Item 5: Fees and Compensation
In general, the Adviser receives a management fee (a “Management Fee”) and a carried interest in
connection with its advisory services to the Funds. The Adviser receives additional compensation in
connection with management services performed for portfolio companies of the Funds and may also receive
additional compensation for other services performed for such portfolio companies. To the extent received,
any such additional compensation offsets in whole or in part the management fees otherwise payable to the
Adviser. In addition, the Adviser may receive compensation for management and other services performed
in connection with co-investments, whether made in portfolio companies of the Funds or otherwise.
Investors and, in certain circumstances, co-investors in a Fund also bear certain expenses. Please refer to
each Fund’s governing documents for a more complete description of the expenses permitted to be borne
by such Fund.
Management Fees
The precise amount of, the manner and calculation of and the manner and timing of payment of the
Management Fee for each Fund is established by the Adviser, and is set forth in such Fund’s Partnership
Agreement, advisory agreements, organizational documents and/or documentation received by each
investor prior to investing in such Fund. The Management Fees and other fees 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 of the Funds may be modified from time to time and Management
Fees may differ from one Fund to another, as well as among investors in the same Fund.
The Management Fee is reduced by an amount equal to 100% of all of a Fund’s non-affiliated investors’
percentage of any closing fees, investment banking fees, placement fees, commitment fees, breakup fees,
litigation proceeds from transactions not consummated, monitoring fees, consulting fees, directors’ fees
and other similar fees (collectively, “Portfolio Company Fees”). The offset of such Portfolio Company
Fees is applied to the Management Fee for the three month period immediately following the quarterly
period of receipt (unless otherwise agreed with the limited partners of a Fund) and, if the amount of such
Portfolio Company Fees exceeds the Management Fee for such period, each subsequent Management Fee
period until all such Portfolio Company Fees have been so applied; provided, that if any such excess
Portfolio Company Fees remain unapplied as of the dissolution of the relevant Fund, the Adviser will rebate
to any applicable limited partner that has so elected in its subscription agreement or otherwise an amount
of the Management Fee equal to the lesser of (1) such limited partner’s pro rata share of any such unapplied
Portfolio Company Fees and (2) the amount of the Management Fee previously paid by such limited partner.
Notwithstanding the foregoing, the Adviser and certain of its related persons, including industry experts
and other third-party consultants (generally referred to herein as “industry experts”), may receive fees
from portfolio companies and other persons for consulting, advisory or similar services at market rates and
such fees will not be included in the Management Fee offset described above. In particular, industry experts
may receive compensation (including, without limitation, cash, stock options and other in-kind
compensation) from certain portfolio companies, none of which, if received, will be treated as Portfolio
Company Fees or otherwise result in an offset to or reduction of the Management Fee.
Various costs and expenses reduce Portfolio Company Fees (and therefore such amounts will not reduce
the Management Fee), including out-of-pocket costs and expenses (including travel expenses) incurred by
the Adviser in connection with any consummated or unconsummated transaction or in connection with
generating any such Portfolio Company Fees.
When applicable, the Adviser typically will also be paid fees of the type referred to in the preceding
paragraphs from, on behalf of or with respect to co-investors in an investment. The receipt of such fees will
not reduce the Management Fee payable by any Fund(s) that have also invested in such investment and, as
a result, a Fund will, in most cases, only benefit with respect to its allocable portion of any such fee and not
the portion of any fee that relates to such co-investors.
To the extent permitted under the relevant Partnership Agreement, the Adviser may waive or agree to reduce
the Management Fee. Certain waived portions of the Management Fee will be treated as a deemed capital
contribution by the relevant General Partner, which effectively will be invested in the relevant Fund on
such General Partner’s behalf, and will operate to reduce the amount of capital such General Partner would
otherwise be required to contribute to the relevant Fund. The limited partners of a Fund may be required
to make a pro rata contribution according to their respective commitments to fund any contribution that
would otherwise be required of such Fund’s General Partner in connection with any such waiver or
reduction as described above and, as a result, the exercise of such waiver may result in an acceleration (or
delay) of investor capital contributions. Waived or reduced Management Fees are not subject to the
Management Fee offsets described above, and the amount of such waived or reduced Management Fees
may be significant. Due to waived or reduced Management Fees by the Adviser and/or timing of receipt
of compensation subject to offsets (as described above), it is possible that Management Fee offsets will not
be fully realized by investors in a Fund, resulting in a net additional benefit to the Adviser.
Carried Interest
The Adviser receives a carried interest with respect to each Fund unless otherwise agreed by the Adviser.
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