Item 5. Fees and Compensation
As compensation for investment supervisory services rendered to the Funds, the Adviser receives
from each such Fund an advisory fee (each, an “Advisory Fee”). Advisory Fees paid by a Fund
are indirectly borne by investors in such Fund.
In addition, the Adviser and its affiliates may perform management, advisory, transaction-
related, financial advisory and other services (“Related Services”) for, and receive fees from,
actual or prospective portfolio companies or other investment vehicles of the Funds, including
fees in connection with mergers, acquisitions, add-on acquisitions, refinancings, public offerings,
sales and similar transactions (“Transaction Fees”). These Transaction Fees may be substantial
and may be paid in cash, in securities of the portfolio companies or investment vehicles (or rights
thereto) or otherwise. Although these fees are in addition to the Advisory Fees, the Adviser will
in some circumstances reduce the amount of Advisory Fees paid by the applicable Fund in
connection with the receipt of such fees. The amount and manner of such reduction is set forth
in the Advisory Agreement and/or organizational documents of the applicable Fund. As some
Funds may not pay Advisory Fees, any such reduction will not benefit such Funds. Any such
reduction of a Fund’s Advisory Fees will be limited to the extent of such Fund’s proportionate
interest in any such portfolio company. Additionally, a portfolio company may reimburse the
Adviser for expenses (including without limitation travel expenses, which may include expenses
for chartered or first class travel and meals and entertainment expenses) incurred by the Adviser
in connection with its performance of services for such portfolio company; such reimbursed
expenses are generally not included in the definition of “Transaction Fees” under the terms of the
applicable organizational documents, and such reimbursements are not subject to the sharing
arrangements described above. For a discussion of material conflicts of interest created by the
receipt of such fees and reimbursements, please see Item 11 below.
From time to time, the Adviser will (in its sole discretion), agree to pay a portion of a transaction
or other fee received from an actual or prospective portfolio company to a third party (“Third
Party Fee”), such as a consultant, advisor, finder, broker-dealer and/or investment bank. In such
event, the Third Party Fee is not a fee that the Adviser is entitled to retain and therefore, the
Adviser is not required under the terms of the applicable organizational documents to share such
Third Party Fee with the Funds.
The precise amount of, and the manner and calculation of, the Advisory Fees for each Fund are
established by the Adviser, as modified by negotiations with investors in the applicable Fund,
and are set forth in such Fund’s Advisory Agreement, organizational documents and/or other
documentation received by each investor prior to investment in such Fund. The Advisory Fees
and other fees and distributions described above are generally subject to waiver or reduction by
the Adviser in its sole discretion, both voluntarily and on a negotiated basis with selected
investors. The fee structures described above may be modified from time to time. Fees may
differ from one Fund to another, as well as among investors in the same Fund.
Advisory Fees, when applicable pursuant to a Fund’s organizational documents, are paid by the
Fund to the Adviser quarterly in advance on the first business day of January, April, July, and
October of each year.
Upon termination of an Advisory Agreement, Advisory Fees that have been prepaid (i.e., excess
fee credits) will be returned on a prorated basis to the extent not previously repaid to a Fund by
the Adviser, pursuant to the organizational documents of such Fund.
The Advisory Fees paid by a Fund will generally be reduced by the amount of fees paid by such
Fund to persons acting as a placement agent in connection with the offer and sale of interests in
such Fund to certain potential investors, as well as by fees incurred by the Adviser in connection
with the organization of such Fund that exceed a limit specified in such Fund’s limited
partnership agreement or analogous organizational documents. As some Funds may not pay
Advisory Fees, any such reduction will not benefit such Funds. In addition, the Adviser may
waive or reduce all or a portion of the Advisory Fee paid by a Fund in full or partial satisfaction
of any obligation of the Adviser and certain employees and affiliates of the Adviser to invest in
and alongside such Fund, which could result in acceleration of investor capital contributions.
Waived or reduced Advisory Fees may not be subject to various offsets or the reductions
described above. Due to waived or reduced Advisory Fees and/or the timing of receipt of
compensation subject to offsets, Fund investors may not receive the full benefit of reductions or
offsets (e.g., during periods when the Adviser no longer receives Advisory Fees and receives
compensation that would otherwise be subject to offset, the Adviser, depending on certain
elections that may be made by Fund investors, may be entitled to retain such compensation
without remitting any such amounts to the applicable Fund or its investments). In addition, in
circumstances when investors in a Fund may not pay Advisory Fees, the Adviser will retain the
portion of any amounts of Advisory Fees attributable to such investors without offset.
To the extent provided in the Advisory Agreements and the partnership agreements and other
organizational documents of the Funds, the Adviser will pay out of Advisory Fees certain
expenses and costs associated with the performance of its services, including expenses on
account of rent, utilities, office supplies, office equipment, travel, entertainment, compensation
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