of New Entities. Two new Delaware limited liability companies were formed in connection with the restructuring:
(a) Ardent Capital Holdings LLC ("HoldCo"), a Delaware limited liability company (EIN 93-1847225, Delaware Division of Corporations File No. 7948231), which serves as the parent holding company of the Ardent Capital platform. HoldCo is the sole member of Ardent Capital Management LLC (the ManCo) and the sole member of Ardent GP Intermediate LLC.
(b) Ardent GP Intermediate LLC, a Delaware limited liability company (EIN 93-1847231, Delaware Division of Corporations File No. 7948237), which serves as an intermediate holding entity. Ardent GP Intermediate LLC is the sole member of Ardent Capital GP III LLC (the General Partner of the Fund).
Departing Principals. In connection with the restructuring, two principals have departed or are departing the Ardent Capital platform:
(a) David Kellner (Senior Partner) is retiring from the Ardent Capital platform effective March 31, 2024. Following his retirement, Mr. Kellner will transition to a Senior Advisor role, providing consulting services on a limited basis. Mr. Kellner's economic interests in the General Partner and the ManCo have been restructured in connection with the formation of HoldCo, and he will no longer hold a membership interest in HoldCo or any of its subsidiaries as of his retirement date.
(b) Joanna Trask (Partner) is departing the Ardent Capital platform voluntarily, effective April 15, 2024. Ms. Trask's economic interests have similarly been restructured, and she will no longer hold a membership interest in HoldCo or any of its subsidiaries as of her departure date.
Remaining and Newly Admitted Principals. Following the restructuring, the membership of HoldCo is as follows:
(a) Marcus Aldridge — Co-Founder and Managing Partner (42% membership interest)
(b) Priya Narayanan — Co-Founder and Managing Partner (36% membership interest)
(c) Robert Hsiao — Partner (14% membership interest)
(d) Elena Marchetti — Principal (4% membership interest) — newly admitted to HoldCo in connection with the restructuring
(e) Samuel Okonkwo — Principal (4% membership interest) — newly admitted to HoldCo in connection with the restructuring
Ms. Marchetti and Mr. Okonkwo are next-generation investment professionals who have been admitted to HoldCo as part of the platform's succession planning and talent retention strategy. Their admission was approved by the existing members of HoldCo in accordance with the Amended and Restated Limited Liability Company Agreement of Ardent Capital Holdings LLC.
LPAC Consent. Consent to the restructuring was obtained from the Limited Partner Advisory Committee (the "LPAC") of the Fund on February 14, 2024, pursuant to Section 9.4 of the LPA, which requires LPAC approval for any material change to the management company structure or the identity of the key persons of the ManCo.
Impact on Co-Investment Policy. This Revised Policy reflects the updated roster of eligible co-investors, revised allocation percentages among HoldCo Members, and compliance with the nine (9) side letters containing co-investment priority rights. The prior Co-Investment Allocation Policy dated April 15, 2019 is hereby superseded in its entirety, and all co-investment opportunities arising on or after February 28, 2024 shall be governed by this Policy.
SECTION 2: DEFINITIONS
The following capitalized terms shall have the meanings ascribed to them below when used in this Policy. Capitalized terms used but not defined herein shall have the meanings given to them in the LPA.
"Co-Investment Opportunity" means any opportunity to invest alongside the Fund in a portfolio company acquisition, follow-on investment, or add-on acquisition where (a) the total equity check required for the investment exceeds the Fund's desired allocation as determined by the Investment Committee, or (b) the GP determines, in its sole discretion, that offering co-investment to one or more eligible participants is appropriate in light of the strategic, relationship, or other considerations applicable to the particular transaction. For the avoidance of doubt, a Co-Investment Opportunity may arise in connection with a new platform investment, a bolt-on or add-on acquisition by an existing Portfolio Company, a follow-on equity investment in an existing Portfolio Company, or a recapitalization or refinancing of an existing Portfolio Company that involves the commitment of additional equity capital.
"Eligible LP Co-Investors" means Limited Partners of the Fund who have been granted co-investment priority rights pursuant to a side letter entered into with the General Partner or the ManCo, or who are otherwise offered co-investment at the GP's discretion in accordance with this Policy. Eligible LP Co-Investors include both Priority LPs and Non-Priority LPs as defined herein.
"Fund" means Ardent Capital Partners III LP, a Delaware limited partnership (EIN 84-3291057), together with any parallel fund, alternative investment vehicle, or feeder vehicle established in connection therewith, except where the context otherwise requires.
