Item 5. Fees and Compensation
Breakwater’s fees and compensation arrangements vary depending on the particular Client. The specific
terms of such arrangements are set forth in each Client’s Operative Documents.
Funds
The Funds will pay Breakwater a management fee (the “Management Fee”) equal to 2.0% per annum for
Breakwater Credit Opportunities Fund LP (“BCOF I”) and Sidecar or 1.5% per annum for Breakwater Credit
Opportunities Fund II LP (“BCOF II”) and Breakwater Credit Opportunities Fund III LP (“BCOF III”) of such
Funds’ cost basis of invested capital, not to exceed aggregate costs. The Management Fee will be paid to
Breakwater quarterly based on the cost basis as of the end of the prior quarter.
The Funds will pay, or reimburse Breakwater, for the organization and startup expenses of each Fund, the
general partner entity, and the offering of interests in the respective Fund, including legal, accounting,
filing, travel-related expenses and placement agent expenses, and other fees and expenses
(“Organizational Expenses”). Organizational Expenses incurred in connection with the completed
fundraising for BCOF II and BCOF III that were in excess of $1,000,000 would have been paid by that Fund,
and any placement fees paid by any Fund, will be ultimately borne by Breakwater through offsetting
reductions to the Management Fee.
In addition to the Management Fee and Organizational Expenses, the Operative Documents for each Fund
set forth the other fees, costs and other expenses incurred by or otherwise related to the Funds to the
extent not reimbursed by third-parties that are permitted to be borne by the Funds, which include,
without limitation, in connection with: (i) acquiring, holding and disposing of investments (including
transactions that are not consummated); (ii) legal, consulting, investment banking, commercial banking,
borrowing, custodial, auditing, accounting and other professional service fees and expenses; (iii) the
preparation of financial statements, tax returns and other filings and Schedule K-1s of the Funds and the
general partner; (iv) any actual or threatened litigation, investigation, audit or other proceeding involving
the Fund, the general partner, Breakwater, the principals or their respective affiliates (and their respective
officers, directors and employees) related to activities of the Funds; (v) any taxes assessed against the
Funds; (vi) the Funds’ legal and regulatory compliance (but excluding any compliance or related expenses
assumed by Breakwater related to its registration as an investment adviser with the Securities and
Exchange Commission); (vii) insurance premiums on behalf of the Funds, the general partner, Breakwater
and their respective affiliates (and their respective officers, directors and employees) and premiums for
any “key man” insurance; (viii) indemnification under the partnership agreement; (ix) the managed
distribution of marketable securities; (xii) the liquidation and winding up of the Fund; (xiii) annual or other
meetings of the partners and the advisory committee, whether individually or as a group; and (xiv) all
other ordinary operating expenses and non-recurring or extraordinary expenses attributable to the
activities and operations of the Funds, including travel-related expenses (e.g., travel, accommodations,
meals and entertainment).
SPVs
Certain SPVs pay Breakwater a Management Fee roughly equal to 2.0% per annum for the SPV’s net asset
value of investments. However, the Management Fee paid by each SPV varies and is determined on a
case-by-case basis. For future private equity investments, Breakwater will generally be entitled to a
closing fee and a management fee as negotiated and agreed upon with the SPV investors.
In addition, certain SPVs will pay, or reimburse Breakwater, for audit and tax related expenses, filing fees
and tax preparation.
Please refer to the Clients’ Operative Documents for further information regarding the fees and expenses
of Breakwater and each respective Fund and SPV.
Neither Breakwater nor any of its employees accept direct compensation for the sale of securities or other
investment products.