CALDERWOOD & HARKNESS LLP
INTERNAL MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
To: File — Matter No. 1001-00002
From: Owen Fischer, Lead Associate
Reviewed by: Nicholas Stern, Responsible Partner
Date: March 15, 2024
Re: Matter Closing Memorandum — Ardent Capital Partners III LP — Management Company Restructuring & Economics Realignment
Status: CLOSED — COMPLETED
This memorandum is protected by the attorney-client privilege and constitutes attorney work product. It has been prepared solely for internal firm purposes in connection with the closing of the above-referenced matter. It should not be disclosed to any person or entity outside of Calderwood & Harkness LLP without the prior written approval of the Responsible Partner. Any inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.
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1. Executive Summary
Calderwood & Harkness LLP ("Calderwood & Harkness" or the "Firm") was engaged on October 9, 2023 by Ardent Capital Management LLC ("ManCo" or the "Client") to advise on 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 aggregate capital commitments from forty-seven (47) limited partners. The engagement arose in the context of the planned retirement of one senior partner (David Kellner) and the voluntary departure of another partner (Joanna Trask), necessitating a thorough reorganization of the ownership, governance, and economic arrangements among the continuing and next-generation principals of the Ardent Capital platform.
The engagement encompassed four principal workstreams, which were subsequently expanded to six coordinated workstreams over the course of the representation:
(1) Entity Restructuring — Formation of a holding company structure (Ardent Capital Holdings LLC and Ardent GP Intermediate LLC) to consolidate ownership of ManCo and the general partner entity, replacing the prior arrangement under which five individual principals held direct membership interests in both entities;
(2) Economics Realignment — Comprehensive reallocation of carried interest percentages, management fee profit sharing, co-investment allocation rights, and GP commitment obligations among the remaining and next-generation principals, including the onboarding of two next-generation principals (Elena Marchetti and Samuel Okonkwo) into the economics of the platform;
(3) Departing Principal Separations — Negotiation and execution of separation and release agreements, carry retention and clawback side letters, and (in the case of David Kellner) a senior advisor agreement, with counterparty counsel Whitford & Chase LLP;
(4) LP Consent, Notification & Side-Letter Compliance — Solicitation and receipt of LPAC consent pursuant to LPA Section 9.4, preparation and distribution of LP notification letters to all 47 limited partners, and comprehensive review and analysis of all 14 side letters for compliance with restructuring-triggered obligations, including key-person analysis;
(5) Regulatory Filings — Preparation and filing of an amended SEC Form ADV for ManCo reflecting the new ownership structure, updated control persons, and revised organizational chart; and
(6) Coordination with Other Advisors — Delineation of responsibilities with Pemberton Hale LLP (ongoing fund formation and operations counsel), coordination with Heathrow Whitman & Co. (auditor and tax advisor) on tax reporting implications, and interaction with Broadleaf Consulting Group (valuation advisor) as needed for performance data.
All workstreams were completed and all restructuring documents were duly executed as of February 28, 2024. The new holding company entities — Ardent Capital Holdings LLC and Ardent GP Intermediate LLC — were formed with the Delaware Secretary of State on March 1, 2024. LP notification letters were sent to all 47 limited partners on March 5, 2024. The SEC Form ADV amendment for ManCo was filed on March 10, 2024. With all deliverables completed and all post-execution administrative steps finalized, the matter is hereby closed as of March 15, 2024.
The engagement team consisted of the following Calderwood & Harkness attorneys:
• Nicholas Stern — Responsible Partner
• Graham Sutherland — Billing Partner
• Owen Fischer — Lead Associate
• Stephen Adler — Working Associate
• Sylvia Hartwell — Specialist Partner, Tax
This Matter Closing Memorandum documents the scope, substance, and resolution of each workstream; identifies all executed documents and closing deliverables; summarizes key commercial terms and tax conclusions; records the timeline of material events; inventories the complete document index; and identifies open items and post-closing matters that do not require further Calderwood & Harkness involvement. The memorandum is intended to serve as the definitive record of the Firm's engagement and to facilitate any future reference to the restructuring by the Firm or (with appropriate authorization) by the Client.
2. Client and Principal Parties
2.1 Client Entity
The Client in this engagement is Ardent Capital Management LLC (the "ManCo"), a Delaware limited liability company organized and existing under the Delaware Limited Liability Company Act (6 Del. C. § 18-101 et seq.). ManCo is registered as an investment adviser with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended, and maintains CRD No. 298417. ManCo's Employer Identification Number is 84-3291070.
ManCo's principal office is located at 590 Madison Avenue, 28th Floor, New York, New York 10022. ManCo serves as the investment adviser and manager of Ardent Capital Partners III LP, providing investment management, portfolio monitoring, and related advisory services to the Fund in accordance with the terms of the Fund's governing documents and ManCo's advisory agreement with the Fund.
Prior to the restructuring, ManCo was owned directly by five individual members (Aldridge, Narayanan, Kellner, Trask, and Hsiao). Following the restructuring, ManCo's sole member is Ardent Capital Holdings LLC, as described below.
2.2 Related Entities
The following entities are related to ManCo and are material to the restructuring:
Ardent Capital Partners III LP (the "Fund"). The Fund is a Delaware limited partnership, EIN 84-3291057, formed for the purpose of making private equity investments primarily in middle-market and upper-middle-market companies across a range of sectors. The Fund held its final closing on April 15, 2019, at which time aggregate capital commitments totaled approximately $2.8 billion from 47 limited partners. The Fund's limited partner base includes public pension funds, endowments, insurance companies, family offices, fund-of-funds vehicles, and sovereign wealth entities. As of September 30, 2023, the Fund maintained 11 active portfolio company investments. The Fund's term expires on December 31, 2029, subject to two one-year extension options exercisable at the discretion of the general partner. The investment period under the Fund's LPA commenced on June 30, 2019 and is scheduled to expire on June 30, 2025.