"GP Co-Investment" means any co-investment made by the General Partner or its affiliates alongside the Fund in connection with a Co-Investment Opportunity. A GP Co-Investment is distinct from, and in addition to, the GP's 1.5% general partner commitment to the Fund, which amounts to approximately $42,000,000 based on total commitments of approximately $2.8 billion.
"HoldCo Members" means the members of Ardent Capital Holdings LLC, which as of the date hereof are Marcus Aldridge (42% membership interest), Priya Narayanan (36% membership interest), Robert Hsiao (14% membership interest), Elena Marchetti (4% membership interest), and Samuel Okonkwo (4% membership interest). For purposes of this Policy, references to HoldCo Members include their respective personal investment vehicles, trusts, and other entities through which they may elect to hold co-investments, subject to the GP's approval and applicable securities law compliance.
"Investment Committee" means the investment committee of Ardent Capital Management LLC, as constituted from time to time. As of the date hereof, the Investment Committee comprises Marcus Aldridge, Priya Narayanan, and Robert Hsiao.
"LPA" means the Amended and Restated Agreement of Limited Partnership of Ardent Capital Partners III LP, dated as of June 15, 2019, as amended by Amendment No. 1, effective February 28, 2024, and as 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 Article IX of the LPA.
"ManCo" means Ardent Capital Management LLC, a Delaware limited liability company registered as an investment adviser with the U.S. Securities and Exchange Commission (CRD #298417), in its capacity as the investment manager of the Fund.
"Portfolio Company" means any of the eleven (11) active portfolio companies currently held by the Fund as of the date hereof, or any new platform investment or add-on acquisition made during the remaining investment period (ending June 30, 2025), or any follow-on investment made thereafter in accordance with the LPA's follow-on investment provisions.
"Priority LP" means a Limited Partner holding a side letter with the General Partner or the ManCo that contains an express co-investment priority right. As of the date hereof, nine (9) Limited Partners hold such rights, as identified in Exhibit A attached hereto.
SECTION 3: GENERAL PRINCIPLES
3.1 GP Discretion
The General Partner retains sole and absolute discretion to determine (a) whether a Co-Investment Opportunity exists in connection with any particular investment or transaction, (b) the size of any co-investment tranche to be offered in connection with a Co-Investment Opportunity, (c) the allocation of such co-investment tranche among eligible participants, and (d) the timing, structure, and terms of any co-investment offering. The GP's exercise of such discretion is subject at all times to (i) the co-investment priority rights and related obligations set forth in the applicable side letters, as described in Section 5 hereof, (ii) the allocation procedures described in Section 6 hereof, and (iii) the GP's fiduciary duties as described in Section 3.2 below.
No Limited Partner or HoldCo Member shall have any right, contractual or otherwise, to receive or participate in any specific Co-Investment Opportunity except as expressly provided in a side letter executed by the General Partner or the ManCo. The GP's decision not to offer a Co-Investment Opportunity to any particular eligible participant shall not give rise to any claim by such participant, provided that the GP has complied with the applicable side-letter commitments and this Policy.
3.2 Fiduciary Obligations
All co-investment allocation decisions will be made in a manner consistent with the fiduciary duties of the General Partner and the ManCo under (a) the Delaware Revised Uniform Limited Partnership Act, (b) the Delaware Limited Liability Company Act, (c) the Investment Advisers Act of 1940, as amended, and (d) any other applicable federal or state law imposing fiduciary or similar duties on the General Partner or the ManCo in connection with the management of the Fund.
Without limiting the generality of the foregoing, the GP will not favor HoldCo Members or their affiliates over Limited Partners in the allocation of Co-Investment Opportunities in a manner that is inconsistent with its fiduciary obligations. The GP acknowledges that HoldCo Members occupy a position of inherent potential conflict with respect to co-investment allocation decisions, and the GP will take appropriate steps to manage and mitigate such conflicts, including the disclosure and consultation procedures described in Section 6.3 hereof.
3.3 No Management Fee or Carried Interest on LP Co-Investments
Consistent with standard market practice in the private equity industry and as expressly set forth in Section 7.2(c) of the LPA, LP co-investments made alongside the Fund will not be subject to management fees or carried interest, unless otherwise agreed in a separate written agreement between the GP (or the ManCo) and the co-investing LP. This provision applies to co-investments made through a co-investment SPV organized by the GP as well as direct co-investments made by an LP alongside the Fund.
Notwithstanding the foregoing, co-investment vehicles organized by the GP to facilitate LP co-investments may bear their own organizational, formation, and deal-related expenses, including but not limited to legal fees, accounting fees, regulatory filing fees, and other transaction costs directly attributable to the co-investment vehicle and its participation in the applicable investment. Such expenses shall be allocated among the co-investors in the applicable co-investment vehicle in accordance with the governing documents of such vehicle.
