1001-00002 · Ardent Capital Management LLC · LP Consent & Notification

lpac-notification-and-consent-letter.docx DOCUMENT Funds

29 / 36 ← → ✕

Contract analysis Extract to table

ARDENT CAPITAL GP III LLC 590 Madison Avenue, 28th Floor New York, NY 10022

Registered Agent: Prestige Registered Agents LLC 850 New Burton Road, Suite 201 Dover, DE 19904

February 5, 2024

VIA ELECTRONIC DELIVERY AND OVERNIGHT COURIER

Mr. Thomas Engström Chief Investment Officer Ridgeline Public Employees' Retirement System Commitment: $225,000,000

Ms. Annika Johansson Director of Private Equity Crestwood Endowment Partners Commitment: $150,000,000

Mr. Derek Mallinson Head of Alternatives Pinnacle Insurance Group Commitment: $175,000,000

Ms. Catherine Whitfield Managing Director Graystone Family Office LLC Commitment: $50,000,000

Re: Ardent Capital Partners III LP — Notification of Proposed Management Company Restructuring, Economics Realignment, and Departures of Senior Principals; Solicitation of LPAC Consent Pursuant to Section 9.4 of the Amended and Restated Agreement of Limited Partnership

Dear Members of the Limited Partner Advisory Committee:

1. Introduction and Purpose

Ardent Capital GP III LLC (the "General Partner"), as the sole general partner of Ardent Capital Partners III LP (the "Fund" or "Fund III"), is writing to provide notification of, and to solicit the consent of the Limited Partner Advisory Committee (the "LPAC" or the "Committee") to, a proposed restructuring of the management company and related realignment of economics among the Fund's principals (the "Restructuring"). This letter sets forth the material terms and circumstances of the Restructuring in detail, together with the background and rationale therefor, and identifies the specific consents being requested of the LPAC in connection therewith.

The consent of the LPAC is being solicited pursuant to Section 9.4 of the Amended and Restated Agreement of Limited Partnership of the Fund, dated as of April 15, 2019 (as amended, supplemented, or otherwise modified from time to time, the "LPA"), which requires LPAC consent for certain material structural changes to the General Partner, the management company, or the economic arrangements among the principals, including without limitation any change in the ownership or control of the General Partner, any material amendment to the organizational documents of the General Partner, and any material realignment of the carried interest or management fee economics of the Fund.

The General Partner respectfully requests that each LPAC member review this letter and the enclosed materials carefully and execute and return the enclosed Form of Written Consent (the "Consent") at or prior to the LPAC meeting scheduled for February 14, 2024, which will be held virtually via videoconference. Details regarding the videoconference will be provided under separate cover. LPAC members may deliver their consent either by execution and return of the enclosed Consent in advance of the meeting or by affirmative vote at the meeting itself.

In connection with the Restructuring, the General Partner has engaged Calderwood & Harkness LLP (Nicholas Stern, responsible partner, and Owen Fischer, lead associate) as restructuring counsel to advise the General Partner on the structural, governance, and transactional aspects of the Restructuring. Pemberton Hale LLP (Victoria Langford, responsible partner) continues to serve as fund counsel for routine Fund operations and has provided guidance on LPA interpretation and side-letter compliance matters. The General Partner wishes to note that Calderwood & Harkness LLP and Pemberton Hale LLP represent the General Partner and the Fund, respectively, and do not represent any individual limited partner or the LPAC. LPAC members are encouraged to consult with their own legal and tax advisors as they deem appropriate.

2. Background on the Fund

Ardent Capital Partners III LP is a Delaware limited partnership formed in 2019 for the purpose of making control-oriented equity investments in middle-market industrial and business-services companies, primarily in North America. The Fund targets companies with enterprise values between $150 million and $750 million, with a focus on sectors where the principals of Ardent Capital have deep operational expertise and established proprietary sourcing channels, including industrial technology, specialty distribution, environmental services, and facility management.

As of the date of this letter, the key parameters of the Fund are as follows:

Total Commitments. The Fund has aggregate capital commitments of $2.8 billion from 47 limited partners, including leading public pension systems, endowments and foundations, insurance companies, family offices, and other institutional investors.

Capital Called and Invested. As of the date of this letter, the Fund has called approximately $1.96 billion in capital from its limited partners, representing approximately 70% of total commitments. Of the capital called, approximately $1.88 billion has been invested or is reserved for follow-on investments across the Fund's portfolio, with the remainder having been applied to management fees, organizational expenses, and other fund-level charges.

Portfolio Overview. The Fund currently holds 11 active portfolio companies across the industrial and business-services sectors. Each portfolio company is actively managed by a dedicated deal team within Ardent Capital, and in each case Ardent Capital holds board representation and exercises significant operational influence.

Fund Performance. As of September 30, 2023, the most recent quarterly valuation date, the Fund's aggregate performance was as follows:

• Gross multiple of invested capital ("MOIC"): 1.42x

• Net internal rate of return ("IRR"): 14.7%

• Total unrealized value: approximately $2.33 billion (based on fair market valuations prepared by Broadleaf Consulting Group, the Fund's independent valuation advisor, and reviewed by Heathrow Whitman & Co., the Fund's auditor)

• Total realized proceeds: approximately $445 million (reflecting partial realizations and dividend recapitalizations from three portfolio companies)

GP Commitment. The General Partner and its principals have made an aggregate capital commitment to the Fund of $42 million, representing 1.5% of total Fund commitments, which is consistent with the minimum GP commitment described in the Fund's confidential private placement memorandum dated March 2019.

Investment Period. The investment period of the Fund commenced on June 30, 2019, and is scheduled to end on June 30, 2025. As of the date of this letter, the Fund has approximately $840 million of uncalled capital commitments available for new investments during the remaining portion of the investment period.

Fund Term. The term of the Fund is scheduled to expire on December 31, 2029, subject to two one-year extensions at the discretion of the General Partner in accordance with Section 12.1 of the LPA.

Management Fee. The Fund pays an annual management fee equal to 1.75% of aggregate capital commitments during the investment period (approximately $49 million per year at current commitment levels) and 1.50% of invested capital (net of write-downs and write-offs) following the expiration of the investment period. The management fee is payable quarterly in advance to Ardent Capital Management LLC (the "Management Company" or "ManCo"), the Fund's SEC-registered investment adviser (CRD #298417).

Carried Interest. The General Partner is entitled to receive carried interest equal to 20% of the Fund's net profits (calculated on a whole-Fund basis), subject to an 8% per annum preferred return to the limited partners and a 100% catch-up to the General Partner thereafter, in each case as more fully described in Section 6.2 of the LPA.

Current Principals. As of the date of this letter, the principals of the General Partner are:

• Marcus Aldridge — Co-Founder & Managing Partner

• Priya Narayanan — Co-Founder & Managing Partner

• David Kellner — Senior Partner

• Joanna Trask — Partner

• Robert Hsiao — Partner

3. Summary of Proposed Restructuring

3.1 Overview. The Restructuring involves four principal workstreams, each of which is described in detail below:

1. Entity Restructuring — the formation of new holding entities and the reorganization of the ownership structure of the General Partner and the Management Company;

2. Economics Realignment — the reallocation of carried interest and Management Company profit-share economics among the remaining and next-generation principals;

3. Departing Principal Separation — the orderly departure and separation of two senior principals, David Kellner and Joanna Trask, and the negotiation and execution of their respective separation and release agreements; and

4. LP Consent and Side-Letter Compliance — the solicitation of LPAC consent as required under the LPA and compliance with notification and consent provisions contained in individual side letters.

The principal rationale for the Restructuring is fourfold: (a) to implement a thoughtful succession plan that positions Ardent Capital for long-term stability and continuity across multiple fund cycles; (b) to enhance governance by establishing a consolidated holding company structure with clear lines of authority and accountability; (c) to integrate the next generation of talent — specifically, Elena Marchetti and Samuel Okonkwo, each of whom has made significant contributions to the Fund's investment activities and portfolio management — into the economic and governance framework of Ardent Capital; and (d) to facilitate the orderly transition of responsibilities and economics following the planned departure of David Kellner (who is retiring after a distinguished career) and the voluntary departure of Joanna Trask. The General Partner believes that the Restructuring will strengthen Ardent Capital's institutional platform and is in the best interests of the Fund and its limited partners.