Ardent Capital GP III LLC (the "GP"). The GP is a Delaware limited liability company, EIN 84-3291063, which serves as the sole general partner of the Fund. The GP maintains a 1.5% general partner commitment to the Fund, representing $42,000,000 in aggregate committed capital. The GP's registered agent is Prestige Registered Agents LLC, located at 850 New Burton Road, Suite 201, Dover, Delaware 19904. Prior to the restructuring, the GP was owned directly by five individual members (Aldridge, Narayanan, Kellner, Trask, and Hsiao). Following the restructuring, the GP's sole member is Ardent GP Intermediate LLC.
Ardent Capital Holdings LLC ("HoldCo"). HoldCo is a newly formed Delaware limited liability company, EIN 93-1847225, Delaware File No. 7948231, formed on March 1, 2024, as part of the restructuring. HoldCo serves as the parent holding company of ManCo (as direct sole member) and of Ardent GP Intermediate LLC (as direct sole member), which in turn is the sole member of the GP. HoldCo is owned by the five remaining and next-generation principals: Marcus Aldridge (42%), Priya Narayanan (36%), Robert Hsiao (14%), Elena Marchetti (4%), and Samuel Okonkwo (4%). The authorized person for formation purposes was Marcus Aldridge. The registered agent is Prestige Registered Agents LLC at the address identified above.
Ardent GP Intermediate LLC ("GP Intermediate"). GP Intermediate is a newly formed Delaware limited liability company, EIN 93-1847231, Delaware File No. 7948237, formed on March 1, 2024, as part of the restructuring. GP Intermediate functions as an intermediate entity between HoldCo and the GP, serving as the sole member of the GP. GP Intermediate was structured as a single-member limited-purpose entity with pass-through of GP economics. The authorized person for formation purposes was Marcus Aldridge. The registered agent is Prestige Registered Agents LLC at the address identified above.
2.3 Principals. The principals of the Ardent Capital platform, as relevant to this engagement, are divided into three categories:
Remaining Principals:
• Marcus Aldridge — Co-Founder & Managing Partner. Mr. Aldridge is a co-founder of the Ardent Capital platform and has served as a Managing Partner since the platform's inception. He is a designated Key Person under the Fund's LPA (Section 5.2). Post-restructuring ownership interest in HoldCo: 42%. Managing Member of HoldCo.
• Priya Narayanan — Co-Founder & Managing Partner. Ms. Narayanan is a co-founder of the Ardent Capital platform and has served as a Managing Partner since the platform's inception. She is a designated Key Person under the Fund's LPA (Section 5.2). Post-restructuring ownership interest in HoldCo: 36%. Managing Member of HoldCo.
• Robert Hsiao — Partner. Mr. Hsiao has served as a Partner at Ardent Capital since the formation of Fund III. Post-restructuring ownership interest in HoldCo: 14%.
Next-Generation Principals:
• Elena Marchetti — Principal. Ms. Marchetti has been elevated to a principal-level role in connection with the restructuring. Post-restructuring ownership interest in HoldCo: 4%. Her interest is subject to vesting provisions set forth in the HoldCo LLC Agreement.
• Samuel Okonkwo — Principal. Mr. Okonkwo has been elevated to a principal-level role in connection with the restructuring. Post-restructuring ownership interest in HoldCo: 4%. His interest is subject to vesting provisions set forth in the HoldCo LLC Agreement.
Departing Principals:
• David Kellner — Senior Partner (retiring). Mr. Kellner is a Senior Partner at Ardent Capital who has elected to retire effective March 31, 2024. Mr. Kellner will transition to a Senior Advisor role upon retirement pursuant to a Senior Advisor Agreement executed in connection with the restructuring.
• Joanna Trask — Partner (departing). Ms. Trask is a Partner at Ardent Capital who has elected to depart effective April 15, 2024, in order to join another investment firm. Ms. Trask's departure was voluntary and negotiated at arm's length.
2.4 Counterparty Counsel
The departing principals, David Kellner and Joanna Trask, were jointly represented by Whitford & Chase LLP in connection with the negotiation of their respective separation terms. The lead attorneys at Whitford & Chase were:
• Richard Beaulieu — Partner
• Hannah Polk — Associate
Whitford & Chase LLP is located at 200 Park Avenue, Suite 4200, New York, New York 10166. All substantive correspondence and negotiations regarding the departing principal separation terms were conducted between Calderwood & Harkness and Whitford & Chase.
2.5 Other Advisors and Counsel
In addition to Calderwood & Harkness (restructuring counsel) and Whitford & Chase (counsel to departing principals), the following advisors and counsel played roles in connection with this engagement or the ongoing operations of the Fund:
Pemberton Hale LLP — Fund formation counsel and ongoing counsel for routine fund operations. The lead partner at Pemberton Hale is Victoria Langford, located at One Liberty Plaza, 40th Floor, New York, New York 10006. Pemberton Hale served as counsel of record for the formation of Fund III and has continued to advise on routine fund operations, portfolio transactions, and non-restructuring LP communications throughout the period of the Calderwood & Harkness engagement. A letter delineating the respective scopes of responsibility of Calderwood & Harkness and Pemberton Hale was sent by Nicholas Stern to Victoria Langford in approximately October 2023, and the two firms coordinated throughout the engagement to avoid duplication of effort and ensure consistency in LP-facing communications. Pemberton Hale provided Calderwood & Harkness with copies of all 14 side letters and the current form of the Fund's LPA and related governing documents at the outset of the engagement.
