SEPARATION AND RELEASE AGREEMENT
by and among
ARDENT CAPITAL GP III LLC
ARDENT CAPITAL MANAGEMENT LLC
and
DAVID KELLNER
Dated as of February 28, 2024
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SEPARATION AND RELEASE AGREEMENT
This SEPARATION AND RELEASE AGREEMENT (this "Agreement") is entered into as of February 28, 2024 (the "Execution Date"), by and among:
ARDENT CAPITAL GP III LLC, a Delaware limited liability company (the "General Partner" or "GP"), with its principal office located at 590 Madison Avenue, 28th Floor, New York, New York 10022, and its registered agent for service of process at Prestige Registered Agents LLC, 850 New Burton Road, Suite 201, Dover, Delaware 19904;
ARDENT CAPITAL MANAGEMENT LLC, a Delaware limited liability company (the "Management Company" or "ManCo"), an investment adviser registered with the United States Securities and Exchange Commission (CRD #298417), with its principal office located at 590 Madison Avenue, 28th Floor, New York, New York 10022; and
DAVID KELLNER, an individual residing in the State of New York ("Kellner" or the "Departing Principal").
The General Partner, the Management Company, and Kellner are each referred to herein individually as a "Party" and collectively as the "Parties." The General Partner and the Management Company may be referred to collectively herein as the "Company Entities."
RECITALS
WHEREAS, the General Partner serves as the sole general partner of Ardent Capital Partners III LP, a Delaware limited partnership (the "Fund"), which was formed in 2019 and which 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 Management Company serves as the investment adviser and manager of the Fund, providing portfolio management, deal sourcing, due diligence, monitoring, and other investment advisory services to the Fund pursuant to the terms of the Management Agreement dated as of June 15, 2019 between the Management Company and the Fund;
WHEREAS, Kellner has served as a Senior Partner of the Ardent Capital platform since 2010 and currently holds a fifteen percent (15%) membership interest in the General Partner and a fifteen percent (15%) share of the carried interest in the Fund, and has been instrumental in the sourcing, evaluation, and management of numerous investments made by the Ardent Capital platform;
WHEREAS, Kellner has informed Marcus Aldridge, Managing Partner, and Priya Narayanan, Partner, of his intention to retire from the Ardent Capital platform, such retirement having been confirmed in writing on November 2, 2023;
WHEREAS, in connection with a comprehensive restructuring of the Management Company and a realignment of the economic arrangements among the Fund's principals (the "Restructuring"), the Company Entities are forming Ardent Capital Holdings LLC, a Delaware limited liability company ("HoldCo"), and Ardent GP Intermediate LLC, a Delaware limited liability company ("GP Intermediate"), as part of a new holding company structure designed to facilitate the orderly transition of ownership and economics among the Remaining Principals and the Next-Generation Principals;
WHEREAS, the Parties desire to set forth the terms and conditions of Kellner's separation from the Company Entities, including, without limitation, his withdrawal as a member of the General Partner and the Management Company, his transition to a Senior Advisor role, the treatment of his carried interest and general partner commitment, the continuation of certain obligations including restrictive covenants and clawback obligations, and a mutual release of claims;
WHEREAS, the Limited Partner Advisory Committee of the Fund (the "LPAC") has consented to the Restructuring, including Kellner's departure from the Company Entities and the related structural changes, pursuant to Section 9.4 of the Amended and Restated Agreement of Limited Partnership of the Fund (the "LPA"), such consent having been obtained on February 14, 2024;
WHEREAS, Kellner has been represented by independent legal counsel, Whitford & Chase LLP (Richard Beaulieu, Partner), in connection with the negotiation, drafting, and execution of this Agreement, and has had adequate time and opportunity to review all terms contained herein; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the Parties, the Parties hereby agree as follows:
ARTICLE 1: DEFINITIONS
Section 1.1 "Accrued Carried Interest" means the aggregate carried interest accrued to the Fund as of September 30, 2023, which the Parties agree is equal to Eighty-Seven Million Six Hundred Thousand Dollars ($87,600,000), as determined by the Fund's auditor based on the fair market value of the Fund's portfolio investments as of such date.
Section 1.2 "Affiliate" means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person. For purposes of this definition, "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
Section 1.3 "Business Day" means any day other than a Saturday, a Sunday, or a day on which banks in New York, New York are authorized or required by law to close.
Section 1.4 "Carry Escrow" means the escrow account maintained for Kellner's benefit in accordance with the Fund's carried interest escrow arrangements, containing thirty percent (30%) of carried interest distributions attributable to Kellner, with a current balance of Three Million Nine Hundred Forty-Two Thousand Dollars ($3,942,000) as of the Execution Date.
Section 1.5 "Clawback Obligation" means Kellner's obligation to return carried interest distributions previously received, as set forth in the LPA and as further provided in Article 4 of this Agreement.
Section 1.6 "Fund" means Ardent Capital Partners III LP, a Delaware limited partnership.
Section 1.7 "Governmental Authority" means any federal, state, local, or foreign government, or any political subdivision thereof, or any agency, authority, bureau, commission, department, official, political subdivision, tribunal, or other instrumentality of any such government or political subdivision, or any self-regulatory organization, including, without limitation, the United States Securities and Exchange Commission and the Financial Industry Regulatory Authority.
Section 1.8 "GP Commitment" means Kellner's share of the general partner commitment to the Fund, as further described in Article 5 of this Agreement.
Section 1.9 "GP Intermediate" means Ardent GP Intermediate LLC, a Delaware limited liability company, Delaware Division of Corporations File No. 7948237, Employer Identification Number 93-1847231.