3.2 Entity Restructuring

The structural component of the Restructuring involves the formation of two new Delaware limited liability companies and the reorganization of the ownership structure of the General Partner and the Management Company. Specifically:

Formation of Ardent Capital Holdings LLC. A new Delaware limited liability company, Ardent Capital Holdings LLC ("HoldCo"), will be formed to serve as the parent holding company of both the Management Company and the General Partner (through an intermediate entity). HoldCo will be governed by an amended and restated limited liability company agreement that provides for the rights, obligations, and economic entitlements of its members.

Formation of Ardent GP Intermediate LLC. A new Delaware limited liability company, Ardent GP Intermediate LLC ("GP Intermediate"), will be formed to serve as an intermediate holding entity between HoldCo and the General Partner. GP Intermediate will be a wholly owned subsidiary of HoldCo.

Post-Restructuring Organizational Structure. Upon completion of the Restructuring, the organizational structure will be as follows:

• HoldCo will be the sole member of both (i) the Management Company (Ardent Capital Management LLC, SEC-registered investment adviser, CRD #298417) and (ii) GP Intermediate.

• GP Intermediate will be the sole member of the General Partner (Ardent Capital GP III LLC).

• The General Partner will continue to serve as the sole general partner of the Fund.

Current Structure Being Replaced. Under the current organizational structure, the five individual principals (Aldridge, Narayanan, Kellner, Trask, and Hsiao) hold direct membership interests in both the General Partner and the Management Company. The direct-ownership model was adopted at the time of the Fund's formation for simplicity, but as Ardent Capital has grown and matured as an institution, the General Partner has determined that a consolidated holding company structure is more appropriate and consistent with industry best practices for institutional-quality private equity platforms. The holding company structure also facilitates the admission and withdrawal of individual principals without requiring amendments to the organizational documents of the General Partner or the Management Company, thereby reducing administrative burden and the need for LP consents in connection with future personnel changes (to the extent otherwise permitted under the LPA).

HoldCo Membership. Following the Restructuring, the members of HoldCo will be:

• Marcus Aldridge — Co-Founder & Managing Partner

• Priya Narayanan — Co-Founder & Managing Partner

• Robert Hsiao — Partner

• Elena Marchetti — Principal

• Samuel Okonkwo — Principal

The Managing Members of HoldCo will be Marcus Aldridge and Priya Narayanan, who will have the authority to manage the business and affairs of HoldCo (and, through HoldCo, the Management Company and the General Partner) in accordance with the terms of the HoldCo operating agreement.

3.3 Principal Departures

David Kellner — Retirement. David Kellner, a Senior Partner of Ardent Capital and one of the founding members of the Fund III team, has informed the General Partner of his intention to retire from active investment management. Mr. Kellner, age 61, has had a distinguished 35-year career in private equity and has been instrumental in building Ardent Capital's industrial services franchise. His retirement will be effective March 31, 2024, following a transition period during which he will work with the remaining principals to ensure an orderly handover of his portfolio company board responsibilities and deal-team oversight functions. Following his retirement, Mr. Kellner will transition to a Senior Advisor role for a two-year advisory term (April 1, 2024 through March 31, 2026), during which he will be available for consultation on portfolio matters at an annual advisory fee of $350,000 per year.

The key economic terms of Mr. Kellner's departure are as follows:

• Current GP Interest: Mr. Kellner currently holds a 15% membership interest in the General Partner and is entitled to a 15% share of the Fund's carried interest.

• Carried Interest Retention: Mr. Kellner will retain 100% of his vested carried interest in Fund III, which, based on the September 30, 2023 valuation, represents an accrued carried interest of approximately $13,140,000. Such retained carried interest will be subject to a modified clawback obligation that will continue for a period of three (3) years following Mr. Kellner's retirement date (i.e., through March 31, 2027), at which time his clawback exposure will expire.

• Management Company Economics: Mr. Kellner's share of ManCo profit distributions will cease effective as of his retirement date. He will receive no further profit-share or other economic distributions from the Management Company after March 31, 2024.

• Restrictive Covenants: Mr. Kellner has agreed to a non-competition covenant for a period of 18 months following his retirement date and non-solicitation covenants with respect to both employees and limited partners of Ardent Capital for a period of 24 months each following his retirement date.

Joanna Trask — Voluntary Departure. Joanna Trask, a Partner of Ardent Capital, has informed the General Partner of her decision to depart from Ardent Capital voluntarily to pursue a senior role at another investment firm. Ms. Trask, age 48, has been a valued member of the Ardent Capital team and has led several successful investments in the business-services sector during her tenure. Her departure will be effective April 15, 2024, following a transition period during which she will complete the handover of her responsibilities.

The key economic terms of Ms. Trask's departure are as follows:

• Current GP Interest: Ms. Trask currently holds a 12% membership interest in the General Partner and is entitled to a 12% share of the Fund's carried interest.

• Carried Interest Retention: Ms. Trask will retain 60% of her vested carried interest in Fund III, representing approximately $6,307,200 based on the September 30, 2023 valuation. The remaining 40% of her vested carried interest, representing approximately $4,204,800, will be forfeited. In addition, Ms. Trask will forfeit 100% of any unvested carried interest. Her retained carried interest will be subject to a clawback obligation for a period of two (2) years following her departure date (i.e., through April 15, 2026).

• Separation Payment: Ms. Trask will receive a one-time lump-sum separation payment of $1,250,000, payable within 30 days following her departure date, in consideration of her execution of a general release of claims and compliance with her ongoing restrictive covenants.

• Restrictive Covenants: Ms. Trask has agreed to a non-competition covenant for a period of 12 months following her departure date and non-solicitation covenants with respect to employees and limited partners of Ardent Capital for a period of 18 months each following her departure date.

Both departures are subject to the terms of negotiated separation and release agreements (each, a "Separation Agreement") that are currently being finalized. Mr. Kellner and Ms. Trask are each independently represented by Whitford & Chase LLP (Richard Beaulieu, partner) in connection with the negotiation of their respective Separation Agreements. Copies of the Separation Agreements (in substantially final form) will be made available to LPAC members upon request, subject to applicable confidentiality provisions.

3.4 Economics Realignment

Upon the effective dates of the departures of Mr. Kellner and Ms. Trask, the aggregate 27% carried interest share held by the departing principals (representing Mr. Kellner's 15% plus Ms. Trask's 12%) will be redistributed among the remaining and next-generation principals. The proposed post-Restructuring allocation of carried interest is set forth in the following table:

The same percentage allocations reflected in the table above will apply to Management Company Profit Share distributions. For reference, Management Company Profit Share distributions (representing approximately 35% of annual management fee revenue retained by the Management Company after deduction of operating expenses) have averaged approximately $17,150,000 per year over the life of the Fund to date. The economics realignment does not alter the overall quantum of management fees or carried interest payable by the Fund or its limited partners; rather, it reflects solely the internal allocation of such economics among the principals of the General Partner and the Management Company.

The following fundamental economic terms of the Fund remain unchanged by the Restructuring:

• The carried interest rate remains at 20% of net profits;

• The preferred return remains at 8% per annum;

• The catch-up remains at 100% to the General Partner;

• The clawback structure remains unchanged, including 100% joint and several liability of the General Partner and its principals, with a 30% individual escrow of carried interest distributions (the "Escrow"); and

• The mechanics of carried interest calculation (whole-Fund, European-style waterfall) remain unchanged.

With respect to accrued carried interest, as of September 30, 2023, the Fund's total accrued (but undistributed) carried interest was approximately $87,600,000. The vested and retained portions of Mr. Kellner's and Ms. Trask's accrued carried interest will be carved out and preserved in accordance with the terms of their respective Separation Agreements, as described in Section 3.3 above. The redistribution set forth in the table above applies on a go-forward basis to carried interest attributable to future appreciation in the Fund's portfolio from and after the effective date of the Restructuring. The specific mechanics of the transition and allocation of accrued versus go-forward carry will be set forth in the amended carry allocation provisions of the GP's organizational documents and in Amendment No. 1 to the LPA.

