Item 5 – Fees and Compensation
Fees
Each Management Company receives a management fee (the “Management Fee”) from each of
the Funds to which they provide day-to-day advisory services, as specified in the applicable LPA.
The SLP’s may receive an allocation of Carried Interest upon the disposition of a Portfolio
Company of the Fund with which they are affiliated. Portfolio Companies of the Funds generally
compensate the relevant Management Company for certain management consulting and
financial advisory services provided to it by the Management Company (“Monitoring Fees”). In
addition, the relevant Management Company may provide transaction advisory services to the
Funds’ Portfolio Companies in connection with mergers, acquisitions, add-on acquisitions,
refinancing transactions, restructurings, divestments, sales, and similar transactions, and may
receive compensation from these Portfolio Companies for such services (collectively,
“Transaction Fees”). In many cases the Monitoring Fees and Transaction Fees paid by Portfolio
Companies to the Management Company of a specific Fund will partially offset the Management
Fee payable by that Fund to that Management Company, as specified in the applicable LPA and
further described herein. Monitoring Fees and Transaction Fees that are paid by a Portfolio
Company that is owned by two or more Funds are allocated pro rata based on each Fund’s
ownership.
The Funds also incur certain operating expenses as described below and as further specified in
each Fund’s respective LPA. Any expenses incurred by a Management Company on behalf of a
Fund are reimbursable by the Fund to the Management Company subject to the terms of the
applicable LPA. If any expenses are associated with two or more Funds, such expenses will be
allocated to each Fund in a fair and reasonable manner based on the Management Company’s
good faith judgement, notwithstanding its interest (if any) in the allocation.
Management Fees
The applicable Management Company receives a Management Fee from the Funds as generally
described below. The terms of any fee charged by future funds formed by a Management
Company or its affiliates may differ materially from those described below:
River VI, L.P.
River VI, L.P. pays a Management Fee to River Associates Investments (TN), LLC quarterly,
in advance, equal to (i) before the Fee Reduction Date, 0.50% (i.e., 2.00% annually) of the
total capital contributions made or committed to be made, and (ii) after the Fee
Reduction Date, 0.50% (i.e., 2.00% annually) of the net capital invested in Portfolio
Companies. The Fund is past its Fee Reduction Date and currently has no Portfolio
Company investments.
River VI Parallel, L.P.
River VI Parallel, L.P. pays a Management Fee to River Associates Investments (TN), LLC
quarterly, in advance, equal to (i) before the Fee Reduction Date, 0.50% (i.e., 2.00%
annually) of the total capital contributions made or committed to be made, and (ii) after
the Fee Reduction Date, 0.50% (i.e., 2.00% annually) of the net capital invested in
Portfolio Companies. The Fund is past its Fee Reduction Date and currently has no
Portfolio Company investments.
River VII, L.P.
River VII, L.P. pays a Management Fee to River Associates Investments, L.P. quarterly, in
advance, equal to (i) before the Fee Reduction Date, 0.50% (i.e., 2.00% annually) of the
total capital contributions made or committed to be made, and (ii) after the Fee
Reduction Date, 0.50% (i.e., 2.00% annually) of the net capital invested in Portfolio
Companies. The Fee Reduction Date for this Fund occurred on June 30, 2022.
River VIII, LP
River VIII, LP pays a Management Fee to River Associates Investments, L.P. quarterly, in
advance, equal to (i) before the Fee Reduction Date, 0.50% (i.e., 2.00% annually) of the
total capital contributions made or committed to be made, and (ii) after the Fee
Reduction Date, 0.50% (i.e., 2.00% annually) of the net capital invested in Portfolio
Companies. The Fee Reduction Date for this Fund has not yet occurred as of this date per
the terms of the Fund’s LPA.
Because (a) Management Fees, for the period after the Fee Reduction Date, are typically based
upon the amount of deployed capital; and (b) [certain investors who are affiliates of River
Associates typically are not charged their pro rata portion of the Management Fees per the terms
of the applicable LPA, the Management Fee structure may create an incentive for River
Associates to cause the Funds to make investments that it may not otherwise make if this
structure was not in place, which presents a potential conflict of interest. River Associates
believes that its Principals’ investments in the Funds generally serve to align their interests with
the Funds’ Limited Partners in this respect. The Funds generally invest on a long-term basis. As
such, Management Fees and other fees are expected to be paid, except as otherwise describe in
the relevant LPA, over the term of the relevant Fund, and investors generally are not permitted
to withdraw or redeem interests in the Fund.
Portfolio Company Fees and Expenses, Management Fee Offsets
In general, and as more fully described in each Fund’s LPA, the Management Fee of the Funds
will be partially reduced by a portion of the Monitoring Fees, directors’ fees, financial consulting
fees, advisory fees, break-up fees, or Transaction Fees paid by Portfolio Companies or prospective
Portfolio Companies of a Fund to River Associates. To the extent any Management Fee is subject
to an offset amount that would reduce the Management Fee for a given year below zero, a credit
against the Management Fee will be carried forward and added to the fees subject to offset in
future periods. Each Management Company has general discretion over the amount of such fees,
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