Black Diamond Capital Management I LLLP

FEES AND COMPENSATION

Management Fees

Black Diamond’s management fees range from a combined senior and subordinated collateral
management fee of 0.1% to 1.0% annually of assets managed in the BD CLOs and 0.2% to 1.0%
annually of the assets managed in the GSC CDOs, to 0% to 2% annually of assets managed in the
Hedge Funds. Black Diamond’s management fee for the Special Purpose Master Fund ranges from
0% to 2% annually of assets depending on the share class. Management fees for the Opportunity
Funds are generally 1.75-2.0% annually of either capital commitments or funded commitments
during the commitment period and, thereafter, 1.75-2.0% annually of funded commitments
reduced by the cost basis or write-down amount of each investment, or portion thereof, that has
been disposed of or permanently written-down in accordance with each such Opportunity Fund’s
governing documents and Black Diamond’s internal policies. Management fees for the Strategic
Capital Funds are generally 1.5% annually of funded commitments reduced by the cost basis or
write-down amount of each investment, or portion thereof, that has been disposed of or
permanently written-down in accordance with the Strategic Capital Fund’s governing documents
and Black Diamond’s internal policies. Management Fees for Fusion are 1.67% annually of funded
commitments for only the first 6 years of the Fusion term. The investors in Fusion also pay a one-
time transaction fee to the Fusion general partner equal to 3.33% of funded commitments.
Management fees are generally calculated and paid quarterly and may be calculated and paid in
advance (Closed End Funds) or in arrears (Hedge Funds, CLOs) either by billing the client’s
trustee, in the case of a CLO, by billing an offshore Hedge Fund’s or Closed End Fund’s
administrator or by direct deduction from a domestic Hedge Fund or Closed End Fund. Black
Diamond does not receive a management fee from Investment L.P.

Management fees and performance-based compensation are generally not negotiable by investors
in the Black Diamond clients, but Black Diamond and/or a client may, nevertheless, agree to
waive, reduce or rebate all or any portion of the applicable management fees or performance-based
compensation with respect to certain investors in a client (including, but not limited to, the Black
Diamond Affiliates, their beneficial owners and their families and Black Diamond Service
Entities’ respective employees) without doing so for any other investor. With respect to private
investment funds that Black Diamond may raise in the future, certain limited partners or

shareholders may seek to negotiate terms (including fees payable to Black Diamond or Black
Diamond Affiliates) through the negotiation of the limited partnership agreement, memorandum
and articles of association, other similar documents or through side letters.

Other Compensation

Black Diamond may, subject to provisions regarding entitlement to ancillary fees set forth in client
governing documents, receive advisory fees, organization or success fees, break-up fees, directors’
fees, monitoring fees, consulting fees, transaction fees and other similar fees. Director fees paid to
BDCM employees for serving on the board of directors of any company in which clients are invested
will, subject to the provisions regarding entitlement to ancillary fees set forth in client governing
documents, be retained by Black Diamond. The receipt of such fees creates a conflict of interest
because Black Diamond and its affiliates have an incentive to enter or structure transactions or
arrangements that generate additional compensation, subject to applicable law and governing
documents. The governing documents of certain Black Diamond clients may require that some or
all of such ancillary fees allocated to those clients (which are generally allocated based on relative
amounts invested by such clients) be rebated to such client as a credit against the management fee.
To the extent that a client’s governing documents do not require such rebate, Black Diamond will
generally retain the amount of such fees allocable to such client.

Black Diamond clients may, subject to provisions regarding entitlement to the following fees set
forth in client governing documents, receive fees in connection with such client’s investments,
including, but not limited to, amendment fees, commitment fees, waiver fees and collateral release
fees. These fees are retained by the applicable client. BDCF may receive and retain fees in
connection with investments made by Black Diamond clients or portfolio companies including,
without limitation, in connection with the origination, syndication or administration of loans or
other financial instruments, but only to the extent that such fees are (A) in consideration of services
that BDCF has historically been in the business of providing, and (B) paid to BDCF on terms at
least as favorable to such client or the applicable portfolio company, as applicable, as those
reasonably expected by Black Diamond to be available in an arm's-length transaction with an
independent third party.

Expenses

Each Black Diamond client bears all of its own transactional expenses (or a pro rata portion of the
transaction expenses where a transaction is for the benefit of multiple clients) including, as
applicable, brokerage commissions, spreads, mark-ups, clearing and settlement costs, short
dividends, commitment fees, interest expense, taxes and other transactional charges, any expenses
associated with proposed investments that are ultimately not made, consultants’ (including
consultants which may provide credit research support services) and other experts’ fees, legal and
due diligence expenses (including travel expenses), insurance expenses, warehouse financing
expenses and custody expenses. For a discussion of the brokerage arrangements that Black
Diamond enters on behalf of clients, see “Brokerage Practices.”
...