3.5 GP Commitment Reallocation

The total GP commitment to the Fund is $42,000,000. As a result of the departures of Mr. Kellner and Ms. Trask, their combined unfunded GP commitment of $3,402,000 (consisting of $1,890,000 attributable to Mr. Kellner and $1,512,000 attributable to Ms. Trask) must be assumed by the remaining principals to ensure that the GP commitment is fully funded through the remainder of the investment period and the balance of the Fund's term. The funded portions of Mr. Kellner's and Ms. Trask's GP commitments will remain in the Fund and will be treated in accordance with their respective Separation Agreements and the LPA.

The unfunded portion of the departing principals' GP commitment will be assumed by the remaining HoldCo members on a pro rata basis, consistent with their post-Restructuring percentage interests, as follows:

Each remaining principal has confirmed his or her willingness and ability to fund the assumed unfunded GP commitment in accordance with the Fund's capital call schedule. The General Partner has received written commitments from each of the above-named individuals to this effect.

4. Key-Person Analysis

Section 5.2 of the LPA designates Marcus Aldridge and Priya Narayanan as "Key Persons" of the Fund. Under Section 5.2, a "Key Person Event" is triggered if: (a) both Key Persons cease to devote substantially all of their business time and attention to the investment activities of the Fund, or (b) one Key Person ceases to devote substantially all of his or her business time and attention to the investment activities of the Fund and a replacement Key Person is not approved by the LPAC within 120 calendar days of such cessation.

The General Partner confirms that neither David Kellner nor Joanna Trask is a designated Key Person under Section 5.2 of the LPA. Accordingly, the departures of Mr. Kellner and Ms. Trask do not trigger a Key Person Event under the LPA, and the investment period will continue without suspension or interruption.

Both Marcus Aldridge and Priya Narayanan will continue to serve as Co-Founders and Managing Partners of Ardent Capital and will continue to devote substantially all of their business time and attention to the investment activities of the Fund, consistent with their obligations under the LPA. Neither Mr. Aldridge nor Ms. Narayanan has any present intention to reduce his or her involvement with the Fund or to pursue other business activities that would be inconsistent with the Key Person requirements of Section 5.2.

Expanded Key-Person Provisions in Side Letters. In connection with its side-letter compliance review, the General Partner and its counsel have identified that 6 of the 14 side letters currently in effect contain "expanded key person" provisions that designate David Kellner as a "Contributing Person" or use analogous terminology. These provisions generally require that the General Partner provide the applicable limited partner with written notice within 15 business days of any Contributing Person's departure from active involvement with the Fund. The General Partner will comply with all such notification requirements in a timely manner.

Additionally, the General Partner has identified that 3 of the 6 side letters containing expanded key-person provisions grant the applicable limited partner a right to request a 90-day suspension of the investment period pending LPAC review in the event of a Contributing Person's departure. The General Partner does not believe that such a suspension is warranted in light of (i) the continued full-time involvement of both designated Key Persons (Aldridge and Narayanan), (ii) the orderly nature of Mr. Kellner's planned retirement and transition to a Senior Advisor role, (iii) the depth and continuity of the remaining investment team, and (iv) the ongoing strong performance of the Fund's portfolio. The General Partner intends to engage directly and proactively with each of the applicable limited partners to discuss these matters and to address any questions or concerns.

5. Side-Letter Compliance Summary

The Fund has 14 side letters currently in effect with various limited partners. In connection with the Restructuring, the General Partner and its counsel at Pemberton Hale LLP and Calderwood & Harkness LLP have conducted a comprehensive review of all 14 side letters to assess compliance with the terms thereof in light of the proposed Restructuring. The results of that review are summarized below:

Most Favored Nation ("MFN") Provisions. Eleven (11) of the 14 side letters contain MFN provisions requiring the General Partner to notify the applicable limited partner of, and/or extend to the applicable limited partner, any more favorable terms granted to any other limited partner. The General Partner has determined that the Restructuring does not involve the granting of any more favorable terms to any limited partner and, accordingly, no MFN issues have been identified.

Fee discount or Rebate Provisions. Eight (8) of the 14 side letters contain provisions granting the applicable limited partner a fee discount, management fee rebate, or other fee accommodation. The Restructuring does not alter the management fee rates of the Fund (which remain at 1.75% of committed capital during the investment period and 1.50% of invested capital thereafter), and accordingly, no impact on fee-related side-letter provisions has been identified.

Co-Investment Priority Rights. Nine (9) of the 14 side letters contain provisions granting the applicable limited partner co-investment priority rights or preferential co-investment allocation rights. The General Partner intends to update its internal co-investment allocation policy to reflect the revised principal allocations and team responsibilities resulting from the Restructuring. The fundamental co-investment allocation framework — which is based on commitment size, co-investment track record, and ability to respond to allocation opportunities within the required timeframe — will remain substantively unchanged. LPAC members with co-investment priority rights will continue to receive advance notice of co-investment opportunities in accordance with their respective side letters.

Material Change Notification and Consent Provisions. Four (4) side letters — those with Ridgeline Public Employees' Retirement System, Pinnacle Insurance Group, Crestwood Endowment Partners, and Haverford Capital Partners — contain provisions requiring prior written notice and, in certain cases, affirmative consent to any "material change in the management structure" of the General Partner, the Management Company, or the Fund's investment team. This letter and the LPAC consent process described herein serve as the required notification to the three LPAC members (Ridgeline, Pinnacle, and Crestwood) that hold such provisions. Separate notice will be provided to Haverford Capital Partners in accordance with the specific requirements of its side letter.

A detailed Side-Letter Compliance and Key-Person Analysis Memorandum is currently being finalized by Pemberton Hale LLP and Calderwood & Harkness LLP. This memorandum, which will include a provision-by-provision analysis of each side letter and a comprehensive key-person analysis, will be made available to LPAC members upon request. LPAC members who wish to receive a copy of the memorandum should contact Nicholas Stern at Calderwood & Harkness LLP or Victoria Langford at Pemberton Hale LLP.

6. Impact on Fund Operations

The General Partner wishes to assure the LPAC that the Restructuring has been designed to ensure continuity and stability in the Fund's operations and to minimize any disruption to the Fund's investment activities and portfolio management. Specifically, the General Partner confirms that the Restructuring will have no impact on the following:

• Investment Strategy: The Fund's investment strategy — control-oriented equity investments in middle-market industrial and business-services companies — will remain unchanged. The Fund will continue to pursue its stated investment objectives in accordance with the investment guidelines and restrictions set forth in the LPA and the Fund's confidential private placement memorandum.

• Investment Period: The investment period of the Fund will continue through its scheduled expiration on June 30, 2025, without suspension, acceleration, or modification of any kind.

• Management Fee Rates: The management fee rates of the Fund will remain unchanged at 1.75% of committed capital during the investment period and 1.50% of invested capital following the expiration of the investment period.

• Carried Interest Terms: The carried interest rate of 20% of net profits, the 8% preferred return, the 100% catch-up, and all other terms of the carried interest waterfall and clawback provisions of the LPA will remain unchanged.

• Fund Term: The term of the Fund will remain as set forth in the LPA, expiring on December 31, 2029, subject to two one-year extensions at the discretion of the General Partner.

• Portfolio Company Management: The day-to-day management, board oversight, and operational improvement activities for each of the Fund's 11 active portfolio companies will continue without interruption. The responsibilities of Mr. Kellner and Ms. Trask with respect to specific portfolio companies have been identified and will be transitioned to other members of the investment team (principally Mr. Hsiao, Ms. Marchetti, and Mr. Okonkwo) in an orderly fashion during the transition periods described in Section 3.3 above.