Heathrow Whitman & Co. — Auditor and tax advisor to the Fund and related entities. The engagement partner at Heathrow Whitman is Paul Devereux, CPA, located at 1345 Avenue of the Americas, 18th Floor, New York, New York 10105. Heathrow Whitman was consulted regarding the tax reporting implications of the restructuring, including Schedule K-1 changes, the carry reallocation mechanics, the treatment of departing principal interests, and the timing of entity-level tax filings. Coordination with Heathrow Whitman was primarily conducted by Sylvia Hartwell.
Broadleaf Consulting Group — Valuation advisor to the Fund. The lead contact at Broadleaf is Martin Schreiber, located at 125 High Street, Suite 2800, Boston, Massachusetts 02110. Broadleaf's involvement in this engagement was limited; the firm's most recent quarterly valuation as of September 30, 2023 was referenced in the LPAC Presentation Memorandum and in the determination of accrued carried interest amounts.
Lockwood Placement Partners LLC — Placement agent retained in connection with the fundraising for Fund III. The lead contact is Sarah Fontaine, located at 399 Park Avenue, Suite 3100, New York, New York 10022. Certain tail-fee obligations owed by ManCo to Lockwood remain in effect in accordance with the terms of the placement agent agreement. No action was required from Calderwood & Harkness with respect to the Lockwood arrangement, and the tail-fee obligations were unaffected by the restructuring.
3. Summary of Workstreams Completed
3.1 Workstream I — Entity Restructuring
3.1.1 Formation of Holding Company Structure. The centerpiece of the restructuring was the formation of a new two-tier holding company structure to replace the prior arrangement under which five individual principals held direct membership interests in both the GP and ManCo. Under the pre-restructuring arrangement, each of the five principals (Aldridge, Narayanan, Kellner, Trask, and Hsiao) held direct ownership percentages in both ManCo and the GP. This structure presented several challenges: (i) the departure of any principal required direct amendments to the governing documents of both ManCo and the GP, together with the re-execution of multiple ancillary agreements; (ii) the admission of new principals similarly required direct amendments at both the ManCo and GP levels; (iii) the platform lacked a centralized governance structure capable of facilitating efficient decision-making and succession planning; and (iv) the direct ownership structure created inefficiencies in connection with tax reporting, capital account administration, and allocation mechanics.
To address these challenges, Calderwood & Harkness designed and implemented a holding company structure consisting of two newly formed Delaware limited liability companies:
Ardent Capital Holdings LLC ("HoldCo") was formed as a new Delaware LLC on March 1, 2024, pursuant to a Certificate of Formation filed with the Delaware Secretary of State, Delaware File No. 7948231. The authorized person for the filing was Marcus Aldridge. The registered agent is Prestige Registered Agents LLC, located at 850 New Burton Road, Suite 201, Dover, Delaware 19904. HoldCo's EIN is 93-1847225. HoldCo serves as the parent holding company of both ManCo (as its direct sole member) and GP Intermediate (as its direct sole member). The five continuing principals hold their economic and governance interests in HoldCo, which centralizes ownership, governance, and economics at a single entity level.
Ardent GP Intermediate LLC ("GP Intermediate") was formed as a new Delaware LLC on March 1, 2024, pursuant to a Certificate of Formation filed with the Delaware Secretary of State, Delaware File No. 7948237. The authorized person for the filing was Marcus Aldridge. The registered agent is Prestige Registered Agents LLC at the same address. GP Intermediate's EIN is 93-1847231. GP Intermediate functions as an intermediate single-member entity between HoldCo and the GP. Its inclusion in the structure serves to provide an additional layer of liability separation between the holding company and the general partner entity, to facilitate future structural flexibility (including the potential admission of additional funds or co-investment vehicles at the GP level), and to preserve certain tax planning optionality identified by Sylvia Hartwell in the tax structuring memorandum.
Under the new structure, the organizational hierarchy is as follows:
• The five continuing principals (Aldridge, Narayanan, Hsiao, Marchetti, and Okonkwo) hold membership interests in HoldCo.
• HoldCo is the sole member of ManCo (directly).
• HoldCo is the sole member of GP Intermediate.
• GP Intermediate is the sole member of the GP.
• The GP is the sole general partner of the Fund.
This structure permits future changes in principal-level ownership, economics, and governance to be accomplished through amendments to the HoldCo LLC Agreement alone, without the need to amend the governing documents of ManCo, the GP, or the Fund (except in circumstances requiring LP notification or consent under the LPA).
3.1.2 Governing Documents Prepared and Executed. The following governing documents were prepared, negotiated, and executed in connection with the entity restructuring workstream. All documents were executed as of February 28, 2024, with the new entity formations completed on March 1, 2024:
Amended and Restated LLC Agreement — Ardent Capital Holdings LLC. This agreement establishes the governance, economic, and operational framework for HoldCo and constitutes the principal governing document of the restructured platform. The first draft was circulated to the continuing principals on November 15, 2023, and was finalized after multiple rounds of negotiation among the principals (in particular regarding the allocation percentages and vesting terms for the next-generation principals). The agreement became effective February 28, 2024. Key provisions include:
• Membership Interests: Aldridge (42%), Narayanan (36%), Hsiao (14%), Marchetti (4%), Okonkwo (4%).
• Managing Members: Marcus Aldridge and Priya Narayanan serve as co-Managing Members with authority to manage the day-to-day affairs of HoldCo and its subsidiaries, subject to certain reserved matters requiring supermajority approval.