Section 1.10 "HoldCo" means Ardent Capital Holdings LLC, a Delaware limited liability company, Delaware Division of Corporations File No. 7948231, Employer Identification Number 93-1847225.
Section 1.11 "Kellner Carry Percentage" means fifteen percent (15%) of the carried interest pool of the Fund, representing Kellner's share of the aggregate carried interest to which the General Partner is entitled under the LPA.
Section 1.12 "LPA" means the Amended and Restated Agreement of Limited Partnership of Ardent Capital Partners III LP, dated as of June 15, 2019, as amended, supplemented, or otherwise modified from time to time.
Section 1.13 "Next-Generation Principals" means Elena Marchetti and Samuel Okonkwo, each of whom is a principal of the Ardent Capital platform and a member of HoldCo.
Section 1.14 "Person" means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, or other entity, or any Governmental Authority.
Section 1.15 "Remaining Principals" means Marcus Aldridge, Priya Narayanan, and Robert Hsiao, each of whom is a principal of the Ardent Capital platform and a member of HoldCo.
Section 1.16 "Senior Advisor Agreement" means the separate Senior Advisor Agreement between the Management Company and Kellner, effective as of the Separation Date, a form of which is attached hereto as Exhibit D.
Section 1.17 "Separation Date" means March 31, 2024.
Section 1.18 "Vested Carried Interest" means Kellner's vested carried interest in the Fund, which the Parties agree is equal to Thirteen Million One Hundred Forty Thousand Dollars ($13,140,000) as of September 30, 2023, being fifteen percent (15%) of the Accrued Carried Interest of Eighty-Seven Million Six Hundred Thousand Dollars ($87,600,000), subject to future appreciation and depreciation based on the performance of the Fund's portfolio investments.
Section 1.19 General Interpretive Provisions. Unless the context otherwise requires, (a) the terms "hereof," "herein," "hereunder," and similar terms refer to this Agreement as a whole and not to any particular provision of this Agreement; (b) the term "including" means "including without limitation"; (c) the singular includes the plural and vice versa; (d) references to a "Section," "Article," or "Exhibit" refer to a section, article, or exhibit of or to this Agreement; and (e) references to any agreement, document, or instrument mean such agreement, document, or instrument as amended, supplemented, or otherwise modified from time to time in accordance with its terms.
ARTICLE 2: SEPARATION AND WITHDRAWAL
Section 2.1 Retirement and Separation Date
(a) Kellner's retirement from the Ardent Capital platform shall be effective as of March 31, 2024 (the "Separation Date"). As of the Separation Date, Kellner shall cease to serve in any capacity as an officer, director, manager, managing member, employee, agent, or representative of the Company Entities and each of their respective subsidiaries and Affiliates, except as expressly set forth in the Senior Advisor Agreement.
(b) For the avoidance of doubt, the period from the Execution Date through the Separation Date (the "Transition Period") shall be governed by Article 12 of this Agreement, during which time Kellner shall continue to perform his duties and responsibilities in a manner consistent with his historical practice, subject to such transitional arrangements as the Company Entities may reasonably request.
Section 2.2 Withdrawal from General Partner
(a) Effective as of the Separation Date, Kellner shall withdraw as a member of Ardent Capital GP III LLC. Kellner's fifteen percent (15%) membership interest in the General Partner shall be cancelled in full as of the Separation Date, and Kellner shall have no further rights, interests, or obligations as a member of the General Partner, except as expressly set forth in this Agreement.
(b) In connection with Kellner's withdrawal, the limited liability company agreement of the General Partner shall be amended and restated (the "Second Amended and Restated GP LLC Agreement") to reflect (i) the withdrawal of Kellner as a member, (ii) the cancellation of Kellner's fifteen percent (15%) membership interest, and (iii) the admission of Ardent GP Intermediate LLC as the sole member of the General Partner. The Second Amended and Restated GP LLC Agreement shall be in form and substance reasonably acceptable to the Parties and shall be executed and delivered concurrently with the effectiveness of this Agreement.
(c) The Member Consent Resolutions dated February 28, 2024, approving Kellner's withdrawal from the General Partner and the adoption of the Second Amended and Restated GP LLC Agreement, have been duly executed by all members of the General Partner and are incorporated herein by reference.
Section 2.3 Withdrawal from Management Company
(a) Effective as of the Separation Date, Kellner shall withdraw as a member of Ardent Capital Management LLC. Kellner's membership interest in the Management Company shall be cancelled in full as of the Separation Date, and Kellner shall have no further rights, interests, or obligations as a member of the Management Company, except as expressly set forth in this Agreement.
(b) In connection with Kellner's withdrawal, the limited liability company agreement of the Management Company shall be amended and restated (the "Second Amended and Restated ManCo LLC Agreement") to reflect (i) the withdrawal of Kellner as a member, (ii) the cancellation of Kellner's membership interest, and (iii) the admission of Ardent Capital Holdings LLC as the sole member of the Management Company. The Second Amended and Restated ManCo LLC Agreement shall be in form and substance reasonably acceptable to the Parties and shall be executed and delivered concurrently with the effectiveness of this Agreement.
(c) In connection with the foregoing, the Company Entities shall cause the filing of an amendment to the Management Company's Form ADV with the United States Securities and Exchange Commission to reflect Kellner's departure, such amendment to be filed within thirty (30) days following the Separation Date or such shorter period as may be required by applicable law or regulation.