• Service Providers: The Fund's existing relationships with its service providers will remain unchanged, including:

• Heathrow Whitman & Co. — auditor and tax advisor

• Broadleaf Consulting Group — independent valuation advisor

• Pemberton Hale LLP — fund counsel

The Management Company will continue to employ 62 professionals across its investment, operations, finance, legal, compliance, and investor relations functions. No reduction in headcount is anticipated in connection with the Restructuring, and the General Partner is actively recruiting additional investment professionals to support the Fund's activities during the remainder of the investment period and beyond.

The SEC Form ADV for Ardent Capital Management LLC (CRD #298417) will be amended to reflect the updated ownership structure and personnel changes resulting from the Restructuring. The General Partner anticipates filing the amended Form ADV within 30 days of the closing of the Restructuring and will provide a copy of the amended Form ADV to any limited partner that requests it.

7. Consent Requested

Pursuant to Section 9.4 of the LPA, the General Partner respectfully requests that each member of the LPAC consent to each of the following actions in connection with the Restructuring:

1. Formation of New Entities. The formation of Ardent Capital Holdings LLC ("HoldCo") and Ardent GP Intermediate LLC ("GP Intermediate") as new Delaware limited liability companies, with HoldCo to serve as the parent holding company and GP Intermediate to serve as an intermediate holding entity between HoldCo and the General Partner, as described in Section 3.2 of this letter.

2. Amendment of GP Operating Agreement. The amendment and restatement of the Limited Liability Company Agreement of Ardent Capital GP III LLC to reflect (a) the withdrawal of David Kellner and Joanna Trask as members, (b) the substitution of GP Intermediate as the sole member of the General Partner, and (c) such other conforming changes as are necessary or appropriate in connection with the Restructuring.

3. Amendment of ManCo Operating Agreement. The amendment and restatement of the Limited Liability Company Agreement of Ardent Capital Management LLC to reflect HoldCo as the sole member of the Management Company and such other conforming changes as are necessary or appropriate in connection with the Restructuring.

4. Amendment No. 1 to the LPA. The execution and delivery of Amendment No. 1 to the Amended and Restated Agreement of Limited Partnership of Ardent Capital Partners III LP, reflecting the structural changes to the General Partner and the Management Company described herein, including updated definitions, representations, and organizational chart references, as necessary to conform the LPA to the post-Restructuring organizational structure.

5. Economics Realignment. The reallocation of carried interest percentages and Management Company profit-share economics among the remaining and next-generation principals of the General Partner, as described in Section 3.4 of this letter and summarized in the economics table set forth therein.

6. Departures and Separations. The departures of David Kellner and Joanna Trask from their respective roles as principals of the General Partner and the Management Company, and the terms of their respective separation arrangements (including carried interest retention, forfeiture, clawback modifications, restrictive covenants, and, in the case of Ms. Trask, the lump-sum separation payment), as described in Section 3.3 of this letter.

Consent may be delivered by execution and return of the enclosed Form of Written Consent to the attention of Marcus Aldridge or Nicholas Stern at the addresses set forth in Section 11 below, or by affirmative vote at the LPAC meeting scheduled for February 14, 2024. Under Section 9.4(c) of the LPA, the affirmative consent of a majority of the members of the LPAC (i.e., at least three of the four current LPAC members) is required for each of the actions described above.

8. LPAC Meeting

The General Partner proposes to hold a virtual meeting of the LPAC on February 14, 2024 (the "LPAC Meeting") to discuss the Restructuring in detail, to respond to questions from LPAC members, and to receive LPAC consent to the actions described in Section 7 above.

Dial-in and videoconference details for the LPAC Meeting will be provided under separate cover no later than February 9, 2024. The General Partner anticipates that the LPAC Meeting will last approximately 90 minutes to two hours.

The following representatives of the General Partner and its counsel will be available to present the enclosed LPAC Presentation Memorandum and to answer questions at the LPAC Meeting:

• Marcus Aldridge, Co-Founder & Managing Partner, Ardent Capital

• Priya Narayanan, Co-Founder & Managing Partner, Ardent Capital

• Nicholas Stern, Responsible Partner, Calderwood & Harkness LLP

• Owen Fischer, Lead Associate, Calderwood & Harkness LLP

LPAC members are encouraged to submit any questions or requests for additional information in advance of the LPAC Meeting to facilitate a productive and efficient discussion. Advance questions may be directed to Nicholas Stern or Owen Fischer at the contact information set forth in Section 11 below.

9. Enclosed Materials

The following materials are enclosed with this letter for the review and consideration of each LPAC member:

1. LPAC Presentation Memorandum — A detailed summary of the Restructuring, including pre- and post-restructuring organizational charts, economics tables, departing principal terms, key-person analysis, and side-letter compliance summary. This memorandum is intended to serve as a comprehensive reference document for LPAC members and will also form the basis of the presentation at the LPAC Meeting.

2. Form of Written Consent — A form of written consent for execution by each LPAC member, consenting to each of the actions described in Section 7 of this letter. LPAC members who wish to deliver their consent in advance of the LPAC Meeting may do so by executing and returning the Form of Written Consent to Marcus Aldridge or Nicholas Stern at the addresses set forth in Section 11 below.

10. Confidentiality

The General Partner reminds each member of the LPAC that the information contained in this letter and the enclosed materials is confidential and proprietary to Ardent Capital and its principals. This letter, the enclosed materials, and all information contained herein and therein constitute "Confidential Information" within the meaning of Section 11.2 of the LPA and the confidentiality provisions of each LPAC member's respective side letter.

The General Partner respectfully requests that each LPAC member treat this letter and all enclosed materials in strict confidence and in accordance with the confidentiality obligations set forth in the LPA and the applicable side letter. This letter and the enclosed materials should not be disclosed, distributed, or made available to any third party (other than the LPAC member's own legal, tax, and investment advisors who have a need to know and who are bound by obligations of confidentiality) without the prior written consent of the General Partner.

11. Contact Information and Questions

LPAC members who have questions about the Restructuring or who require additional information are encouraged to contact any of the following individuals:

Marcus Aldridge Co-Founder & Managing Partner Ardent Capital 590 Madison Avenue, 28th Floor New York, NY 10022 Telephone: (212) 555-4100

Email: m.aldridge@ardentcapital.com

Nicholas Stern Responsible Partner Calderwood & Harkness LLP One Vanderbilt Avenue, 44th Floor New York, NY 10017 Telephone: (212) 555-7200

Email: nstern@calderwoodharkness.com

Owen Fischer Lead Associate Calderwood & Harkness LLP One Vanderbilt Avenue, 44th Floor New York, NY 10017 Telephone: (212) 555-7245

Email: ofischer@calderwoodharkness.com

We appreciate your continued confidence in Ardent Capital and the investment team. The General Partner is committed to managing the Restructuring in a transparent and orderly manner and to ensuring that the interests of the Fund's limited partners are fully protected throughout the process. We look forward to discussing the Restructuring with you at the LPAC Meeting on February 14, 2024, and to receiving your consent in connection therewith.

Very truly yours,

ARDENT CAPITAL GP III LLC as General Partner of Ardent Capital Partners III LP

By: ________

Name: Marcus Aldridge

Title: Managing Member

By: ________

Name: Priya Narayanan

Title: Managing Member

Enclosures:

1. LPAC Presentation Memorandum

2. Form of Written Consent

cc: Nicholas Stern, Calderwood & Harkness LLP cc: Owen Fischer, Calderwood & Harkness LLP cc: Victoria Langford, Pemberton Hale LLP (fund counsel)

Principal	Pre-Restructuring Carry Share	Post-Restructuring Carry Share	Change
Marcus Aldridge	35%	42%	+7%
Priya Narayanan	30%	36%	+6%
Robert Hsiao	8%	14%	+6%
Elena Marchetti	0%	4%	+4%
Samuel Okonkwo	0%	4%	+4%
Total	100%	100%	—
Principal	Post-Restructuring %	Assumed Unfunded GP Commitment
Marcus Aldridge	42%	$1,428,840
Priya Narayanan	36%	$1,224,720
Robert Hsiao	14%	$476,280
Elena Marchetti	4%	$136,080
Samuel Okonkwo	4%	$136,080
Total	100%	$3,402,000

