Madison Street Capital: Overview of Investment Banking Services

Disclaimer
I. Madison Street Capital Overview The attached presentation sets forth a summary of the terms pursuant to which Madison Street Capital, LLC (MSC) will seek to identify possible financing opportunities to the recipient hereof, including debt refinancing, mezzanine and term loans, revolving credit facilities, secured lending facilities, syndicated loans and other types of commercial credit facilities or operational lending. MSC will act as a financial arranger in connection with such financing transactions. If MSC is successful in identifying a source of financing, it will be entitled to receive a fee in connection therewith. However, there can be no assurance that MSC will be successful in identifying a satisfactory financing source, and MSC makes no guarantee of financing. Please note that MSC is not a bank or commercial lender and will not act as the lender with respect to any financing arranged pursuant to this arrangement, and MSC bears no responsibility for the performance of the lender(s) with respect to any such financing. The terms of any financing identified by MSC hereunder will be subject to the independent negotiation and agreement of the parties to such financing, and MSC accepts no responsibility for the negotiation or content of such terms. MSC makes no representation that the terms on which financing may be obtained represent the best terms available, or that such terms are representative of the market for comparable financing arrangements.

Confidential Firm Overview

Table of Contents
I.
II. III. IV.

Madison Street Capital Overview

MSC Global Investment Banking Services Overview Capital Raising Process Mergers & Acquisitions Process

V.
VI.

Capital Markets Credentials

Key Professionals

VII. Contact Information

Confidential Firm Overview

Madison Street Capital Overview

Madison Street Capital (MSC) is a global investment banking firm providing financial advisory services, merger and acquisition expertise, financial opinions, and valuation services to publicly and privately held businesses. MSC and its broker dealer, MSC-BD, LLC , a registered broker-dealer and a Financial Industry Regulatory Authority (FINRA) member, are committed to the highest levels of professional standards.

The firm has industry sectors around the world on engagements ranging from: M&A transactions, Private Debt Placements, Capital Raising, Fairness & Solvency Opinions, Valuation, Restructuring and ESOP Advisory.
MSCs professionals have represented a broad universe of Public and Private Companies, as well as their Boards, Special Committees, and shareholders. Current in-house deal count of more than 100 deals under exclusive contract.

Confidential Firm Overview

Madison Street Capital Expertise

MSC professionals have specialized expertise in partnering with middle-market firms across multiple industry verticals and niche markets to achieve the optimal results. We analyze each clients unique needs to obtain the best match between buyers and sellers, arrange appropriate financing, and create capitalization structures that optimize the clients potential.
Professional Depth Unparalleled Leadership Decades of Experience National Footprint Highest level of Professional Standards Independent Valuation Services Fairness and Solvency Opinions Financial Reporting Tax Compliance Portfolio Valuation Litigation Support

Investment Banking Mergers & Acquisitions Capital Raising Private Placements Corporate Finance Advisory Financial Restructuring ESOP Advisory

Extensive Network Diverse range of contacts on both financial and strategic fronts Connections with high level decision-makers Comprehensive Resources

Confidential Firm Overview

Table of Contents
I. Madison Street Capital Overview

II.
III. IV. V. VI.

MSC Global Investment Banking Services Overview

Capital Raising Process Mergers & Acquisitions Process Capital Markets Credentials Key Professionals

VII. Contact Information

Confidential Firm Overview

Our Clients
MSCs Global Investment Banking services:
Small to middle market businesses in United States (and Canada); Established and successful businesses seeking growth with a commercial presence in the United States; International companies expanding into the United States; and International companies seeking United States based capital providers.

Our clients profile include:

Companies with $10 to $500 million in revenue (USD); Companies with an EBITDA of $1 to $50 million (USD); and Companies with growth potential above 10% in yearly sales.

US Industry Sectors
Aviation Business Services Construction Consumer Goods and Services Financial Services Food & Beverage Healthcare Information Technology Manufacturing Media Real Estate Wholesale and Retail Trade

International Industry Sectors

Consumer Goods Education Energy Financial Services Healthcare Infrastructure Irrigation and Drainage Sanitation Telecommunications Transportation Water Agribusiness Textiles Business Services Construction Food & Beverage Manufacturing Media Real Estate Renewable Energy Retail

Confidential Firm Overview

Unique Appreciation for the Middle Market

Management is a more crucial variable More room for creativity with growth opportunities (storytelling) Must make room in the process for investors to get to know management, sometimes even before submission of first round bids More time invested in pre-launch phase of process Requires anticipation of potential issues to avoid slippage in timetable and unwinding of competitive tension Process Matters

More granular due diligence requirements

Wider range of potential valuation outcomes Larger number of potential participants in process Business is often not a must have for any single investor Transaction agreements are highly customized Process can be taxing on limited management resources

Requires experience to narrow the field and to interpret first round bids Need to walk a fine line between drawing investors into the process and conveying strength at the same time Contract negotiations cannot be divorced from the rest of the process

Advisor must be prepared to carry a significant load

GREATER SCOPE FOR ADVISOR TO ADD VALUE. NEED FOR SPECIALIZED SKILLS.

