CALDERWOOD & HARKNESS LLP Counselors at Law One Vanderbilt Avenue, 44th Floor New York, New York 10017
Telephone: (212) 814-6000 Facsimile: (212) 814-6001 www.calderwoodharkness.com
October 9, 2023
VIA EMAIL AND HAND DELIVERY
Ardent Capital Management LLC 590 Madison Avenue, 28th Floor New York, New York 10022
Attention: Marcus Aldridge, Co-Founder & Managing Partner
Priya Narayanan, Co-Founder & Managing Partner
Dear Mr. Aldridge and Ms. Narayanan:
We are pleased to confirm the engagement of Calderwood & Harkness LLP ("Calderwood & Harkness," the "Firm," "we," or "us") by Ardent Capital Management LLC (the "ManCo" or the "Client") to serve as legal counsel in connection with the matters described herein. This letter (the "Engagement Letter") sets forth the terms and conditions upon which we will provide legal services to the Client in connection with this engagement.
1. Purpose and Engagement
This Engagement Letter confirms that Calderwood & Harkness has been engaged by the ManCo to serve as legal counsel in connection with a comprehensive restructuring of the management company and realignment of economics among the principals of Ardent Capital Partners III LP (the "Fund"), a Delaware limited partnership with approximately $2.8 billion in total commitments. The ManCo is a Delaware limited liability company and a registered investment adviser with the United States Securities and Exchange Commission (the "SEC") under CRD #298417. The Fund's sole general partner is Ardent Capital GP III LLC (the "General Partner"), a Delaware limited liability company.
The engagement encompasses the formation of new holding entities, the negotiation of separation arrangements with departing principals, the realignment of carried interest and management fee economics among continuing and next-generation principals, the solicitation of necessary limited partner consents, compliance with existing side-letter obligations, and related tax structuring. The scope of the representation, the personnel assigned to the engagement, the fee arrangement, and other terms and conditions governing this engagement are set forth in the sections that follow.
2. Scope of Representation
The engagement will comprise the following principal workstreams, each of which is described in greater detail below. We understand that the scope of the engagement may evolve as the restructuring progresses; any material expansion of the scope described herein will be discussed with the Client in advance.
2.1 Entity Restructuring
Calderwood & Harkness will advise on the restructuring of the organizational hierarchy of the Ardent Capital platform, including:
(a) Advising on the formation of a new Delaware limited liability company, to be named Ardent Capital Holdings LLC ("HoldCo"), which will serve as a parent holding company for both the General Partner and the ManCo, thereby consolidating the principals' economic interests and governance rights in a single vehicle at the top of the organizational structure.
(b) Advising on the formation of an intermediate entity, Ardent GP Intermediate LLC ("GP Intermediate"), as a wholly owned subsidiary of HoldCo and the sole member of the General Partner. GP Intermediate will serve as an interposing entity between HoldCo and the General Partner, facilitating the allocation of carried interest economics and providing structural flexibility for the admission of future principals and the potential establishment of successor funds.
(c) Drafting and negotiating limited liability company agreements for each of HoldCo and GP Intermediate, including provisions governing capital contributions, profit and loss allocations, distribution waterfalls, governance (including voting and consent requirements), transfer restrictions, withdrawal and removal mechanics, non-compete and non-solicitation covenants, and such other provisions as may be appropriate.
(d) Preparing amended and restated limited liability company agreements for the General Partner and the ManCo to reflect the new holding-company structure, including modifications to membership interest provisions, management and officer provisions, and capital account and allocation provisions necessitated by the interposition of HoldCo and GP Intermediate.
(e) Preparing and filing Certificates of Formation with the Delaware Secretary of State for each of HoldCo and GP Intermediate, together with any ancillary filings or registrations required in connection with the formation and qualification of such entities.
(f) Preparing Amendment No. 1 to the Amended and Restated Agreement of Limited Partnership of the Fund (the "LPA") to reflect the structural changes to the General Partner, including any required modifications to the definitions, representations, and governance provisions of the LPA necessitated by the interposition of GP Intermediate and HoldCo above the General Partner.
2.2 Economics Realignment
Calderwood & Harkness will advise on the reallocation and documentation of the economic arrangements among the principals of the Fund, including:
(a) Advising on the reallocation of carried interest percentages and management fee profit-share allocations among the remaining and next-generation principals, taking into account the departure of the principals described in Section 2.3 below, the contributions of continuing principals, and the Firm's understanding of the Client's objectives with respect to the incentivization and retention of key personnel.
(b) Drafting an amended and restated Carried Interest Allocation Agreement reflecting the revised carried interest percentages applicable to each principal, including vesting schedules, forfeiture and clawback provisions, and mechanics for the allocation of carried interest among HoldCo members through the GP Intermediate and General Partner chain.
