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  1. 1. INTRODUCTION TO BRENTWOOD CAPITAL ADVISORS DECEMBER 3, 2003
  2. 2. OVERVIEW OF BRENTWOOD CAPITAL ADVISORS BCA FOCUS • Partner-owned and NASD-licensed investment bank founded in 1999 • Private placement and financial advisory assignments • Focused transaction ranges: $10 million to $100 million • Represent proven business models and management teams • Background on BCA professionals: - Over $6 billion in completed financing and advisory assignments - Over 80 years of combined industry experience with leading regional investment banks and law firms FINANCIAL ADVISORY PRIVATE PLACEMENTS • Sell/Buy-side M&A Services • Early to Late-Stage Equity • Fairness Opinions • Subordinated Debt • Leveraged Buyouts • Senior Debt • Leveraged Buildups • Recapitalizations 2
  3. 3. OVERVIEW OF BRENTWOOD CAPITAL ADVISORS BCA PROFESSIONALS • BCA Professionals and Experience: Kevin Murphy – Managing Partner (19 Years of Industry Experience): • Head of Private Capital Group, SunTrust Equitable Securities • Co-Head – Capital Markets Group / Senior Vice President, Wachovia Corporation Tom Wylly – Senior Partner (26 Years of Industry Experience): • Co-Head – Corporate Finance Group, J.C. Bradford & Co. Gentry Barden – Partner (17 Years of Industry Experience): • Managing Director and Head of Nashville Office, McDonald Investments, Inc. • Managing Director and Co-Head of M&A, J.C. Bradford & Co. • Partner, Bass Berry & Sims (Nashville Law Firm) Nick Carteaux – Vice President (Eight Years of Industry Experience): • Associate – Investment Banking Group, SunTrust Equitable Securities Jack Harrington – Vice President (Eight Years of Industry Experience): • Vice President – Merchant Banking, Nelson Capital Corporation Jonathan Smith – Associate (Three Years of Industry Experience): • Analyst – Investment Banking Group, Robert W. Baird & Company 3
  4. 4. OVERVIEW OF BRENTWOOD CAPITAL ADVISORS BCA DELIVERS: “Credibility . . . Proven Track Record” BCA’S TRANSACTION EXPERTISE • Optimal capital structures • Relationships with leading capital sources PRIVATE EQUITY • Extensive transaction track record • Deep market and segment expertise SUBORDINATED DEBT • Objective advice SENIOR • Proper market positioning DEBT • Highly competitive processes FINANCIAL • Creative persistence in closing transactions ADVISORY 4
  5. 5. OVERVIEW OF BRENTWOOD CAPITAL ADVISORS SELECTED RECENT TRANSACTIONS – PRIVATE PLACEMENTS DentalCare Partners, Inc. Symbion, Inc. • Leading dental practice • Leading operator of surgery centers management company offering a providing surgical procedures full range of general and specialty across many specialties dental services • Raised $40 million in Subordinated • Operates dental and orthodontic Debt from DLJ Investment practices within Sears Dental and Partners and existing investors DentalWorks locations • Proceeds provided capital for • Raised $22.5 million in a growth and acquisitions combination of Senior and Subordinated Debt financing Senior / Subordinated Debt Financing Growth Financing 5
  6. 6. OVERVIEW OF BRENTWOOD CAPITAL ADVISORS SELECTED RECENT TRANSACTIONS – PRIVATE PLACEMENTS Prime Office Products, Inc. Psychiatric Solutions, Inc. • Leading nationwide network of • Leading provider of behavioral office distributors for small and healthcare services medium-sized commercial businesses • Raised $25 million PIPE financing from Oak Investment Partners, • Raised $17 million in Senior Debt Salix Ventures and Brown Brothers from PNC Business Credit: Harriman (i) $15 million revolver; and (ii) $2 million secured term loan • Raised $20 million of Subordinated Debt from Brown Brothers • Proceeds refinanced existing credit Harriman’s 1818 Mezzanine Fund facility and provided capital for growth and acquisitions Senior Debt Financing Growth Equity 6