Confidential Firm Overview

Sound Strategic Advice

MSC differentiates itself by leveraging our experience to provide sound strategic advice at each of the critical junctures in the Transaction process.
Dedication to Middle Market M&A / Cap Raise Superior Senior Level Attention at Each Stage of the Process Unparalleled Attention to Detail

Critical Junctures in the Front-End Marketing Process

Identifying timing to initiate a process Crafting the appropriate sale process Identifying potential strategic and financial partners Conveying the story and opportunities Deciphering initial indications Assembling a competitive group of investors Showcasing the Company and management to investors Critical Junctures in the Back-End Process

Outstanding Negotiation Skills Institutional Network of Strategic and Financial Buyers

Fully understanding all final proposals to develop a true comparison between bids Establishing the right next steps Determining the most advantageous time to negotiate with potential investors Developing counter proposal(s) and the best script with which to deliver them Craft a process to maintain leverage through closing
Confidential Firm Overview

Table of Contents
I. II. Madison Street Capital Overview MSC Global Investment Banking Services Overview

III. Capital Raising Process

IV. Mergers & Acquisitions Process

V.
VI.

Capital Markets Credentials

Key Professionals

VII. Contact Information

Confidential Firm Overview

MSC Capital Raising Process

Description of Services:
MSC Global Investment Banking acts in several capacities on capital raising projects such as
financial advisor and arranger of senior/mezzanine debt and equity for capital requirements. Our capital raising services include:

On-going enterprises seeking growth capital

Revenues track record above $10 million (USD) EBITDA profit levels above $1 million (USD) Quantifiable track record of growth

Companies interested in capital raising towards M&A activities: buy or sell roles Certain Real Estate Projects across different stages of Development

Furthermore, MSC has a world-class network of financial sponsors that are mandated to lend to
middle market opportunities both domestic and internationally based. These include specialty finance companies, hedge funds, certain US and global commercial banks and other alternative lending sources.

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Confidential Firm Overview

MSCs Capital Raising

Distinctive Approach:
MSC negotiates ideal deal terms based on agreed upon strategic objectives. Key elements of MSCs negotiation methodologies include valuation considerations and risk mitigation strategies Selection of our capital partners in our engagement execution
strong relationships with lending groups interested in the middle market segment; strong partnerships with government agencies (like SBA) supporting middle market initiatives; and negotiations capabilities to reach the best terms to our clients

We conduct an in-depth pre-marketing phase leveraging MSCs extensive network with institutional investors to:
understand the markets appetite for the deal; identify potential sources of funds (SOFs); and validate and/or improve our clients business plan

Our deal execution team processes and negotiates our deals from start to finish including coordinating due-diligence and the communication process with prospective investors

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Confidential Firm Overview

MSC Professionals Add Value

MSC serves as an intermediary in negotiations
Insulates the owners and management from the need to make immediate decisions Ability to act as the bad cop and not sour the buyer on the transaction or the owners and management team Provides the owner the ability to maintain an appropriate distance from the sales process

MSC professionals leverage industry and financing experience

Prepares a company for the transaction process and can provide suggestions on how to enhance value in the eyes of bidders Utilizes industry contacts and pre-existing relationships to target investors most likely to meet shareholder objectives Understands the implications of different deal terms and how to guard clients against disadvantageous conditions

MSC process allows management to concentrate on the day-to-day issues of running the business
Avoid neglecting customers, vendors, and employees It is critical that the business continues to perform well during the transaction process

MSC raises the sophistication level of the transaction and maximizes potential value
Investors assume they can acquire stakes in companies that lack representation at bargain prices Representation translates directly into more advantageous transaction terms
Confidential Firm Overview

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Table of Contents
I. II. III. Madison Street Capital Overview MSC Global Investment Banking Services Overview Capital Raising Process

IV. Mergers & Acquisitions Process

V.
VI.

Capital Markets Credentials

Key Professionals

VII. Contact Information

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Confidential Firm Overview

Mergers & Acquisitions Services

Description of Services: MSC identifies, assesses and values strategic acquisition targets for our clients and provides
capital raising support to finance growth strategies. MSC also assists our clients with the design and implementation of successful exit strategies in connection with sell-side mandates

