ITEM 5 – FEES AND COMPENSATION
The Adviser or its affiliates generally receive Management Fees and Carried Interest (each as
defined below) or similar performance-based remuneration from a Fund. A Fund, and/or its
portfolio companies may also make other payments to the Adviser or its affiliates for services
provided to the portfolio companies which, in certain circumstances, may reduce the Management
Fees payable to the Adviser. Additionally, consistent with the Organizational Documents of a
Fund, the Fund typically bears certain out-of-pocket expenses incurred by the Adviser in
connection with the services provided to the Fund and/or the portfolio companies. Further details
about certain common fees and expenses are set forth below.
Management Fees
As compensation for investment supervisory services rendered to the Funds, the Adviser receives
from each such Fund a Management Fee, typically at an agreed fixed rate for a fixed number of
years and then subsequently calculated based on the remaining net invested capital, with respect
to such Fund. Management Fees are payable quarterly in advance. Management Fees are reduced
throughout the life of a Fund. Management Fees paid by a Fund may also be reduced by other fees
or compensation received by the Adviser or its affiliates that relate to such Fund’s activities
and investments, or by certain organizational or other expenses borne by such Fund, as described
in more detail below. Management Fees paid by a Fund are indirectly borne by investors in such
Fund.
The precise amount and calculation of the Management Fees for each Fund are set forth in
such Fund’s Limited Partnership Agreement, Advisory Agreement and/or the Organizational
Documents received by each investor prior to investment in such Fund. Management Fee structures
can differ from one Fund to another.
Certain investors in the Funds that are employees, partners, members, directors, managers and
officers of the Adviser or its affiliates, certain business associates (collectively, the “Adviser
Investors”) will not typically pay Management Fees in connection with their investment in a Fund.
Upon termination of an Advisory Agreement, Management Fees that have been prepaid are
generally returned to Fund investors on a prorated basis. However, in certain instances, including
in the case of termination for a non-causal event, the Adviser may be entitled to a compensation
payment equal to the prior 12 months of management fees.
In addition to the Management Fees discussed above, the Adviser and/or its affiliates will receive
a Carried Interest allocation as described in Item 6 below.
Other Fees
Fees Payable by the Portfolio Companies
The Adviser and its affiliates may, from time to time, perform transaction-related, management,
advisory, financial advisory, monitoring, consulting and other services for, and receive fees
from, actual or prospective portfolio companies or other investment vehicles of the Funds, which
fees will be in addition to the Management Fee and the Carried Interest paid by a Fund (such fees,
together with the other fees described in this section, “Other Fees”). These services may include
services provided by certain of the Adviser’s employees. The Other Fees may also include fees
received by the Adviser and its affiliates in connection with service on the board of directors of a
portfolio company, and the break-up fees received in connection with unconsummated
transactions. The Management Fee payable by a Fund shall be reduced by an amount equal to
100% of any such Other Fees. The amount and manner of such reduction, if any is set forth in the
Advisory Agreement and/or Organizational Documents of the applicable Fund.
In many cases with respect to the implementation of the arrangements described above, there is
not an independent third-party involved on behalf of the relevant portfolio company. Therefore, a
conflict of interest exists in the determination of any such fees and other related terms in the
applicable agreement with the portfolio company.
Expense Reimbursement
Additionally, a portfolio company may reimburse the Adviser for expenses, including without
limitation, due diligence costs (which without limitation may include: accounting and taxation
reviews, legal reviews, intellectual property rights reviews, personnel background check reviews,
technology reviews, independent experts and consultants), travel expenses, which may include
expenses for travel, meals and entertainment expenses (including, as applicable, closing dinners
and mementos, transportation and meals, social and entertainment events with portfolio company
management, customers, clients, borrowers, brokers and service providers), expenses relating to
training programs, meetings or other events (to the extent such programs, meetings or events are
attended by portfolio company personnel), expenses relating to hiring portfolio company personnel
(including background checks, recruiting and relocation expenses), indemnification expenses,
certain legal expenses and similar out-of-pocket expenses, as well as consulting fees and other
cash and non-cash compensation and expenses, incurred by the Adviser in connection with its
performance of services for such portfolio company; such reimbursed expenses are generally not
included in the definition of “Other Fees” under the terms of the applicable Organizational
Documents, and such reimbursements are not subject to the Management Fee offset
arrangements described above. To the extent not reimbursed by a portfolio company, such
expenses may be paid or reimbursed by the applicable Fund, as described below.
In addition to arrangements where the Adviser or its affiliates may receive reimbursements of
expenses, the Adviser will make recommendations regarding the engagement of services providers
or the incurrence of expenses by the Funds. Because certain expenses are paid for by the Funds
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