Section 2.4 Cessation of ManCo Economics
(a) As of the Separation Date, Kellner shall cease to participate in the ManCo Profit Share. For the avoidance of doubt, Kellner's pre-Restructuring share of the ManCo Profit Share was fifteen percent (15%) of the Management Company's distributable income, which, based on the Management Company's net revenue of approximately Seventeen Million One Hundred Fifty Thousand Dollars ($17,150,000) for the fiscal year ended December 31, 2023, would have resulted in an annual distribution to Kellner of approximately Two Million Five Hundred Seventy-Two Thousand Five Hundred Dollars ($2,572,500).
(b) No further distributions of management fee revenue or any other income of the Management Company shall be made to Kellner with respect to any period following the Separation Date. Kellner acknowledges that he shall have no right, title, or interest in any management fees, advisory fees, transaction fees, monitoring fees, or any other fees or revenues earned or received by the Management Company with respect to periods after the Separation Date.
(c) Any ManCo Profit Share that has accrued to Kellner but remains unpaid as of the Separation Date, including with respect to the period from January 1, 2024 through March 31, 2024, shall be calculated in accordance with the Management Company's customary practices and paid to Kellner within thirty (30) days following the Separation Date. The Company Entities shall provide Kellner with a written statement setting forth the calculation of such accrued and unpaid ManCo Profit Share concurrently with such payment.
Section 2.5 Transition to Senior Advisor
(a) As of the Separation Date, Kellner shall transition from his current role as a Senior Partner of the Ardent Capital platform to the role of Senior Advisor to the Management Company, pursuant to the terms and conditions of the Senior Advisor Agreement, a form of which is attached hereto as Exhibit D.
(b) The Senior Advisor Agreement shall provide for a two (2)-year advisory term commencing on the Separation Date and expiring on March 31, 2026, at an annual advisory fee of Three Hundred Fifty Thousand Dollars ($350,000) per year, for a total advisory fee of Seven Hundred Thousand Dollars ($700,000) over the term of the Senior Advisor Agreement. The advisory fee shall be payable in equal quarterly installments of Eighty-Seven Thousand Five Hundred Dollars ($87,500) each.
(c) The Parties acknowledge and agree that the Senior Advisor role shall not constitute membership in, partnership with, or employment by any Company Entity, HoldCo, GP Intermediate, or any Affiliate thereof. Kellner shall serve as an independent contractor for purposes of the Senior Advisor Agreement, and nothing in this Agreement or the Senior Advisor Agreement shall be construed to create an employer-employee relationship, a joint venture, or a partnership between Kellner and any Company Entity.
(d) Kellner's obligations under the Senior Advisor Agreement shall not exceed ten (10) hours per month in the aggregate, and shall consist of providing advice and counsel to the Remaining Principals on matters relating to the Fund's existing portfolio investments, strategic planning, and such other matters as the Management Company may reasonably request from time to time.
ARTICLE 3: CARRIED INTEREST
Section 3.1 Retention of Vested Carried Interest
(a) Kellner shall retain one hundred percent (100%) of his Vested Carried Interest in Fund III. As of September 30, 2023, Kellner's Vested Carried Interest is Thirteen Million One Hundred Forty Thousand Dollars ($13,140,000), representing fifteen percent (15%) of the Accrued Carried Interest of Eighty-Seven Million Six Hundred Thousand Dollars ($87,600,000). The Vested Carried Interest is subject to future appreciation and depreciation based on the performance of the Fund's eleven (11) active portfolio companies and any other investments of the Fund through the term of the Fund.
(b) Kellner's retained carried interest shall entitle him to distributions of carried interest in accordance with the terms of the LPA and the Carry Retention and Clawback Side Letter entered into by the Parties concurrently with the execution of this Agreement. The Carry Retention and Clawback Side Letter shall set forth additional terms and conditions governing the distribution of carried interest to Kellner following his separation, including timing of distributions, reporting obligations, and coordination with the Fund's distribution waterfall.
(c) The Company Entities shall cause the General Partner to make distributions of carried interest attributable to Kellner's retained interest in a timely manner and in accordance with the Fund's ordinary distribution practices, and shall not take any action for the purpose of delaying or diminishing distributions to which Kellner is entitled under the LPA and this Agreement.
Section 3.2 Carry Distribution Mechanics
(a) Distributions of carried interest attributable to Kellner's retained interest shall be made through Ardent GP Intermediate LLC and the General Partner in accordance with the Fund's carried interest waterfall as set forth in the LPA, which provides for carried interest equal to twenty percent (20%) of net profits, subject to an eight percent (8%) preferred return to limited partners and a full catch-up allocation to the General Partner.
(b) Kellner's carried interest relates solely to investments made by the Fund prior to the Separation Date. Kellner shall participate in gains and losses attributable to such investments through the term of the Fund, which is currently scheduled to expire on December 31, 2029, subject to two (2) one-year extension periods at the discretion of the General Partner in accordance with the LPA.
(c) For the avoidance of doubt, Kellner's participation in the carried interest waterfall shall be calculated on the same basis as if Kellner had remained a member of the General Partner, subject to the adjustments and modifications set forth in this Agreement and the Carry Retention and Clawback Side Letter. Kellner's carried interest share shall not be diluted or reduced as a result of any reallocation of carry percentages among the Remaining Principals and the Next-Generation Principals with respect to investments made after the Separation Date.
(d) A summary of Kellner's carry retention is set forth in Exhibit A attached hereto.
Section 3.3 No Unvested Carry Forfeiture
For the avoidance of doubt, Kellner has served as a principal of the Ardent Capital platform for more than thirteen (13) years. Accordingly, all of Kellner's carried interest in the Fund is fully vested as of the Execution Date, and no forfeiture, reduction, or acceleration of vesting shall apply in connection with Kellner's retirement or separation from the Company Entities. The Parties acknowledge that any vesting provisions contained in the General Partner's LLC Agreement, the Management Company's LLC Agreement, or any carried interest allocation agreement with respect to Kellner's carried interest are fully satisfied as of the Execution Date.