• Governance: Includes reserved matter provisions (e.g., admission of new members, amendments to fund documents, new fund formation, indebtedness above certain thresholds, related-party transactions) requiring the affirmative vote of members holding at least 70% of the membership interests.
• Capital Contributions: Addresses initial and subsequent capital contribution obligations, including the assumption of departing principal unfunded GP commitment obligations.
• Distributions: Establishes the priority and mechanics of distributions from HoldCo, including management fee profit distributions and carried interest pass-through distributions, in each case in accordance with each member's membership interest percentage.
• Transfer Restrictions: Comprehensive restrictions on transfer of membership interests, including rights of first refusal, mandatory offer-back provisions, and permitted transfer exceptions for estate planning purposes.
• Buy-Sell Provisions: Includes cross-purchase, put/call, and tag-along/drag-along mechanics triggered upon specified events (death, disability, termination for cause, voluntary departure, change of control).
• Vesting Schedules: The membership interests of the next-generation principals (Marchetti and Okonkwo) are subject to four-year vesting with a one-year cliff, with acceleration upon a change of control or termination without cause.
LLC Agreement — Ardent GP Intermediate LLC. This agreement governs GP Intermediate as a single-member entity wholly owned by HoldCo. The agreement provides for pass-through governance (all governance decisions are made by HoldCo as sole member), pass-through of GP economics to HoldCo, and limited purpose provisions restricting GP Intermediate's activities to the holding of the membership interest in the GP and ancillary activities related thereto. The agreement became effective February 28, 2024.
Second Amended and Restated LLC Agreement — Ardent Capital GP III LLC. This agreement amends and restates the prior LLC Agreement of the GP to reflect: (i) the withdrawal of Kellner and Trask as members; (ii) the admission of GP Intermediate as the sole member of the GP (replacing the five individual principals); (iii) the updated GP commitment allocation and mechanics for the assumption of departing principals' unfunded commitment obligations (totaling $3,402,000); (iv) revised indemnification provisions; and (v) conforming changes to address cross-references to LPA Sections 8.3 and 9.7. The agreement became effective February 28, 2024.
Second Amended and Restated LLC Agreement — Ardent Capital Management LLC. This agreement amends and restates the prior LLC Agreement of ManCo to reflect: (i) the admission of HoldCo as the sole member of ManCo (replacing the five individual principals); (ii) revised management fee profit distribution provisions to accommodate the pass-through of profit distributions to HoldCo for further allocation among the HoldCo members; (iii) updated key-personnel provisions reflecting the restructured ownership; and (iv) updated regulatory compliance provisions, including provisions addressing ManCo's obligations as an SEC-registered investment adviser. The agreement became effective February 28, 2024.
Amendment No. 1 to the Amended and Restated Agreement of Limited Partnership — Ardent Capital Partners III LP. This amendment to the Fund's LPA was prepared to reflect the restructuring at the Fund level. The amendment: (i) amends certain defined terms to reflect the new holding company structure and the departure of Kellner and Trask; (ii) updates the GP commitment provisions to address the assumption of the departing principals' unfunded commitment obligations ($3,402,000 in aggregate); and (iii) makes conforming changes to Sections 5.2 (Key Person provisions), 8.3 (GP Removal and Replacement), and 9.4 (Amendments and Consents). The amendment was executed as of February 28, 2024, following receipt of LPAC consent on February 14, 2024, as required under LPA Section 9.4.
Member Consent Resolutions — Ardent Capital GP III LLC. Written resolutions dated February 28, 2024, evidencing the unanimous written consent of all five then-current members of the GP (Aldridge, Narayanan, Kellner, Trask, and Hsiao) to: (i) approve the restructuring transactions and the formation of the holding company structure; (ii) authorize the withdrawal of Kellner and Trask as members of the GP; (iii) authorize the admission of GP Intermediate as the sole member of the GP; and (iv) authorize the execution and delivery of all restructuring documents by the GP.
3.2 Workstream II — Economics Realignment
3.2.1 Carried Interest Reallocation. A central objective of the restructuring was the reallocation of carried interest percentages among the principals to reflect the departures of Kellner and Trask and the elevation of Marchetti and Okonkwo to principal-level economic participation.
The pre-restructuring carried interest allocation percentages were as follows:
The aggregate departing carry share of 27% (Kellner 15% plus Trask 12%) was redistributed among the remaining and next-generation principals as follows:
The reallocated percentages were the product of extensive negotiation among the remaining principals, with particular attention to ensuring that the next-generation principals received meaningful economic participation sufficient to serve as a retention incentive, while preserving the primacy of the co-founders' economic positions.
The core carry economics of Fund III were not altered by the restructuring. Carried interest remains at 20% of net profits above the limited partners' capital contributions and a preferred return of 8% per annum (compounded annually), with a full (100%) catch-up to the general partner before the 80/20 split applies. The clawback obligation remains 100% joint and several among the principals (now through HoldCo), with a 30% individual escrow requirement applicable to each principal's share of distributed carry.
As of September 30, 2023 (the most recent quarterly valuation date as of the date of the restructuring), accrued (but undistributed) carried interest for Fund III totaled $87,600,000. The Separation and Release Agreements and Carry Retention and Clawback Side Letters executed in connection with the departures of Kellner and Trask document the specific carve-outs from the reallocation applicable to their retained vested carry interests:
• David Kellner: Retains 100% of his vested carried interest, equal to $13,140,000 (calculated as 15% of the $87,600,000 accrued carry pool). Kellner's carry escrow of $3,942,000 (30% of $13,140,000) remains in place for three (3) years following his retirement.
