Investment Overview

FILLING THE
FINANCING GAP

• Senior lenders unable to satisfy growth financing needs due to credit constraints
• Larger institutional mezzanine investors not interested in transaction sizes less than $5 million
• Alternative capital sources can be very dilutive and may involve control issues

ISSUER
BENEFITS

• Flexible repayment/redemption terms
• Deductibility of interest
• Less restrictive covenants
• Smaller equity dilution vs. straight equity
• Absence of control issues

FUND
BENEFITS

• Current investment income
• Focus on capital preservation
• Return of invested capital during period of investment
• Capital appreciation upside

EXPANSION CAPITAL

• Product line and /or market extensions
• Working capital enhancement in support of growth
• New product/service development

ACQUISITION
CAPITAL

• Buy-outs (sponsored and management-led)
• Recapitalizations
• Generational transfers
• Add-ons

"TURNED-AROUND" RECAP CAPITAL

• De-lever senior debt to provide revolver availability
• Decrease combined debt service requirements to conserve operating cash flow
• Provide "patient" capital to provide for enhanced senior debt facilities

COMPANY ATTRIBUTES

• Quality management
• Developed internal structure
• Market leading position
• Established operation history

FINANCIAL ATTRIBUTES

• Revenues of greater than $5 million
• Demonstrable EBITDA of greater than $1 million
• Record of profitable or "turned-around" operations

• Long-term growth potential
• Well-defined market niche
• Barriers to entry

• No more than 10% of total capital (i.e., private capital plus SBA Leverage) invested in one company

INVESTMENT TYPES

• Primary - Subordinated Debt with Warrants
• Secondary - Stretch Senior Term Loans, Redeemable Preferred Stock, and Common Equity in conjunction with Subordinated Debt

INVESTMENT STRUCTURES

• Interest rates of 10-15% & dividend rates of 8-12%
• 4-6 Year repayment/redemption of invested capital
• Equity-based yield enhancement
• Contractual exit agreement

• $1,000,000 to $4,000,000
• Larger fundings with co-investors

• Primarily Southern & Gulf States Region (OK/TX to GA)
• Focus on underserved markets
• Other locations where compelling reason to invest

EVALUATION, ANALYSIS & STRUCTURING

• Employ disciplined approach to evaluating and analyzing potential investment opportunities
• Develop detailed financial model and sensitivity scenarios
• Structure investment based upon evaluation and modeling

DETAILED PROPOSAL LETTER

• Draft detailed proposal letter encompassing all major terms and conditions of investment
• Receive application and due diligence fees before commencing due diligence process

• Conduct in depth, on-site due diligence
• Emphasis on market, management, products, operations, customers, vendors, accounting, etc.
• Draft detailed Investment Memo for review and discussion by General Partner

• Commence extensive and well-established legal documentation after receipt of legal deposit

"HIGH-TOUCH" PHILOSOPHY

• Frequent and consistent interaction with multiple contact points within each investee company

BOARD/OBSERVER PARTICIPATION

• Participate at the Board level of each portfolio company as a member or observer
• Initiate institutionalization of business practices and processes

• Work closely with senior management teams of investee companies to develop annual budgets, cash flows, etc.
• Provide counsel with respect to personnel issues
• Utilize ACF industry/management contacts to assist in various strategic initiatives

• Assist investee companies in a myriad of strategic and financial issues: i.e., buyside/sellside advisory; private placements; refinancings; etc.