Mark Carroll, Founder and Managing Partner, Superior Capital, Detroit, MI

Matt Davidson, Director, Conway MacKenzie, Birmingham, MI

Ralph Kourtjian, Vice President, First Business Capital, Southfield, MI

Robert Bowles, Founder-Executive Director, Bluewater Transaction Advisors, Warren, MI

Al Loewenstein, Vice President, Maynards Appraisals, Southfield, MI

Ted Sylwestrzak, Partner, Dickinson Wright, Detroit, MI

Angus White, Senior Vice President, Troy, MI

Based in Old Industrial Town, MI, founded by Jim Smith in 2002

Supplies super widgets to a wide variety of customers

Oil and Gas, Automotive, Aerospace and Defense industries

The company’s lenders are tired and losing patience

Mr. Smith is seeking Third Party Financing to accomplish the following:

$500k for consulting expenses to repair failed ERP installation and implementation

Replenish $2 million of working capital that disappeared

o Large Oil and Gas customer filed for chapter 7 bankruptcy, no recovery is expected

Fund $2 million of Capital expenditures related to a new multi-year contract

o Sterling Heights based TACOM unit (US Army)

($ in mm's) 2009 2010 2011 2012 2013 2014B 2015P

Revenue $22.0 $24.0 $28.0 $32.0 $25.0 $22.0 $40.0

EBITDA 1.5 2.2 2.8 4.5 1.3 0.8 6.0

EBITDA % 7.0% 9.0% 10.0% 14.0% 5.0% 3.5% 15.0%

CapEx 0.3 0.3 1.5 0.3 0.3 2.3 0.3

Total Debt 4.5 4.0 3.0 11.2 10.2 12.5 TBD

Total Leverage 2.9x 1.9x 1.1x 2.5x 8.2x 16.2 TBD

Renowned private equity firm Rock River Tree (“RRT”) is prepared to invest $5 million to fund a de-leveraging transaction and is seeking a senior debt provider to partner with and ensure sufficient liquidity for future operations

($ in mm's)

AR Detail: Inventory Detail:

US TACOM $1.0 Raw Materials $2.0

NRG Resources $1.5 WIP $1.0

Ford Motor $0.8 Finished Goods $1.0

All Other $2.2

PP&E:

Land $0.8

Building $0.3

Robotic Line for 2 large customers $3.0

Stamping and Extrusion lines $1.9

Book Balance Advance Rate

Estimated

Availability

Account Receivable 5.5$ 90.0% 5.0$

Inventory 4.0 65.0% 2.6

PP&E 6.0 85.0% 5.1

Total 15.5$ 12.7$

Old Industrial Town, MI HQ Plant

Former site of Acme Asbestos

and Plating CO.

Current owner Jim Smith’s yacht

Purchased in December 2012

Owned by Jim and Suzy Cruisers LLC

Pro’s Con’s

• Three year contracts • Prepay fees

• Few covenants • Collateral / financial reporting

• Aggressive advance rates • Dominion of Funds / lockbox

• Lend to companies with inconsistent

earnings

• Quarterly field exams

• Lend to companies with leveraged balance

sheets

• Higher overall costs

• Few industry restrictions • No WIP advances

• Flexible working capital structure

Term Description

• Length of contract • Fixed commitment

• Collateral exams • Survey exam and recurring exams

• Inventory • Annual appraisals

• Lockbox • All collections to lockbox

• Covenants • Max CapEx / fixed charge ratio

• Reporting • Weekly / monthly borrowing base cert.

• Monthly financials

• Monthly accounts receivable aging

• Monthly accounts payable aging

Examination of accounts receivable dilution and turnover to provide analytics to

determine an advance rate (typically an 85% advance rate is supported by 5% or less

dilution)

Dilution is the percentage of non-cash credits compared to gross receivable sales

Turnover is cash collections compared to the beginning accounts receivable balance

((A/R Turnover=AR Balance/”True” Cash Collected for the Month)*30 days)

Standard inventory review includes an analysis of excess inventory (typically defined as

inventory on-hand in excess of 12-months sales, calculated on a SKU level)

Past-due accounts

Credit balances aged past due

Taint rule (cross-age)

Foreign accounts

Government accounts

Affiliated accounts

Cash on deposit

Contra offsets

Tooling invoices

Overpayments

Bankrupt accounts

Allowances on general ledger

Dated and/or extended terms

Prebilled/advanced billings

Consigned or guaranteed sales

Retainage’s (retentions)

Progress billings

Interest or finance charges

Unbilled or held A/R

Bonded receivables

Customer deposits

Raw Materials at Outside Vendor Locations

Returned inventory, which has been added

Paints, Solvents, and the Like

Scrap Inventory

Consigned Goods

Reserves associated with exam testing

Work-in-Progress

Slow Moving Inventory

(criteria set by the Lender)