Section 3.4 Go-Forward Carry
(a) Kellner shall not participate in any carried interest attributable to investments made by the Fund after the Separation Date. For purposes of this Section 3.4, an investment shall be deemed to have been made on the date on which the Fund first funds capital in connection with such investment.
(b) The go-forward carried interest pool, consisting of one hundred percent (100%) of the carried interest attributable to investments made after the Separation Date, shall be allocated among the Remaining Principals and the Next-Generation Principals pursuant to the Amended and Restated Carried Interest Allocation Agreement to be entered into by such persons concurrently with the effectiveness of this Agreement, as follows:
(i) Marcus Aldridge: forty-two percent (42%);
(ii) Priya Narayanan: thirty-six percent (36%);
(iii) Robert Hsiao: fourteen percent (14%);
(iv) Elena Marchetti: four percent (4%); and
(v) Samuel Okonkwo: four percent (4%).
(c) The allocation set forth in Section 3.4(b) above is provided for informational purposes only and shall not create any rights or obligations on the part of Kellner. Kellner acknowledges that the allocation of go-forward carry is a matter solely among the Remaining Principals and the Next-Generation Principals, and Kellner shall have no right to approve, consent to, or object to any such allocation or any subsequent modification thereof.
ARTICLE 4: CLAWBACK OBLIGATION
Section 4.1 Continuation of Clawback
(a) Kellner's clawback obligation under the LPA, which is a joint and several obligation among the members of the General Partner at one hundred percent (100%) of carried interest distributions received, shall continue in full force and effect for a period of three (3) years following the Separation Date (i.e., through March 31, 2027) (the "Clawback Period"). During the Clawback Period, Kellner shall remain obligated to return carried interest distributions previously received to the extent required under the terms of the LPA.
(b) Following the expiration of the Clawback Period, Kellner's clawback obligation shall be released and terminated, and Kellner shall have no further obligation to return any carried interest distributions; provided, however, that if any clawback claim is pending, threatened, or reasonably anticipated as of the expiration of the Clawback Period, the clawback obligation shall continue solely with respect to such claim until such claim has been finally resolved.
(c) The Company Entities shall provide Kellner with prompt written notice of any claim, demand, or circumstance that could give rise to a clawback obligation during the Clawback Period, and shall consult with Kellner in good faith prior to agreeing to any settlement or other resolution of such claim that would result in a clawback from Kellner.
Section 4.2 Carry Escrow
(a) The existing Carry Escrow balance of Three Million Nine Hundred Forty-Two Thousand Dollars ($3,942,000), representing thirty percent (30%) of the Vested Carried Interest of Thirteen Million One Hundred Forty Thousand Dollars ($13,140,000), shall remain in the escrow account for a period of three (3) years following the Separation Date (i.e., through March 31, 2027), coterminous with the Clawback Period.
(b) During the Clawback Period, the Carry Escrow shall be maintained in accordance with the existing escrow arrangements of the Fund, including the Escrow Agreement dated as of June 15, 2019, by and among the General Partner, the Fund, and Greaves Bancorp as escrow agent. The Carry Escrow shall be invested in accordance with the investment provisions of such Escrow Agreement, and any interest or earnings accruing on the Carry Escrow during the Clawback Period shall be for the account of Kellner.
(c) Upon expiration of the Clawback Period, the escrow balance (including the original amount of Three Million Nine Hundred Forty-Two Thousand Dollars ($3,942,000), plus any interest or earnings thereon), less any amounts required to satisfy clawback obligations that have been triggered or are pending as of such expiration date, shall be released and distributed to Kellner within thirty (30) days following the expiration of the Clawback Period.
(d) In the event that any portion of the Carry Escrow is required to satisfy a clawback obligation during the Clawback Period, the Company Entities shall provide Kellner with at least thirty (30) days' prior written notice of the proposed withdrawal from the Carry Escrow, together with a detailed statement setting forth the basis for the clawback and the amount to be withdrawn.
Section 4.3 Limitation on Clawback Exposure
(a) Notwithstanding any provision of the LPA or any other agreement to the contrary, Kellner's maximum clawback exposure shall not exceed the aggregate carried interest distributions actually received by Kellner (including amounts held in the Carry Escrow and any distributions received after the Separation Date in respect of his retained Vested Carried Interest), net of any taxes paid or payable by Kellner on such distributions.
(b) The Company Entities shall provide Kellner with quarterly statements, delivered within forty-five (45) days following the end of each calendar quarter, reflecting (i) the current status of the Fund's performance, including the net asset value of the Fund's portfolio and any unrealized gains or losses, (ii) the current status of Kellner's clawback exposure, (iii) the current balance of the Carry Escrow (including interest and earnings), and (iv) any distributions of carried interest made or anticipated to be made to Kellner.
(c) The Company Entities shall use commercially reasonable efforts to ensure that any clawback obligation is allocated equitably among all persons who have received carried interest distributions from the Fund, and shall not seek to impose a disproportionate share of any clawback obligation on Kellner relative to the other recipients of carried interest distributions.