  7. 7. OVERVIEW OF BRENTWOOD CAPITAL ADVISORS SELECTED RECENT TRANSACTIONS – PRIVATE PLACEMENTS Surgical Alliance Corporation HealthEssentials Solutions, Inc. • Develops, acquires and manages • Leading provider of geriatric specialty surgical hospitals healthcare services through physician partnerships • Raised $12 million in Senior Debt • Experienced management team from Healthcare Business Credit consisting of former executives Corporation to fund future working and co-founders of OrthoLink capital needs Physician’s Corporation • Sponsored by Bruckmann, Rosser • Raised $15.6 million in Preferred & Sherrill, a $770 million, New Equity from Wachovia Capital York-based private equity fund Partners and Noro-Moseley Partners Growth Equity Senior Debt 7
  8. 8. OVERVIEW OF BRENTWOOD CAPITAL ADVISORS SELECTED RECENT TRANSACTIONS – PRIVATE PLACEMENTS / FINANCIAL ADVISORY KEYS Group Holdings LLC Century Foods International, Inc. * • Leading provider of “at-risk” youth • Privately held nutritional services supplement contract manufacturer headquartered in • Going private transaction of Wisconsin Children’s Comprehensive Services • Served as exclusive financial • Provided merger and acquisition advisor to the company - advisory services regarding the performed extensive auction purchase of Children’s process Comprehensive Services • $115 million transaction • Raised $10 million of Preferred Equity from Harbert Corporation • Strategic Sale to Hormel Foods and Red River Capital Change of Control Equity Strategic Sale * Transactions managed by BCA professionals while at predecessor firms. 8
  9. 9. OVERVIEW OF BRENTWOOD CAPITAL ADVISORS SELECTED RECENT TRANSACTIONS – FINANCIAL ADVISORY Psychiatric Solutions, Inc. Psychiatric Solutions, Inc. • Leading provider of behavioral • Leading provider of behavioral healthcare services through healthcare services through freestanding psychiatric hospitals freestanding psychiatric hospitals • Provided Fairness Opinion for PIPE • Provided Fairness Opinion for transaction (valuation of PSYS PMR transaction (valuation of equity securities) transaction and PSYS common shareholder consideration) Fairness Opinion Fairness Opinion 9
  10. 10. OVERVIEW OF BRENTWOOD CAPITAL ADVISORS SELECTED RECENT TRANSACTIONS – FINANCIAL ADVISORY Children’s Comprehensive Services * The Potomac Group, Inc. / MedifaxEDI * • Leading provider of “at-risk” youth • Leading provider of medical services eligibility transaction services • Served as exclusive financial • Advised Board of Directors on sale advisor to the company in response of healthcare information services to unsolicited offer company to Crescent Capital Investments • $70 million transaction • $117 million transaction • Strategic Sale to KEYS Group Holdings LLC • Provided a Fairness Opinion in connection with the transaction Strategic Sale / Fairness Opinion Fairness Opinion * Transactions managed by BCA professionals while at predecessor firms. 10
  11. 11. OVERVIEW OF BRENTWOOD CAPITAL ADVISORS RECENTLY COMPLETED TRANSACTIONS AND CURRENT ENGAGEMENTS • Since January 1, 2002, BCA has completed: $22,500,000 $40,000,000 $17,000,000 • Eight financing transactions, raising $162.1 million DentalCare for its clients, or approximately $20.0 million per Partners, Inc. Symbion, Inc. Prime Office transaction; and Products Senior and Subordinated Debt Subordinated Debt Senior Debt • Two financial advisory assignments September 2003 July 2003 May 2003 • Active engagements ($345.0 million in transaction value): $25,000,000 $15,600,000 $20,000,000 - Distribution Company: - $270.0 Million (Senior Debt and Subordinated Debt) Psychiatric Surgical Alliance Psychiatric Solutions, Inc. Corporation Solutions, Inc. - Tax Software Provider: PIPE Financing Private Equity Subordinated Debt - $75.0 Million (Senior Debt, Subordinated Debt and February 2003 September 2002 July 2002 Equity) - Behavioral Health Residential Treatment Center: $12,000,000 Undisclosed $10,000,000 - Undisclosed (Sell-side Advisory) - Medical/Surgical and Psychiatric Hospital: HealthEssentials Psychiatric KEYS Group Solutions, Inc. Solutions, Inc. Holdings, LLC - Undisclosed (Sell-side Advisory) Senior Debt Fairness Opinion Private Equity May 2002 April 2002 January 2002 11
  12. 12. OVERVIEW OF BRENTWOOD CAPITAL ADVISORS THE COMPANY WE KEEP HEALTHCARE SERVICES EDUCATION / TRAINING BUSINESS SERVICES / OUTSOURCING DISTRIBUTION / LOGISTICS CONSUMER / RETAIL MEDIA / COMMUNICATIONS 12
