Item 5 - Fees and Compensation
For providing its management services, Mason Wells Partners II is entitled to receive from Fund
II both management and growth-based fees, as described in this Item and Item 6 below. Fees are
established by the terms of Fund II's Partnership Agreement, and are deducted from Fund II’s
assets as they become due (in the case of the Management Fees, quarterly in advance). The
managing member of Executive Fund II, who is affiliated with Mason Wells Partners II, may,
and in the past has, received certain Management Fees from Executive Fund II, in accordance
with its Operating Agreement.
Management Fees. Management Fees are paid by Fund II to Mason Wells Partners II quarterly
in advance. The Management Fees are currently 1% of Net Invested Capital. If Fund II’s term
continues after December 31, 2016, then the Management Fees will be reduced to 0.25% of Net
Invested Capital, unless the Limited Partners approve the continuation of a higher fee. For
purposes of calculating the Management Fees, “Net Invested Capital” means the aggregate
amount of money invested by Fund II in portfolio companies (less dividends which constitute a
return of capital) which are still owned by Fund II as of the date of determination, excluding any
portfolio company investments which have been completely written off the financial books and
records of Fund II.
Executive Fund II does not currently pay any Management Fees to its managing member, an
affiliate of Mason Wells Partners II.
Transaction Fees. Mason Wells Partners II (and its officers and affiliates) may receive
transaction fees from portfolio companies (or from entities that would be portfolio companies if
acquired). These fees include directors, transaction, and management fees. One-half of all such
fees received in any quarter will be credited against the Management Fee otherwise payable by
Fund II to Mason Wells Partners II for the following quarter, unless the transaction fees are in
excess of 1% of the underlying purchase or sales price in the transaction that led to the payment
of transaction fees (or, in the event that Fund II along with any limited partners of Fund II who
are invited to co-invest purchases less than 50% of the institutional equity invested in such
portfolio company, 1% of Fund II’s equity investment in the underlying transaction), in which
case the amount in excess of 1% will be completely credited against the Management Fee.
Break-up Fees. In addition, Mason Wells Partners II (and its officers and affiliates) may receive
break-up fees and all break-up fees (net of expenses) will be 100% credited against the
Management Fee.
Except as described above, Mason Wells Partners II does not receive any other form of
compensation from Fund II or Executive Fund II other than the growth participation described in
Item 6. However, Fund II is responsible for reimbursing Mason Wells Partners II for expenses
incurred on behalf of Fund II. Further, Fund II absorbs all of its own operating expenses, such as
those for accounting, administrative, legal, and management expenses and reimburses the
General Partner and the Advisory Board (in the case of Fund II) and the managing members (in
the case of Executive Fund II) for out-of-pocket expenses incurred to third parties in conjunction
with such operation and private placement, including such out-of-pocket costs incurred in
connection with the investigation of potential investments by the Fund.