• Joanna Trask: Retains 60% of her vested carried interest, equal to $6,307,200 (calculated as 60% of 12% of $87,600,000, i.e., 60% of $10,512,000). Trask forfeits the remaining 40% of her vested carry ($4,204,800) and 100% of any unvested carry. Trask's carry escrow is adjusted to $1,892,160 (30% of $6,307,200), with a partial release of $1,257,840 from her existing escrow balance of $3,150,000.
The redistribution of carry percentages applies on a go-forward basis to future appreciation in the Fund's portfolio. The accrued carry allocable to the departing principals' retained vested interests is treated as a fixed entitlement, documented in the Carry Retention and Clawback Side Letters, and will be distributed to the departing principals in accordance with the Fund's standard distribution waterfall as and when distributions occur.
The economic terms of the carry reallocation were memorialized in the Amended and Restated Carried Interest Allocation Agreement, which was executed by all relevant parties and became effective as of February 28, 2024.
3.2.2 Management Fee Sharing Reallocation. In addition to carried interest, the restructuring addressed the allocation of management fee profits among the principals. The Fund's annual management fee during the investment period is 1.75% on committed capital, producing approximately $49,000,000 in annual management fee revenue based on $2.8 billion in aggregate commitments.
ManCo's annual operating expenses were estimated at approximately $31,850,000 (representing approximately 65% of gross management fee revenue), yielding ManCo profit share of approximately $17,150,000 (representing approximately 35% of gross management fee revenue). Under the restructured arrangement, ManCo's net profits are distributed to HoldCo as its sole member, and HoldCo in turn distributes such profits to its members in accordance with their respective membership interest percentages.
The post-restructuring management fee profit share allocations through HoldCo are as follows:
Note: Amounts shown are approximations based on current management fee revenue and estimated operating expenses, and are subject to variation based on actual Fund performance, capital deployment, and ManCo operating costs.
The terms of the management fee profit sharing arrangement were memorialized in the Management Fee Sharing and Profit Allocation Agreement, which was executed by all relevant parties and became effective as of February 28, 2024.
3.2.3 Co-Investment Allocation. The restructuring also required revision of ManCo's co-investment allocation policy to reflect: (i) the removal of Kellner and Trask from the co-investment allocation framework; (ii) the updated allocation percentages applicable to the remaining and next-generation principals; and (iii) compliance with nine (9) side letters containing co-investment priority rights granted to certain limited partners.
The revised co-investment allocation policy was carefully designed to ensure that LP co-investment priority rights are satisfied before any allocation to the principals or their related persons, consistent with the terms of the applicable side letters and ManCo's fiduciary obligations. The revised policy also addresses the process for allocating co-investment opportunities among the principals through HoldCo, with allocations generally made pro rata in accordance with membership interest percentages, subject to certain exceptions for conflict management and regulatory compliance.
The revised terms were memorialized in the Co-Investment Allocation Policy (Revised), which was adopted by ManCo and became effective as of February 28, 2024.
3.2.4 GP Commitment Reallocation. The restructuring required the reallocation of the GP's $42,000,000 aggregate commitment to the Fund, specifically with respect to the assumption of the departing principals' unfunded commitment obligations:
The combined unfunded departing commitment of $3,402,000 was assumed by the remaining HoldCo members on a pro rata basis in accordance with their respective HoldCo membership interest percentages, as follows:
Note: Minor rounding adjustments were applied to Aldridge's assumed amount to ensure the total matched precisely.
The GP commitment reallocation was documented in the Second Amended and Restated LLC Agreement of the GP, the Amendment No. 1 to the Fund's LPA, and the HoldCo LLC Agreement.
3.3 Workstream III — Departing Principal Separations
3.3.1 David Kellner — Retirement. David Kellner, Senior Partner, elected to retire from the Ardent Capital platform effective March 31, 2024. Kellner's retirement was anticipated and planned; he will transition to a Senior Advisor role upon the effectiveness of his retirement.
The following agreements were negotiated and executed in connection with Kellner's retirement:
Separation and Release Agreement — David Kellner. Executed February 28, 2024. The first draft of this agreement was sent by Calderwood & Harkness to Whitford & Chase LLP (Richard Beaulieu and Hannah Polk) on December 8, 2023. Key terms of the Kellner Separation Agreement are as follows:
• Withdrawal: Kellner withdraws as a member of the GP and ManCo, effective upon his retirement date (March 31, 2024).
• Carry Retention: Kellner retains 100% of his vested carried interest in Fund III, equal to $13,140,000 based on the September 30, 2023 accrued carry amount.
• Clawback: Kellner's clawback obligation with respect to his retained carry continues for a period of three (3) years following his retirement date (i.e., through March 31, 2027).
• Carry Escrow: Kellner's carry escrow of $3,942,000 (representing 30% of his retained carry of $13,140,000) remains in place and is not subject to release for three (3) years following his retirement date.
• Non-Competition: Kellner is subject to a non-competition covenant for a period of eighteen (18) months following his retirement date.
• Non-Solicitation (Employees): Kellner is subject to a non-solicitation of employees covenant for a period of twenty-four (24) months following his retirement date.
• Non-Solicitation (LPs): Kellner is subject to a non-solicitation of limited partners covenant for a period of twenty-four (24) months following his retirement date.
• Health Insurance: ManCo will provide COBRA-equivalent health insurance continuation for Kellner for a period of twenty-four (24) months, at an estimated cost of approximately $52,000.
