Baxter Capital Management Inc

Fees and Compensation
The fee for our investment advisory service is based upon the average par amount of the investment
portfolio during the month and is payable immediately upon receipt of statement for services rendered
during the previous month. Our advisory agreement continues until termination by either party on thirty
(30) days’ written notice.

                                   BASIC MONTHLY FEE SCHEDULES

                For Non-financial Institutions                      For Financial Institutions

                1/12 x (.00200 x 1st $5 million)                       1/12 x (.0015 x 1st $5 million)
              + 1/12 x (.00120 x next $15 million)                   + 1/12 x (.0012 x next $5 million)
              + 1/12 x (.00030 x next $80 million)                   + 1/12 x (.0008 x next $5 million)
              + 1/12 x (.00015 x over $100 million)                  + 1/12 x (.0005 x next $5 million)
                                                                     + 1/12 x (.0002 x over 20 million)

                Minimum 1/12 x $5,000                                  Minimum 1/12 x $9,900

All fees are negotiable. Typically, explicit commissions are not charged on the fixed-income investments
we recommend; they are sold on a net basis. We expect our clients to have their own safekeeping agent
and to pay any of those costs.

Performance-Based Fees and Side-by-Side Management
Baxter Capital Management does not use a performance-based fee structure.

Types of Clients
The types of clients we serve include:

       Banks and Thrifts
       Credit Unions
       Endowments and other non-profit organizations
       Hospitals
       Corporations
       Pension and Profit-Sharing Plans

We do not impose a minimum dollar value to start or maintain an account.

Methods of Analysis, Investment Strategies, and Risk of Loss

Security analysis methods are primarily fundamental. The main sources of information are ratings, filings
with regulators, Bloomberg data and analysis, financial newspapers and magazines, and research material
prepared by others. We primarily manage fixed-income liquidity portfolios of our institutional clients.
Therefore, liquidity needs are a key determinant of the maturity and type of investments recommended.
Because of changing liquidity positions and needs, all portfolios are non-discretionary and require
preapproval prior to security purchases. Surplus funds are invested in a wider array of securities. All of
our clients have detailed written investment policies that include approved types of investments,
acceptable ratings, and dollar limits. Almost all purchases are high quality, shorter-term investment grade
securities.

Even though we try to carefully manage risk, all investments have some risks borne by the investor. Some
of these risks are:

       Default risk – The risk of not receiving all of your principal back and/or timely payment of
        interest.

       Interest rate risk – The risk that a security's value will decline due to a change in market interest
        rates.

       Reinvestment risk – The risk that cash flows from a security will be reinvested at lower rates than
        assumed in the purchase yield-to-maturity. This is a particular concern for investments that have
        significant periodic cash flows such as mortgage-backed securities.

       Price risk – The risk that the price of a security will change over time, which is particularly
        important if a security is sold prior to maturity.

       Liquidity risk – The risk that a security will not be able to be sold or at least not at a “reasonable”
        price typically due to market dislocations.

       Political risk – The risk that a security’s value changes due to political decisions or concerns. This
        is an issue particularly regarding Federal agency, financial firm, and municipal securities.

       Event risk – The risk that some unusual event, such as a terrorist attack, weather event, or a
        government collapse, could cause a change in the value of a security.