ACG St. Louis The State of the Credit Markets June 19, 2009 Ronald Kahn Managing Director

1. ACG St. Louis The State of the Credit Markets June 19, 2009 Ronald Kahn Managing Director Lincoln International LLC (312) 580-6280 rkahn@lincolninternational.com

2. Transaction Types • Closes concurrently with acquisition • Coordination and commitments are paramount • Critical to have options available to the end Acquisition Financing • Initial deal is bridged / over-equitized to guarantee quick closing • Effected post-acquisition to optimize solicitation process and/or take advantage of credit market conditions Post - Acquisition Financing • Improve pricing and other terms • Take out fatigued lender(s) • Rebalance senior and junior tranches Refinancing • Creates additional availability to fund growth • Possibly includes a delayed draw capex or acquisition line Expansion Financing • Proceeds to shareholders in the near-term • ABL and mezz less sensitive to dividends • Interim realization when a sale is not optimal or timely Dividend Recap Cash Flow Loans Sale-Leasebacks Second Lien Mezzanine/ Sub Debt Minority Equity ABLs Experience with High Profile Financial Sponsors Lincoln International’s investment bankers have worked with a number of high profile sponsors to execute financings across a range of transaction types and capital structures Types of Capital Placed by Lincoln

3. The Market at a Crossroads Technical aspects of the market have been improving . . . Average Bid and Ask of Leveraged Loans Bloomberg US Industrial BB Yield Curve Source: Bloomberg Source: Standard & Poor’s Leveraged Commentary and Data Average First- and Second-Lien Secondary Spread (Index of 15 Largest Issuers with Both Tranches) Market Dynamics • Greater demand for higher-yielding debt securities has driven yields downward • The re-pricing of credits, in conjunction with amendments and extensions, has resulted in higher yields and, therefore, higher loan values • A resurgence in the high-yield market has resulted in the repayment of leveraged loans, creating additional liquidity Source: Standard & Poor’s Leveraged Commentary and Data (as of 4/23/2009)

4. BDC Performance And the price per share of most BDCs is on the rise, as BV/share begins to stabilize . . . Market Dynamics Last 18 Months of BDC Price per Share and BV/Share • Lincoln created an index to monitor the price per share and book value per share of the eleven largest business development corporations (“BDCs”) (market cap over $180 million) • Since December 2007, while the BV/share of each BDC has deteriorated 34.4%, the average price per share of Lincoln’s BDC index has decreased by 63.7% • Recently, the price per share index has begun to improve, and the gap between price per share and BV/share has narrowed • Signs of returned strength to BDCs indicate potential for additional liquidity and improved conditions throughout the broader financing markets Source: Capital IQ Last 18 Months of BDC Price per Share and BV/Share Source: Capital IQ

5. Loan Volumes and M&A Activity – Waiting to Recover However, loan volumes and M&A activity remain anemic . . . Total Middle Market Loan Volume ($ in billions) (Issuers with EBITDA of Less Than $50 million) Global New-Issue Leveraged Loan Volume ($ in billions) Source: Standard & Poor’s Leveraged Commentary and Data Source: Standard & Poor’s Leveraged Commentary and Data Middle Market M&A Transaction Volume (Rolling TTM) Market Dynamics • The recent stagnation in loan volume and M&A activity is due to a combination of: • Continued poor economic conditions • Lack of visibility into many borrowers’ future performance • The underwriting standards of lenders still providing capital have remained very tight • Mismatch of buyer and seller expectations Source: Factset Mergerstat Note: Transaction Values between $10 million and $250 million

6. Credit Quality – The Great Indicator Despite the improvement in the technical aspects of the market, the fundamentals remain weak . . . Percentage of Issuers with Outstandings in Payment Default or Bankruptcy U.S. Speculative-Grade Default Rate and 12-Month Forward Forecast Source: Standard & Poor’s Leveraged Commentary and Data Market Dynamics • Defaults have been rising and are expected to continue to increase throughout 2009 • Increase in defaults delayed by: • Covenant-light transactions • Use of equity cures • PIK toggle provisions • According to LCD, EBITDA is down by an average of 15% vs. last year; the reduction in EBITDA has resulted in an increase to total leverage ratios • Significant increase in restructuring activity is anticipated Source: Standard & Poor’s Ratings Direct

