Item 5 – Fees and Compensation
The SBIC Fund
For the five years following the date on which the SBIC Fund makes its first portfolio company
investment or receives its SBIC license, whichever is earlier (the “Initial Management Fee Period”),
ACP will receive a management fee equal to two percent (2%) of the sum (a) the aggregate
Management Fee Unreduced Regulatory Capital (as defined in the SBIC Fund’s Governing
Document) of the limited partners (other than the principals, members of the Executive Advisory
Board and employees of ACP (collectively, the “GP Related Partners”)), plus (b) an amount equal
to the product of the Assumed Leverage (as defined in the SBIC Fund’s Governing Document),
multiplied by a fraction, the numerator of which is the aggregate Management Fee Unreduced
Regulatory Capital of the limited partners (other than GP Related Partners) and the denominator of
which is the aggregate Management Fee Unreduced Regulatory Capital of all of the partners.
After the end of the Initial Management Fee Period, ACP will receive a management fee equal to
two percent (2%) of the product of (a) the Fund’s cost basis of loans and investments in active
portfolio companies, multiplied by (b) a fraction, the numerator of which is the aggregate capital
contributions of the limited partners (other than the principals, members of the Executive Advisory
Board and employees of ACP (collectively, the “GP Related Partners”) and the denominator of which
is the aggregate capital contributions of all of the partners. The SBIC Fund will not pay any
management fees with respect to any fiscal year in excess of the amount of management fees
approved by SBA.
The management fees will be paid in advance on the first day of each fiscal quarter or a portion
thereof in cash. The management fees will be prorated for partial periods.
Management fees will be offset by 100% of the amount of any transaction fees, or advisory fees,
break-up fees, commitment, and other similar fees received by ACP in connection with the SBIC
Fund investments; provided, however, if the SBIC Fund were to invest alongside an affiliated
Fund(s), the SBIC Fund management fees would not be offset if transaction fees, or advisory fees,
break-up fees, commitment, and other similar fees received by the SBIC Fund and the affiliated
Fund(s) if they each receive their proportional share of the aggregate fees received based on the
relative amounts of investments by the SBIC Fund and such affiliated Fund(s) in the portfolio
company paying the fees.
Additionally, the general partner of the SBIC Fund is entitled to receive a 20% carried interest on
distributions, subject to return of capital, an 8% preferred return and clawback provisions in
accordance with the Governing Documents.
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The general partner has and may, on its own behalf or on behalf of the SBIC Fund, without the
approval of any investor or other person, but subject to the written approval of SBA, enter into side
letter agreements or similar agreements with one or more investors that have the effect of establishing
rights under, or altering or supplementing the terms of, the SBIC Fund’s limited partnership
agreement (“Side Letters”). However, no Side Letter may modify the obligation of a partner to
contribute its commitment in a manner not permitted by SBA. All Side Letters must be approved by
SBA. ACP has entered into an arrangement with certain anchor investors in the SBIC Fund whereby
those investors have supplemental rights, including the right to receive a portion of the fees earned
by ACP and its affiliates related to the SBIC Fund and similar advisory clients.
The SBIC Fund will pay organizational and offering expenses in an amount not to exceed
$500,000, including, without limitation legal fees, printing fees, travel costs, entertainment costs, and
other expenses incidental to the formation and fund raising of the SBIC Fund and the general partner
and the licensing of the SBIC Fund as an SBIC (“Organizational and Offering Expenses”). The
general partner may elect to have the SBIC Fund pay all or any portion of the Organizational and
Offering Expenses in excess of $500,000 (such excess amount, the “Excess Organizational and
Offering Expense Amount”) if amount so paid by the SBIC Fund is credited against the Management
Fee.
The general partner and its affiliates may engage placement agents on the SBIC Fund’s behalf in
connection with the offer and sale of SBIC Fund’s limited partnership interests, but the fees and
expenses payable to such placement agents (the “Placement Agent Fee and Expense Amount”) will
be paid by ACP, the general partner or their affiliates (other than the SBIC Fund); provided, that the
general partner may elect to have the SBIC Fund pay such Placement Agent Fee and Expense
Amount if the amount so paid by the SBIC Fund is credited against the Management Fee. ACP does
not have any supervised persons who act as solicitors or receive additional compensation for referrals
to the SBIC Fund.
The SBIC Fund will pay the following expenses (“SBIC Fund Expenses”): (i) all (x) fees, costs and
expenses of the SBIC Fund relating to the annual audit of the SBIC Fund and the preparation of the
Federal and state tax returns of the SBIC Fund and K-1s and (y) other accounting and fund
administration fees, costs and expenses of the SBIC Fund, including without limitation, the
preparation of the annual and interim financial statements of the SBIC Fund and the preparation of
portfolio financing reports and capital certificates; provided that the fees, costs and expenses
described in this clause (y) shall be included in SBIC Fund expenses only to the extent that the SBIC
Fund’s payment of such fees, costs and expenses will not result in the sum of the management fees
paid by the SBIC Fund, plus aggregate amount of such fees, costs and expenses, to exceed the
maximum management fees an SBIC is permitted to pay under the SBIC Act; (ii) all amounts payable
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