ARTICLE 5: GP COMMITMENT
Section 5.1 Kellner's GP Commitment
Kellner's total general partner commitment to the Fund is Six Million Three Hundred Thousand Dollars ($6,300,000), representing fifteen percent (15%) of the aggregate general partner commitment of Forty-Two Million Dollars ($42,000,000). As of the Execution Date, Kellner has funded Four Million Four Hundred Ten Thousand Dollars ($4,410,000) of such commitment (representing seventy percent (70%) of his total GP Commitment), with One Million Eight Hundred Ninety Thousand Dollars ($1,890,000) remaining unfunded. A summary of Kellner's GP Commitment is set forth in Exhibit B attached hereto.
Section 5.2 Funded Commitment
(a) Kellner's funded GP Commitment of Four Million Four Hundred Ten Thousand Dollars ($4,410,000) shall remain invested in the Fund and shall continue to participate in Fund distributions in accordance with the LPA on the same basis as other capital contributions made by the General Partner and its members.
(b) Kellner shall receive his pro rata share of return of capital and profits attributable to such funded GP Commitment through the term of the Fund, including any extension periods. Distributions to Kellner on account of his funded GP Commitment shall be made through the General Partner and GP Intermediate in accordance with the Fund's distribution waterfall, and shall be subject to the same terms, timing, and conditions as distributions to other holders of GP commitment capital.
(c) The Company Entities shall not take any action for the purpose of impairing, diminishing, or delaying distributions to Kellner on account of his funded GP Commitment, and Kellner's funded GP Commitment shall at all times rank pari passu with the GP Commitments of the Remaining Principals and the Next-Generation Principals.
Section 5.3 Assumption of Unfunded Commitment
(a) Kellner's remaining unfunded GP Commitment of One Million Eight Hundred Ninety Thousand Dollars ($1,890,000) shall be assumed by the members of Ardent Capital Holdings LLC, pro rata in accordance with their respective membership percentages in HoldCo, as follows:
Note: Any rounding adjustments shall be allocated to Marcus Aldridge.
(b) Each HoldCo member identified in Section 5.3(a) above shall execute and deliver, concurrently with the execution of this Agreement, a joinder or assumption agreement evidencing such member's assumption of the applicable portion of Kellner's unfunded GP Commitment.
(c) Following the assumption of the unfunded GP Commitment as provided in this Section 5.3, Kellner shall have no further obligation to fund any portion of the GP Commitment, whether in connection with future capital calls, follow-on investments, management fee bridge facilities, or otherwise.
Section 5.4 Release of Funding Obligation
Effective as of the Separation Date, Kellner is hereby irrevocably released and discharged from any and all obligations to fund future capital calls related to the GP Commitment, including any obligations arising under the LPA, the GP LLC Agreement, the Management Agreement, or any subscription agreement or side letter. The Company Entities shall cause the General Partner to take all actions necessary to effectuate such release, including the delivery of any notices to the Fund's limited partners, the Fund's administrator, or any lender under any credit facility of the Fund.
ARTICLE 6: RESTRICTIVE COVENANTS
Section 6.1 Non-Competition
(a) Kellner acknowledges that, during his tenure with the Ardent Capital platform, he has had access to and has developed confidential and proprietary information, trade secrets, investor relationships, and specialized knowledge regarding the Company Entities' investment strategy, portfolio management techniques, and competitive position. Kellner further acknowledges that the Company Entities have a legitimate business interest in protecting such information and relationships.
(b) For a period of eighteen (18) months following the Separation Date (i.e., through September 30, 2025), Kellner shall not, directly or indirectly, whether as a principal, agent, partner, member, manager, officer, director, employee, consultant, investor, or in any other capacity, establish, manage, operate, join, control, participate in, or be connected with any investment fund, investment vehicle, investment advisory business, or other business enterprise that pursues a substantially similar investment strategy to the Fund. For purposes of this Section 6.1, a "substantially similar investment strategy" means a strategy focused on control investments in middle-market industrial companies, middle-market business-services companies, or both, with an enterprise value at the time of investment of between One Hundred Million Dollars ($100,000,000) and One Billion Dollars ($1,000,000,000).
(c) The geographic scope of the non-competition covenant set forth in this Section 6.1 shall be the United States of America.
(d) Notwithstanding the foregoing, nothing in this Section 6.1 shall prohibit Kellner from (i) making passive investments in publicly traded securities not exceeding two percent (2%) of the outstanding equity securities of any publicly traded entity, (ii) serving on the board of directors of a publicly traded company that does not compete with the Company Entities, (iii) making personal investments in private companies in which the Fund does not have an investment and which do not compete with the Fund or any of its portfolio companies, or (iv) engaging in charitable, civic, or educational activities.
Section 6.2 Non-Solicitation of Employees
(a) For a period of twenty-four (24) months following the Separation Date (i.e., through March 31, 2026), Kellner shall not, directly or indirectly, whether on his own behalf or on behalf of any other Person, solicit, recruit, hire, engage, or attempt to solicit, recruit, hire, or engage any employee, consultant, independent contractor, or other service provider of the Company Entities or any of their respective Affiliates, or induce or encourage any such person to terminate his or her relationship with the Company Entities or any such Affiliate.
(b) As of the Execution Date, the Management Company employs sixty-two (62) professionals, including investment professionals, investor relations professionals, operations professionals, and administrative staff. The non-solicitation covenant set forth in this Section 6.2 shall apply to all such professionals, as well as any person who was an employee or consultant of the Company Entities at any time during the twelve (12)-month period preceding any such solicitation.
(c) Notwithstanding the foregoing, the restrictions in this Section 6.2 shall not apply to (i) general solicitations of employment not specifically directed at employees or consultants of the Company Entities, including job postings in newspapers, trade publications, or online platforms, or (ii) any person who was terminated by the Company Entities without cause at least six (6) months prior to the date of any solicitation by Kellner.