Distinctive Approach:
MSC conducts a detailed diagnosis of our clients strategic considerations and competitive landscape in order to formulate and execute accretive transactions
For buy-side engagements, MSC identifies target companies through our extensive middlemarket network and well-developed institutional relationships as well as proprietary and industry focused databases From a sell-side perspective, MSC assists our clients in the identification of value maximizing strategies and strategic planning. MSC serves as an integral partner throughout businesses divestitures whereby we coordinate the communication and negotiation with strategic and corporate investors

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Confidential Firm Overview

Buyers & Sellers - Bridging the Gap with Structure

Proper deal structure can narrow the gap between expectations
M&A transactions can be complex at times. Given that there has to be agreement between both the buyer & seller that is predicated with the highest degree of trust it can be difficult to protect against every scenario through a contract. It is important to balance incentives across all constituents and create a structure that retains this alignment as best as possible post-transaction. For a buyer, they will need to ensure interest remains sufficiently aligned with any selling equity holders who remains key to managing the business and/or crucial to investment function. As with most successful deals, a true partnership exists at the senior-most level of each business. Below are key deal elements that should be considered, and in some cases, need to be carefully designed in order to achieve success: Earn outs Staged sales/ Delayed or contingent payment of purchase price Employment contracts/ Multi-year commitments post-transaction Retention payments Compensation plans Put &Call Options Equity grants Separate treatment of management and incentive fee streams Amount of retained equity in business by seller Reinvestment of after-tax proceeds in the business Consideration about day-to-day management /control of business * Given the complexity of these type of deals, it is wise to have proper representation with regards to investment banker, attorneys, accountants and other professionals.

Acquirer

Madison Street Capital

Law Firm

MSC Client
Employees Tax & Estate Planning

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Confidential Firm Overview

Comparison of Buyer Types

The two primary types of acquirers are strategic and financial buyers
Each set of buyers typically evaluates an acquisition based on different criteria and goals
FINANCIAL BUYERS STRATEGIC BUYERS Raises capital in funds from various sources to invest in businesses with the expectation of exiting within a relatively short time period (typically five to seven years) to achieve a targeted rate of return for investors (generally 20% to 25%)

Typically public or private corporations currently involved in similar or complementary business line Places a greater emphasis on identifying and realizing potential revenue and cost synergies Rationale for acquisition more strategic in nature (i.e. reducing competition, enter new geographic markets, etc.) Typically concerned with generating longterm value from acquisition and effectively integrating the target into the buyers existing operations Higher valuation could be supported by the realization of synergies

ADD-ON Has a similar or complementary business in existing portfolio of investments Acquisition drivers are typically similar to those of strategic buyers, but additionally driven by the need to put raised capital to work and grow investments before fund life expires Often an ideal buyer as they have financial resources of private equity backing and strategic rationale to support a favorable purchase price

PLATFORM Does not have a similar business in existing investment portfolio Seeks entry into an attractive market with potential for growth and definable exit strategy

Acquisition can serve to diversify investment portfolio and create a platform for future acquisitions in the same space
Identification of opportunities to create value through a strategic partnership

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Confidential Firm Overview

Assessing Deal Structure and Options

Number of transactions completed Integration success of previous transactions Integration planning effort Marketing Financing relationships Credit approval process of financing source Financing structure of current operations
Equity available Returns to equity participants

Deal with the decision makers who can allocate capital Strong strategic fit core business:
Strategic logic: component, module, system Geographic reach; low cost sourcing opportunity Capacity needs Capable of identifying and implementing process improvements Capable of bringing engineering and design improvements Focused purchasing effort could generate material cost reduction Customer diversification

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Confidential Firm Overview

Table of Contents
I. II. III. IV. Madison Street Capital Overview MSC Global Investment Banking Services Overview Capital Raising Process Mergers & Acquisitions Process

V.
VI.

Capital Markets Credentials

Key Professionals

VII. Contact Information

18

Confidential Firm Overview

Assessing Deal Structure and Options

Number of transactions completed Integration success of previous transactions Integration planning effort Marketing Financing relationships Credit approval process of financing source Financing structure of current operations
Equity available Returns to equity participants

Deal with the decision makers who can allocate capital Strong strategic fit core business:
Strategic logic: component, module, system Geographic reach; low cost sourcing opportunity Capacity needs Capable of identifying and implementing process improvements Capable of bringing engineering and design improvements Focused purchasing effort could generate material cost reduction Customer diversification

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Confidential Firm Overview

Capital Markets Credentials

Madison Street Capital provides investment banking services to corporations and institutions throughout the United States and around the world. Our model provides clients with new sources of demand by effectively penetrating 2nd and 3rd tier investors that are typically overlooked by large firms as well as large tier 1 accounts with a goal of creating a diverse investor base Our Competitive Advantage: Distribution capabilities to place a significant volume of securities with institutional investors Diverse investor base that includes: Financial Institutions, Corporations, Money Managers, Mutual Funds, Pension Funds, State and Local Governments, Unions, Endowments and Foundations

Access to deep pools of capital based on relationship with pension funds

Reputable team exceptionally qualified to lead-manage or co-manage significant transactions

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Confidential Firm Overview

Recent Transactions

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Confidential Firm Overview

Table of Contents
I. II. III. IV. Madison Street Capital Overview MSC Global Investment Banking Services Overview Capital Raising Process Mergers & Acquisitions Process

V.