3.4 Co-Investment by GP and HoldCo Members
Any co-investment made by the General Partner, the ManCo, HoldCo Members, or their respective affiliates alongside the Fund shall be subject to the same terms (including entry price, equity structure, valuation, and governance rights) as the Fund's investment in the applicable Portfolio Company, except to the extent that any deviation from such terms is disclosed to and approved by the LPAC in advance of the closing of such co-investment.
GP and HoldCo Member co-investments are in addition to, and shall not reduce or offset, the GP's 1.5% general partner commitment to the Fund (approximately $42,000,000 based on total commitments of approximately $2.8 billion). The GP's general partner commitment shall continue to be funded in accordance with the LPA, and any co-investment by the GP or HoldCo Members shall be funded separately from such commitment.
SECTION 4: ELIGIBLE CO-INVESTORS
4.1 Categories of Eligible Co-Investors
For purposes of this Policy, eligible co-investors are organized into four categories, each of which is subject to the allocation procedures described in Section 6 hereof:
Category A — Priority LPs. This category consists of the nine (9) Limited Partners who hold side letters containing express co-investment priority rights. The identity of each Priority LP, the nature of its co-investment right, and the applicable notification and response periods are set forth in Exhibit A attached hereto. Priority LPs receive preferential treatment in the co-investment allocation waterfall as described in Section 6.2.
Category B — Non-Priority LPs. This category consists of the remaining thirty-eight (38) of the Fund's forty-seven (47) Limited Partners who do not hold side letters containing express co-investment priority rights. Non-Priority LPs may be offered co-investment at the GP's discretion in accordance with the allocation procedures described in Section 6.2, but they do not have any contractual right to receive co-investment offers or to participate in any particular Co-Investment Opportunity.
Category C — HoldCo Members. This category consists of the current members of Ardent Capital Holdings LLC, specifically Marcus Aldridge, Priya Narayanan, Robert Hsiao, Elena Marchetti, and Samuel Okonkwo, each in their individual capacities or through personal investment vehicles, trusts, or other entities through which they may elect to hold co-investments. The internal allocation of co-investment among HoldCo Members is governed by the percentages set forth in Section 4.3 below.
Category D — GP / ManCo. This category consists of Ardent Capital GP III LLC, Ardent Capital Management LLC, Ardent GP Intermediate LLC, Ardent Capital Holdings LLC, or any other affiliated entity designated by the GP to participate in a co-investment alongside the Fund. Co-investment by Category D participants is distinct from, and in addition to, the GP's 1.5% general partner commitment to the Fund.
4.2 Removal of Departing Principals
In connection with the management company restructuring described in Section 1.2, the following individuals are no longer eligible to participate in co-investment opportunities arising under this Policy:
(a) David Kellner (Senior Partner, retiring) — Mr. Kellner is no longer an eligible co-investor as of his retirement date, March 31, 2024. Mr. Kellner's removal from co-investment eligibility is consistent with the terms of his separation agreement and the Amended and Restated Limited Liability Company Agreement of Ardent Capital Holdings LLC.
(b) Joanna Trask (Partner, departing voluntarily) — Ms. Trask is no longer an eligible co-investor as of her departure date, April 15, 2024. Ms. Trask's removal from co-investment eligibility is consistent with the terms of her separation agreement and the Amended and Restated Limited Liability Company Agreement of Ardent Capital Holdings LLC.
For the avoidance of doubt, any existing co-investments made by Mr. Kellner or Ms. Trask alongside Fund III portfolio companies prior to their respective departure dates remain in place and are unaffected by this Policy. Such existing co-investments shall continue to be governed by the terms of the applicable co-investment documentation and shall not be subject to any forced disposition, redemption, or other adverse action as a result of their departures from the Ardent Capital platform.
Neither Mr. Kellner nor Ms. Trask may participate in any new Co-Investment Opportunity arising after their respective departure dates, whether in connection with a new platform investment, a follow-on investment, an add-on acquisition, or any other transaction involving a Portfolio Company.
4.3 HoldCo Member Allocation Percentages (for GP/Principal Co-Invest Pool)
When a co-investment tranche (or any portion thereof) is allocated to HoldCo Members under Step 5 of the allocation waterfall described in Section 6.2, the internal allocation of such co-investment among the HoldCo Members shall be consistent with their restructured economic percentages in HoldCo, as follows:
Any HoldCo Member may decline all or any portion of their allocation in connection with a particular Co-Investment Opportunity. In the event of a partial or full decline by a HoldCo Member, the declined portion shall, at the GP's discretion, be either (a) offered to the remaining HoldCo Members on a pro rata basis (based on their respective HoldCo membership interests, recalculated to exclude the declining member), or (b) returned to the general co-investment pool for allocation to Limited Partners in accordance with the allocation waterfall described in Section 6.2.
