Item 5 Fees and Compensation
For services provided to each Fund, Mill Road charges a management fee, which is generally
computed at a rate of 2.0% per annum of the investors’ aggregate commitments until the end of
the Investment Period (as described in the Fund’s operating documents), and, thereafter, 2.0%
per annum of the cost basis of all investments then held by the Fund which were funded by limited
partner capital contributions, provided that the cost basis would be reduced by investments
written off or permanently written down, as applicable, by such Fund. Fees are payable by the
Fund quarterly, in advance. If Mill Road ceases to provide services to the Fund, the unearned
portion of the management fee (computed on the basis of the number of days elapsed) will be
refunded to the Fund.
The management fees paid by each Fund, and any capital contributions called to pay such
expenses, are allocated to the limited partners in each Fund in proportion to their respective
capital contributions. Mill Road has and could in the future agree with any investor in a Fund to
waive or reduce these management fees at its discretion, and the allocation of the management
fee expense of the Fund reflects any such reductions or waivers.
The management fee for each Fund is reduced and offset by the full amount of any advisory,
monitoring, commitment, director’s, financial consulting, transaction, break-up or similar fees
Mill Road or its affiliates receive from existing or prospective portfolio companies, to the extent
apportionable to the activities of such Fund. In Fund II and Fund III, the management fee was also
reduced by any placement agent fees paid by the Fund.
Mill Road does not charge a management fee to the AIVs.
Fund III was responsible for paying the expenses of organizing Fund III, including Fund III GP, the
aggregate amount of these expenses in excess of $1.5 million was to reduce/offset Fund III’s
management fee. Fund III’s expenses were not in excess of the $1.5 million amount. Fund I and
Fund II were responsible for paying or reimbursing the first $1 million in aggregate expenses of
organizing Fund I and Fund II, respectively, including Fund I GP and Fund II GP, and the remainder
of these expenses were borne by the Firm.
As permitted by their respective Limited Partnership Agreements, the Clients bear their respective
operating costs and expenses, including the following: (i) expenses for legal services, (ii) expenses
for third party services in connection with custody, administration, bookkeeping and
recordkeeping, and in the case of Fund III any portion of compensation of the Firm that is
attributable to services that would otherwise be provided by a third-party fund administrator, (iii)
expenses for auditing, accounting, tax and other services of independent registered public
accountants, (iv) expenses for consulting (including the use of expert networks and research
consultants) and all other professional services (including in Fund III services for licensing,
implementing or maintaining of any internet portal), (v) brokerage fees, commissions, discounts
and all other expenses incurred in connection with the purchase, holding or sale of securities by
the Clients and in the case of Fund II and Fund III for Investments (whether or not consummated),
as defined in the limited partnership agreements, (vi) travel, lodging and other expenses incurred
directly in connection with a transaction or proposed transaction (whether or not consummated)
by the Clients that are payable by the Clients or Mill Road to unaffiliated third parties, (vii) filing
fees, (viii) taxes, fees, assessments and all other governmental charges levied or assessed against
the Clients including all expenses relating to the compliance-related matters and regulatory filings
of the Clients including all filings required by Sections 13(d), (f) or (g), and Section 16 of the United
States Securities Exchange Act of 1934 and expenses incurred in connection with the registration
or exemption from registration of the Securities held by any Clients under the United States
Securities Act of 1933 (the “Securities Act”), (ix) expenses of any lenders, investment banks and
other financing sources incurred by the Clients, (x) expenses of providing reports and other
information to the Clients’ limited partners and expenses of holding meetings of the Clients’
limited partners, (xi) expenses and fees incurred by the tax matters partner of the Clients (the
general partner of each Client currently is the tax matters partner of the Client), (xii) expenses and
fees incurred by the advisory committees and their members, (xiii) the cost of insurance coverage
associated with the operation of the Clients including the reasonable premiums of liability
insurance, and (xiv) other than those to be borne by a Client’s general partner or Mill Road, all
other liabilities and expenses (including judgments, fines, penalties, amounts paid in settlement,
attorneys’ fees, and costs of investigation) incurred by or on behalf of the Clients in connection
with the conduct of the activities of the Clients or the defense or disposition of any claim, action,
suit or proceeding, whether civil, criminal, administrative or investigative, arising in connection
with the conduct of the activities of the Clients.
In addition, when agreed to with Mill Road, the portfolio companies of the Clients bear certain
costs and expenses related to the activities associated with a Client’s investment or potential
investment in that particular company, including travel and lodging, meals while traveling,
accounting, tax, consulting, due diligence, legal and research.
Please see “Item 12. Brokerage Practices” of this Brochure for more information about the Firm’s
brokerage arrangements for the Clients.
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