Inverness Management LLC

FEES AND COMPENSATION

       In general, Inverness Management receives a management fee (the “Management Fee”)
and the General Partners receive a carried interest allocation (“Carried Interest”) in connection
with its advisory services. Inverness Management or its affiliates may receive additional
compensation in connection with management and other services performed for portfolio
companies of Private Investment Funds, including, without limitation, break-up, transaction and
monitoring fees (collectively, “Supplemental Fees”). Investors in the Current Inverness Funds
also bear certain fund expenses.

Management Fees

       Fund II no longer pays a Management Fee.

Carried Interest

        Each General Partner will receive Carried Interest with respect to the applicable Current
Inverness Fund equal to 20% of all net realized profits of such Current Inverness Fund so long as
such Current Inverness Fund has achieved a minimum 10% annual preferred return, as more
fully described in the applicable Partnership Agreement. The Carried Interest distributed to such
General Partner is subject to a potential giveback at the end of life of the applicable Current
Inverness Fund if such General Partner has received excess cumulative distributions.
Additionally, Inverness Management also provides investment advisory services to certain
parallel investment funds that are not subject to Carried Interest. This practice could present a
conflict of interest because Inverness Management has an incentive to favor accounts that are
subject to Carried Interest. Inverness Management seeks to address this potential conflict of
interest by causing such parallel investment fund to invest, to the extent practicable, in the same
portfolio companies at the same time and on the same terms on a pro rata basis, based on
relative commitment sizes of the applicable parallel investment funds, with the applicable
Current Inverness Fund.

Other Information

        Inverness may exempt co-investors from payment of all or a portion of Management Fees
and/or Carried Interest, as well as affiliated parallel funds from all or a portion of Carried
Interest.

        The Current Inverness Funds and other Private Investment Funds invest on a long-term
basis. Accordingly, investment advisory and other fees are expected to be paid, except as
otherwise described in the Partnership Agreements, over the term of the Current Inverness Funds
(or the relevant Private Investment Fund, as applicable) and investors generally are not permitted

to withdraw or redeem interests in the Current Inverness Funds (or other relevant Private
Investment Fund, as applicable).

       Inverness Management LLC personnel may receive a portion of the Carried Interest or
other compensation received by Inverness or its affiliates.

        In addition to the Carried Interest payable to Inverness, the Current Inverness Funds bears
certain expenses. As set forth in the Partnership Agreements, the Current Inverness Funds bear
all expenses to the extent not paid by portfolio companies, including legal, accounting,
investment banking, travel, consulting, research, brokerage, finder’s fees, custody, transfer,
registration, insurance, advisory board, interest, taxes, extraordinary expense and other similar
fees and expenses, but not Inverness expenses in connection with maintaining and operating its
offices (such as compensation of its employees, rent, utilities and general office expenses.).
Brokerage fees may be incurred in accordance with the practices set forth in “Brokerage
Practices.”

                PERFORMANCE-BASED FEES AND SIDE-BY-SIDE MANAGEMENT

        As described under “Fees and Compensation,” Inverness receives Carried Interest on
certain net realized profits in the Current Inverness Funds.

TYPES OF CLIENTS

        Inverness provides investment advice to Private Investment Funds, including the Current
Inverness 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
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 Inverness and its affiliates.

       The Current Inverness Funds generally have required a minimum investment amount of
$5 million for third-party investors, and the Current Inverness Funds interests were offered and
sold solely to qualified purchasers (or qualified knowledgeable Inverness personnel). Such
minimum investment amount may be waived by Inverness.

            METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS

General

       Inverness’ strategy is to make private equity investments in a relatively small number of
businesses that Inverness believes have strong risk/reward profiles. Inverness invests in a variety
of industries, generally based on its judgment that the performance of the company and/or the
industry is temporarily depressed and the purchase valuation is reasonable in relation to the
company’s cash flow at the time of the investment. Inverness believes that it is important to
remain strictly disciplined with regard to valuation. Inverness seeks to make equity, equity-
equivalent and “quasi-equity” investments in companies that can be purchased at reasonable

prices, have the potential for significant improvement in their operating performance, and can
support a high degree of financial leverage. Historically, Inverness’ preferred strategy has been
to form close relationships with entrepreneurial management teams of businesses that typically
are in industries which are out of favor in the investment community, and are often either
divisions or subsidiaries of large corporations. Inverness has originated nearly all of its
investments without participating in competitive auctions.

Investment and Operating Strategy

         Historically, there have been four key components to Inverness’ approach to sourcing
investments, which Inverness believes were critical to developing investment opportunities that
met its investment criteria. First, Inverness targeted industries that were experiencing cyclical
downturns and were out of favor in the investment community; second, Inverness sought to form
close working relationships with the management team of an acquisition target; third, Inverness
sought to source its transactions other than through the auction process; and fourth, Inverness has
targeted attractive investment opportunities in company’s seeking to reduce excessive financial
leverage. Inverness believes that these components, which are discussed further below,
facilitated the identification and completion of acquisitions that are consistent with its investment
criteria.

       Inverness seeks to make equity and equity-equivalent investments in companies that can
be purchased at reasonable prices, have the potential for significant improvement in their
operating performance, and can support a high degree of financial leverage, as more fully
discussed below.

        Reasonable Purchase Price – Inverness believes that a strict discipline with respect to
valuation is a critical component of successful leveraged equity investing. Inverness historically
has attempted to acquire portfolio investments at reasonable prices by targeting industries where
valuations are temporarily depressed due to cyclical or other factors and by seeking to avoid
auction situations. Inverness traditionally has aligned with management to approach parent
companies that prefer not to subject the target company to a competitive auction process. By
aligning with management, Inverness provides the seller with greater confidence that the
contemplated transaction will be completed.

        Potential for Improvement - Inverness seeks to acquire companies that are under-
performing and have the potential for improvement. Ideally, a target company has excess capital
employed and has the potential for increasing free cash flow. Excess capital employed is
commonly found in “non-core” subsidiaries or divisions of larger parent companies. By
disposing of non-strategic assets either prior to, or just after, closing, the effective purchase price
of a target company can be reduced. The resulting reduction in debt burden can increase
significantly the potential economic reward and reduce risk. Likewise, companies that are
acquired in the midst of an industry downturn can achieve significant free cash flow
improvement as the industry recovers. Similarly, Inverness seeks companies that have the
potential to increase free cash flow significantly through more effective management, such as
through overhead expense reductions. By providing management with a significant ownership
stake, management generally performs with increased efficiency and makes decisions that are
more likely to enhance the value of shareholders’ investments.

         Ability to Support High Degree of Leverage – Inverness seeks companies that can support
a high degree of financial leverage, since such companies can produce superior returns at
reasonable risk levels. Such companies typically have experienced modest amounts of growth,
generate stable cash flow and have significant amounts of assets with which to secure
indebtedness. The revenue growth rate is generally a less important factor in a target company’s
ability to support indebtedness. Since high rates of growth usually require significant investment
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