ARDENT CAPITAL GP III LLC 590 Madison Avenue, 28th Floor New York, NY 10022
Registered Agent: Prestige Registered Agents LLC 850 New Burton Road, Suite 201 Dover, DE 19904
February 5, 2024
VIA ELECTRONIC DELIVERY AND OVERNIGHT COURIER
Mr. Thomas Engström Chief Investment Officer Ridgeline Public Employees' Retirement System Commitment: $225,000,000
Ms. Annika Johansson Director of Private Equity Crestwood Endowment Partners Commitment: $150,000,000
Mr. Derek Mallinson Head of Alternatives Pinnacle Insurance Group Commitment: $175,000,000
Ms. Catherine Whitfield Managing Director Graystone Family Office LLC Commitment: $50,000,000
Re: Ardent Capital Partners III LP — Notification of Proposed Management Company Restructuring, Economics Realignment, and Departures of Senior Principals; Solicitation of LPAC Consent Pursuant to Section 9.4 of the Amended and Restated Agreement of Limited Partnership
Dear Members of the Limited Partner Advisory Committee:
1. Introduction and Purpose
Ardent Capital GP III LLC (the "General Partner"), as the sole general partner of Ardent Capital Partners III LP (the "Fund" or "Fund III"), is writing to provide notification of, and to solicit the consent of the Limited Partner Advisory Committee (the "LPAC" or the "Committee") to, a proposed restructuring of the management company and related realignment of economics among the Fund's principals (the "Restructuring"). This letter sets forth the material terms and circumstances of the Restructuring in detail, together with the background and rationale therefor, and identifies the specific consents being requested of the LPAC in connection therewith.
The consent of the LPAC is being solicited pursuant to Section 9.4 of the Amended and Restated Agreement of Limited Partnership of the Fund, dated as of April 15, 2019 (as amended, supplemented, or otherwise modified from time to time, the "LPA"), which requires LPAC consent for certain material structural changes to the General Partner, the management company, or the economic arrangements among the principals, including without limitation any change in the ownership or control of the General Partner, any material amendment to the organizational documents of the General Partner, and any material realignment of the carried interest or management fee economics of the Fund.
The General Partner respectfully requests that each LPAC member review this letter and the enclosed materials carefully and execute and return the enclosed Form of Written Consent (the "Consent") at or prior to the LPAC meeting scheduled for February 14, 2024, which will be held virtually via videoconference. Details regarding the videoconference will be provided under separate cover. LPAC members may deliver their consent either by execution and return of the enclosed Consent in advance of the meeting or by affirmative vote at the meeting itself.
In connection with the Restructuring, the General Partner has engaged Calderwood & Harkness LLP (Nicholas Stern, responsible partner, and Owen Fischer, lead associate) as restructuring counsel to advise the General Partner on the structural, governance, and transactional aspects of the Restructuring. Pemberton Hale LLP (Victoria Langford, responsible partner) continues to serve as fund counsel for routine Fund operations and has provided guidance on LPA interpretation and side-letter compliance matters. The General Partner wishes to note that Calderwood & Harkness LLP and Pemberton Hale LLP represent the General Partner and the Fund, respectively, and do not represent any individual limited partner or the LPAC. LPAC members are encouraged to consult with their own legal and tax advisors as they deem appropriate.
2. Background on the Fund
Ardent Capital Partners III LP is a Delaware limited partnership formed in 2019 for the purpose of making control-oriented equity investments in middle-market industrial and business-services companies, primarily in North America. The Fund targets companies with enterprise values between $150 million and $750 million, with a focus on sectors where the principals of Ardent Capital have deep operational expertise and established proprietary sourcing channels, including industrial technology, specialty distribution, environmental services, and facility management.
As of the date of this letter, the key parameters of the Fund are as follows:
Total Commitments. The Fund has aggregate capital commitments of $2.8 billion from 47 limited partners, including leading public pension systems, endowments and foundations, insurance companies, family offices, and other institutional investors.
Capital Called and Invested. As of the date of this letter, the Fund has called approximately $1.96 billion in capital from its limited partners, representing approximately 70% of total commitments. Of the capital called, approximately $1.88 billion has been invested or is reserved for follow-on investments across the Fund's portfolio, with the remainder having been applied to management fees, organizational expenses, and other fund-level charges.
Portfolio Overview. The Fund currently holds 11 active portfolio companies across the industrial and business-services sectors. Each portfolio company is actively managed by a dedicated deal team within Ardent Capital, and in each case Ardent Capital holds board representation and exercises significant operational influence.
Fund Performance. As of September 30, 2023, the most recent quarterly valuation date, the Fund's aggregate performance was as follows:
• Gross multiple of invested capital ("MOIC"): 1.42x
• Net internal rate of return ("IRR"): 14.7%
• Total unrealized value: approximately $2.33 billion (based on fair market valuations prepared by Broadleaf Consulting Group, the Fund's independent valuation advisor, and reviewed by Heathrow Whitman & Co., the Fund's auditor)
• Total realized proceeds: approximately $445 million (reflecting partial realizations and dividend recapitalizations from three portfolio companies)
GP Commitment. The General Partner and its principals have made an aggregate capital commitment to the Fund of $42 million, representing 1.5% of total Fund commitments, which is consistent with the minimum GP commitment described in the Fund's confidential private placement memorandum dated March 2019.
Investment Period. The investment period of the Fund commenced on June 30, 2019, and is scheduled to end on June 30, 2025. As of the date of this letter, the Fund has approximately $840 million of uncalled capital commitments available for new investments during the remaining portion of the investment period.
Fund Term. The term of the Fund is scheduled to expire on December 31, 2029, subject to two one-year extensions at the discretion of the General Partner in accordance with Section 12.1 of the LPA.
Management Fee. The Fund pays an annual management fee equal to 1.75% of aggregate capital commitments during the investment period (approximately $49 million per year at current commitment levels) and 1.50% of invested capital (net of write-downs and write-offs) following the expiration of the investment period. The management fee is payable quarterly in advance to Ardent Capital Management LLC (the "Management Company" or "ManCo"), the Fund's SEC-registered investment adviser (CRD #298417).
Carried Interest. The General Partner is entitled to receive carried interest equal to 20% of the Fund's net profits (calculated on a whole-Fund basis), subject to an 8% per annum preferred return to the limited partners and a 100% catch-up to the General Partner thereafter, in each case as more fully described in Section 6.2 of the LPA.
Current Principals. As of the date of this letter, the principals of the General Partner are:
• Marcus Aldridge — Co-Founder & Managing Partner
• Priya Narayanan — Co-Founder & Managing Partner
• David Kellner — Senior Partner
• Joanna Trask — Partner
• Robert Hsiao — Partner
3. Summary of Proposed Restructuring
3.1 Overview. The Restructuring involves four principal workstreams, each of which is described in detail below:
1. Entity Restructuring — the formation of new holding entities and the reorganization of the ownership structure of the General Partner and the Management Company;
2. Economics Realignment — the reallocation of carried interest and Management Company profit-share economics among the remaining and next-generation principals;
3. Departing Principal Separation — the orderly departure and separation of two senior principals, David Kellner and Joanna Trask, and the negotiation and execution of their respective separation and release agreements; and
4. LP Consent and Side-Letter Compliance — the solicitation of LPAC consent as required under the LPA and compliance with notification and consent provisions contained in individual side letters.
The principal rationale for the Restructuring is fourfold: (a) to implement a thoughtful succession plan that positions Ardent Capital for long-term stability and continuity across multiple fund cycles; (b) to enhance governance by establishing a consolidated holding company structure with clear lines of authority and accountability; (c) to integrate the next generation of talent — specifically, Elena Marchetti and Samuel Okonkwo, each of whom has made significant contributions to the Fund's investment activities and portfolio management — into the economic and governance framework of Ardent Capital; and (d) to facilitate the orderly transition of responsibilities and economics following the planned departure of David Kellner (who is retiring after a distinguished career) and the voluntary departure of Joanna Trask. The General Partner believes that the Restructuring will strengthen Ardent Capital's institutional platform and is in the best interests of the Fund and its limited partners.
