Item 5. Fees and Compensation
We receive a management fee from the Spring Lake Funds based on either capital committed
during the investment period or cost basis of the portfolio after the investment period. Beginning
January 1, 2025, we voluntarily adjusted the post investment period management fee of a Fund to
be calculated on the lower of cost basis or fair market value on a portfolio company by portfolio
company basis. Each of the Spring Lake Equity GP Entities has the right to receive performance-
based compensation in the form of a “carried interest” with respect to the Spring Lake Fund for
which it serves as managing member. Fund investors may negotiate with respect to the
management fee and “carried interest” paid with respect to their interests in a Spring Lake Fund.
The Spring Lake Equity GP Entities are permitted to enter into a “side letter” with an investor with
respect to economic, as well as other, terms. See Item 11 (“Code of Ethics, Participation or Interest
in Client Transactions and Personal Trading” / “Certain Potential Conflicts.”)
The Spring Lake Equity GP Entities generally make capital calls on investors in the Spring Lake
Funds sufficient to pay our management fees and, through our control over the Spring Lake Equity
GP Entities, we cause the Spring Lake Funds to pay those fees to us.
With respect to the Spring Lake Funds, our fees and compensation and that of the Spring Lake
Equity GP Entities are set forth in investment management agreements, Fund governance
documents, or “side letters” with some investors. We generally are reimbursed by a portfolio
company held by the Spring Lake Funds for travel and lodging expenses incurred by directors
appointed by a Spring Lake Fund.
Third-Party Fees and Expenses
In addition to the payment of management fees and performance-based compensation, the Spring
Lake Funds each pay certain third-party fees and expenses. We or one of the Spring Lake Equity
GP Entities is each responsible for customary overhead expenses of managing each of the Spring
Lake Funds, including compensation for employees, rent and utilities. Each of the Spring Lake
Funds is responsible for all other expenses incurred by it or on its behalf that are not reimbursed
by portfolio companies, including legal, auditing, consulting, financing, accounting and
administration fees and expenses of the Fund; expenses associated with the Fund’s financial
statements, tax returns and K-1s; expenses associated with Advisory Committee and annual
meetings; out-of-pocket expenses of Spring Lake Equity Manager and the Spring Lake Equity GP
Entities for transactions not consummated; other expenses associated with the acquisition, holding
and disposition of investments, including but not limited to, break-up costs, other third-party costs,
and extraordinary expenses (such as litigation, if any); insurance costs, including D&O insurance
and any taxes, fees or other governmental charges levied against the Spring Lake Funds. Investors
in the Spring Lake Funds are assessed periodically for such expenses in accordance with their
respective sharing percentages.
Each of the Spring Lake Funds has borne all organizational and offering expenses (including legal,
travel, accounting, filing, capital-raising and other expenses) incurred in connection with its
formation and formation of other related or affiliated entities, as well as the offering of interests in
the Spring Lake Funds. Please see Item 14 for additional information regarding placement fees
(“Client Referrals and Other Compensation”).
Expenses that benefit more than one Spring Lake Fund are allocated among the benefitting Spring
Lake Funds based on measures that are intended to estimate relative benefit, including, in some
instances, relative assets and relative investment size. However, our co-investment funds generally
are not expected to pay broken deal expenses, because such funds are generally formed to invest
in a specific security and are not formed until it has been determined that the investment will be
going forward. If the investment does not go forward (that is, there is a broken deal), there
generally is not a co-investment fund that could share in the costs that have been incurred in
exploring the transaction. Similarly, expenses that benefit a Fund and us (or a Spring Lake Equity
GP Entity) are allocated between that Fund and is based on measures that are intended to estimate
relative benefit.
Item 6. Performance Fees and Side by Side Management
Spring Lake Equity GP Entities, or the principals of Spring Lake Equity Management, receive, or
have the potential to receive, compensation based on the performance of the Spring Lake Funds.
This arrangement creates an incentive for us to cause a Client to make investments that are more
speculative than would be the case in the absence of performance-based compensation. However,
this incentive may be tempered by the fact that losses will reduce a Client’s performance, and thus
potentially reduce the compensation paid to the principals of Spring Lake Equity Management or
our affiliates. As relates to the co-investment Funds, this conflict is substantially mitigated by the
fact that they are invested in a single portfolio company that is identified at the time of the
investment.