SECTION 5: SIDE-LETTER CO-INVESTMENT RIGHTS
5.1 Overview
As of the date hereof, fourteen (14) side letters are in effect between the General Partner (or the ManCo) and various Limited Partners of the Fund. These side letters were negotiated and executed in connection with the Fund's initial and subsequent closings and address a range of topics, including co-investment rights, reporting and transparency, key-person provisions, excuse and exclusion rights, transfer restrictions, and most-favored-nation protections.
Of the fourteen (14) side letters currently in effect, nine (9) contain co-investment priority rights of varying scope, nature, and specificity. The GP is obligated to comply with all co-investment commitments set forth in these side letters, and this Policy is designed to ensure that such compliance is achieved on a systematic and documented basis.
5.2 Nature of Co-Investment Priority Rights
The co-investment rights contained in the nine (9) applicable side letters vary in their terms and conditions but generally require the GP to take one or more of the following actions in connection with a Co-Investment Opportunity:
(a) Notification. The GP is required to notify the Priority LP of the existence of a Co-Investment Opportunity within a specified timeframe following the GP's decision to offer co-investment. The notification period varies by side letter but is typically five (5) to ten (10) business days from the date on which the GP determines that a Co-Investment Opportunity will be offered.
(b) Reasonable Opportunity to Participate. The GP is required to offer the Priority LP a "reasonable opportunity" to participate in the Co-Investment Opportunity. The Priority LP is generally given a specified response period within which to accept, decline, or indicate its desired level of participation. The response period varies by side letter but is typically five (5) to ten (10) business days from the date of notification.
(c) Allocation. The GP is required to allocate co-investment to the Priority LP in an amount to be agreed between the GP and the Priority LP, often subject to a minimum threshold (e.g., $5 million or $10 million) or a maximum cap. The specific allocation methodology varies by side letter.
The co-investment rights in the nine (9) applicable side letters fall into two primary categories:
(a) "First Look" Rights. Certain side letters grant the Priority LP a "first look" right, meaning the right to be approached and offered participation in a Co-Investment Opportunity before any non-priority LPs are contacted. A first-look right does not guarantee a specific allocation amount but ensures priority in the sequence of offers.
(b) "Pro Rata" Rights. Certain side letters grant the Priority LP a "pro rata" right, meaning the right to co-invest in an amount proportional to the LP's capital commitment to the Fund as a percentage of total Fund commitments. A pro rata right establishes a formulaic basis for determining the LP's allocation, subject to the overall size of the co-investment tranche.
Some side letters combine elements of both first-look and pro rata rights, while others provide for co-investment at the GP's discretion with enhanced notification and consideration requirements.
5.3 Key Priority LPs
The following is an illustrative summary of the co-investment priority rights held by certain key Priority LPs. A complete listing of all nine (9) Priority LPs and the terms of their co-investment rights is set forth in Exhibit A attached hereto.
Ridgeline Public Employees' Retirement System. Ridgeline Public Employees' Retirement System has a capital commitment to the Fund of $225,000,000. The primary contact for co-investment matters is Thomas Engström, Chief Investment Officer. Ridgeline holds a co-investment priority right with a first-look provision, requiring the GP to approach Ridgeline before any non-priority LPs with respect to Co-Investment Opportunities exceeding $50 million in aggregate equity. The notification period is seven (7) business days, and the response period is ten (10) business days.
Crestwood Endowment Partners. Crestwood Endowment Partners has a capital commitment to the Fund of $150,000,000. The primary contact for co-investment matters is Annika Johansson, Director of Private Equity. Crestwood holds a co-investment priority right with a pro rata option, entitling Crestwood to co-invest in an amount proportional to its commitment as a percentage of total Fund commitments, subject to a minimum allocation of $10,000,000 per Co-Investment Opportunity. The notification period is five (5) business days, and the response period is seven (7) business days.
Pinnacle Insurance Group. Pinnacle Insurance Group has a capital commitment to the Fund of $175,000,000. The primary contact for co-investment matters is Derek Mallinson, Head of Alternatives. Pinnacle holds a co-investment priority right with a first-look provision, substantially similar to the Ridgeline provision. The notification period is five (5) business days, and the response period is ten (10) business days.
Graystone Family Office LLC. Graystone Family Office LLC has a capital commitment to the Fund of $50,000,000. The primary contact for co-investment matters is Catherine Whitfield, Managing Director. Graystone holds a co-investment priority right at the GP's discretion, requiring the GP to give Graystone "good faith consideration" for co-investment opportunities. The notification period is five (5) business days, and the response period is five (5) business days.
