Item 5. Fees and Compensation
Fees Paid by the Funds.
Currently, neither of the Funds pay any management fees.
Baker Capital and its affiliates may perform management, advisory, transaction-related, financial
advisory and other services for, and receive fees from, actual or prospective portfolio companies
of the Funds, including such fees in connection with mergers, acquisitions, add-on acquisitions,
refinancings, sales and similar transactions. These fees may be paid in cash, in securities of the
portfolio company or a combination thereof. Although such fees are in addition to the
management fees paid by the Funds, Baker Capital will reduce future management fees in
connection with the receipt of these fees. The calculation of such reduction is described in the
Fund Governing Documents of the Funds.
Affiliates of Baker Capital are entitled to receive carried interest distributions from the Funds
once certain performance hurdles have been achieved. See “Item 6. Performance-Based Fees
and Side-by-Side Management” below for more details.
Expenses Incurred by the Funds.
Each Fund generally bears all third-party fees, expenses and costs that are incidental or related to
the maintenance and administration of the Fund or related to the acquisition, management and
disposition of investments. These expenses include: (i) organizational expenses up to specified
cap; (ii) all out-of-pocket costs of the administration of the Fund, including the management fees
described above, accounting, audit, tax return preparation and legal expenses, costs of holding
any meetings of investors in the Fund, costs of any liability insurance obtained on behalf of the
Fund, its general partner and/or Baker Capital with respect to any indemnified party, and costs
associated with reporting and providing information to existing and prospective investors in the
Fund; (iii) all expenses incurred in connection with the registration, qualification or exemption of
the Fund under any applicable laws; (iv) all unreimbursed expenses incurred in connection with
the collection of amounts due to the Fund from any person; (v) all expenses incurred in
connection with the preparation of alterations and amendments to the Fund Governing
documents; (vi) expenses of the Fund limited partner advisory committee; (vii) fees and
expenses of the Fund’s industry advisory board; (viii) expenses incurred in connection with any
litigation involving the Fund (including the cost of any investigation and preparation) and the
amount of any judgment or settlement paid in connection therewith; (ix) all expenses for
indemnity or contribution payable by the Fund to any person, whether payable under the Fund
Governing Documents or otherwise and whether payable in connection with any litigation
involving the Fund or otherwise; (x) all expenses incurred in connection with administrative
proceedings relating to the determination of Fund items at the Fund level undertaken by the tax
matters partner, and any audit with respect to taxes; (xi) all expenses incurred in connection with
the dissolution and liquidation of the Fund; (xii) all expenses incurred on account of taxes, fees
or other governmental charges of the Fund; and (xiii) all out-of-pocket costs and expenses
directly related to portfolio investments or prospective investments of the Fund, including out-of-
pocket costs such as legal, accounting and other professional or third-party costs, travel and other
costs, brokerage commissions and other transactions costs, custody fees and fees of professional
advisors and consultants relating to investments or prospective investments, specific expenses
incurred in obtaining systems, research and other information utilized with respect to the Fund’s
investment program, expenses in connection with any Fund investment vehicle or alternative
investment vehicle, and any withholding, transfer or other taxes imposed on the Fund, including
any transaction expenses not absorbed by a portfolio company.
The Funds have retained LocalPosts LLC (“LocalPosts”) to provide certain administrative
services to the Funds, including fund accounting, investment valuation, investor reporting, tax
reporting, treasury, operations and other “back-office” fund administration functions. The Funds
pay certain fees and expenses to LocalPosts in consideration for such services. LocalPosts is
owned by one of our former senior executives, who performs similar administrative functions on
Baker Capital’s behalf. See “Item 10. Other Financial Activities and Affiliations” for more
details.
Investors in a Fund should refer to such Fund’s Governing Documents for more detailed
information concerning the fees, carried interest and other expenses that such Fund will bear