(c) Drafting a Management Fee Sharing and Profit Allocation Agreement at the HoldCo level, setting forth the allocation of management fee revenue among HoldCo members, including base compensation allocations, discretionary bonus pools, and distribution priorities.
(d) Revising the co-investment allocation policy to reflect the revised principal group and to address any changes in co-investment rights and priorities resulting from the restructuring.
2.3 Departing Principal Separation
Calderwood & Harkness will advise on the negotiation and documentation of separation arrangements for two departing principals:
(a) David Kellner (Senior Partner), who is retiring from the Ardent Capital platform; and
(b) Joanna Trask (Partner), who is departing voluntarily.
In connection with each departing principal, the Firm will:
(i) Draft comprehensive separation and release agreements, addressing, among other things, the departing principal's resignation from all positions with the ManCo, the General Partner, HoldCo (if applicable), and all affiliated entities; mutual releases of claims; confidentiality, non-disparagement, non-solicitation, and (as applicable) non-competition covenants; cooperation obligations; and any ongoing compensation or benefits arrangements.
(ii) Draft carry retention and clawback side letters, specifying the portion of carried interest to be retained by each departing principal with respect to investments made during his or her tenure, the clawback obligations applicable thereto, and the mechanics for the calculation and payment of any retained carry distributions.
(iii) As applicable, draft a senior advisor agreement in favor of Mr. Kellner, setting forth the terms of any ongoing advisory role, including the scope of services, compensation, expense reimbursement, and termination provisions.
(iv) Coordinate, as necessary and appropriate, with Whitford & Chase LLP, counsel to the departing principals, led by Richard Beaulieu, Esq., in connection with the negotiation and finalization of all separation documentation.
2.4 LP Consent and Side-Letter Compliance
Calderwood & Harkness will advise on all limited partner notification, consent, and compliance matters arising from the restructuring, including:
(a) Preparing materials for notification to, and solicitation of consent from, the Limited Partner Advisory Committee ("LPAC") pursuant to Section 9.4 of the LPA, including a detailed memorandum describing the restructuring and its implications for the Fund and its limited partners.
(b) Analyzing compliance with the Fund's fourteen (14) existing side letters, with particular attention to key-person provisions under Section 5.2 of the LPA and any expanded or supplemental key-person provisions contained in certain side letters, to determine whether the departures of Mr. Kellner and Ms. Trask or the structural changes contemplated by the restructuring trigger key-person events, consent requirements, or notification obligations under any such side letter.
(c) Preparing LP notification letters to all forty-seven (47) limited partners of the Fund, describing the restructuring, the changes to the General Partner structure, the departures of Mr. Kellner and Ms. Trask, and any other information required to be disclosed under the LPA or the applicable side letters.
(d) Advising on the preparation and filing of an amended SEC Form ADV (Parts 1 and 2) to reflect the restructuring, and advising on any other regulatory filings or notifications required in connection with the restructuring, including any applicable state regulatory filings.
2.5 Tax Structuring
Calderwood & Harkness will provide tax analysis and structuring advice in connection with the restructuring, including:
(a) Federal income tax analysis of the formation of HoldCo and GP Intermediate, including the tax treatment of the contribution or transfer of interests in the General Partner and the ManCo to HoldCo.
(b) Delaware tax analysis of the formation of HoldCo and GP Intermediate, including any applicable Delaware franchise taxes, formation taxes, or annual reporting obligations.
(c) Federal income tax analysis of the reallocation of carried interest among the principals, including the application of Section 1061 of the Internal Revenue Code and any implications arising from the modification of existing partnership interests.
(d) Tax analysis of the economic arrangements with departing principals, including the characterization of carry retention payments and the tax treatment of any consideration paid in connection with the separation arrangements.
(e) Section 704(b) and Section 704(c) analysis of built-in gain allocations with respect to existing Fund investments, including the impact of the restructuring on the allocation of built-in gains and losses among the principals and the mechanics for tracking and allocating such amounts through the revised entity structure.
(f) All tax structuring advice under this engagement will be provided by Sylvia Hartwell, Specialist Partner (Tax), who will coordinate as necessary with the Client's independent accountants at Heathrow Whitman & Co.
2.6 Limitations on Scope
The scope of this engagement is limited to the matters described in Sections 2.1 through 2.5 above. Without limiting the generality of the foregoing, the following matters are expressly excluded from the scope of this engagement:
(a) Routine fund operations, portfolio company transactions, and ongoing limited partner communications unrelated to the restructuring described herein. We understand that such matters will continue to be handled by Pemberton Hale LLP (Victoria Langford, Partner), which serves as the Fund's existing fund formation and operations counsel.
