Item 5: Fees and Compensation
A. Advisory Fees and Compensation
It is critical that Investors refer to the Governing Documents for a complete understanding of how
advisory fees are paid to NightDragon. The information contained herein is a summary only and is
qualified in its entirety by such documents.
Management Fees: NightDragon receives compensation for the provision of investment advisory
services to the Fund in the form of Management Fees. Management Fees paid by the Fund are
calculated based on committed capital and subject to various offset or other provisions within the
Fund Governing Documents. The precise amount of, and the manner and calculation of, the
Management Fees for the Fund are established by NightDragon and are set forth in the Fund’s
Governing Documents received by each Investor prior to investment in the Fund. The fee structures
described herein may be modified from time to time. NightDragon, in its sole discretion, may modify,
reduce or waive any Management Fee at any time, including with respect to one or more Investors.
Carried Interest: A portion of the profits of the Fund is distributed to the General Partner, if any, as
“carried interest” (the “Carried Interest”) generally related to and based on the investment
performance of the Fund. The allocation of Carried Interest is dependent on meeting certain criteria
defined in accordance with the Governing Documents of the Fund.
B. Payment of Fees
Pursuant to the terms of the various Governing Documents, NightDragon deducts advisory fees from
Fund assets as follows:
• Management Fees are calculated on the first day of the fiscal quarter, payable in advance of
the applicable quarter.
• Carried Interest paid by the Fund is typically based on profits realized from the Fund’s
investments. Carried Interest, if applicable is earned and payable in accordance with the terms
set out in the applicable Governing Documents for the Fund.
Certain affiliated persons of NightDragon that participate in the Fund are not charged advisory fees
as described above.
C. Other Advisory Client Fees and Expenses
To the extent provided in the Governing Documents of the Fund, the Adviser will bear all normal
operating expenses incurred in connection with the management of the Fund, which generally shall
include, without limitation, expenditures on account of salaries, wages and other expenses of
employees of the Adviser, rentals payable for space used by the Adviser or the General Partner,
utilities, office supplies and equipment.
To the extent set forth in the Fund’s Governing Documents, the Fund shall bear all costs, expenses
and losses incurred by the Fund, the General Partner or the Adviser and associated with formation,
operation, dissolution, winding-up, or termination of the Fund: out-of-pocket expenses associated
with the organization of the General Partner or the Fund or the syndication of interests therein; legal,
accounting, audit, valuation, tax compliance, regulatory compliance, custodial, registered agent and
other professional fees; consulting fees relating to services rendered to the Fund that could not have
been reasonably rendered by the General Partner or its members in the ordinary course of their
activities; banking, brokerage, registration, qualification, finders, depositary and similar fees or
commissions; transfer, capital and other taxes, as well as charges, duties and fees, and any other out-
of-pocket costs (including broken-deal, unconsummated deal and similar fees and costs, as well as
costs of data, market intelligence and similar services), incurred in evaluating, acquiring, holding,
monitoring, selling or otherwise managing or disposing, or hedging against changes in the value of
Fund investment opportunities, assets or obligations; insurance premiums, indemnifications, costs of
litigation and other extraordinary expenses; costs of financial statements and other reports to
Investors, costs of governmental returns, reports and other filings, and costs of governmental
examinations, audits, investigations and similar proceedings; costs of meetings of the Investors
(meetings of the Advisory Committee), including the reasonable travel and other out-of-pocket costs
incurred by the General Partner (and Advisory Committee members) in attending such meetings;
interest expenses; amounts paid to or for the benefit of portfolio companies other than as capital
contributions thereto or in exchange for securities issued thereby; the Management Fee, as well as any
out-of-pocket costs, expenses or losses incurred in generating or realizing fees subject to offset;
advertising (including event sponsorship and attendance, and professional organization costs) and
public notice costs; costs and expenses associated with preparing Fund tax returns, making tax
elections and determinations, and similar activities; taxes and other governmental charges imposed
upon the Fund as an entity; reasonable out-of-pocket travel, business meals and related expenses
incurred by the General Partner or the Adviser in connection with their activities on behalf of the
Fund or portfolio company; fees and expenses chargeable by qualified independent persons appointed
to serve as members of the Advisory Committee; and any other expenses not listed in the preceding
clauses above that are not normal operating expenses of the General Partner.
Subject to the Governing Documents of the Fund, to the extent that the Fund bears any expenses:
(a) that relate to a portfolio company investment and that benefit one or more investment entities
advised or managed by the Adviser, such expenses shall be allocated equitably among such entities by
the applicable General Partner in its reasonable discretion; and (b) that do not relate to a portfolio
company investment and that also benefit one or more investment entities advised or managed by the
...