HG Capital Management LLC

Fees and Compensation

The fees and expenses associated with investments in a Fund are described in detail in each
Fund’s Offering Documents. Heritage Group acts as investment adviser to the Funds, a
Delaware limited partnership. An affiliate of Heritage Group will act as a general partner
to each Fund (each a “General Partner”).
Heritage Group may, in its sole discretion, manage other funds or accounts with higher or
lower fees, different fee structures and different expense payment arrangements than a
Fund. Further, Heritage Group, in its sole discretion, may agree with a Fund investor to
waive or modify the application provisions of a Fund’s Offering Documents, including
the fees charged, with respect to such investor, without obtaining the consent of any other
investor.
Set forth below is a summary schedule of a Fund’s fees and expenses.

       Management Fee. With respect to each Fund, Heritage Group is entitled to fee
       equal to a percentage of aggregate Commitments held by investors not designated
       as “affiliated partners” by a general partner, paid quarterly in advance (the
       “Management Fee”).
       Related Fees. Any directors’ fees, consulting or advisory fees, or other similar
       fees, received by Heritage Group, a Fund’s general partner, or any affiliated
       person related to the Fund’s acquisition of portfolio investments will be disclosed
       to and/or approved by the LP Advisory Committee, as applicable, and retained by
       Heritage Group or its affiliate.
       Organizational and Operating Expenses. Subject to the terms of the applicable
       Offering Documents, a Fund will be responsible for, or will reimburse Heritage
       Group for, all organizational and offering costs of the Fund.
       Furthermore, a Fund shall bear all costs and expenses related to: (i) the purchase,
       holding, and disposition of portfolio investments (whether or not ultimately
       consummated), including all private placement fees, legal and accounting fees,
       travel expenses, valuations, broker and bank fees; (ii) all legal, accounting,
       consulting and other fees related to the Fund, including fees associated with the
       preparation of audited financial statements and tax returns; (iii) all travel and out-
       of-pocket expenses of the members of the Investment Committee, LP Advisory
       Committee and Strategic Advisory Committee; (iv) insurance premiums; (v) all
       other reasonable expenses of the Fund which are not ordinary operating expenses,
       including litigation and indemnity expenses, if any; and (vi) all costs and expenses
       related to the disposition of Fund assets and the dissolution and winding up of the
       Fund.
       Carried Interest Payment. W i t h r e s p e c t t o e a c h f u n d , net proceeds from the
       disposition of the Fund’s investments are first distributed to each participating
       investor (including the general partner) until said investor receives return of paid-
       in capital. Thereafter, the remaining proceeds will be distributed to participating

       investors and to Heritage Group or its affiliate as its carried interest (“Carried
       Interest”).
With respect to payment of the Management Fees as well as Organization and Operating
Expenses, Heritage Group, or the general partner of the applicable Client, may draw-down
capital commitments from the investors in the Client, or may use amounts that would
otherwise be available for distribution to such investors, in order to meet the Client’s
obligation to pay the Management Fee or applicable expenses. Heritage Group will
charge Management Fees quarterly in advance. Management Fee installments for any
period other than a full quarterly period shall be adjusted on a pro rata basis according to
the actual number of days elapsed.

Other than as described above, neither Heritage Group nor any of its supervised persons
shall receive any additional compensation from the sale of securities or other investment
products. However, in connection with each Fund investment, Heritage Group or one of
its affiliates may enter into a service agreement with the portfolio company for certain
consulting, operational and business advisory services, and in connection therewith may
earn certain advisory, monitoring, break-up, commitment, directors’ or similar fees.

Types of Clients

Heritage Group intends to provide investment advisory services to a Fund based on the
investment objectives and strategies described in that Fund’s Offering Documents.
Heritage Group, in its sole discretion, may manage other funds or accounts with different
objectives, higher or lower fees and different fee structures.

Investors in a Fund will be required to complete and submit a subscription agreement
binding them to the terms of the Fund’s governing documents. Heritage Group only admits
“accredited investors”, as defined in Rule 501(a) of Regulation D under the Securities Act
of 1933 and “qualified clients” as defined in Rule 205-3 of the Investment Advisers Act of
1940, as amended. The minimum investment in a Fund is $10,000,000, with respect to a
corporate investor, and $1,000,000, with respect to an individual investor, although a
General Partner may accept investments in a lesser amount at its sole discretion.