3.2 Entity Restructuring
The structural component of the Restructuring involves the formation of two new Delaware limited liability companies and the reorganization of the ownership structure of the General Partner and the Management Company. Specifically:
Formation of Ardent Capital Holdings LLC. A new Delaware limited liability company, Ardent Capital Holdings LLC ("HoldCo"), will be formed to serve as the parent holding company of both the Management Company and the General Partner (through an intermediate entity). HoldCo will be governed by an amended and restated limited liability company agreement that provides for the rights, obligations, and economic entitlements of its members.
Formation of Ardent GP Intermediate LLC. A new Delaware limited liability company, Ardent GP Intermediate LLC ("GP Intermediate"), will be formed to serve as an intermediate holding entity between HoldCo and the General Partner. GP Intermediate will be a wholly owned subsidiary of HoldCo.
Post-Restructuring Organizational Structure. Upon completion of the Restructuring, the organizational structure will be as follows:
• HoldCo will be the sole member of both (i) the Management Company (Ardent Capital Management LLC, SEC-registered investment adviser, CRD #298417) and (ii) GP Intermediate.
• GP Intermediate will be the sole member of the General Partner (Ardent Capital GP III LLC).
• The General Partner will continue to serve as the sole general partner of the Fund.
Current Structure Being Replaced. Under the current organizational structure, the five individual principals (Aldridge, Narayanan, Kellner, Trask, and Hsiao) hold direct membership interests in both the General Partner and the Management Company. The direct-ownership model was adopted at the time of the Fund's formation for simplicity, but as Ardent Capital has grown and matured as an institution, the General Partner has determined that a consolidated holding company structure is more appropriate and consistent with industry best practices for institutional-quality private equity platforms. The holding company structure also facilitates the admission and withdrawal of individual principals without requiring amendments to the organizational documents of the General Partner or the Management Company, thereby reducing administrative burden and the need for LP consents in connection with future personnel changes (to the extent otherwise permitted under the LPA).
HoldCo Membership. Following the Restructuring, the members of HoldCo will be:
• Marcus Aldridge — Co-Founder & Managing Partner
• Priya Narayanan — Co-Founder & Managing Partner
• Robert Hsiao — Partner
• Elena Marchetti — Principal
• Samuel Okonkwo — Principal
The Managing Members of HoldCo will be Marcus Aldridge and Priya Narayanan, who will have the authority to manage the business and affairs of HoldCo (and, through HoldCo, the Management Company and the General Partner) in accordance with the terms of the HoldCo operating agreement.
3.3 Principal Departures
David Kellner — Retirement. David Kellner, a Senior Partner of Ardent Capital and one of the founding members of the Fund III team, has informed the General Partner of his intention to retire from active investment management. Mr. Kellner, age 61, has had a distinguished 35-year career in private equity and has been instrumental in building Ardent Capital's industrial services franchise. His retirement will be effective March 31, 2024, following a transition period during which he will work with the remaining principals to ensure an orderly handover of his portfolio company board responsibilities and deal-team oversight functions. Following his retirement, Mr. Kellner will transition to a Senior Advisor role for a two-year advisory term (April 1, 2024 through March 31, 2026), during which he will be available for consultation on portfolio matters at an annual advisory fee of $350,000 per year.
The key economic terms of Mr. Kellner's departure are as follows:
• Current GP Interest: Mr. Kellner currently holds a 15% membership interest in the General Partner and is entitled to a 15% share of the Fund's carried interest.
• Carried Interest Retention: Mr. Kellner will retain 100% of his vested carried interest in Fund III, which, based on the September 30, 2023 valuation, represents an accrued carried interest of approximately $13,140,000. Such retained carried interest will be subject to a modified clawback obligation that will continue for a period of three (3) years following Mr. Kellner's retirement date (i.e., through March 31, 2027), at which time his clawback exposure will expire.
• Management Company Economics: Mr. Kellner's share of ManCo profit distributions will cease effective as of his retirement date. He will receive no further profit-share or other economic distributions from the Management Company after March 31, 2024.
• Restrictive Covenants: Mr. Kellner has agreed to a non-competition covenant for a period of 18 months following his retirement date and non-solicitation covenants with respect to both employees and limited partners of Ardent Capital for a period of 24 months each following his retirement date.
Joanna Trask — Voluntary Departure. Joanna Trask, a Partner of Ardent Capital, has informed the General Partner of her decision to depart from Ardent Capital voluntarily to pursue a senior role at another investment firm. Ms. Trask, age 48, has been a valued member of the Ardent Capital team and has led several successful investments in the business-services sector during her tenure. Her departure will be effective April 15, 2024, following a transition period during which she will complete the handover of her responsibilities.
The key economic terms of Ms. Trask's departure are as follows:
• Current GP Interest: Ms. Trask currently holds a 12% membership interest in the General Partner and is entitled to a 12% share of the Fund's carried interest.
• Carried Interest Retention: Ms. Trask will retain 60% of her vested carried interest in Fund III, representing approximately $6,307,200 based on the September 30, 2023 valuation. The remaining 40% of her vested carried interest, representing approximately $4,204,800, will be forfeited. In addition, Ms. Trask will forfeit 100% of any unvested carried interest. Her retained carried interest will be subject to a clawback obligation for a period of two (2) years following her departure date (i.e., through April 15, 2026).
• Separation Payment: Ms. Trask will receive a one-time lump-sum separation payment of $1,250,000, payable within 30 days following her departure date, in consideration of her execution of a general release of claims and compliance with her ongoing restrictive covenants.
• Restrictive Covenants: Ms. Trask has agreed to a non-competition covenant for a period of 12 months following her departure date and non-solicitation covenants with respect to employees and limited partners of Ardent Capital for a period of 18 months each following her departure date.
Both departures are subject to the terms of negotiated separation and release agreements (each, a "Separation Agreement") that are currently being finalized. Mr. Kellner and Ms. Trask are each independently represented by Whitford & Chase LLP (Richard Beaulieu, partner) in connection with the negotiation of their respective Separation Agreements. Copies of the Separation Agreements (in substantially final form) will be made available to LPAC members upon request, subject to applicable confidentiality provisions.
3.4 Economics Realignment
Upon the effective dates of the departures of Mr. Kellner and Ms. Trask, the aggregate 27% carried interest share held by the departing principals (representing Mr. Kellner's 15% plus Ms. Trask's 12%) will be redistributed among the remaining and next-generation principals. The proposed post-Restructuring allocation of carried interest is set forth in the following table:
The same percentage allocations reflected in the table above will apply to Management Company Profit Share distributions. For reference, Management Company Profit Share distributions (representing approximately 35% of annual management fee revenue retained by the Management Company after deduction of operating expenses) have averaged approximately $17,150,000 per year over the life of the Fund to date. The economics realignment does not alter the overall quantum of management fees or carried interest payable by the Fund or its limited partners; rather, it reflects solely the internal allocation of such economics among the principals of the General Partner and the Management Company.
The following fundamental economic terms of the Fund remain unchanged by the Restructuring:
• The carried interest rate remains at 20% of net profits;
• The preferred return remains at 8% per annum;
• The catch-up remains at 100% to the General Partner;
• The clawback structure remains unchanged, including 100% joint and several liability of the General Partner and its principals, with a 30% individual escrow of carried interest distributions (the "Escrow"); and
• The mechanics of carried interest calculation (whole-Fund, European-style waterfall) remain unchanged.
With respect to accrued carried interest, as of September 30, 2023, the Fund's total accrued (but undistributed) carried interest was approximately $87,600,000. The vested and retained portions of Mr. Kellner's and Ms. Trask's accrued carried interest will be carved out and preserved in accordance with the terms of their respective Separation Agreements, as described in Section 3.3 above. The redistribution set forth in the table above applies on a go-forward basis to carried interest attributable to future appreciation in the Fund's portfolio from and after the effective date of the Restructuring. The specific mechanics of the transition and allocation of accrued versus go-forward carry will be set forth in the amended carry allocation provisions of the GP's organizational documents and in Amendment No. 1 to the LPA.