(b) Accounting, auditing, and valuation services, which we understand are provided by Heathrow Whitman & Co. (accountants and auditors) and Broadleaf Consulting Group (valuation), respectively. Nothing in this engagement shall be construed as the provision of accounting, auditing, or valuation advice by Calderwood & Harkness.
(c) Representation of any departing principal, including David Kellner and Joanna Trask, in connection with the restructuring or any other matter. Each departing principal is separately represented by Whitford & Chase LLP.
(d) Representation of any limited partner of the Fund in connection with the restructuring or any other matter.
To the extent matters arise during the course of this engagement that fall outside the scope described herein but that may benefit from our involvement, we will discuss with the Client whether and on what terms such matters should be added to the scope of this engagement or addressed through a separate engagement.
3. Engagement Team
The following attorneys will serve as the primary members of the engagement team:
From time to time, additional attorneys or paraprofessionals may be assigned to the engagement as the Firm deems necessary or appropriate to ensure efficient and timely completion of the workstreams described herein. The Client will be notified in advance of any such additions to the engagement team.
4. Fee Arrangement and Billing
4.1 Hourly Rates
Fees for services rendered in connection with this engagement will be charged on an hourly basis at the following standard rates:
The foregoing rates are subject to annual adjustment, typically effective January 1 of each year. In the event of any rate adjustment during the term of this engagement, the Firm will communicate such adjustment to the Client in advance. Adjusted rates will apply to services rendered on or after the effective date of the adjustment.
4.2 Estimated Fee Range
Based on the anticipated scope and complexity of the engagement as described in Section 2 above, and taking into account the number of workstreams, the anticipated volume of document drafting and negotiation, and the extent of LP consent and regulatory compliance work expected to be required, we estimate that total professional fees for this engagement will fall within the range of $850,000 to $1,100,000.
This estimate is provided solely for budgeting purposes and does not constitute a cap, ceiling, or fixed fee. Actual fees may vary from this estimate based on a number of factors, including (without limitation) the ultimate scope and complexity of the work, the nature and duration of negotiations with Whitford & Chase LLP on behalf of the departing principals, the extent and complexity of LP consent solicitation and side-letter compliance matters, the number and complexity of tax structuring issues that arise, and any expansion of the scope of the engagement beyond the matters described herein. The Firm will endeavor to keep the Client informed on an ongoing basis of any circumstances that are likely to cause total fees to exceed the upper end of the estimated range, and will discuss with the Client any potential modifications to the scope or approach to the engagement that might mitigate such costs.
4.3 Disbursements. In addition to professional fees, the Client will be responsible for reimbursement of reasonable out-of-pocket disbursements incurred by the Firm in connection with the engagement. Disbursements may include, without limitation, filing fees (including Delaware Secretary of State filing fees for Certificates of Formation and other filings), messenger and courier charges, travel expenses (including transportation, lodging, and meals incurred in connection with travel reasonably necessary for the engagement), document production and reproduction costs, computerized legal research charges, and similar items. All disbursements will be itemized on the Firm's monthly invoices.
4.4 Billing Procedures
Invoices for professional fees and disbursements will be rendered monthly. All invoices are due and payable within thirty (30) days of receipt. Invoices will be directed to:
Ardent Capital Management LLC 590 Madison Avenue, 28th Floor New York, New York 10022
Attention: Finance Department
Copies of all invoices will also be provided to Marcus Aldridge and Priya Narayanan at the address set forth above, or at such other address or electronic mail address as the Client may designate in writing from time to time. The Client agrees to notify the Firm promptly if there is any question or dispute regarding any invoice, so that any such matter may be addressed in a timely manner.
5. Client Identity and Conflicts
The Client for purposes of this engagement is Ardent Capital Management LLC. Calderwood & Harkness does not represent, and will not be deemed to represent, any individual principal of the Fund (including, without limitation, Marcus Aldridge, Priya Narayanan, or any other continuing principal), any departing principal (including David Kellner and Joanna Trask), any limited partner of the Fund, or any other entity in the Ardent Capital structure (including, without limitation, the Fund, the General Partner, HoldCo, GP Intermediate, or any portfolio company) in their individual or separate capacities. Each such person and entity should consult with its own independent legal counsel with respect to any matter in which its interests may differ from those of the ManCo.
The Firm has conducted a conflict check in accordance with its standard procedures and, as of the date hereof, has identified no conflicts of interest that would preclude this engagement. In the event that a conflict of interest arises during the course of the engagement, the Firm will promptly notify the Client and take appropriate action, which may include seeking an informed written waiver of the conflict from the affected parties or, if a waiver cannot be obtained or is not appropriate under the circumstances, withdrawing from the representation in whole or in part as required by applicable rules of professional conduct.
