• • 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 (i.e., equity) can be very dilutive and may involve control issues

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

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

• • 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

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

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

INDUSTRY
ATTRIBUTES

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

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

• • 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

INVESTMENT
AMOUNTS

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

INVESTMENT
REGION

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

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

• • Draft detailed proposal letter encompassing all major terms and conditions of investment
• • Approach allows for greater transpanency

DUE DILIGENCE

• • Conduct in-depth, on-site due diligence
• • Emphasis on market, management, products, operations, customers, vendors, accounting, etc.

LEGAL
DOCUMENTATION

• • Transactions documented using well-established forms in order to minimize legal costs

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

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

MANAGEMENT
MENTORING

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

FINANCIAL ADVISORY ASSISTANCE

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