The remaining five (5) Priority LPs and the specific terms of their co-investment rights are set forth in detail in Exhibit A.
5.4 MFN Implications
Eleven (11) of the fourteen (14) side letters currently in effect contain most-favored-nation ("MFN") provisions of varying scope. Under these MFN provisions, any co-investment right granted to one Limited Partner may, under certain circumstances, be extended to other Limited Partners holding MFN rights, subject to the specific terms and conditions of each MFN provision (including, in certain cases, commitment-size thresholds, investor-type carve-outs, and timing limitations).
The GP shall review MFN applicability on a deal-by-deal basis in connection with each Co-Investment Opportunity. In conducting such review, the GP shall consider (a) whether the co-investment right being exercised by a Priority LP triggers an MFN obligation to any other LP, (b) whether any applicable carve-outs or thresholds limit the scope of the MFN extension, and (c) the practical implications of extending co-investment rights to additional LPs on the overall allocation and timeline of the co-investment. The ManCo's compliance function and outside counsel shall be consulted as necessary in connection with MFN determinations.
SECTION 6: ALLOCATION PROCEDURES
6.1 Identification of Co-Investment Opportunity
The process for allocating co-investment begins with the identification of a potential Co-Investment Opportunity by the Investment Committee. A Co-Investment Opportunity is identified when the Investment Committee determines that a potential or pending portfolio company investment presents circumstances in which co-investment is appropriate. Such circumstances typically include, but are not limited to, the following:
(a) The total equity requirement for the investment exceeds the Fund's desired allocation, whether due to concentration limits, portfolio construction considerations, or the overall size of the transaction.
(b) Strategic or relationship considerations support offering co-investment to one or more Limited Partners, such as the desire to strengthen LP relationships, to satisfy side-letter commitments, or to facilitate the participation of LPs with sector expertise relevant to the particular transaction.
(c) The GP determines that offering co-investment is in the best interest of the Fund and its Limited Partners, taking into account the overall investment strategy, portfolio diversification objectives, and the Fund's available capital.
Upon identification of a Co-Investment Opportunity, the ManCo deal team responsible for the applicable transaction shall prepare a preliminary co-investment sizing memorandum (the "Co-Investment Sizing Memo") setting forth the following information:
(a) The total equity check required for the investment, including any anticipated equity contributions for working capital, transaction fees, or reserves.
(b) The Fund's desired allocation, as determined by the Investment Committee based on portfolio construction, concentration limits, and available capital considerations.
(c) The available co-investment tranche, calculated as the difference between the total equity check and the Fund's desired allocation.
(d) The recommended allocation of the co-investment tranche among eligible co-investors, including a proposed allocation to Priority LPs, Non-Priority LPs, HoldCo Members, and GP/ManCo affiliates, in accordance with the allocation waterfall described in Section 6.2.
The Co-Investment Sizing Memo shall be reviewed and approved by the Investment Committee prior to the commencement of the allocation process. The Investment Committee may modify the recommended allocation in its discretion, subject to the side-letter commitments described in Section 5 and the allocation waterfall described in Section 6.2.
6.2 Allocation Waterfall
Co-investment tranches shall be allocated in accordance with the following sequential waterfall:
Step 1 — Fund Allocation. The Fund receives its primary allocation based on the Investment Committee's sizing determination as set forth in the Co-Investment Sizing Memo. The Fund's allocation represents the portion of the total equity check that will be funded from the Fund's committed capital (including recycled capital, if applicable) and constitutes the Fund's direct investment in the Portfolio Company.
Step 2 — Priority LP Notification. Following the Fund's allocation determination, the nine (9) Priority LPs holding co-investment priority rights under their respective side letters are notified of the Co-Investment Opportunity. The notification shall be delivered in accordance with the terms of each Priority LP's side letter, including the applicable notification period (typically five to ten business days from the GP's decision to offer co-investment). The notification shall include a summary description of the Co-Investment Opportunity, the estimated size of the available co-investment tranche, and the terms on which participation is being offered.
Step 3 — Priority LP Response Period. Following notification, each Priority LP has the contractually specified response period (typically five to ten business days, as set forth in its respective side letter) within which to accept the co-investment offer, decline the co-investment offer, or indicate a desired participation amount that may differ from the amount initially offered. The GP shall use commercially reasonable efforts to accommodate each Priority LP's desired participation amount, subject to the overall size of the co-investment tranche and the relative priority of the various Priority LP rights.