3.5 GP Commitment Reallocation
The total GP commitment to the Fund is $42,000,000. As a result of the departures of Mr. Kellner and Ms. Trask, their combined unfunded GP commitment of $3,402,000 (consisting of $1,890,000 attributable to Mr. Kellner and $1,512,000 attributable to Ms. Trask) must be assumed by the remaining principals to ensure that the GP commitment is fully funded through the remainder of the investment period and the balance of the Fund's term. The funded portions of Mr. Kellner's and Ms. Trask's GP commitments will remain in the Fund and will be treated in accordance with their respective Separation Agreements and the LPA.
The unfunded portion of the departing principals' GP commitment will be assumed by the remaining HoldCo members on a pro rata basis, consistent with their post-Restructuring percentage interests, as follows:
Each remaining principal has confirmed his or her willingness and ability to fund the assumed unfunded GP commitment in accordance with the Fund's capital call schedule. The General Partner has received written commitments from each of the above-named individuals to this effect.
4. Key-Person Analysis
Section 5.2 of the LPA designates Marcus Aldridge and Priya Narayanan as "Key Persons" of the Fund. Under Section 5.2, a "Key Person Event" is triggered if: (a) both Key Persons cease to devote substantially all of their business time and attention to the investment activities of the Fund, or (b) one Key Person ceases to devote substantially all of his or her business time and attention to the investment activities of the Fund and a replacement Key Person is not approved by the LPAC within 120 calendar days of such cessation.
The General Partner confirms that neither David Kellner nor Joanna Trask is a designated Key Person under Section 5.2 of the LPA. Accordingly, the departures of Mr. Kellner and Ms. Trask do not trigger a Key Person Event under the LPA, and the investment period will continue without suspension or interruption.
Both Marcus Aldridge and Priya Narayanan will continue to serve as Co-Founders and Managing Partners of Ardent Capital and will continue to devote substantially all of their business time and attention to the investment activities of the Fund, consistent with their obligations under the LPA. Neither Mr. Aldridge nor Ms. Narayanan has any present intention to reduce his or her involvement with the Fund or to pursue other business activities that would be inconsistent with the Key Person requirements of Section 5.2.
Expanded Key-Person Provisions in Side Letters. In connection with its side-letter compliance review, the General Partner and its counsel have identified that 6 of the 14 side letters currently in effect contain "expanded key person" provisions that designate David Kellner as a "Contributing Person" or use analogous terminology. These provisions generally require that the General Partner provide the applicable limited partner with written notice within 15 business days of any Contributing Person's departure from active involvement with the Fund. The General Partner will comply with all such notification requirements in a timely manner.
Additionally, the General Partner has identified that 3 of the 6 side letters containing expanded key-person provisions grant the applicable limited partner a right to request a 90-day suspension of the investment period pending LPAC review in the event of a Contributing Person's departure. The General Partner does not believe that such a suspension is warranted in light of (i) the continued full-time involvement of both designated Key Persons (Aldridge and Narayanan), (ii) the orderly nature of Mr. Kellner's planned retirement and transition to a Senior Advisor role, (iii) the depth and continuity of the remaining investment team, and (iv) the ongoing strong performance of the Fund's portfolio. The General Partner intends to engage directly and proactively with each of the applicable limited partners to discuss these matters and to address any questions or concerns.
5. Side-Letter Compliance Summary
The Fund has 14 side letters currently in effect with various limited partners. In connection with the Restructuring, the General Partner and its counsel at Pemberton Hale LLP and Calderwood & Harkness LLP have conducted a comprehensive review of all 14 side letters to assess compliance with the terms thereof in light of the proposed Restructuring. The results of that review are summarized below:
Most Favored Nation ("MFN") Provisions. Eleven (11) of the 14 side letters contain MFN provisions requiring the General Partner to notify the applicable limited partner of, and/or extend to the applicable limited partner, any more favorable terms granted to any other limited partner. The General Partner has determined that the Restructuring does not involve the granting of any more favorable terms to any limited partner and, accordingly, no MFN issues have been identified.
Fee discount or Rebate Provisions. Eight (8) of the 14 side letters contain provisions granting the applicable limited partner a fee discount, management fee rebate, or other fee accommodation. The Restructuring does not alter the management fee rates of the Fund (which remain at 1.75% of committed capital during the investment period and 1.50% of invested capital thereafter), and accordingly, no impact on fee-related side-letter provisions has been identified.
Co-Investment Priority Rights. Nine (9) of the 14 side letters contain provisions granting the applicable limited partner co-investment priority rights or preferential co-investment allocation rights. The General Partner intends to update its internal co-investment allocation policy to reflect the revised principal allocations and team responsibilities resulting from the Restructuring. The fundamental co-investment allocation framework — which is based on commitment size, co-investment track record, and ability to respond to allocation opportunities within the required timeframe — will remain substantively unchanged. LPAC members with co-investment priority rights will continue to receive advance notice of co-investment opportunities in accordance with their respective side letters.
Material Change Notification and Consent Provisions. Four (4) side letters — those with Ridgeline Public Employees' Retirement System, Pinnacle Insurance Group, Crestwood Endowment Partners, and Haverford Capital Partners — contain provisions requiring prior written notice and, in certain cases, affirmative consent to any "material change in the management structure" of the General Partner, the Management Company, or the Fund's investment team. This letter and the LPAC consent process described herein serve as the required notification to the three LPAC members (Ridgeline, Pinnacle, and Crestwood) that hold such provisions. Separate notice will be provided to Haverford Capital Partners in accordance with the specific requirements of its side letter.
A detailed Side-Letter Compliance and Key-Person Analysis Memorandum is currently being finalized by Pemberton Hale LLP and Calderwood & Harkness LLP. This memorandum, which will include a provision-by-provision analysis of each side letter and a comprehensive key-person analysis, will be made available to LPAC members upon request. LPAC members who wish to receive a copy of the memorandum should contact Nicholas Stern at Calderwood & Harkness LLP or Victoria Langford at Pemberton Hale LLP.
6. Impact on Fund Operations
The General Partner wishes to assure the LPAC that the Restructuring has been designed to ensure continuity and stability in the Fund's operations and to minimize any disruption to the Fund's investment activities and portfolio management. Specifically, the General Partner confirms that the Restructuring will have no impact on the following:
• Investment Strategy: The Fund's investment strategy — control-oriented equity investments in middle-market industrial and business-services companies — will remain unchanged. The Fund will continue to pursue its stated investment objectives in accordance with the investment guidelines and restrictions set forth in the LPA and the Fund's confidential private placement memorandum.
• Investment Period: The investment period of the Fund will continue through its scheduled expiration on June 30, 2025, without suspension, acceleration, or modification of any kind.
• Management Fee Rates: The management fee rates of the Fund will remain unchanged at 1.75% of committed capital during the investment period and 1.50% of invested capital following the expiration of the investment period.
• Carried Interest Terms: The carried interest rate of 20% of net profits, the 8% preferred return, the 100% catch-up, and all other terms of the carried interest waterfall and clawback provisions of the LPA will remain unchanged.
• Fund Term: The term of the Fund will remain as set forth in the LPA, expiring on December 31, 2029, subject to two one-year extensions at the discretion of the General Partner.
• Portfolio Company Management: The day-to-day management, board oversight, and operational improvement activities for each of the Fund's 11 active portfolio companies will continue without interruption. The responsibilities of Mr. Kellner and Ms. Trask with respect to specific portfolio companies have been identified and will be transitioned to other members of the investment team (principally Mr. Hsiao, Ms. Marchetti, and Mr. Okonkwo) in an orderly fashion during the transition periods described in Section 3.3 above.
