Item 5. Fees and Compensation
The Adviser does not currently charge an advisory or management fee (“Advisory Fee”) for any
Fund, although it did so in the past.
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The Adviser and its affiliates have performed and may in the future perform management,
advisory, transaction-related, financial advisory and other services (“Related Services”) for, and
received fees from, actual or prospective portfolio companies or other investment vehicles of the
Funds, including fees in connection with mergers, acquisitions, add-on acquisitions,
refinancings, public offerings, sales and similar transactions (“Transaction Fees”). Generally,
under the terms of the Governing Documents, these Transaction Fees are net of out-of-pocket
costs and expenses incurred by the Adviser in connection with consummated or unconsummated
transactions or in connection with generating any such fees. These Transaction Fees have been
paid in cash, in securities of the portfolio companies or investment vehicles (or rights thereto) or
otherwise. There are also certain circumstances (such as the occurrence of an initial public
offering or strategic exit) which have accelerated the payment of such fees. Since the agreements
with the portfolio companies providing for such fees have had prolonged terms (often exceeding
ten years and/or subject to automatic extensions and renewal), the effect of such acceleration has
been substantial, particularly in the event such circumstances occurred early in the life of the
Fund’s investment in such portfolio company. Although these fees are in addition to the
Advisory Fees, the Adviser will in some circumstances reduce the amount of Advisory Fees paid
by the applicable Fund in connection with the receipt of such fees. The amount and manner of
such reduction is set forth in the Governing Documents of the applicable Fund. As some Funds
do not pay Advisory Fees, any such reduction will not benefit such Funds. Additionally, a
portfolio company may reimburse the Adviser for expenses (including without limitation travel
expenses, which may include expenses for chartered or first class travel, and meals and
entertainment 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 “Transaction Fees” under the terms of the Governing Documents. For a discussion
of material conflicts of interest created by the receipt of such fees and reimbursements, please
see Item 11 below.
From time to time, the Adviser may (in its sole discretion), agree to pay a portion of a transaction
or other fee received from an actual or prospective portfolio company to a third party ("Third
Party Fee"), such as a consultant, advisor, finder, broker and/or investment bank. In such event,
the Third Party Fee is not a fee that the Adviser is entitled to retain and, therefore, the Adviser is
not required under the terms of the applicable Governing Documents to share such Third Party
Fee with the Funds.
In addition, the Adviser or its managing directors or employees, on behalf of Adviser, may
receive stock of a portfolio company as a Transaction Fee due to service of a partner or
employee of the Adviser on the board of such portfolio company. In the event of such a
distribution or receipt of stock, the recipients, or Adviser, with respect to stock received as a
Transaction Fee, may act in their own interest with respect to the share of securities and may
determine to sell the distributed securities, or hold on to the distributed securities for such time as
such recipient, or the Adviser, shall determine. The ability of such recipients, or the Adviser,
with respect to stock received as a Transaction Fee, to act in their own interest with respect to
such distributed shares creates a conflict of interest between the Adviser, as an adviser to the
Fund, and its related persons, on the one hand, and the Fund.
The Adviser and its affiliates also engage and retain advisers, consultants, and other similar
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professionals who are not employees or affiliates of the Adviser and who may, from time to time,
receive payments from, or allocations with respect to, portfolio companies and/or other entities.
Also, a portfolio company may pay fees, commissions or other compensation to members of the
Adviser’s executive network, consultants or other independent contractors for services rendered
to such company or reimburse such persons for expenses (including without limitation travel
expenses, which may include expenses for chartered or first class travel, and meals and
entertainment expenses) incurred by such person in connection with its performance of services
for such portfolio company; such amounts are generally not included in the definition of
“Transaction Fees” under the terms of the Governing Documents. In such circumstances, such
amounts will not be deemed paid to or received by the Adviser and its affiliates and such
amounts will not be subject to the sharing arrangements described below.
The precise amount of, and the manner and calculation of, the Advisory Fees for each Fund are
established by the Adviser, as modified by negotiations with investors in the applicable Fund,
and are set forth in such Fund’s Governing Documents. The Advisory Fees and other fees and
distributions described above are generally subject to waiver or reduction by the Adviser in its
sole discretion, both voluntarily and on a negotiated basis with selected investors. The fee
structures described above may be modified from time to time.
Advisory Fees vary Fund by Fund and are generally payable quarterly in advance. No Advisory
Fees are currently being charged for any Fund, although Advisory Fees were paid by the Funds
in the past.
Upon termination of an advisory agreement, Advisory Fees that have been prepaid are generally
returned on a prorated basis.
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