Step 4 — Non-Priority LP Allocation (Discretionary). Any remaining co-investment capacity after the completion of the Priority LP allocation process may be offered to Non-Priority LPs at the GP's discretion. In determining which Non-Priority LPs to approach and the amounts to be offered, the GP shall consider the following factors, among others:
(a) The depth and quality of the LP's relationship with the Ardent Capital platform, including the LP's participation in prior fund offerings and its engagement with the GP's investor relations team.
(b) The size of the LP's capital commitment to the Fund, with larger commitments generally (but not necessarily) receiving priority consideration.
(c) The LP's prior co-investment participation history, including the LP's track record of accepting or declining previous co-investment offers and its reliability in meeting funding deadlines.
(d) The strategic value of including the LP as a co-investor, including the LP's sector expertise, industry relationships, or geographic presence that may be relevant to the particular Portfolio Company or transaction.
(e) The LP's operational capability for timely closing, including the LP's internal approval processes, legal and compliance review timelines, and ability to fund within the required timeframe.
Step 5 — HoldCo Member / GP Allocation. After the completion of the LP allocation process (including both Priority LP and Non-Priority LP allocations), any remaining co-investment capacity may be offered to HoldCo Members and/or GP affiliates. The allocation among HoldCo Members shall be in accordance with the percentages set forth in Section 4.3 of this Policy (i.e., Aldridge 42%, Narayanan 36%, Hsiao 14%, Marchetti 4%, Okonkwo 4%).
Step 6 — Reallocation of Declined Amounts. In the event that any eligible co-investor declines all or any portion of its allocated co-investment, the declined amount shall be recycled through the allocation waterfall in the following sequence: (a) offered to remaining Priority LPs who have indicated a willingness to increase their participation, (b) offered to Non-Priority LPs at the GP's discretion, and (c) offered to HoldCo Members and/or GP affiliates. This reallocation process shall continue until the co-investment tranche is fully allocated or the GP determines, in its discretion, to reduce the overall size of the co-investment tranche. In the latter case, the Fund's allocation may be increased to absorb any unallocated co-investment capacity, subject to the Fund's concentration limits and available capital.
6.3 Conflict of Interest Considerations
The GP acknowledges that co-investment by HoldCo Members alongside the Fund and its Limited Partners creates an inherent potential conflict of interest, insofar as the individuals who control the allocation process (the members of the Investment Committee) are themselves among the eligible co-investors. To manage and mitigate this conflict, the following safeguards shall apply:
(a) Priority of LP Rights. HoldCo Members shall not participate in a co-investment unless the allocation waterfall described in Section 6.2 has been followed and all Priority LP and Non-Priority LP allocation steps have been completed.
(b) LPAC Consultation. The LPAC may be consulted on any co-investment allocation involving HoldCo Members if the GP determines that such consultation is appropriate in light of the particular circumstances of the transaction, or if such consultation is required under the LPA.
(c) Quarterly Disclosure. All co-investments by HoldCo Members shall be disclosed to the LPAC in the quarterly reporting package described in Section 8.1 of this Policy, including the identity of the participating HoldCo Members, the amounts invested, and the terms of the co-investment.
(d) Same Terms. All GP and HoldCo Member co-investments shall be made on the same terms as the Fund's investment, as described in Section 3.4 of this Policy, unless any deviation is disclosed to and approved by the LPAC.
6.4 Emergency / Time-Sensitive Situations
The GP recognizes that competitive dynamics, seller requirements, or other exigent circumstances may necessitate a compressed timeline for the completion of a co-investment allocation. In such situations, the GP may abbreviate the notification and response periods set forth in the applicable side letters and in Section 6.2 of this Policy, provided that the following conditions are satisfied:
(a) The abbreviated notification and response periods applicable to Priority LPs shall not be less than two (2) business days in any event, regardless of the urgency of the situation.
(b) The GP shall document the circumstances giving rise to the need for an abbreviated timeline, including the specific competitive or seller-driven factors that prevent compliance with the standard notification and response periods.
(c) The GP shall report to the LPAC at the next available opportunity regarding any co-investment allocation conducted under abbreviated timelines, including an explanation of the circumstances and a summary of the allocation decisions made.
SECTION 7: CO-INVESTMENT VEHICLES AND DOCUMENTATION
7.1 SPV Structure
LP co-investments will generally be effected through a special-purpose vehicle ("SPV") organized as a Delaware limited partnership or a Delaware limited liability company. The use of an SPV structure facilitates the aggregation of multiple co-investors' capital, simplifies the capitalization table of the Portfolio Company, and provides administrative efficiency in connection with information rights, voting, and distribution mechanics.
