January 31, 2012

Investment Philosophy

We believe in forming strong partnerships with the management teams with whom we invest.  Our success is ultimately derived from these partnerships, and from our collective ability to work together to create incremental value for all of us as shareholders.

We believe in the strong alignment of interests with our portfolio companies, and for this reason we require each of our Potomac Equity team members to invest their personal funds in each transaction that we complete.

We actively seek to create shareholder value by capitalizing on growth opportunities.  In most of our prior investments, we have focused both on organic growth initiatives (such as expanding a company‚Äôs product/service offerings), and also have actively sought add-on acquisition opportunities to capitalize on the expertise of our management partners.

We expect for most of our investor returns to be derived from successful growth opportunities and operational improvements, instead of financial engineering.  While we typically capitalize our companies with leverage, we intend for the leverage to be modest, and to not prohibit our companies from aggressively pursuing growth opportunities.

We conduct ourselves with utmost integrity, treat our partners with respect and fairness, and expect our partners to do the same.