ITEM 5: FEES AND COMPENSATION
LKCM HW Fees
The LKCM HW Funds pay a management fee to LKCM equivalent to 2% per annum of either the aggregate
capital commitments of limited partners or invested capital of the partnership, as determined under Fund
Governing Documents, calculated and payable quarterly in advance. C3CM receives a fixed management fee
from LKCM for each LKCM HW Fund, pursuant to the terms of a sub-advisory agreement. HW II Sidecar
pays a management fee equal to 1% per annum of invested capital, as determined under Fund Governing
Documents. C3CM does not currently receive a separate sub-advisory fee for HW II Sidecar.
LKCM, C3CM, or their respective affiliates may enter into management consulting or advisory agreements
with one or more Portfolio Companies pursuant to which such person receive management, performance,
oversight, board, administrative or similar fees in connection with management, monitoring, administrative
or similar services provided to such Portfolio Companies. These fees generally are not negotiated, may be
paid in cash, securities of Portfolio Companies or otherwise, and are in addition to investment management
fees received from the LKCM HW Funds. Management fees are generally offset by 80% of any such fees
received by C3CM, LKCM or any of their affiliates from Portfolio Companies. In addition, 80% of any other
fees received by C3CM, LKCM or any of their affiliates in conjunction with Portfolio Company transactions,
which may include commitment, break-up, “topping,” management, monitoring, oversight, consulting,
director or similar fees, will be applied, after reimbursement of out-of-pocket expenses by such parties, to
reduce management fees. Only fees received that are related to the relevant LKCM HW Fund’s invested
capital in any Portfolio Investment are subject to the management fee offset. The offset does not apply to any
portion of fees received by C3CM or Robertson III that are allocable to any non-LKCM HW Fund investors,
including BIP I, BIP II, or Robertson III investments in such Portfolio Companies. Portfolio Companies may
engage and retain operating partners, consultants, advisors or other professionals that are not employees of
C3CM or LKCM and who receive payments for their services. Such amounts are not subject to the offset
arrangements described above.
The LKCM GPs receive a 20% carried interest based on a percentage of the net profits distributed by the
LKCM HW Funds and HW II Sidecar after Investors have received a return of invested capital plus a
preferred return (generally 8% per annum for the LKCM HW Funds or 12% for HW II Sidecar) on the net
outstanding invested capital contributions calculated from the date each capital contribution is due to the date
of return, as determined under Fund Governing Documents. The carried interest is subject to clawback, as
determined under Fund Governing Documents.
C3CM and LKCM principals, employees, and their affiliates and related parties are limited partners in the
LKCM HW Funds. All partners pay management fees at this time; however, performance-based
compensation is generally waived for such parties. LKCM GP may waive or reduce management fees or any
portion of carried interest, in its discretion. Thus, different Investors in the LKCM HW Funds may pay
different fees based on side letters or other agreements. Except as otherwise agreed, the LKCM GPs are not
obligated to waive or reduce fees for any other Investor when offering waivers or reductions to a particular
Investor.
C3CM, LKCM and/or LKCM GP may receive management fees, performance incentives and/or other related
fees from co-investors, co-investment vehicles and/or with respect to co-investments related to LKCM HW
Portfolio Companies. The fees and expenses charged to co-investors and co-investment vehicles may be
different than fees and expenses paid by the LKCM HW Funds.
SPV Fees
The SPVs do not pay management fees. However, as general partner for BIP I, C3CM is entitled to a 10%
profit allocation or “participation right” after limited partners have received 150% of their aggregate capital
contributions. The general partner reserves the right to reimburse any limited partner for their pro rata share
of the general partner’s 10% participation right or to make a special distribution and allocation to any limited
partner to effectively “exempt” (partially or fully) such limited partner from the application of the general
partner’s 10% participation right. BIP II does not include a provision for a general partner participation right.
Other Fees and Expenses
In addition to the management fee, each Private Fund pays its own operating expenses, pursuant to the terms
established in the Fund’s Governing Documents (“Partnership Expenses”), which may include, among
others:
Fees and expenses incurred in evaluating, negotiating, structuring, acquiring or disposing of
investments, including investments not consummated (i.e., “dead deal costs”);
Fees and expenses incurred in carrying, managing, monitoring or otherwise dealing with investments,
such as legal, due diligence, financing, custodial, consulting, accounting, recordkeeping, investment
banking, brokerage, and administration fees and expenses;
Fees and expenses incurred in preparing financial reports and tax returns;
Accounting, administration, legal, tax and other professional fees and expenses;
Fees, expenses and charges incurred in connection with investment, acquisition and trading activities,
such as brokerage commissions, margin interest, custodial fees and other transaction costs;
Interest on, and fees and expenses arising out of, borrowings;
Research and investment-related travel and entertainment fees and expenses; and
Other organizational and operating fees, costs and expenses.
The LKCM HW Funds, HW II Sidecar and/or Portfolio Companies generally bear or reimburse travel and
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