6. Confidentiality
Calderwood & Harkness will maintain the confidentiality of all information provided by or on behalf of the Client in connection with this engagement, in accordance with the Firm's professional obligations and applicable rules of professional conduct. This obligation of confidentiality extends to all non-public information concerning the Fund, the General Partner, the ManCo, HoldCo, GP Intermediate, the principals (whether continuing or departing), the limited partners, the portfolio companies, and any other entities or persons about which information is provided to the Firm in connection with the engagement.
The Firm may disclose confidential information as required by applicable law, regulation, or court order, or with the prior written consent of the Client. In the event the Firm receives a subpoena, court order, or other compulsory process seeking the disclosure of confidential information relating to this engagement, the Firm will, to the extent permitted by law and practicable under the circumstances, provide prompt notice to the Client prior to making any such disclosure, so that the Client may seek protective measures or take other appropriate action.
7. Document Retention
Calderwood & Harkness will retain engagement files, including correspondence, memoranda, agreements, and other documents generated or received in connection with this engagement, in accordance with the Firm's document retention policy, as in effect from time to time. Upon completion or termination of the engagement, the Firm will, at the Client's request and expense, return original documents to the Client or make arrangements for the transfer of files. Documents retained by the Firm may be destroyed in accordance with the Firm's document retention policy following the expiration of the applicable retention period, unless the Client requests in writing that such documents be returned or otherwise preserved.
8. Governing Law
This Engagement Letter and the terms and conditions set forth herein shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict-of-laws principles thereof.
9. Termination
Either party may terminate this engagement at any time upon written notice to the other party. In the event of termination by either party, the Client will remain responsible for payment of all professional fees earned and disbursements incurred through the date of termination, in accordance with the billing and payment terms set forth in Section 4 above.
Upon termination, Calderwood & Harkness will take reasonable steps to protect the Client's interests, including cooperating in the orderly transition of the matter to successor counsel designated by the Client. The Firm will promptly deliver to the Client or its successor counsel all documents and materials necessary for the continued handling of the matter, subject to the Firm's right to retain copies of such documents in accordance with its document retention policy and applicable rules of professional conduct.
10. Acceptance and Counterparts
We respectfully request that the Client confirm its acceptance of the terms and conditions of this engagement by having each of the undersigned representatives execute and return the enclosed copy of this Engagement Letter to Calderwood & Harkness at the address set forth above, or by transmitting an executed copy by electronic mail to Nicholas Stern at nstern@calderwoodharkness.com or Graham Sutherland at gsutherland@calderwoodharkness.com.
This Engagement Letter may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Delivery of an executed counterpart by electronic mail in portable document format (.pdf) or by other electronic transmission shall be effective as delivery of a manually executed counterpart.
We look forward to working with you and the Ardent Capital team on this important matter. Please do not hesitate to contact either of us if you have any questions regarding the terms of this engagement or if you would like to discuss any aspect of the representation in greater detail.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Nicholas Stern Partner
By: ________
Graham Sutherland Partner
ACKNOWLEDGMENT AND ACCEPTANCE
The undersigned, on behalf of Ardent Capital Management LLC, hereby acknowledge receipt of the foregoing Engagement Letter and agree to the terms and conditions set forth therein.
ARDENT CAPITAL MANAGEMENT LLC
By: ________
Name: Marcus Aldridge
Title: Co-Founder & Managing Partner
Date: ________
By: ________
Name: Priya Narayanan
Title: Co-Founder & Managing Partner
Date: ________
| Name | Role | Responsibility |
| Nicholas Stern | Responsible Partner | Overall supervision of the engagement, strategic advice, and senior-level involvement in key negotiations and decision points |
| Graham Sutherland | Billing Partner | Billing, engagement administration, and fee-related communications |
| Owen Fischer | Lead Associate | Day-to-day management of the engagement, including document drafting and negotiation, coordination with counterparty counsel (Whitford & Chase LLP) and other advisors (Pemberton Hale LLP, Heathrow Whitman & Co., Broadleaf Consulting Group) |
| Stephen Adler | Working Associate | Document drafting, due diligence, preparation of regulatory filings, and research support |
| Sylvia Hartwell | Specialist Partner (Tax) | Tax structuring advice, Section 704(b) and 704(c) analysis, and coordination with Heathrow Whitman & Co. on tax-related matters |
| Timekeeper Level | Hourly Rate | |
| Partner | $1,650 | |
| Specialist Partner | $1,750 | |
| Senior Associate | $950 | |
| Associate | $750 |