• Mutual General Release: The parties exchanged mutual general releases of all claims arising from or relating to Kellner's membership in, or service to, ManCo, the GP, and the Fund, subject to customary carve-outs for obligations surviving under the restructuring documents and the Senior Advisor Agreement.
Senior Advisor Agreement — David Kellner. Executed February 28, 2024, to become effective March 31, 2024 (Kellner's retirement date). Key terms:
• Term: Two (2) years (March 31, 2024 through March 31, 2026).
• Compensation: $350,000 per year ($700,000 total over the two-year term), payable in quarterly installments.
• Scope of Services: Kellner will provide advisory and consulting services to ManCo on a non-exclusive basis, not to exceed ten (10) hours per month.
• Confidentiality: Kellner remains subject to comprehensive confidentiality obligations with respect to all proprietary and confidential information of ManCo, the Fund, and the portfolio companies.
• Independent Contractor Status: The Senior Advisor Agreement expressly provides that Kellner's engagement is as an independent contractor and not as an employee, partner, or agent of ManCo.
Carry Retention and Clawback Side Letter — David Kellner. Executed February 28, 2024. This side letter documents the specific mechanics of Kellner's retained carried interest, including: (i) the amount and calculation methodology of Kellner's retained carry ($13,140,000); (ii) the terms of Kellner's continuing clawback obligation (3 years); (iii) the escrow arrangements ($3,942,000, not subject to release for 3 years); (iv) reporting obligations (Kellner is entitled to receive quarterly carry statements from ManCo for so long as he holds a retained carry interest); and (v) distribution mechanics (Kellner's retained carry will be distributed through the standard Fund distribution waterfall as and when distributions occur).
GP Commitment: Kellner's unfunded GP commitment of $1,890,000 was assumed by the remaining HoldCo members pro rata, as described in Section 3.2.4 above.
3.3.2 Joanna Trask — Voluntary Departure. Joanna Trask, Partner, elected to depart from the Ardent Capital platform effective April 15, 2024, in order to join another investment firm. Trask's departure was voluntary, and the terms of her separation were negotiated at arm's length between Calderwood & Harkness and Whitford & Chase LLP.
The following agreements were negotiated and executed in connection with Trask's departure:
Separation and Release Agreement — Joanna Trask. Executed February 28, 2024. The negotiation timeline for the Trask Separation Agreement was more extended than for the Kellner Separation Agreement, reflecting several areas of substantive disagreement between the parties:
• First draft sent by Calderwood & Harkness to Whitford & Chase LLP on December 8, 2023.
• Whitford & Chase counter-proposals received January 12, 2024.
• Revised version circulated by Calderwood & Harkness on January 19, 2024.
• Further rounds of negotiation occurred between January 19 and approximately February 15, 2024, culminating in the final agreed-upon terms.
Key terms of the Trask Separation Agreement are as follows:
• Withdrawal: Trask withdraws as a member of the GP and ManCo, effective upon her departure date (April 15, 2024).
• Carry Retention: Trask retains 60% of her vested carried interest in Fund III, equal to $6,307,200 (calculated as 60% of $10,512,000, where $10,512,000 represents 12% of the $87,600,000 accrued carry pool as of September 30, 2023).
• Carry Forfeiture: Trask forfeits 40% of her vested carry ($4,204,800) and 100% of any unvested carry. The forfeited carry is redistributed among the remaining and next-generation principals as part of the go-forward carry reallocation.
• Clawback: Trask's clawback obligation with respect to her retained carry continues for a period of two (2) years following her departure date (i.e., through April 15, 2026).
• Carry Escrow: Trask's carry escrow is adjusted to $1,892,160 (representing 30% of her retained carry of $6,307,200). A partial release of $1,257,840 is to be processed from Trask's existing escrow balance of $3,150,000 (i.e., $3,150,000 minus $1,892,160 = $1,257,840 released).
• Separation Payment: ManCo will pay Trask a lump-sum separation payment of $1,250,000, payable within thirty (30) days of her departure date (i.e., by May 15, 2024).
• Non-Competition: Trask is subject to a non-competition covenant for a period of twelve (12) months following her departure date.
• Non-Solicitation (Employees): Trask is subject to a non-solicitation of employees covenant for a period of eighteen (18) months following her departure date.
• Non-Solicitation (LPs): Trask is subject to a non-solicitation of limited partners covenant for a period of eighteen (18) months following her departure date.
• Mutual General Release: The parties exchanged mutual general releases of all claims arising from or relating to Trask's membership in, or service to, ManCo, the GP, and the Fund, subject to customary carve-outs for obligations surviving under the restructuring documents and the Carry Retention and Clawback Side Letter.
Carry Retention and Clawback Side Letter — Joanna Trask. Executed February 28, 2024. This side letter documents the specific mechanics of Trask's retained carried interest, including: (i) the amount and calculation methodology of Trask's retained carry ($6,307,200); (ii) the terms of Trask's continuing clawback obligation (2 years); (iii) the escrow arrangements ($1,892,160, with partial release of $1,257,840); (iv) reporting obligations; and (v) distribution mechanics.
GP Commitment: Trask's unfunded GP commitment of $1,512,000 was assumed by the remaining HoldCo members pro rata, as described in Section 3.2.4 above.
3.3.3 Negotiation with Whitford & Chase LLP. Richard Beaulieu (Partner) and Hannah Polk (Associate) of Whitford & Chase LLP represented both David Kellner and Joanna Trask in connection with their respective separations from the Ardent Capital platform. While the representation was joint, the negotiation dynamics differed as between the two departing principals.
