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“Fees and Compensation.”

       Versa Capital reserves the right from time to time to enter into solicitation arrangements
pursuant to which it compensates third parties for referrals that result in a potential investor
becoming a limited partner in a Versa Fund. Any fees payable to any such placement agents
generally will be borne by Versa Capital indirectly through an offset against the Management Fee

under the Partnership Agreements, although related expenses incurred pursuant to the relevant
placement agent or similar agreement, including, but not limited to, placement agent travel, meal
and entertainment expenses, typically are borne by the relevant Versa Fund(s).

TYPES OF CLIENTS

       Versa Capital provides investment advice to Private Investment Funds, including the Versa
Funds. Private Investment Funds may include investment partnerships or other investment entities
formed under domestic or foreign laws and operated as exempt investment pools under the
Investment Company Act of 1940, as amended. The investors participating in such Private
Investment Funds may include individuals, banks or thrift institutions, other investment entities,
pension and profit-sharing plans, trusts, estates or charitable organizations or other corporations or
business entities and may include, directly or indirectly, principals or other employees of Versa
Capital and its affiliates.

        The Versa Funds generally have a minimum investment amount of $5-10 million for third-
party institutional investors and $1 million for third-party individual investors. Such minimum
investment amount may be waived by the relevant General Partner. Versa Capital Fund II, L.P.
and Versa Capital Fund III, L.P. interests are offered and sold solely to qualified purchasers, and
Versa Capital Fund II-A, L.P., Versa Capital Fund III-A, L.P. and Versa Capital Fund III-B, L.P.
interests are offered and sold solely to qualified clients.

             METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS

General

        Versa Capital is a private investment firm dedicated to investments in distressed leveraged
buyouts and other “special situation” investment opportunities principally involving middle-
market companies throughout North America. The General Partners’ investment advisory services
consist of identifying and evaluating investment opportunities, negotiating investments, managing
and monitoring investments and achieving dispositions for investments. Investments are
predominantly in non-public companies, although investments in public companies are permitted.

        The General Partners’ investment strategy for the Versa Funds focuses on investments
involving companies anticipating or experiencing financial distress or undergoing a turnaround
by, among other things, investing new capital in such companies in exchange for new debt or
equity securities or structured contractual payments, purchasing the assets of such companies
and/or funding the payment of the expenses of administration and/or dividends to creditors under
a Chapter 11 plan of reorganization. The General Partners will seek on behalf of the Versa Funds
both current income and capital appreciation from making investments in the outstanding equity
or debt securities or other indebtedness of companies in financial distress, which are anticipating
a turnaround, or other “special situations” and will typically seek, alone or with others, to obtain
control of or significant influence over the underlying assets or businesses in question.

        There can be no assurance that a General Partner will achieve the investment objectives of
the relevant Versa Fund, and a loss of investment is possible.

Investment and Operating Strategy

        Versa Capital’s team of investment and portfolio operations professionals is dedicated to
supporting portfolio company investments (together, the “Versa Capital Team”). The Versa
Capital Team’s expertise covers key aspects of restructurings, including: (i) operational and
strategic turnarounds; (ii) financial and legal navigation of Chapter 11 reorganizations and out-of-
court restructurings; (iii) asset and portfolio acquisitions and liquidations; and (iv) investment of
new capital for recapitalization or acquisition.

        Staging of Distressed Opportunities. The Versa Capital Team targets companies that have
gone through a process of transition into decline, which eventually produces distress. The distress
can advance to the point of crisis which can lead to the possibility of liquidation. Through a
directed intervention, however, certain of these businesses can reverse the trend and make a
turnaround to recovery that sets the company back on a path of renewal and regrowth.

        The Versa Funds generally will focus on targets that have already passed the early stage of
decline in which stakeholders are often unwilling or unable to recognize and address problems and
on targets that are in the early stages of the recovery cycle. The Versa Funds generally will seek
to avoid investing in companies that are too late in the restructuring process, when the business is
stabilized again and a target for mainstream leveraged buyout (“LBO”) investment. At that point,
the companies are too expensive for the relevant General Partner’s underwriting standards and
beyond the need for the value-added ownership the Versa Capital Team can provide.

        Accordingly, the targets of the Versa Funds generally will fall between the middle to later
stages of decline and the early to middle parts of recovery where there is the greatest potential for
value-added ownership. In this critical stage, the turnaround solution will not yet have been
implemented and may be unknown. Execution risk and process complexity will characterize the
situation. In the opinion of the Versa Capital Team, these characteristics reduce competition for
deals, creating opportunities for investment at more compelling valuations.

         LBO/Control Investment Strategy. LBO/control investments in target portfolio companies
falling in the lower portions of the range of decline and recovery are the primary portfolio strategy
of the Versa Funds. Control can take various forms, from affirmatively participating in directing a

portfolio company’s operations and management to exercising the right as a material stakeholder
to block certain actions to be taken with respect to a portfolio company.

        Targets for LBO/control investments will typically be: (i) middle-market companies with
a history of $50 million to $1 billion in annual revenue and a viable product, service or business
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