Stellex Capital Management LLC

FEES AND COMPENSATION

        In general, Stellex receives a management fee and a carried interest in connection with the
provision of advisory services to its clients. Stellex receives additional compensation in connection
with management and other services performed for portfolio companies of the Private Investment
Funds and such additional compensation will generally offset in whole or in part the Management
Fees (as defined below) otherwise payable to Stellex to the extent provided by the relevant
Governing Documents. In addition, in certain circumstances Stellex receives compensation for
management and other services performed in connection with the co-investments made in portfolio
companies of the Funds, which are not offset in whole or in part the Management Fees. Investors
in the Funds also bear certain fund expenses.

Management Fees

        A Fund is expected to pay Stellex an annual management fee (the “Management Fee”)
equal to 2.0% per annum of aggregate investor capital commitments to the Fund
(“Commitments”) commencing on certain dates as detailed in the relevant Funds’ Governing
Documents. Investors participating in a closing after a Fund’s initial closing date bear the
Management Fee from a date set forth in the relevant Fund’s Governing Documents, generally in
addition to an interest component payable to Stellex or an affiliate. The precise amount, the manner
and calculation of, and the manner and timing of payment of the Management Fee for each Fund
are established by Stellex and are set forth in the respective Fund’s Governing Documents. Upon
a date specified in the respective Governing Documents (the “Stepdown Date”), the Management
Fee will be reduced and will equal 2.0% of: (i) the aggregate contributions, less (ii) the aggregate
amount of contributions with respect to the portion of each investment that has been disposed of,
completely written-off or permanently written-down. Stellex intends to adjust installments of the
Management Fee payable for any period other than a full three-month period on a pro rata basis
according to the actual number of days in such period.

        Management Fees for each Fund will be charged on a basis that generally is not based on
the respective Fund’s then-current net asset value. Subject to the Governing Documents, from the
effective date of the relevant Fund until the Stepdown Date, Management Fees generally will be
charged based on a percentage of the relevant Fund’s aggregate Commitments. After the Stepdown
Date, Management Fees generally will be charged based on a percentage of an amount equal to
(x) the aggregate amount of investment contributions with respect to investments made by the
relevant Fund relating to the Fund’s aggregate investments in its portfolio companies (including,
where applicable, a Fund borrowing component (including interest expenses) and the amount of
any capitalized fees or expenses, including costs of Operating Partners) excluding those
investments that have been completely written off for U.S. federal income tax purposes (such
excluded investments, “Impaired Value Investments”) minus (y) the aggregate amount of any
permanent write downs required under the Governing Documents of investments that have not
been disposed of. Following the expiration of the term of the relevant Fund, excluding any
extensions thereto, the Management Fee shall be an amount determined by the relevant General
Partner with the consent of the Fund’s advisory committee; provided, that such Management Fee
shall not exceed the Management Fee set forth in the immediately preceding sentence. Due to the
differences in the criteria set forth in their respective Governing Documents, in the event where
more than one Fund participates in an investment, there is the possibility that an investment will
become an Impaired Value Investment for purposes of one Fund’s Governing Documents but not
those of one or more other Funds.

        Under the Governing Documents, where the fair market value of an investment exceeds
the total amount of investment contributions relating to such investment, post-Stepdown Date
Management Fees will not be calculated based upon such appreciated value and will instead
continue to be calculated based on the amount of applicable investment contributions. Conversely,
the Governing Documents do not require Management Fees to be reduced or refunded following
the occurrence of a write down (other than a permanent write down required under the Governing
Documents), decrease (including a significant decrease) in fair value or other event not constituting
a complete realization, such as a partial sale or disposition, reorganization, recapitalization
(including recapitalizations involving dividends), roll-over investment in connection with a sale or

dividend distribution, except in the case of investments meeting the relevant Impaired Value
Investment standard under the Governing Documents.