  13. 13. OVERVIEW OF BRENTWOOD CAPITAL ADVISORS WORKING WITH PORTFOLIO COMPANIES OF AND SELLING SECURITIES TO LEADING INSTITUTIONAL INVESTORS REPRESENTATIVE PRIVATE EQUITY AND SUBORDINATED DEBT FUNDS 13
  14. 14. OVERVIEW OF BRENTWOOD CAPITAL ADVISORS BCA’S ADVISORY BOARD • BCA’s Advisory Board is comprised of experienced operators who are highly knowledgeable and respected within select industry verticals • BCA’s Advisory Board, consisting of the following businessmen and women, assists in due diligence and industry-related research: - David Bartholomew, Staffmark - Bob Dupuis, Bluestar & Axonn - W. Earl Reed, Allegro Group - Barbara Cannon, Celeris - Rock Morphis, Surgical - Cartter Patten, Patten & Patten Alliance & Heritage Health - Paul Christians, Prime Office - Don Taylor, American Healthways - Ed Nelson, Nelson Capital - Michael Cote, SecureWorks - Ed Wissing, American HomePatient REPRESENTATIVE INDUSTRY VERTICAL EXPERTISE C 14
  15. 15. MARKET OVERVIEW SENIOR DEBT CAPITAL MARKETS • Senior debt landscape continues to change - Commercial loans – personal financial statements and guaranties - Corporate loans: Status Cash Flow Loan Type Lower Middle-Market $5 to $15 million Asset-based Stretch piece Last-out-senior Middle-Market $15 to $30 million Asset-based Cash flow Last-out-senior Upper Middle-Market $25 to $50 million Cash flow “B” term loan High yield Large Corporate $50 million + Public bond • Market is improving - New participants - Banks marginally more expensive 15
  16. 16. MARKET OVERVIEW SENIOR DEBT FINANCING PARAMETERS Funding: At Close Facility Structure: Asset-Based Cash Flow Advance Rates: A/R 50% 85% Inventory 40% 90% Term Loan: Fixed Assets 0% 60% Airball 0% 30% Revolver Maturity: 364 Days 5 Years Term Loan Maturity: 1 Year 7 Years Amortization: 2 Years Bullet Interest Rate: P or LIBOR + 200 P+5% or LIBOR + 600 Commitment Fee: 0% 2% Facility Fee: 0% 2% Covenants: None Many 16
  17. 17. MARKET OVERVIEW SUBORDINATED DEBT CAPITAL MARKETS • Companies with cash flow greater than $10 million have multiple sources - Mezzanine funds - Insurance companies - SBICs • Current competitive environment favors issuers - Significant amount of capital seeking to be deployed - Target rates of return have been lowered - Additional flexibility being shown (prepayment penalties, fees, etc.) • Subordinated debt lenders are offering “revolver-like” facilities - Draw on commitments as needed - Pay closing fees on amounts drawn - Unused fee similar to senior debt revolver • Interest-only pricing available to companies with EBITDA greater than $20 million - Cash coupon typically 12% to 14% - PIK coupon typically 3% to 5% - Interest-only, final maturity of 5 to 7 years - Flexible structure 17
  18. 18. MARKET OVERVIEW SUBORDINATED DEBT FINANCING PARAMETERS Valuation: Low High Funding: At Close Facility Total %: 17% 25% Cash Interest: 10% 18% Equity: 0% Warrant Coverage Term: 3 Years 9 Years Structure: Amortizing Bullet Upfront Fees: None 3% Prepayment Penalty: 2% 12% Covenants: None Many Exercise Price: Nominal Market Anti-Dilution: Full Ratchet Weighted Average Registration Rights: Demand Shelf Board Representation: None Multiple 18
  19. 19. MARKET OVERVIEW PRIVATE EQUITY CAPITAL MARKETS • Private equity firms are eager to invest in strong companies with proven management teams and predictable cash flow • Due to a sluggish M&A environment, private equity investors are willing to pay a premium for acquisition candidates with significant annual cash flows • Buyout funds have lowered their return requirements from mid-30%s to mid-20%s and will not close on any deals with even minor issues 19
  20. 20. MARKET OVERVIEW EQUITY FINANCING PARAMETERS Valuation: Low High Liquidity: None 5 Years Registration Rights: Demand Shelf Liquidation Preference: Non-Part. Participating Principal & 3x to 4x Accrued Div. Dividend Rate: 5% 12% Automatic Conversion: Exit (none) @ Strike Price Anti-Dilution: Full Ratchet Weighted Average Board Representation: None Multiple 20

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