Obsolete Inventory

(criteria set by the Lender)

In-transit items carried on the perpetual of general ledger

Packaging Supplies, Labels, and Racks

(in mm’s)

Net Accounts Receivable 5.5$ 100.0%

Ineligible Detail:

Over 90 Days (Aging Ineligible) (0.3) -6.0%

Affiliates (0.1) -1.5%

Aged Credits (0.1) -1.3%

Contra Analysis (0.1) -1.1%

Cross Aged (0.0) -0.4%

Customer Deposits (0.0) -0.4%

Government (0.0) -0.2%

International (0.0) -0.2%

Total Ineligible (0.6) -11.0%

Eligible Accounts receivable 4.9 89.0%

Blended Advance Rate 82.0% ---

A/R Availability 4.0 72.9%

A/R Availability Cap 6.5 ---

A/R Availability w/ Loan Cap 4.0 72.9%

(in mm’s)

Inventory:

Raw

Material WIP

Finished

Goods

Total

Inventory

Gross Inventory 2.0$ 1.0$ 1.0$ 4.0$

Ineligible Detail:

Test Count Variance (0.1) - (0.1) (0.2)

Cost Test Variance (0.0) - - (0.0)

WIP - (1.0) - (1.0)

Excess Inventory (0.2) - (0.2) (0.4)

Less: Total Ineligible (0.3) (1.0) (0.3) (1.6)

Eligible Inventory 1.7 - 0.7 2.4

Advance Rate 65.0% 0.0% 72.5% 61.5%

Inventory Availability 1.1 - 0.5 1.5

Inventory Availability after Sub-Limit 1.5 - 0.5 2.0

Effective Inventory Advance Rate 55% 0% 47% 37%

Quantity of like assets (Supply and demand)

Available in-plant

Available on the market

Accessories

The addition of accessories may increase value

The absence of accessories may decrease value and/or affect marketability

Condition of the industry (External obsolescence)

Removal factors

The location of the asset

o In-Plant

o Geographic

The ability to remove the assets

The cost to remove the assets

Time and cost to reinstall the asset(s)

Extraordinary transportation costs

Complete descriptive information

Year of manufacture

Manufacturer’s name

Model number

Serial number

Capacity

Relevant operating specifications

Individual value estimates

Photographs of major equipment

Condition of the asset

Age versus physical deterioration

Maintenance practices

Rebuilds and retrofits

Functional and technological obsolescence

Size of the market for the asset(s)

Is the appeal for the asset(s) universal

Is the asset special or of proprietary design

ISSUES CASH FLOW ABL

Length 25 – 50 Pages Often 100 Pages Plus

Level of Detail Somewhat

Detailed Very Detailed

Financial

Covenants Many

1. Fixed Charge

2. Capital Ex

ISSUES CASH FLOW ABL

Personal

Guaranty Not Unusual Very Unusual

Lender

Discretion Not a Lot

A Lot

(Particularly re Collateral)

(Right to Adjust Advance

Rates)

Lockboxes

DOF Not Unusual Almost Always

ISSUES CASH FLOW ABL

Landlord /

Processor

Waivers

Not Usually Almost Always

Dividends Yes, With Some

Limitations Generally Prohibited

Notice and

Cure

re Defaults

1. Payment up to

5 Days

2. Non-Payment

30 Days

1. None for Payment

2. Short (10-20 Days)

For defaults that can be

cured

ISSUES CASH FLOW ABL

Appraisals

No Ongoing

Appraisal

Requirement

1 – 2 Per Year

(Inventory and

Equipment)

Book

Balance Ineligible

Advance

Rate

Loanable

Collateral

Book

Balance Ineligible

Advance

Rate

Loanable

Collateral

Account Receivable 5.5$ - 90.0% 5.0$ Account Receivable 5.5$ (0.6) 82.0% 4.0$

Inventory 4.0 - 65.0% 2.6 Inventory 4.0 (1.6) 65.0% 1.6

Land & Building 1.1 - 85.0% 0.9 Land & Building 1.1 - NA -

Robotic Line 3.0 - 85.0% 2.6 Robotic Line 3.0 - NA 0.7

Stamping Line 1.9 - 85.0% 1.6 Stamping Line 1.9 - NA 2.5

15.5$ -$ 12.7$ 15.5$ (2.2)$ 8.8$

Equity from RRT 5.0 Equity from RRT 5.0

Required Availability (3.0) Required Availability (3.0)

Total Sources 14.7$ Total Sources 10.8$

Original Estimate of Sources of Funds Post Underwriting Sources of Funds