5. Fees and Compensation
In general, Ethos Capital or an affiliate thereof receives a Management Fee (as defined below)
and a carried interest in connection with the provision of discretionary advisory services to the
Funds (and in certain instances, for services provided to an SPV). Ethos Capital or affiliates receive
additional compensation in connection with management and other services performed for
Portfolio Companies of the Funds and SPVs and such additional compensation will offset in whole
or in part the management fees otherwise payable to Ethos Capital, as and to the extent provided
by the Governing Documents. In addition, in certain circumstances Ethos Capital receives
compensation for management and other services performed in connection with co-investments
made in Portfolio Companies of the Funds and SPVs. Investors in a Fund or SPV also bear certain
expenses. The inclusion of an expense category in a Fund’s Governing Documents will not impose
on Ethos Capital an obligation to charge an expense (or the full amount of that expense) solely to
that Fund; instead, permitted expenses are permitted to be allocated and charged in Ethos
Capital’s discretion to the Fund(s) it deems appropriate.
Additionally, a portion of certain SPVs’ net investment profit will be allocated to the capital account
of Ethos Capital or a related person of Ethos Capital serving as its Managing Partner or in an
equivalent capacity as “carried interest” as set forth in each SPV’s Governing Documents.
Management Fees:
During a Fund’s investment period, such Fund will pay Ethos Capital a management fee (the
“Management Fee”) equal to 2.0% per annum on aggregate investor capital commitments
(“Commitments”). Upon a date specified in the Governing Documents (the “Stepdown Date”), the
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Management Fee of the relevant Fund will be reduced and will equal 2.0% per annum of (a) the
aggregate investment contributions made (or payable to the relevant Fund pursuant to any
outstanding capital call notice or capital call notice the relevant General Partner intends to issue
to repay indebtedness incurred pursuant to the Governing Documents), less the aggregate amount
of investment contributions with respect to the portion of each investment that has been disposed
of or permanently written-down. The Management Fee will be payable until the final distribution of
the relevant Fund’s assets or until Ethos Capital’s relationship with the Fund is terminated for other
reasons (as described in the Governing Documents). Installments of the Management Fee payable
for any period other than a full quarterly period are adjusted on a pro rata basis according to the
actual number of days in such period. As a general matter, Management Fees will be payable
during term extensions unless otherwise agreed with Investors.
As is generally the case in private equity funds, the Governing Documents provide that a Fund’s
Management Fees will be calculated and charged on a basis that generally is not tied to the Fund’s
then-current net asset value.
Under the Governing Documents, where the fair market value of an investment exceeds the total
amount of investment contributions relating to such investment, post-Stepdown Date Management
Fees will not be calculated based upon such appreciated value, and will instead continue to be
calculated based on the amount of applicable investment contributions. Conversely, the Governing
Documents do not require Management Fees to be reduced or refunded following the occurrence
of a write-down, decrease (including a significant decrease) in fair value or other event not
constituting a complete realization, such as a partial sale or disposition, reorganization,
recapitalization (including capitalizations involving dividends), roll-over investment in connection
with a sale or dividend distribution, except in the case of partial dispositions or permanent write-
downs that result in the aggregate value of all remaining investments in the relevant Portfolio
Company being less than the aggregate investment contributions with regard to all existing or
former investments in such Portfolio Company (an “Impaired Value Investment”). Due to
differences in the criteria set forth in their respective Governing Documents, in the event where
more than one Fund participates in an investment, there is the possibility that an investment will
become an Impaired Value Investment for purposes of one Fund’s Governing Documents but not
those of one or more other Funds. For the avoidance of doubt, following the Stepdown Date, if a
partial disposition or permanent write-down results in an investment becoming an Impaired Value
Investment, then the amount of Management Fees otherwise payable relating to the remaining
investment(s) in the relevant Portfolio Company will be reduced taking into account the portion of
the investment(s) realized or permanently written-down, as applicable, as compared to the amount
of total investment contributions made with respect to all existing and former investments in the
relevant Portfolio Company.
As a result, and as is generally the case for private equity funds, the amount of Management Fees
generally will not correspond with fluctuations in the net asset value of individual investments or of
the Fund, including following the relevant investment period, and will not be reduced in connection
with any write downs (whether temporary or permanent), except in the case of Impaired Value
Investments. Except where the Governing Documents expressly provide to the contrary,
Management Fees will not be reduced (in whole or in part) in the case of partial sales or
dispositions, dividend recapitalizations, reorganizations, restructurings, roll-over investments,
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extraordinary dividends or similar transactions or in circumstances where one or more other
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