Item 5 – Fees and Compensation
In consideration of our advisory and management services, CEM and its affiliates generally are entitled to
receive (i) management fees based upon a percentage of the capital commitments or invested capital of
each investor or Client, and (ii) carried interest distributions or other performance-based compensation
with respect to each investor or Client. Investors should carefully review the applicable Account
Documents of each Client for a description and details regarding the fees and expenses applicable to it.
Nevertheless, an overview of our expected general fee schedule with respect to each Client is set forth
below:
Management Fees. Pursuant to the terms and conditions of the Account Documents of each Client, CEM
generally is entitled to receive, on a quarterly basis in advance, a management fee from such Client,
which is calculated and determined in accordance with the terms and conditions set forth in the applicable
Account Documents of such Client. Subject to the terms and conditions of the applicable Account
Documents, the management fee with respect to each Client generally is calculated and determined as
follows: (i) for each quarter that occurs during the investment period of such Client, 0.4375% (1.75% per
annum) of each investor’s or Client’s aggregate capital commitment, and (ii) beginning with the first full
calendar quarter commencing after the end of the investment period, (A) 0.375% (1.5% per annum) of
each investor’s aggregate invested capital with respect to non-mitigation bank investments and (B) 0.5%
(2.0% per annum) of each investor’s aggregate invested capital with respect to mitigation bank
investments (subject to such adjustments contemplated in the Account Documents). Notwithstanding the
foregoing, with respect to any investor whose capital commitment is accepted as of the initial closing date
of a Fund (an “Initial Closing Investor”), the management fee rate described in clause (i) above generally
is 0.375% (1.5% per annum) with respect to such investor.
Management fees are payable by each Client to CEM or an affiliate on the first day of each calendar
quarter in advance. Except as otherwise determined by CEM, each investor generally is responsible for
bearing and paying its pro rata or allocable share or portion of such management fees in accordance with
the terms in the Account Documents. Management fees typically are or may be funded or paid with
capital contributions called from the investors for such purpose, but may also be funded with proceeds
from investments and borrowings or indebtedness. Installments of the management fee for any period
other than a full calendar quarter are adjusted on a prorated basis according to the day elapsed in that
period.
Carried Interest Distributions. CEM or an affiliate generally is entitled to receive a carried interest
distribution equal to twenty percent (20%) of profits derived from the disposition of investments
(following a return of aggregate capital contributions attributable to disposed investments and a preferred
rate of return of six percent (6%) per annum to investors). Upon the termination of a Client and after
giving effect to all other distributions made or to be made pursuant to the Account Documents, CEM or
an affiliate thereof generally is required to return any carried interest distributions previously received by
it in respect of an investor to the extent that they exceed amounts that would have been distributed to
CEM or an affiliate as carried interest distributions if such carried interest distributions were calculated on
an aggregate basis covering all transactions of such Client (subject to the terms and limitations set forth in
the applicable Account Documents). Carried interest distributions generally are waived or reduced with
respect to employees of CEM and employees of CEM’s operating partners, advisory board or committee
members, strategic partners or such other persons (or affiliates thereof) determined by CEM in its
discretion.
Carried interest distributions with respect to a Client are calculated from time to time upon disposition of
investments by such Client and are distributed to an affiliate of CEM (after the return of aggregate capital
contributions and a preferred rate of return to investors, as more particularly described above).
Each investor in a Fund generally is required to represent to us that it is, among other things, an
“accredited investor” and either a “qualified purchaser” or “knowledgeable employee,” as each such
terms are defined in applicable U.S. securities laws.
Management fees and/or carried interest distributions generally are not negotiable. However, CEM and its
affiliates may enter into side letters or similar agreements or arrangements with one or more investors in a
Client that alter, modify, change or adjust the management fees or carried interest distributions applicable
to such investors (as determined by CEM in its sole discretion).
In addition to management fees and carried interest distributions, each Client generally bears all costs and
expenses in connection with the business and operations of such Client, subject to the terms and
conditions set forth in the applicable Account Documents of such Client.
Subject to the applicable Account Documents, each Client generally is responsible for paying all costs
and expenses incurred in connection with the organization, operation and activities of such Client
including, without limitation, all fees, expenses, costs, liabilities and obligations relating or attributable
to: (i) activities with respect to the identifying, sourcing (including meeting with consultants, finders,
broker-dealers and other sources of investments), structuring, organizing, negotiating, consummating,
financing, refinancing, diligencing (including any subscriptions to any periodicals or databases and dues
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