The GP or its affiliate will typically serve as the general partner (in the case of a limited partnership SPV) or the managing member (in the case of an LLC SPV) of the co-investment SPV. The GP may designate an existing affiliate or form a new entity for this purpose, as appropriate in light of the particular transaction and the number and identity of the participating co-investors.
In certain circumstances, the GP may determine that a separate SPV is not required and that LP co-investments may be made directly alongside the Fund through a direct co-investment arrangement. The GP shall make this determination based on the number of participating co-investors, the aggregate size of the co-investment tranche, and the administrative and legal considerations applicable to the particular transaction.
7.2 Terms
The governing documents of any co-investment SPV shall provide that the co-investment will be made on terms that mirror the Fund's investment to the extent practicable, including:
(a) Entry Price. Co-investors shall acquire their interests in the Portfolio Company at the same per-unit entry price as the Fund.
(b) Equity Structure. Co-investors shall participate in the same class or tranche of equity securities as the Fund, with the same rights, preferences, and obligations.
(c) Governance Rights. Co-investment SPVs shall exercise governance rights (including board representation, information rights, and consent rights) in coordination with the Fund, and in most cases through the GP or its designee acting on behalf of both the Fund and the co-investment SPV.
No management fee or carried interest shall apply to the co-investment SPV, unless the GP and one or more co-investors separately agree in writing to an alternative fee or carry arrangement. Such arrangements, if any, shall be disclosed to the LPAC.
Co-investment SPVs may bear their own organizational, formation, and deal-related expenses, as described in Section 3.3 of this Policy.
7.3 HoldCo Member Co-Investments
HoldCo Members may elect to co-invest directly in their individual names, or through personal investment vehicles, family trusts, individual retirement accounts, or other entities established for their benefit, without the need for a separate co-investment SPV. Any such direct co-investment by a HoldCo Member is subject to the following conditions:
(a) The GP must approve the proposed investment structure and the identity of the investing entity or account.
(b) The co-investment must comply with all applicable securities law requirements, including the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(c) The co-investment must be made at the same entry price and on the same terms as the Fund's investment, as described in Section 3.4 and Section 7.2 of this Policy.
(d) The HoldCo Member must provide the GP with such documentation and information as the GP may reasonably request in connection with anti-money laundering, know-your-customer, and other regulatory compliance requirements.
SECTION 8: REPORTING AND RECORD-KEEPING
8.1 Quarterly Reporting
The ManCo shall maintain a comprehensive co-investment log (the "Co-Investment Log") that tracks the following information for each Co-Investment Opportunity identified during the term of the Fund:
(a) The name of the Portfolio Company to which the Co-Investment Opportunity relates.
(b) The date on which the Co-Investment Opportunity was identified by the Investment Committee.
(c) The total co-investment tranche offered in connection with the Co-Investment Opportunity.
(d) The allocation of the co-investment tranche to each participant category (Priority LPs, Non-Priority LPs, HoldCo Members, GP/ManCo affiliates), including the specific amounts offered to and accepted by each participant.
(e) The amounts accepted and the amounts declined by each participant, together with any reallocation of declined amounts through the waterfall.
(f) The closing date of the co-investment and the aggregate amount funded by each participant.
A summary of co-investment activity derived from the Co-Investment Log shall be included in the Fund's quarterly report to Limited Partners. The summary shall provide information regarding the Portfolio Companies in which co-investment was offered during the applicable quarter, the aggregate co-investment amounts allocated and funded, and the categories of participants who received allocations. Individual LP-level allocation information shall be treated as confidential and shall not be disclosed in the quarterly report to all LPs, except to the extent required by the LPA or applicable law.
8.2 Annual Review
This Policy shall be reviewed at least annually by the Investment Committee to assess whether the Policy remains appropriate in light of current market conditions, the Fund's investment activity, the composition of the LP base, and any changes to applicable law or regulatory guidance. The Investment Committee may update or amend this Policy as necessary following such review, subject to the limitations set forth in Section 10 hereof.
Any material amendments to this Policy resulting from the annual review process shall be communicated to the LPAC in writing, and the LPAC shall have the opportunity to provide feedback or raise concerns regarding any such amendments. For purposes of this Section, a "material amendment" includes any change to the allocation waterfall, the categories of eligible co-investors, or the HoldCo Member allocation percentages.
8.3 Side-Letter Compliance Tracking
The ManCo's compliance function shall maintain a side-letter compliance matrix (the "Co-Investment Compliance Matrix") that tracks, for each of the nine (9) side letters containing co-investment priority rights, the following information on a deal-by-deal basis:
(a) The notification deadline applicable to the Priority LP under its side letter, and the date on which notification was actually delivered.
(b) The response period applicable to the Priority LP under its side letter, and the date on which the Priority LP's response was received.