TYPES OF CLIENTS
Black Diamond’s clients are private investment vehicles— hedge funds, control/distressed private
equity funds, non-control stressed/distressed closed end funds, collateralized loan obligation
vehicles and asset backed security vehicles — the interests in which are offered pursuant to
exemptions from registration under the Securities Act of 1933, as amended and the Investment
Company Act of 1940, as amended.

The investors in these vehicles are public and private employee benefit plans, trusts, corporations,
other U.S. and non-U.S. institutional investors, including private investment funds, sovereign
wealth funds and endowments, and high net worth individuals. Minimum note denominations for
CLOs (USD denominated notes) generally range between $100,000 and $500,000, and the
minimum investment amounts in the Closed End Funds and Hedge Funds generally range from $5
million to $10 million. Black Diamond and the relevant client may agree to permit an investment
in an amount smaller than the minimum stated amount, subject to any minimum amount required
in a particular governing jurisdiction.

METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS
Black Diamond advises clients with respect to investments in syndicated bank loans, middle
market loans, asset based loans, real estate loans and/or mortgages, real estate investment trusts,
equipment loans and financings, bridge loans, debtor-in-possession financing transactions and
other restructuring financings, second lien transactions, aircraft financings, commercial real estate,
mortgage-backed securities, asset-backed securities, publicly-traded and privately placed debt
securities, and derivative instruments (primarily credit related, including credit default swaps).

Black Diamond focuses on investments in companies or situations with substantial assets and/or
enterprise value, primarily through an investment in such companies’ senior debt. Client
investments may be investment grade or below investment grade, including investments that are
non-performing. Black Diamond also advises clients with respect to investments in equity
securities (both long and short), U.S. and non-U.S. government securities, repurchase and reverse
repurchase agreements and other financial instruments. Black Diamond’s primary investment
strategy is similar to that of an opportunistic asset-based lender or finance company pursuing
investments in market sectors where it believes it will receive the highest risk-adjusted yield.

In conducting its investment analysis, Black Diamond Service Entities perform fundamental credit
research on potential investments and consider both quantitative and qualitative factors.
Quantitative factors include capital structure, operating and revenue trends, cash flow consistency,
collateral analysis, financial covenants, debt maturities and liquidity. Qualitative factors include
management quality, competitive position within the industry, equity sponsors, business
fundamentals and legal structure. Black Diamond Service Entities conduct a rigorous due
diligence process with a particular emphasis on, among other factors, a company’s market position
within a sector, dependence on access to the capital markets to fund ongoing operations,
management’s ability to operate under current market conditions, liquidation value of underlying
assets collateralizing the security being purchased, competitive environment, and the extent of
overcapacity in the applicable sector and time frame required to see overcapacity eliminated. Black
Diamond Service Entities generally conduct due diligence through extensive management
discussions, collateral appraisals, on-site visits, discussions with research analysts and other
sources, as well as through the use of industry consultants unaffiliated with Black Diamond.

In effecting client transactions, Black Diamond may, at times, utilize leverage by purchasing
securities with the use of borrowed funds, selling securities short, entering into warehousing, swap,
repurchase and other financing arrangements (and other securitizations, including through the
formation of special purpose vehicles) that create leverage. The CLOs issue debt securities
collateralized by a portfolio of leveraged loans and high yield bonds and, as a result, are highly
leveraged.

A client portfolio, or specific investments within a client portfolio, may be hedged through short
sales or the use of swaps, forward contracts or other negotiated notional principal transactions.

To the extent consistent with a client’s investment mandate, Black Diamond may utilize an activist
approach when investing client assets, including acquiring, on behalf of one or more clients,
control or blocking positions in a target company’s debt that may be converted into controlling
equity interests through financial restructurings or reorganizations in bankruptcy.

Material Risks

The following is a summary of some of the material risks associated with the investment strategy
employed by Black Diamond on behalf of clients. This summary does not attempt to describe all

of the risks associated with each client. Each client’s offering memorandum contains a more
complete description of the risks associated with an investment in each such client.

•      Investing in below investment grade debt, the debt of financially distressed companies,
       borrowing funds for investment purposes, short-selling and entering swaps and other
       derivative transactions all entail significant risks. A client may acquire relatively illiquid
       investments which may not be readily marketable. As a result of such limited liquidity,
       market prices for such investments may be subject to greater volatility than is the case for
       most debt and equity securities. Bank loans, swaps and forward currency contracts are not
       traded on regulated exchanges, are not registered with U.S. or other governmental authorities
...