7. Increase in Amendment Activity The deepening economic slump has sparked increased amendment activity Dynamics of Amendment Activity Leveraged Loan Market Monthly Amendments • As of June 16, 2009, there have been 192 amendments that have been approved vs. 54 during the same period last year • The economic recession has resulted in a steady increase in the number of defaults. Lenders have been able to improve their position by providing amendments and forbearance agreements for existing credits • Recent amendment activity has shown the following dynamics: • Amendment Fees: On average, issuers paid 48 basis points of amendment fees in May, down from 60 basis points in 1Q09 • Rate Increases: Raising rates are typically the highest priority for lenders who provide amendments; the average spread increase in May was 191 basis points, down from 204 basis points in 1Q09 and 202 basis points in 4Q08 • Reduction in line: 1Q08 through 2Q09 have shown more amendments requiring a reduction in line commitments • Paydowns: Approximately 10% of amendments over the first five months of 2009 have required borrowers make a paydown to the amount outstanding Source: Standard & Poor’s Leveraged Commentary and Data

8. Term Subordinated Preferred Common Revolver Loan Notes Stock Equity Libor + Libor + 22% 27% 30% 275 325 Finance Insurance Mezzanine Private Equity Traditional Banks Companies BDCs Hedge Funds Companies Funds Funds Revolver Term Loans Last Out Tranche Second Enterprise Value Rate Only Sub Debt Preferred Common Senior B Lien Loans Second Lien Loans Sub Debt W/ Warrants Stock Equity Libor + Libor + Libor + 15 - 17% 17 - 19% 21 - 25% 25%+ 250 350 400 - 900 Transition of Debt Capital Availability – “The Credit Bubble” Between 2004 and early 2007, the capital markets introduced new forms of debt financing and competition resulted in higher multiples, lower pricing and more flexible terms Limited Sources of Debt Financing Available Prior to 2004 Increased Sources of Debt Financing and Competition by 2007

9. Finance Insurance Mezzanine Private Equity BDCs Funds Traditional Banks Companies Hedge Funds Companies Funds Revolver1 Term Loans1 Last Out Tranche Second Rate Only Traditional Preferred Common Senior B Lien Loans Sub Debt Sub Debt2 Stock Equity Libor + Libor + 16 - 20% 18 - 23% 20 - 25%+ 550 - 650 (Cash Flow) 300 - 400 (ABL) 600 - 700 (Cash Flow) 350 - 450 (ABL) Current Market Liquidity For about the past year and one half, there has been a continual reduction in both the number of lenders and the types of securities available Current Landscape of Debt Financing 1.) LIBOR floor typically established for revolver and term loans; 300 – 350 basis point floor for cash flow loans and 200 – 250 basis point floor for asset-based loans 2.) Traditional sub-debt must include warrants or co-investment • Continued decline in the number of active senior and second lien lenders • Capital providers that remain are gravitating towards larger companies • Senior debt with minimal amortization (Tranche B loans), as well as second lien loans and rate only subordinated debt, are rarely available • Landscape gravitating back to conditions similar to those pre-“Credit Bubble”

10. Financing Sources – Current Landscape • Active lenders are seeing significant deal flow and have increased underwriting standards

11. Sources of Capital – A Changing Environment While many traditional cash flow senior lenders have exited the market, senior asset-based lending has increased in popularity Most Active Pro Rata Investors (Lenders that Made Ten or More Primary Commitments) Asset-based Lending as a Percentage of All Leveraged Loans ~54% decline Source: Standard & Poor’s Leveraged Commentary and Data Source: Standard & Poor’s Leveraged Commentary and Data