• Service Providers: The Fund's existing relationships with its service providers will remain unchanged, including:
• Heathrow Whitman & Co. — auditor and tax advisor
• Broadleaf Consulting Group — independent valuation advisor
• Pemberton Hale LLP — fund counsel
The Management Company will continue to employ 62 professionals across its investment, operations, finance, legal, compliance, and investor relations functions. No reduction in headcount is anticipated in connection with the Restructuring, and the General Partner is actively recruiting additional investment professionals to support the Fund's activities during the remainder of the investment period and beyond.
The SEC Form ADV for Ardent Capital Management LLC (CRD #298417) will be amended to reflect the updated ownership structure and personnel changes resulting from the Restructuring. The General Partner anticipates filing the amended Form ADV within 30 days of the closing of the Restructuring and will provide a copy of the amended Form ADV to any limited partner that requests it.
7. Consent Requested
Pursuant to Section 9.4 of the LPA, the General Partner respectfully requests that each member of the LPAC consent to each of the following actions in connection with the Restructuring:
1. Formation of New Entities. The formation of Ardent Capital Holdings LLC ("HoldCo") and Ardent GP Intermediate LLC ("GP Intermediate") as new Delaware limited liability companies, with HoldCo to serve as the parent holding company and GP Intermediate to serve as an intermediate holding entity between HoldCo and the General Partner, as described in Section 3.2 of this letter.
2. Amendment of GP Operating Agreement. The amendment and restatement of the Limited Liability Company Agreement of Ardent Capital GP III LLC to reflect (a) the withdrawal of David Kellner and Joanna Trask as members, (b) the substitution of GP Intermediate as the sole member of the General Partner, and (c) such other conforming changes as are necessary or appropriate in connection with the Restructuring.
3. Amendment of ManCo Operating Agreement. The amendment and restatement of the Limited Liability Company Agreement of Ardent Capital Management LLC to reflect HoldCo as the sole member of the Management Company and such other conforming changes as are necessary or appropriate in connection with the Restructuring.
4. Amendment No. 1 to the LPA. The execution and delivery of Amendment No. 1 to the Amended and Restated Agreement of Limited Partnership of Ardent Capital Partners III LP, reflecting the structural changes to the General Partner and the Management Company described herein, including updated definitions, representations, and organizational chart references, as necessary to conform the LPA to the post-Restructuring organizational structure.
5. Economics Realignment. The reallocation of carried interest percentages and Management Company profit-share economics among the remaining and next-generation principals of the General Partner, as described in Section 3.4 of this letter and summarized in the economics table set forth therein.
6. Departures and Separations. The departures of David Kellner and Joanna Trask from their respective roles as principals of the General Partner and the Management Company, and the terms of their respective separation arrangements (including carried interest retention, forfeiture, clawback modifications, restrictive covenants, and, in the case of Ms. Trask, the lump-sum separation payment), as described in Section 3.3 of this letter.
Consent may be delivered by execution and return of the enclosed Form of Written Consent to the attention of Marcus Aldridge or Nicholas Stern at the addresses set forth in Section 11 below, or by affirmative vote at the LPAC meeting scheduled for February 14, 2024. Under Section 9.4(c) of the LPA, the affirmative consent of a majority of the members of the LPAC (i.e., at least three of the four current LPAC members) is required for each of the actions described above.
8. LPAC Meeting
The General Partner proposes to hold a virtual meeting of the LPAC on February 14, 2024 (the "LPAC Meeting") to discuss the Restructuring in detail, to respond to questions from LPAC members, and to receive LPAC consent to the actions described in Section 7 above.
Dial-in and videoconference details for the LPAC Meeting will be provided under separate cover no later than February 9, 2024. The General Partner anticipates that the LPAC Meeting will last approximately 90 minutes to two hours.
The following representatives of the General Partner and its counsel will be available to present the enclosed LPAC Presentation Memorandum and to answer questions at the LPAC Meeting:
• Marcus Aldridge, Co-Founder & Managing Partner, Ardent Capital
• Priya Narayanan, Co-Founder & Managing Partner, Ardent Capital
• Nicholas Stern, Responsible Partner, Calderwood & Harkness LLP
• Owen Fischer, Lead Associate, Calderwood & Harkness LLP
LPAC members are encouraged to submit any questions or requests for additional information in advance of the LPAC Meeting to facilitate a productive and efficient discussion. Advance questions may be directed to Nicholas Stern or Owen Fischer at the contact information set forth in Section 11 below.
9. Enclosed Materials
The following materials are enclosed with this letter for the review and consideration of each LPAC member:
1. LPAC Presentation Memorandum — A detailed summary of the Restructuring, including pre- and post-restructuring organizational charts, economics tables, departing principal terms, key-person analysis, and side-letter compliance summary. This memorandum is intended to serve as a comprehensive reference document for LPAC members and will also form the basis of the presentation at the LPAC Meeting.
2. Form of Written Consent — A form of written consent for execution by each LPAC member, consenting to each of the actions described in Section 7 of this letter. LPAC members who wish to deliver their consent in advance of the LPAC Meeting may do so by executing and returning the Form of Written Consent to Marcus Aldridge or Nicholas Stern at the addresses set forth in Section 11 below.
10. Confidentiality
The General Partner reminds each member of the LPAC that the information contained in this letter and the enclosed materials is confidential and proprietary to Ardent Capital and its principals. This letter, the enclosed materials, and all information contained herein and therein constitute "Confidential Information" within the meaning of Section 11.2 of the LPA and the confidentiality provisions of each LPAC member's respective side letter.
The General Partner respectfully requests that each LPAC member treat this letter and all enclosed materials in strict confidence and in accordance with the confidentiality obligations set forth in the LPA and the applicable side letter. This letter and the enclosed materials should not be disclosed, distributed, or made available to any third party (other than the LPAC member's own legal, tax, and investment advisors who have a need to know and who are bound by obligations of confidentiality) without the prior written consent of the General Partner.
11. Contact Information and Questions
LPAC members who have questions about the Restructuring or who require additional information are encouraged to contact any of the following individuals:
Marcus Aldridge Co-Founder & Managing Partner Ardent Capital 590 Madison Avenue, 28th Floor New York, NY 10022 Telephone: (212) 555-4100
Email: m.aldridge@ardentcapital.com
Nicholas Stern Responsible Partner Calderwood & Harkness LLP One Vanderbilt Avenue, 44th Floor New York, NY 10017 Telephone: (212) 555-7200
Email: nstern@calderwoodharkness.com
Owen Fischer Lead Associate Calderwood & Harkness LLP One Vanderbilt Avenue, 44th Floor New York, NY 10017 Telephone: (212) 555-7245
Email: ofischer@calderwoodharkness.com
We appreciate your continued confidence in Ardent Capital and the investment team. The General Partner is committed to managing the Restructuring in a transparent and orderly manner and to ensuring that the interests of the Fund's limited partners are fully protected throughout the process. We look forward to discussing the Restructuring with you at the LPAC Meeting on February 14, 2024, and to receiving your consent in connection therewith.
Very truly yours,
ARDENT CAPITAL GP III LLC as General Partner of Ardent Capital Partners III LP
By: ________
Name: Marcus Aldridge
Title: Managing Member
By: ________
Name: Priya Narayanan
Title: Managing Member
Enclosures:
1. LPAC Presentation Memorandum
2. Form of Written Consent
cc: Nicholas Stern, Calderwood & Harkness LLP cc: Owen Fischer, Calderwood & Harkness LLP cc: Victoria Langford, Pemberton Hale LLP (fund counsel)
Principal | Pre-Restructuring Carry Share | Post-Restructuring Carry Share | Change
Marcus Aldridge | 35% | 42% | +7%
Priya Narayanan | 30% | 36% | +6%
Robert Hsiao | 8% | 14% | +6%
Elena Marchetti | 0% | 4% | +4%
Samuel Okonkwo | 0% | 4% | +4%
Total | 100% | 100% | —
Principal | Post-Restructuring % | Assumed Unfunded GP Commitment
Marcus Aldridge | 42% | $1,428,840
Priya Narayanan | 36% | $1,224,720
Robert Hsiao | 14% | $476,280
Elena Marchetti | 4% | $136,080
Samuel Okonkwo | 4% | $136,080
Total | 100% | $3,402,000

ARDENT CAPITAL GP III LLC 590 Madison Avenue, 28th Floor New York, NY 10022

VIA ELECTRONIC DELIVERY AND OVERNIGHT COURIER

Record

Parties

Dates

Amounts