Section 6.3 Non-Solicitation of Limited Partners
(a) For a period of twenty-four (24) months following the Separation Date (i.e., through March 31, 2026), Kellner shall not, directly or indirectly, whether on his own behalf or on behalf of any other Person, solicit or attempt to solicit any limited partner of the Fund, or any limited partner of any other fund managed by the Ardent Capital platform, for the purpose of providing capital commitments, investments, or financial support to any competing investment fund, investment vehicle, or investment advisory business.
(b) As of the Execution Date, the Fund has forty-seven (47) limited partners, including pension funds, endowments, foundations, sovereign wealth funds, family offices, and other institutional investors. The non-solicitation covenant set forth in this Section 6.3 shall apply to all such limited partners, as well as any person or entity that was a limited partner of the Fund at any time during the twelve (12)-month period preceding any such solicitation.
(c) For the avoidance of doubt, nothing in this Section 6.3 shall prohibit Kellner from (i) engaging in ordinary social or professional interactions with individuals who are employees or representatives of limited partners of the Fund, provided that such interactions do not involve the solicitation of capital commitments to a competing fund, or (ii) investing his personal capital in any fund or investment vehicle that may also have limited partners in common with the Fund, provided that Kellner does not personally solicit such limited partners for such fund or vehicle.
Section 6.4 Enforcement; Equitable Relief
(a) Kellner acknowledges and agrees that the restrictive covenants set forth in this Article 6 are reasonable and necessary for the protection of the Company Entities' legitimate business interests, and that a breach or threatened breach of any such covenant would cause the Company Entities irreparable harm that cannot be adequately compensated by monetary damages alone.
(b) In the event of a breach or threatened breach of any restrictive covenant set forth in this Article 6, the Company Entities shall be entitled to seek and obtain injunctive relief, specific performance, and any other equitable remedy from any court of competent jurisdiction, in addition to any and all other remedies available at law or in equity. Kellner hereby waives any requirement for the posting of a bond or other security in connection with any such equitable relief.
(c) If any court of competent jurisdiction determines that any restrictive covenant set forth in this Article 6 is overly broad in scope, duration, or geographic area, such court is hereby authorized and directed to modify such covenant to the minimum extent necessary to render it enforceable, and such covenant as so modified shall be enforced to the fullest extent permitted by law.
(d) In the event that Kellner breaches any restrictive covenant set forth in this Article 6, the applicable restricted period shall be tolled for the duration of such breach, such that the restricted period shall be extended by a period equal to the duration of the breach.
(e) A summary of the restrictive covenants is set forth in Exhibit C attached hereto.
ARTICLE 7: CONFIDENTIALITY
Section 7.1 Confidential Information
(a) For purposes of this Agreement, "Confidential Information" means all non-public information relating to the Fund, the Fund's portfolio companies, the Company Entities, HoldCo, GP Intermediate, the limited partners of the Fund, the investment strategy, the investment process, the financial information, the performance data, the proprietary processes, the trade secrets, and the business affairs of the foregoing, in each case whether disclosed orally, in writing, electronically, or by any other means, and whether or not marked or identified as confidential.
(b) Without limiting the generality of the foregoing, Confidential Information includes (i) Fund performance data, including the Fund's Gross MOIC of 1.42x, Net IRR of 14.7%, unrealized value of approximately Two Billion Three Hundred Thirty Million Dollars ($2,330,000,000), and realized proceeds of approximately Four Hundred Forty-Five Million Dollars ($445,000,000), each as of September 30, 2023; (ii) the identity, capital commitments, contact information, and investment preferences of the Fund's forty-seven (47) limited partners; (iii) the terms and conditions of the Fund's fourteen (14) side letters; (iv) information regarding the Fund's eleven (11) active portfolio companies, including financial statements, projections, strategic plans, and valuation analyses; (v) the terms and conditions of this Agreement; (vi) the Restructuring and the organizational structure of HoldCo and GP Intermediate; and (vii) any proprietary investment tools, models, or methodologies developed by the Company Entities.
Section 7.2 Non-Disclosure Obligation
(a) Kellner shall not, at any time following the Execution Date, disclose, reveal, communicate, publish, or make available any Confidential Information to any third party, or use any Confidential Information for any purpose other than as expressly contemplated by this Agreement or the Senior Advisor Agreement, without the prior written consent of the Company Entities.
(b) Kellner's obligation of non-disclosure under this Section 7.2 shall survive the Separation Date, the expiration of the Senior Advisor Agreement, and the termination of this Agreement, and shall continue indefinitely, or for the maximum period enforceable under applicable law.
(c) Kellner acknowledges that any unauthorized disclosure or use of Confidential Information could cause substantial and irreparable harm to the Company Entities, the Fund, and the Fund's limited partners, and that the Company Entities shall be entitled to seek injunctive relief and other equitable remedies in addition to any other remedies available at law.
Section 7.3 Exceptions
(a) The obligations set forth in Section 7.2 shall not apply to Confidential Information that: (i) is or becomes publicly available other than as a result of a disclosure by Kellner in violation of this Agreement; (ii) was known to Kellner prior to his association with the Ardent Capital platform, as documented by contemporaneous written records; (iii) is independently developed by Kellner without reference to or use of any Confidential Information; or (iv) is received by Kellner from a third party that is not, to Kellner's knowledge, subject to any obligation of confidentiality with respect to such information.