Capital Markets Credentials

VI. Senior Professionals

VII. Contact Information

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Confidential Firm Overview

Senior Professionals
Business Experience
Karl D'Cunha, CA is a Senior Managing Director at Madison Street Capital. The range of services include M&A Advisory, Capital raising, Portfolio Valuation, Restructuring and Financial Sponsor advisory services. Mr. DCunha has broad financial services experience including over 16 years experience in the asset management industry working with some of the largest investors in the world. Mr. DCunha has been actively raising capital for companies in different stages of development and has established a global network of contacts at private equity, venture capital, hedge funds, RIAs, public and private pensions, family offices and other entities. Mr. D'Cunha was previously an audit manager at Ernst & Young, LLP and PricewaterhouseCoopers, LLP with 8 years experience in their respective Asset Management industry groups. Mr. D'Cunha holds a B.A. in Finance and Economics from University of Western Ontario and a Graduate Diploma in Accounting from McGill University. Mr. D'Cunha is a Chartered Accountant, a level III candidate in the Chartered Financial Analyst program, and is registered with FINRA as a General Securities Representative (Series 7) and an Investment Banking Representative (Series 79). Mr. DCunha is a member of the following organizations: New York Hedge Fund Roundtable, Canadian Institute of Chartered Accountants, CFA Society of Chicago, CFA Institute, and American MENSA, Ltd.

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Confidential Firm Overview

Senior Professionals
Business Experience
Jay Rodgers is a Managing Director at Madison Street Capital. His primary responsibilities in the Capital Markets Group are focused on merger and acquisition advisory and corporate finance engagements. Mr. Rodgers has worked on the largest amount of renewable energy projects at the firm across several verticals. Prior to joining MSC, Mr. Rodgers worked for a nationally recognized management consulting firm as Director of Transactions for Mergers/Acquisitions and Corporate Finance. In the publicly-traded market place, Mr. Rodgers spent twenty years with Hornblower & Weeks-Hemphill, Noyes Inc., Drexel Burnham Lambert, and Lehman Brothers. Mr. Rodgers served as an officer in the United States Army for two years active duty and four years of reserves following graduation with a Bachelor of Science in Business from Florida State University.

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Confidential Firm Overview

Senior Professionals
Business Experience
Reginald McGaugh is a Managing Director at Madison Street Capital. Mr. McGaugh leads the Global Healthcare Markets Group for the firm. Mr. McGaugh has extensive experience and relationships in the healthcare sector including biotechnology firms, pharmaceutical firms, Tele-medicine firms, diagnostic imaging firms, healthcare medical device firms, Healthcare REITs and direct professional experience with both healthcare providers and managed care companies. Prior to joining Madison Street Capital, Mr. McGaugh served as a senior executive with a Merchant Banking firm that was involved in an $83 Million acquisition of a specialty hospital where he served as interim Chief Operating Officer for the hospital and the associated ancillary facilities. His experience includes the development and project management of specialty hospitals and big box ambulatory care centers specializing on hospital/physician joint venture structures. Mr. McGaughs experience also includes the energy, telecommunications and transportation sectors. Mr. McGaugh has served as an analyst/consultant with Harley Davidson Financial Services, MidAmerican Energy Holdings (A Berkshire Hathaway Company), Peoples Energy, University of Nebraska Medical Center, Nebraska Orthopedic Hospital, Ryder Logistics and WestLB Mellon Private Equity. Along with his focus on healthcare, Mr. McGaugh will also focus his efforts on the advisory side of deals structured in compliance with Islamic Law (Sharia) principles as the firm expands in Africa and the Middle East. Mr. McGaugh holds a Bachelor of Science in Finance degree from the University of Nebraska Lincoln and a MBA in Finance from the Florida A&M University School of Business & Industry. He completed a 2 year formal credit training program at Wells Fargo Bank.

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Confidential Firm Overview

Table of Contents
I. II. III. IV. Madison Street Capital Overview MSC Global Investment Banking Services Overview Capital Raising Process Mergers & Acquisitions Process

V.
VI.

Capital Markets Credentials

Key Professionals

VII. Contact Information

26

Confidential Firm Overview

Tuesday, December 12th, 2006

For more information please contact : Karl DCunha, CA Senior Managing Director 105 W. Madison Street, Suite 1200 Chicago, IL, 60602 (312) 529-7000 kdcunha@madisonstreetcapital.com

Confidential