(c) The amount of co-investment offered to the Priority LP, the amount accepted (if any), and the amount declined (if any).
(d) Any allocation commitments (such as minimum or maximum thresholds or pro rata formulas) applicable to the Priority LP under its side letter, and confirmation that such commitments were satisfied.
(e) Any MFN implications identified in connection with the co-investment offer, and the GP's determination regarding MFN applicability.
The Co-Investment Compliance Matrix shall be reviewed by the ManCo's Chief Compliance Officer on a quarterly basis and shall be made available to outside counsel upon request. The Side-Letter Compliance and Key-Person Analysis Memorandum dated February 22, 2024, prepared by Calderwood & Harkness LLP, serves as the baseline reference for co-investment side-letter obligations and shall be updated as necessary to reflect subsequent developments.
SECTION 9: RELATIONSHIP TO FUND GOVERNING DOCUMENTS
9.1 LPA Supremacy
This Policy is supplemental to the LPA and is intended to provide operational guidance for the implementation of the co-investment provisions set forth in the LPA and the applicable side letters. This Policy does not create any rights or obligations that are not already provided for in the LPA or the applicable side letters. In the event of any conflict or inconsistency between this Policy and the LPA (including Amendment No. 1, effective February 28, 2024), the LPA shall control in all respects.
9.2 Side-Letter Supremacy
In the event of any conflict or inconsistency between this Policy and a specific side-letter provision governing co-investment rights, the applicable side-letter provision shall control with respect to the Limited Partner that is party to such side letter. Nothing in this Policy shall be construed to limit, modify, or waive any co-investment right expressly granted to a Limited Partner by side letter, unless such limitation, modification, or waiver is separately agreed in writing by the affected LP.
9.3 Investment Period Considerations
The Fund's investment period, as defined in the LPA, ends on June 30, 2025 (subject to extension as provided in the LPA). Co-Investment Opportunities related to new platform investments (i.e., investments in companies that are not existing Portfolio Companies of the Fund) will generally be available only during the investment period.
Co-Investment Opportunities related to follow-on investments and add-on acquisitions by or for existing Portfolio Companies (currently eleven (11) active Portfolio Companies as of the date hereof) may be offered after the expiration of the investment period, subject to the follow-on investment provisions set forth in Section 6.8 of the LPA, which permit the Fund to make follow-on investments in existing Portfolio Companies during the post-investment period under specified conditions and subject to specified limitations.
The availability and scope of co-investment opportunities after the expiration of the investment period will depend on the nature and timing of follow-on investment activity and the GP's assessment of the appropriateness of offering co-investment in connection with such transactions.
SECTION 10: AMENDMENTS AND WAIVERS
This Policy may be amended, restated, supplemented, or otherwise modified at any time by the General Partner, acting through the Investment Committee, without the consent of any Limited Partner; provided, however, that no amendment to this Policy shall reduce, impair, or adversely affect any co-investment right granted to a Limited Partner by side letter without the prior written consent of the affected Limited Partner.
The Investment Committee may grant waivers of specific provisions of this Policy on a case-by-case basis in connection with particular Co-Investment Opportunities, provided that (a) such waiver does not violate any co-investment right granted by side letter, (b) such waiver does not conflict with the LPA, and (c) such waiver is documented in writing by the Investment Committee, including the rationale for the waiver and the specific provisions being waived. Any waiver granted under this Section shall apply only to the specific Co-Investment Opportunity for which it is granted and shall not constitute a waiver of the same or any other provision in connection with any subsequent Co-Investment Opportunity.
Material amendments to this Policy shall be communicated to the LPAC in accordance with Section 8.2 hereof.
EXHIBIT A
Schedule of Limited Partners with Co-Investment Priority Rights
The following table sets forth the nine (9) Limited Partners holding co-investment priority rights under side letters with the General Partner or the ManCo, together with the key terms of each such right.
Notes:
1. "First-Look" means the LP has the right to be approached and offered participation before any Non-Priority LPs are contacted.
2. "Pro Rata" means the LP has the right to co-invest in an amount proportional to its capital commitment as a percentage of total Fund commitments.
3. "Discretionary (Good Faith)" means the GP is required to give the LP good faith consideration for co-investment opportunities but is not obligated to offer a specific allocation.
4. Minimum and maximum allocation thresholds are per Co-Investment Opportunity.
5. Side Letter Ref. refers to the section of the applicable side letter in which the co-investment priority right is set forth.
6. The terms summarized in this Exhibit are for reference purposes only. In the event of any discrepancy between this summary and the actual terms of a side letter, the side letter shall control.
EXHIBIT B
HoldCo Member Allocation Table