Item 5 – Fees and Compensation
Management Fees
YieldCo and LeverageCo do not pay any management fees to TRYC Manager or TRLC Manager
respectively. CompoundCo pays TRCC Manager an annual management fee equal to .75% of the
assets under its management (the “Management Fee”). The Management Fee is payable to TRCC
Manager in quarterly installments in arrears, funded by amounts from the quarterly distributions it
receives from its investment into assets such as YieldCo and LeverageCo, in accordance with the
CompoundCo LLC Agreement.
Profit Share
Generally speaking, TRLC Manager and TRYC Manager do not receive traditional management
fees and instead receive a share of profits when profitable distributions are made to investors.
YieldCo and LeverageCo seek to generate income in three ways: profits from the sale of Operating
Subsidiaries, profit from the Cash From Operations, and the profits generated when a Member sells
its Units in a Company for a value greater than for which they were initially acquired. (Capitalized
terms are as defined in the applicable Governing Documents.) After expenses are paid at YieldCo
and LeverageCo, remaining cash is used to make distributions to investors (or CompoundCo when
it is the investor) and Tide Rock receives its share of these distributions.
For both YieldCo and LeverageCo, proceeds from the sale of Operating Subsidiaries and similar
realization events are distributed pursuant to an investment-level waterfall (or may be retained and
reinvested). Under this structure, as to distributions, investors are entitled, first, to receive a return
of capital contributions to the extent that the capital contributions attributable to the applicable
investment are not retained or reinvested. Second, investors receive distributions intended to
provide an 8% annual cumulative but non-compounded preferred return (the “Preferred Return”)
on such investment. Distributions then shift to a catch-up tier as set forth in the applicable
Governing Documents. Thereafter, any remaining proceeds are distributed 75% to the investors
and 25% to Tide Rock.
For purposes of these distributions, both the return of capital and the calculation of the Preferred
Return are measured by reference to the “TRY Investment Amount” or “TRL Investment Amount”
attributable to the applicable portfolio investment, which generally reflects a Company’s total
invested capital in that investment, including initial acquisition consideration and follow‑on capital
contributions. In addition, Tide Rock has discretion, upon an asset sale, to retain and reinvest
proceeds minus an annual tax distribution to investors as outlined in the Governing Documents.
With respect to YieldCo, TRYC Manager is entitled to receive 25% of Cash From Operations (as
defined in the Governing Documents). With respect to LeverageCo, TRLC Manager receives a
25% share of EBITDA generated from the operations of the Operating Subsidiaries in the form of
a fee.
With respect to each Manager, in connection with a member-level liquidity event, including a
transfer or repurchase of interests, proceeds are first distributed to the exiting investor until such
investor has received a return of capital. Thereafter, the remaining proceeds are distributed 75% to
the exiting investor and 25% to Tide Rock; provided, however, that with respect to a member of
CompoundCo, if Tide Rock has already received its 25% share in connection with such member’s
liquidity event at the YieldCo or LeverageCo level (or other Tide Rock entity investment level),
then the CompoundCo member will receive 100% of the remaining profits at the CompoundCo
level.
Collectively, the priority of distributions results in Tide Rock receiving a performance‑based share
of Company distributions that attempts to align Tide Rock with investors by providing a share of
profits when Operating Subsidiaries are sold, as well as when Operating Subsidiaries are held and
generate a profit. The amount ultimately received by Tide Rock depends on the level and timing
of operating cash flows, successful exits, and Company Unit price appreciation. Distributions to
Tide Rock or to investors may be funded through the use of leverage or other borrowings at a
Company or Operating Subsidiary level, which could increase financial risk. These arrangements
may create incentives for the Manager to pursue investment strategies, financing structures,
distribution timing, and exit strategies that generate distributable cash or realized gains, which may
not always align with an investor’s preference for longer‑term value maximization. Tide Rock
addresses these conflicts through the above attempted alignment in profit sharing, disclosure,
investor reporting, and its fiduciary obligations under applicable law.
Other Fees
In addition, Tide Rock may receive certain types of fee income from Operating Subsidiaries, such as
directors’ fees, consulting fees (including initial consulting services fees and other consulting fees paid
with respect to services provided to Operating Subsidiaries) the IPD Fee (as defined below), and
monitoring fees (“Fee Income”) related to its business activities. TRYC Manager and TRLC Manager
each charge certain Operating Subsidiaries a fee equal to 1% of the applicable Manager’s assets under
management attributable to such Operating Subsidiary (and any bolt-on or other acquisitions by
Operating Subsidiaries) for services related to integration and playbook deployment during the first
twelve (12) months of Tide Rock ownership of the Operating Subsidiary, or of a bolt-on or other
acquisition by an Operating Subsidiary (the “IPD Fee”). The IPD Fee is charged quarterly in advance
during the first twelve (12) months of Tide Rock ownership of each Operating Subsidiary or of a bolt-
on or other acquisition by an Operating Subsidiary. Investors will not receive any part of the Fee
Income or the benefit of any offset of fees. Fee Income could adversely affect an Operating
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