(b) Notwithstanding anything in this Article 7 to the contrary, Kellner may disclose Confidential Information to the extent required by applicable law, regulation, subpoena, civil investigative demand, or other legal process issued by a court of competent jurisdiction or a Governmental Authority; provided, however, that Kellner shall (i) provide the Company Entities with prompt written notice of such requirement (to the extent legally permissible), (ii) cooperate with the Company Entities in seeking a protective order or other appropriate remedy to limit the scope of such disclosure, and (iii) disclose only such Confidential Information as is legally required.
(c) Kellner may disclose Confidential Information on a need-to-know basis to his legal counsel (Whitford & Chase LLP, Richard Beaulieu, Partner), his tax advisors, and his financial advisors, in each case solely in connection with Kellner's rights and obligations under this Agreement, the Senior Advisor Agreement, and the Carry Retention and Clawback Side Letter; provided that such counsel, tax advisors, and financial advisors are bound by obligations of confidentiality at least as restrictive as those set forth in this Article 7.
Section 7.4 Return of Materials
(a) Within ten (10) Business Days following the Separation Date, Kellner shall return to the Company Entities all property, documents, files, records, correspondence, memoranda, notes, reports, data, electronic records, storage media, devices, and other materials of any kind (in whatever form or medium) that contain, reflect, or relate to Confidential Information or that are the property of the Company Entities, the Fund, or any of their respective Affiliates. Such return shall include, without limitation, any laptops, mobile phones, security tokens, or other electronic devices provided to Kellner by the Company Entities.
(b) In addition to returning the materials described in Section 7.4(a), Kellner shall permanently delete and destroy all electronic copies of Confidential Information in his possession, custody, or control, including any copies stored on personal computers, cloud storage services, email accounts, or other electronic platforms. Kellner shall provide the Company Entities with a written certification of compliance with this Section 7.4(b) within ten (10) Business Days following the Separation Date.
(c) Notwithstanding the foregoing, Kellner may retain (i) copies of his personal tax records, including Schedule K-1s and related documentation, (ii) documentation relating to his carried interest, GP Commitment, and other rights retained pursuant to this Agreement, (iii) copies of this Agreement and all exhibits and schedules hereto, and (iv) personal contact information and personal correspondence that does not contain Confidential Information.
ARTICLE 8: HEALTH INSURANCE CONTINUATION
Section 8.1 COBRA Equivalent Coverage
(a) In recognition of Kellner's long tenure with the Ardent Capital platform and his contributions to the Company Entities, the Management Company shall provide Kellner with continued health insurance coverage for a period of twenty-four (24) months following the Separation Date (i.e., through March 31, 2026), at the sole cost and expense of the Management Company.
(b) The coverage provided pursuant to this Section 8.1 shall be substantially equivalent to the health insurance coverage provided to Kellner immediately prior to the Separation Date, including medical, dental, and vision coverage for Kellner and his eligible dependents. The Management Company shall use commercially reasonable efforts to maintain such coverage through its existing group health insurance plan or, if necessary, through a comparable individual or group health insurance arrangement.
(c) The estimated cost of the health insurance continuation provided pursuant to this Section 8.1 is approximately Fifty-Two Thousand Dollars ($52,000) for the twenty-four (24)-month period, based on current premium rates. The Management Company shall be responsible for the payment of all premiums and other costs associated with such coverage during the continuation period.
(d) The health insurance continuation provided pursuant to this Section 8.1 is intended to be in addition to, and not in lieu of, any rights Kellner may have under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), or any comparable state law. To the extent that the coverage provided pursuant to this Section 8.1 satisfies the requirements of COBRA, the twenty-four (24)-month continuation period shall run concurrently with any applicable COBRA continuation period.
Section 8.2 Termination of Coverage
The health insurance continuation provided pursuant to Section 8.1 shall terminate upon the earliest to occur of: (a) the expiration of the twenty-four (24)-month continuation period on March 31, 2026; (b) Kellner's eligibility for coverage under the Medicare program or under a comparable employer-sponsored group health insurance plan; or (c) Kellner's written election to decline or terminate such coverage. Kellner shall promptly notify the Management Company in writing upon becoming eligible for Medicare or comparable employer-sponsored coverage.
ARTICLE 9: MUTUAL GENERAL RELEASE
Section 9.1 Release by Kellner
(a) In consideration of the payments, benefits, and other consideration provided to Kellner under this Agreement, Kellner hereby irrevocably and unconditionally releases, acquits, and forever discharges the Company Entities, HoldCo, GP Intermediate, the Fund, and their respective members, managers, officers, directors, employees, agents, representatives, partners, successors, and assigns (collectively, the "Company Released Parties") from any and all claims, demands, actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, losses, liabilities, costs, and expenses of any kind or nature whatsoever, in law or in equity, whether known or unknown, suspected or unsuspected, matured or unmatured, contingent or accrued, which Kellner now has, has ever had, or may hereafter have against any of the Company Released Parties, arising out of, relating to, or in connection with Kellner's membership in, employment by, engagement with, or association with the Company Entities, or any acts or omissions of the Company Released Parties, from the beginning of time through the Execution Date.
(b) Without limiting the generality of the foregoing, the release set forth in this Section 9.1 includes, but is not limited to, any and all claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act of 1993, the New York State Human Rights Law, the New York City Human Rights Law, and any other federal, state, or local statute, regulation, ordinance, or common law doctrine, including any claims for breach of contract, breach of fiduciary duty, tortious interference, defamation, negligence, fraud, or any other tort.
