FEES AND COMPENSATION
A. Advisory Fees and Compensation.
The fees applicable to each Fund will be set forth in detail in each Fund's offering
documents. The fees applicable to each Managed Account will be set forth in detail in each
Managed Account's investment management agreement. A brief summary of such fees, expenses,
and compensation (all of which is qualified by and subject to the language of the applicable Fund's
offering documents) is provided below.
1. The Funds
Management Fee. The Domestic Fund and the Offshore Fund will pay the Investment
Manager as of the beginning of each quarter a fee for management services (the "Management
Fee") equal to the product of 0.25% (1.0% annualized) multiplied by (a) the balance of each
Limited Partner's capital account and (b) a Limited Partner's share of the cost basis of all
investments held by the Funds that are designated by the Investment Manager as "Special
Investments" in which the Limited Partner has an interest, in each case, as of the beginning of such
quarter (before taking into account the estimated accrued Incentive Allocation (as defined below),
if any).
Payment of the Management Fee will be made within 10 days of the beginning of each
quarter or as soon as reasonably practicable thereafter. The Management Fee will be prorated for
any capital contribution by a Limited Partner that is effective other than as of the first day of a
fiscal quarter.
The Investment Manager, in its sole discretion, may elect to reduce, waive or calculate
differently the Management Fee with respect to any Limited Partner, including, without limitation,
any employee or affiliate of the Investment Manager, any family member thereof or trusts, estate
planning and other investment accounts and/or vehicles established by or for the benefit of such
persons. The Fund General Partner will not be charged the Management Fee. The Fund General
Partner may, without the consent of the Limited Partners, cause the Management Fee to be charged
to and paid by the Mini-Master Fund instead of the Offshore Fund.
The Investment Manager and its affiliates may receive transaction fees, monitoring fees,
break-up fees, exit fees, directors' fees and other advisory fees from or in respect of actual or
proposed investments that are related to the Funds (collectively, "Transaction Fees"). The
applicable Management Fee borne by the Limited Partners participating in the investment
(including any Special Investment) to which any Transaction Fees relate will be reduced by an
amount equal to the amount of such Transaction Fees (or a pro rata portion thereof, if other
Donerail Funds or related co-investing entities have invested in the investment generating such
payment). Other types of fees paid to, or income earned by, the Investment Manager and its
affiliates will not reduce the Management Fee. No amount of a Transaction Fee that is in excess
of the Management Fee will be refunded to the Funds or the Limited Partners in the event of
dissolution of the Funds.
DOC ID - 31921532.5 4
Incentive Allocation. Generally, at the end of each fiscal year of the Domestic Fund and
the Offshore Funds, such Funds will reallocate from each capital account of each Limited Partner
to the capital account of the Fund General Partner an amount (the "Incentive Allocation") equal to
the result of 15% multiplied by the amount of the net capital appreciation (taking into account
gains and losses realized with respect to Special Investments and income related to Special
Investment allocated during the fiscal year) allocated to such capital account of such Limited
Partner for such fiscal year after reduction by an amount equal to the amount of the Management
Fee debited to such capital account for such fiscal year; provided, however, that the net capital
appreciation upon which the calculation of the Incentive Allocation is based will be reduced to the
extent of any balance in such capital account's Loss Recovery Account (as defined below). The
Incentive Allocation will also be made with respect to net capital appreciation attributable to
amounts withdrawn and to amounts transferred (provided that such transfer results in a change in
the beneficial ownership of the interest transferred) and in connection with the termination of the
Funds.
The Domestic Fund and the Offshore Fund maintain a loss recovery account (a "Loss
Recovery Account") for each capital account of a Limited Partner that tracks the losses that must
be recouped before an Incentive Allocation can be made with respect to such capital account of a
Limited Partner (i.e., tracks the "high water mark" of such capital account). The balance in each
capital account's Loss Recovery Account is adjusted at the end of each fiscal year (and immediately
prior to the creation of a Special Investment account) to reflect the aggregate net capital
depreciation with respect to such capital account (but excluding any unrealized gains and losses in
Special Investment accounts). The Loss Recovery Account will also be adjusted as necessary to
account for net capital appreciation and intra-year withdrawals (including, for the avoidance of
doubt, capital that is withdrawn from such capital account as a result of the creation of a Special
Investment account, which shall proportionately reduce the balance in each capital account's Loss
Recovery Account by the fraction expressed as a percentage with respect to such balance, which
equals (x) the capital that is withdrawn as a result of the creation of such Special Investment
account and (y) the aggregate capital account balance prior to the creation of such Special
Investment account). Any reduction to a Loss Recovery Account upon the establishment of a
Special Investment account will be reversed upon the realization of the Special Investment related
to such Special Investment account.
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