Kellner negotiation. The Kellner separation terms were less contentious, reflecting the fact that Kellner was retiring voluntarily and on good terms with the remaining principals. The primary points of negotiation were: (i) the clawback duration, with Whitford & Chase initially proposing two (2) years and Calderwood & Harkness proposing four (4) years, ultimately settling at three (3) years; and (ii) the Senior Advisor Agreement compensation, with Whitford & Chase initially proposing $425,000 per year and Calderwood & Harkness proposing $300,000 per year, ultimately settling at $350,000 per year.
Trask negotiation. The Trask separation terms were more heavily negotiated, given that Trask was departing to join a competing firm and the remaining principals sought more protective restrictive covenant terms. The key negotiation points were:
• Carry retention percentage: Calderwood & Harkness's initial proposal was 50% retention of vested carry; Trask (through Whitford & Chase) requested 75% retention. The parties ultimately agreed on 60% retention, reflecting a compromise that took into account Trask's tenure, her contributions to the Fund III portfolio, and market precedent for voluntary departures to competitors.
• Non-compete duration: Calderwood & Harkness's initial proposal was eighteen (18) months; Trask requested six (6) months, citing the need for a reasonable transition period to her new firm. The parties ultimately agreed on twelve (12) months.
• Separation payment amount: Trask initially requested a separation payment of $2,000,000; Calderwood & Harkness's initial position was that no separation payment was warranted for a voluntary departure. The parties ultimately agreed on a lump-sum separation payment of $1,250,000, payable within thirty (30) days of Trask's departure date.
• Escrow release mechanics: The mechanics for the partial release of Trask's existing carry escrow balance were negotiated to provide for an immediate release of $1,257,840 (representing the excess of Trask's prior escrow balance over the adjusted escrow requirement), with the remaining $1,892,160 to be maintained for two (2) years.
All substantive communications with Whitford & Chase were conducted by Owen Fischer under the supervision of Nicholas Stern. The key item of correspondence preserved in the file is the cover letter dated January 19, 2024 from Owen Fischer to Richard Beaulieu transmitting the revised Trask Separation Agreement. This letter accompanied the revised draft and outlined Calderwood & Harkness's responses to each of the counter-proposals raised by Whitford & Chase in their January 12, 2024 submission.
3.4 Workstream IV — LP Consent, Notification & Side-Letter Compliance
3.4.1 LPAC Consent. The Fund's LPA requires that certain amendments and structural changes receive the prior consent of the Limited Partner Advisory Committee ("LPAC") pursuant to LPA Section 9.4. The LPAC for Fund III consists of four members, each representing a significant limited partner:
• Thomas Engström — Chief Investment Officer, Ridgeline Public Employees' Retirement System. Commitment: $225,000,000.
• Annika Johansson — Director of Private Equity, Crestwood Endowment Partners. Commitment: $150,000,000.
• Derek Mallinson — Head of Alternatives, Pinnacle Insurance Group. Commitment: $175,000,000.
• Catherine Whitfield — Managing Director, Graystone Family Office LLC. Commitment: $50,000,000.
Calderwood & Harkness prepared and sent an LPAC notification and consent solicitation letter to each LPAC member on February 5, 2024. The letter was accompanied by a comprehensive LPAC Presentation Memorandum that summarized: (i) the rationale for the restructuring, including the planned departures of Kellner and Trask; (ii) the new entity structure, including organizational charts depicting the pre- and post-restructuring structures; (iii) the economics realignment, including updated carry and management fee profit share allocations; (iv) the key terms of the departing principal separation agreements; and (v) a confirmation that the restructuring does not constitute a Key Person Event under LPA Section 5.2, as neither Kellner nor Trask is a designated Key Person (only Aldridge and Narayanan hold that designation).
A virtual LPAC meeting was convened on February 14, 2024, during which the LPAC members had the opportunity to ask questions and discuss the restructuring with the remaining principals and Calderwood & Harkness. Following the meeting, LPAC consent was obtained in the form of a written consent executed by all four LPAC members, constituting the approval required under LPA Section 9.4 for the execution of Amendment No. 1 to the LPA.
3.4.2 LP Notification. Following the execution of all restructuring documents on February 28, 2024, the formation of HoldCo and GP Intermediate on March 1, 2024, and the filing of the SEC Form ADV amendment on March 10, 2024, Calderwood & Harkness prepared and sent LP notification letters to all 47 limited partners of the Fund on March 5, 2024. The notification letters informed the limited partners of:
• The completed restructuring, including the formation of HoldCo and GP Intermediate;
• The realignment of economics among the principals;
• The departures of David Kellner (retirement, effective March 31, 2024) and Joanna Trask (voluntary departure, effective April 15, 2024);
• The receipt of LPAC consent on February 14, 2024;
• The execution of Amendment No. 1 to the LPA; and
• Confirmation that there is no change to: the Fund's investment strategy; management fee rates (1.75% on committed capital during the investment period, transitioning to 1.50% on invested capital post-investment period); or the Fund's term (December 31, 2029, with two one-year extension options).
The LP notification letters were sent in coordination with ManCo's investor relations team and were delivered by email and by mail to the notice addresses specified in the Fund's investor records.
3.4.3 Side-Letter Compliance. A comprehensive side-letter compliance analysis was a critical component of the restructuring. Calderwood & Harkness prepared a Side-Letter Compliance and Key-Person Analysis Memorandum, finalized on February 22, 2024, authored by Owen Fischer and Stephen Adler. The memorandum reviewed all 14 side letters executed in connection with the Fund, copies of which were provided by Pemberton Hale LLP at the outset of the engagement.