        There could be situations in which Stellex is incentivized to adjust the valuation of a Fund’s
assets, such as by (i) employing valuation methodologies that improve a Fund’s track record and
do not reduce the amount of investments used to determine the amount of Management Fees due,
(ii) minimizing losses from write downs and/or (iii) aggregating or disaggregating portfolio
investments in determining whether a permanent impairment in value has occurred. Any such
determination will be made by a General Partner, in its discretion, subject to the Governing
Documents and to Stellex’s policies and procedures. In this regard, when a Fund owns multiple or
different securities in the same portfolio company (characterized as separate portfolio
investments), the applicable General Partner will, in its discretion, determine whether such
separate portfolio investments should be aggregated or disaggregated for purposes of calculating
the Management Fee base and/or to what extent a given portfolio investment (or series of portfolio
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TYPES OF CLIENTS

         Stellex provides investment advice solely to its Private Investment Funds clients, including
the Main Funds, and references throughout this Brochure to “clients” and to Stellex’s related duties
to and practices on behalf of its clients and/or investors should be construed accordingly. Private
Investment Funds generally include investment partnerships or other investment entities formed
under U.S. or non-U.S. laws and operated as exempt investment pools under the Investment
Company Act of 1940, as amended. The investors participating in Private Investment Funds
generally 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 often include, directly or indirectly, principals or other personnel of Stellex or its
affiliates, as well as executives of portfolio companies.

        The Main Funds generally have a minimum investment amount of $10 million for third-
party investors, and the Main Funds’ interests are offered and sold solely to qualified purchasers
(or qualified knowledgeable Stellex personnel). Stellex is permitted to waive such minimum
investment amount.

              METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS

General

        Stellex seeks to primarily invest in value-oriented middle-market companies within North
America and Europe that represent an attractive opportunity to generate desirable risk-adjusted
returns. Stellex believes that distress and the opportunity to invest in distressed companies are
systemically inherent to both geographies, regardless of the stage in the overall economic cycle.
Stellex expects the combined skill sets, experience and locations of its investment team to enable
the Funds to be well-positioned to take advantage of these opportunities.

        Once an investment opportunity has been identified, Stellex seeks to implement an
effective operating strategy in an effort to improve the performance of the acquired company by
(i) developing restructuring and operating plans, (ii) driving business improvement and (iii)
controlling the implementation of such plans and improvements by obtaining board representation
and/or management installation.

       The following is a summary of the investment strategies and processes generally expected
to be employed by Stellex on behalf of the Funds. There can be no assurance that Stellex will
achieve the investment objectives of a Fund and a loss of investment, including a total loss, may
be possible.

Investment Strategy and Process

        When considering potential investment opportunities, Stellex generally intends to rely on
the following set of investment criteria:

 Target Investment Attributes

                •   Companies or operating assets that are experiencing financial, operational or
                    industry-driven uncertainty

                •   Underperforming and mismanaged companies or divisions within larger
                    entities and enterprises
 Situation
                •   Operationally sound companies that are over-levered

                •   Buy-and-build platforms

                •   Special situations that involve sectors or businesses where Stellex has strong
                    in-house knowledge

                •   Asset intensive businesses that allow for downside protection
 Industries     •   Various verticals within the broader industrial sector
                •   Businesses with proven applications or markets

                 •   Annual revenues, generally, of $100 million to $500 million, and may invest
                     behind larger enterprise values on select transactions

                 •   Situations where Stellex can deploy $75 to $150 million of capital, with the
 Size                potential to support larger investments on select transactions

 Location        •   North America and Europe

        The investment strategy of Stellex is premised upon identifying and executing investments
that generally meet these investment criteria and have the potential to provide desirable private-
equity type returns with meaningful downside protection. Stellex believes it can successfully
implement this strategy due to the Stellex team’s expertise in the middle market, their flexibility
in creating investments, the ability to leverage the investment and industry expertise of the Stellex
team and the physical proximity of the Stellex platform to local opportunities in North America
and Europe. Stellex transaction opportunities will be subject to a due diligence process that
includes consideration of potential downside risks and will be implemented through a deliberate
investment pace and approach. Generally, investment opportunities are expected to have
collateralization or current income features that facilitate the management of downside risk and
protection of capital. Stellex anticipates that the appreciation potential in a Fund’s investments will
be enhanced by an emphasis on investing at disciplined initial valuations and employing a “hands-
on” sponsorship style that works with portfolio companies to enhance value post-transaction.

        Regardless of the geographic location of the investment opportunity, Stellex expects that
there will be uniformity in its approach to identifying and executing investment transactions across
the Stellex platform on behalf of the Funds.

        Sourcing. Stellex and its senior investment and business development team have a history
of creating proprietary, “below the radar” deal flow. This deal flow has been and is expected to
continue to be generated through a variety of means, including networks and relationships in the
middle market with established dealmakers in the financial advisory, legal and turnaround
professions. In addition to investment opportunities expected to be sourced through relationships
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