Palladium Equity Partners Advisor LLC

Item 5 (Fees and Compensation) for a more detailed description of such fees and compensation.
In many cases with respect to the implementation of such arrangements, there is not an
independent third party involved on behalf of the relevant portfolio company. Therefore, a
conflict of interest may exist in the determination of any such fees and other related terms in the
applicable agreement with the portfolio company.

        From time to time, Palladium advises or encourages portfolio companies of one Fund to
do business with the portfolio companies of another Fund where doing so may be mutually
beneficial to both portfolio companies and effected via arms’ length transactions. Certain
portfolio companies of one Fund do business with a portfolio company of another Fund. Conflicts
of interest may arise in this scenario because Palladium has an incentive to maintain goodwill
between the portfolio companies of each respective Fund, although the products or services
recommended may not necessarily be the best or lowest cost option available to the portfolio
companies, and could result in higher expenses for the portfolio company (and a disadvantage to
the Fund holding such portfolio company); a conflict may also arise if such circumstances create
a financial advantage for the Fund holding the service-providing portfolio company.

   D. Allocation of Personnel

       Palladium personnel will devote such time as shall be reasonably necessary to conduct
the business affairs of the Funds in an appropriate manner. However, Palladium personnel will
work on other projects, including Palladium’s other investment funds and other vehicles
permitted by the partnership agreements and, therefore, conflicts may arise in the allocation of
management resources, including in the allocation of personnel to Palladium Heritage (as defined
below) matters as further discussed under “Other Potential Conflicts of Interest” below.

        Additionally, members of the Funds’ investment teams and other investment
professionals of Palladium do currently serve, and are expected to continue serving, as members
of the boards of directors of various companies and do currently participate, and are expected to
continue participating, in other activities outside of Palladium. Conflicts may arise as a result of
such activities. The possibility exists that the companies with which one or more of the members
of the Funds’ investment teams and/or other investment professionals of Palladium is involved
could engage in transactions that would be suitable for the Funds, but in which the Funds might
be unable to invest. With respect to any persons who serve as directors of a portfolio company,
such individuals, in their capacity as directors, will generally be required to make decisions that
they consider to be in the best interests of the portfolio company. There may be conflicts of
interests between such person’s duties with respect to the relevant General Partner and such
person’s duties as a director of the portfolio company.

   E. Allocation of Investments

      In circumstances where more than one Fund is in the active investment stage, Palladium is
faced with a variety of potential conflicts of interest in exercising its discretion to allocate
investment opportunities. For example, in allocating an investment opportunity among funds
with differing fee, expense, or compensation structures, Palladium may have an incentive to
allocate investment opportunities to the Funds from which the Investment Manager or its related
persons may derive, directly or indirectly, a higher fee, compensation, Carried Interest, or other
benefits.

       The Firm’s policy is to allocate investment opportunities in a manner that is consistent
with both its fiduciary obligations as an investment advisor to, and also the Governing Documents

of, each Fund. If more than one Fund will participate in an investment opportunity, the Firm
allocates the investment opportunity among the Funds based on relevant factors, determined in
the Firm’s sole discretion with appropriate consideration of its fiduciary duties to each Fund,
which may include but are not limited to: each Fund’s investment objectives and investment
focus; each Fund’s liquidity and reserves; each Fund’s investment diversification; applicable
lender covenants and other limitations; the amount of capital available for investment by each
Fund as well as each Fund’s projected future capacity for investment; each Fund’s targeted rate
of return; the stage of development of the prospective portfolio company or other investment;
the composition of each Fund’s portfolio; the suitability as a follow-on investment for a current
portfolio company of a Fund (if applicable); the availability of other suitable investments for each
Fund; risk considerations; cash flow considerations; asset class restrictions for each Fund;
industry and other allocation targets for each Fund; minimum and maximum investment size
requirements for each Fund; tax implications for each Fund; legal, contractual or regulatory
constraints for each Fund; and any other relevant limitations imposed by or conditions set forth
in the applicable offering documents and Governing Documents of each Fund.

        In analyzing allocation considerations, Palladium’s allocation policies provide that the
Firm must not favor or disfavor any Fund or class of Funds in relation to any other Funds. The
Firm also cannot allocate investment opportunities based, in whole or in part, on (i) the relative
fee structure or amount of fees paid by any Fund, (ii) the profitability of any Fund or (iii) any
person’s interest in offering or participating in co-investment opportunities outside of any Fund.

        The Heritage Funds will have a “first call” on certain investments made within the business
to business (“B2B”) and industrial company sectors (together, the “Target Sectors”) with an initial
...

ITEM 7 – TYPES OF CLIENTS
        Palladium provides investment advisory services to pooled investment vehicles that are
exempt from registration under the Company Act and whose securities are exempt from
registration under the Securities Act. Investment advice is provided directly to the Funds and not
individually to investors in the Funds. In general, the minimum initial investment in a Fund is $10
million, although lesser amounts are from time to time accepted at the discretion of the
applicable Fund’s General Partner.

       All Fund investors are “qualified purchasers” as defined in the Company Act and include,
among others, some or all of the following: public and private corporate pension plans, charitable
organizations, endowments, high net worth individuals, banks, profit sharing plans, trusts,
estates, corporations, limited partnerships, limited liability companies and other entities.