The key findings of the side-letter review were as follows:
• Most Favored Nation (MFN) Provisions (11 side letters): Eleven of the 14 side letters contained MFN provisions entitling the relevant LP to receive the benefit of any more favorable terms subsequently granted to another LP. The restructuring did not implicate any MFN provisions, as no new side letter terms were granted to any LP in connection with the restructuring. No issues were identified.
• Expanded Key-Person Provisions (6 side letters): Six side letters contained expanded key-person provisions that named David Kellner as a "Contributing Person" (a broader designation than the LPA's "Key Person" definition, which includes only Aldridge and Narayanan). Under these expanded provisions, Kellner's retirement triggers a notification obligation requiring ManCo to provide written notice to the affected LPs within fifteen (15) business days. Additionally, three of those six side letters (Ridgeline Public Employees' Retirement System, Pinnacle Insurance Group, and one additional LP) grant the affected LP the right to request a suspension of the investment period for up to ninety (90) days pending LPAC review. All required notifications were issued in connection with the LP notification process, and no LP elected to exercise the investment period suspension right.
• Fee discount/Rebate Provisions (8 side letters): Eight side letters contained management fee discount or rebate provisions. The restructuring had no impact on these provisions, as management fee rates and the underlying fee structure were not altered.
• Material Change in Management Structure Provisions (4 side letters): Four side letters — specifically those held by Ridgeline Public Employees' Retirement System, Pinnacle Insurance Group, Crestwood Endowment Partners, and Haverford Capital Partners — require prior written notice and, in certain cases, affirmative consent from the relevant LP in advance of any "material change in the management structure" of ManCo or the GP. Calderwood & Harkness determined that the restructuring constituted a "material change in the management structure" within the meaning of these provisions. Accordingly, prior written notice was provided to all four affected LPs, and affirmative consent was obtained from those LPs whose side letters required it, in each case in advance of the execution of the restructuring documents.
• Co-Investment Priority Rights (9 side letters): Nine side letters granted co-investment priority rights to the relevant LPs. The revised Co-Investment Allocation Policy was designed to ensure compliance with these provisions, as described in Section 3.2.3 above.
The memorandum concluded that no Key Person Event was triggered under LPA Section 5.2 as a result of the restructuring, because neither Kellner nor Trask is a designated Key Person under the LPA. Only Marcus Aldridge and Priya Narayanan are designated Key Persons, and both are continuing with the platform in their existing roles as Co-Founders and Managing Partners. All required notifications and consents under the side letters were obtained prior to or concurrently with the LP notification process.
3.5 Workstream V — Regulatory Filings
3.5.1 SEC Form ADV Amendment. As a registered investment adviser under the Investment Advisers Act of 1940, ManCo (CRD No. 298417) is required to file amendments to its Form ADV with the SEC to reflect material changes to its ownership, management, and operations. The restructuring necessitated an amendment to ManCo's Form ADV.
Calderwood & Harkness prepared and coordinated the filing of the Form ADV amendment, which was filed on March 10, 2024, through the Investment Adviser Registration Depository (IARD) system. The key changes reflected in the amendment include:
• Updated Ownership Structure: HoldCo is reflected as the sole member of ManCo, replacing the prior direct ownership by five individual principals.
• Removal of Control Persons: David Kellner and Joanna Trask have been removed as control persons of ManCo.
• Addition of Supervised Persons: Elena Marchetti and Samuel Okonkwo have been added as supervised persons of ManCo.
• Updated Organizational Chart: A revised organizational chart depicting the new holding company structure (HoldCo → ManCo; HoldCo → GP Intermediate → GP → Fund) was included in the filing.
• Updated Schedule D: The private fund reporting section (Schedule D) for Ardent Capital Partners III LP was updated to reflect the restructured general partner and management company arrangements.
A Summary of Changes Memorandum was prepared by Stephen Adler documenting each material change reflected in the Form ADV amendment, the rationale for the change, and the specific sections of the Form ADV affected. This memorandum is preserved in the matter file for reference.
In addition, a draft Form ADV Part 2A Brochure Supplement was prepared reflecting updated key personnel information. The updated Brochure Supplement includes biographical and disciplinary information for: Marcus Aldridge, Priya Narayanan, Robert Hsiao, Elena Marchetti, and Samuel Okonkwo. The entries for David Kellner and Joanna Trask have been removed. The draft Brochure Supplement was provided to ManCo for its use in connection with the annual updating amendment and delivery to clients.
3.6 Workstream VI — Coordination with Other Advisors
3.6.1 Pemberton Hale LLP. At the outset of the engagement, Nicholas Stern sent a letter (approximately October 2023) to Victoria Langford at Pemberton Hale LLP delineating the respective scopes of responsibility between the two firms. Under this arrangement:
• Calderwood & Harkness was responsible for all restructuring-specific matters, including: the design and implementation of the holding company structure; all restructuring documentation (entity formation, governing document amendments, carry and economics agreements); all departing principal separation negotiations and documentation; LPAC consent solicitation and LP notifications relating to the restructuring; side-letter compliance analysis; and regulatory filings triggered by the restructuring.
• Pemberton Hale LLP continued in its role as fund counsel for routine fund operations, including: portfolio company transactions; ongoing LP communications unrelated to the restructuring; compliance monitoring; and other day-to-day fund operation matters.
Pemberton Hale provided Calderwood & Harkness with copies of all 14 side letters, the current form of the Fund's LPA (including all prior amendments), the existing LLC Agreements of the GP and ManCo, and other governing documents necessary for the restructuring. The two firms coordinated regularly throughout the engagement to ensure consistency and avoid duplication, with particular attention to LP-facing communications.