(c) Notwithstanding the foregoing, the release set forth in this Section 9.1 shall not apply to, and Kellner expressly reserves, the following rights and claims:
(i) Kellner's rights under this Agreement, including without limitation his rights to the payments and benefits described herein;
(ii) Kellner's rights under the Senior Advisor Agreement;
(iii) Kellner's retained Vested Carried Interest and his right to distributions thereof as set forth in Article 3;
(iv) Kellner's rights to distributions on his funded GP Commitment as set forth in Article 5;
(v) Kellner's rights with respect to the Carry Escrow as set forth in Article 4;
(vi) Any rights to indemnification and advancement of expenses to which Kellner is entitled under the LPA, the GP LLC Agreement, the ManCo LLC Agreement, or any directors' and officers' insurance policy, as set forth in Article 11;
(vii) Any rights under COBRA or applicable state continuation coverage laws; and
(viii) Any rights that cannot be released or waived as a matter of applicable law.
Section 9.2 Release by the Company Entities
(a) In consideration of the covenants and agreements of Kellner under this Agreement, the Company Entities hereby irrevocably and unconditionally release, acquit, and forever discharge Kellner and his heirs, executors, administrators, personal representatives, successors, and assigns (collectively, the "Kellner Released Parties") from any and all claims, demands, actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, losses, liabilities, costs, and expenses of any kind or nature whatsoever, in law or in equity, whether known or unknown, suspected or unsuspected, matured or unmatured, contingent or accrued, which the Company Entities now have, have ever had, or may hereafter have against any of the Kellner Released Parties, arising out of, relating to, or in connection with Kellner's membership in, employment by, engagement with, or association with the Company Entities, or any acts or omissions of the Kellner Released Parties, from the beginning of time through the Execution Date.
(b) Notwithstanding the foregoing, the release set forth in this Section 9.2 shall not apply to, and the Company Entities expressly reserve, the following rights and claims:
(i) Kellner's obligations under this Agreement, including without limitation the restrictive covenants set forth in Article 6 and the confidentiality obligations set forth in Article 7;
(ii) Kellner's Clawback Obligation as set forth in Article 4;
(iii) Kellner's obligations under the restrictive covenants set forth in Article 6;
(iv) Kellner's confidentiality obligations set forth in Article 7;
(v) Any claim against Kellner based on fraud, willful misconduct, gross negligence, or criminal conduct;
(vi) Any obligation of Kellner arising under applicable securities laws, including without limitation the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940; and
(vii) Kellner's obligations under the Senior Advisor Agreement.
Section 9.3 Waiver of Unknown Claims
Each Party expressly waives and relinquishes any and all rights and benefits that he, she, or it may have under any statute, legal principle, or doctrine of any jurisdiction that would otherwise limit the scope of the releases set forth in this Article 9 to claims known or suspected at the time of execution of this Agreement. Each Party understands and acknowledges that he, she, or it may discover facts in addition to or different from those now known or believed to be true regarding the matters released herein, and agrees that the releases set forth in this Article 9 shall remain in full force and effect notwithstanding the discovery of any such additional or different facts.
Section 9.4 No Admission
This Agreement, including the releases set forth in this Article 9, does not constitute an admission by any Party of any wrongdoing, liability, violation of law, or breach of any duty or obligation. The Parties enter into this Agreement solely for the purpose of settling and resolving all matters between them arising out of or relating to Kellner's association with the Company Entities, and to facilitate an orderly transition.
ARTICLE 10: REPRESENTATIONS AND WARRANTIES
Section 10.1 Representations by Kellner
Kellner hereby represents and warrants to the Company Entities as follows:
(a) Capacity and Authority. Kellner has full legal capacity and authority to execute, deliver, and perform this Agreement. This Agreement constitutes the legal, valid, and binding obligation of Kellner, enforceable against Kellner in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and to general principles of equity.
(b) Independent Counsel. Kellner has been represented by independent legal counsel, Whitford & Chase LLP (Richard Beaulieu, Partner), in connection with the negotiation, review, and execution of this Agreement. Kellner has relied on the advice of his own counsel and has not relied on any representation or statement made by the Company Entities, their counsel, or any of their respective agents or representatives, except as expressly set forth in this Agreement.
(c) Adequate Opportunity. Kellner has had adequate time and opportunity to review, consider, and understand the terms and conditions of this Agreement, including the releases set forth in Article 9. Kellner has had the opportunity to ask questions of the Company Entities regarding this Agreement and has received satisfactory answers to all such questions.
(d) No Assignment of Claims. Kellner has not assigned, transferred, pledged, or otherwise conveyed or encumbered any of the claims, causes of action, or rights released in Article 9 to any third party, and no third party has any interest in any such claims, causes of action, or rights.
(e) No Undisclosed Claims. Kellner is not aware of any pending or threatened claim, demand, action, suit, investigation, or proceeding against the Company Entities, the Fund, or any of their respective Affiliates that has not been disclosed to the Company Entities in writing prior to the Execution Date.
(f) Compliance with Law. Kellner has complied in all material respects with all applicable laws, regulations, and rules in connection with his service to the Company Entities and the Fund, and is not aware of any facts or circumstances that could give rise to a claim that Kellner has violated any applicable law, regulation, or rule in connection with such service.
Section 10.2 Representations by the Company Entities
Each of the Company Entities hereby represents and warrants to Kellner as follows:
(a) Organization and Good Standing. Each Company Entity is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware, and has all requisite power and authority to carry on its business as currently conducted.
(b) Authority. Each Company Entity has full power and authority to execute, deliver, and perform this Agreement. The execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary action on the part of each Company Entity, including the Member Consent Resolutions dated February 28, 2024, and no further action or approval is required.
(c) Binding Obligation. This Agreement constitutes the legal, valid, and binding obligation of each Company Entity, enforceable against such Company Entity in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and to general principles of equity.