12. Senior Lenders – A Changing Landscape Decreasing availability of senior debt has driven senior leverage downwards and pricing upwards Average Institutional Spreads of Middle Market Loans (Issuers with EBITDA of Less Than $50 million) Average Senior Debt Multiples of LBO Middle Market Loans Source: Standard & Poor’s Leveraged Commentary and Data Note: Data on Average Senior Debt Multiples is not available for 1Q09 due to lack of market activity Source: Standard & Poor’s Leveraged Commentary and Data Market Dynamics • Senior cash flow lending for companies with under $10 million of EBITDA is extremely limited • Cash flow loans are limited to companies with strong fundamentals that are perceived to be recession resistant • Currently there are no underwritten deals in the market • “Club” deals are more the norm, with hold sizes rarely exceeding $20-$25 million and often in the $10-$15 million range • Due to the decline in financial performance in 4Q08, lenders are now less focused on TTM performance and more focused on the last six months or 2009 run rate • Senior lenders are increasingly focused on the “agency” role when deciding whether to participate in a transaction • Increased amortization now required – focus on fixed charge coverage • Any changes to the existing agreements (i.e., forbearance agreements, amendments, waivers) are resulting in a re-pricing of the outstanding loans

13. Asset-based Lending – A Market Re-emerging Asset-based lending has been established as an attractive funding alternative for companies with appropriate collateral Asset-based Lending Market Dynamics Asset-based Spreads vs. BB/BB- All-in Institutional Spreads • Funding Availability • Liquidity exists in this traditional structure provided an issuer has a significant base of assets • However, asset-based lenders are becoming more conservative and focused on company fundamentals • Relative Cost Advantages • Pricing has increased in tandem with the broader credit markets; however, it remains lower than cash flow loans by approximately 200 - 250 bps • Closing fees are increasing as negotiating leverage has returned to the lending community • Not a Universal Remedy • Not available for service businesses or companies with little base of hard assets • Increased reporting requirements • Reliability of Appraisals • In light of the recent economic downturn, asset-based lenders have begun questioning the reliability of asset appraisals and, as a result, are reducing the amount of term loans they are prepared to provide borrowers Source: Standard & Poor’s Leveraged Commentary and Data Note: Data on Asset-based Spreads is not available for 1Q09 and 2Q09 due to lack of market activity Typical Asset-based Formulas • Accounts Receivable: 80% - 85% • Inventory: 50% - 60% • Real Estate: 60% - 70% of FMV • Machinery and Equipment: 80% - 90% of OLV

14. Second Lien Loans – Middle Market Second lien loans relying on collateral may be a junior capital alternative when paired with ABL first lien loans Second Lien Quarterly Volume in the Total Market ($ in billions) Second Lien Loans as a Percentage of Mid-Market Volume Source: Standard & Poor’s Leveraged Commentary and Data Source: Standard & Poor’s Leveraged Commentary and Data Second Lien Pricing Market Dynamics • Due to inter-creditor issues, second lien loans are no longer paired with senior cash flow loans; however, opportunities are still available when matched with asset-based loans • Market conditions have once again begun to resemble the environment in which second lien loans originated • Asset-based lenders are becoming more conservative, leaving more collateral value for second lien lenders • Higher priced sub-debt leaves the door open for an additional security Source: Standard & Poor’s Leveraged Commentary and Data

15. Mezzanine Debt – Growing in Popularity Mezzanine debt has become all but essential in completing any kind of financing Sub Debt as a Percentage of Total Leverage (Issuers with EBITDA of Less than $50 million) Average Total Debt Multiples of Middle Market LBOs 2007 2008 6.2x 6.0x 5.6x 4.7x 5.1x 4.8x 4.7x 4.7x 4.7x 4.2x 4.5x 4.1x 4.0x 3.9x 4.1x 3.8x 3.4x 2.6x Source: Standard & Poor’s Leveraged Commentary and Data Note: Data on Average Total Debt Multiples is not available for 1Q09 due to lack of market activity Source: Standard & Poor’s Leveraged Commentary and Data Market Dynamics Mezzanine Pricing • Cash coupons of 12% - 14% • PIK rates of 2% - 4% • Closing fees of 2% - 4% • All-in yields of 16% - 20% • Warrants are increasingly required; co-investments are becoming less of an alternative to warrants • Pre-payment penalties are increasingly stringent and make-whole provisions are becoming more prevalent • Mezzanine debt is now being used more frequently to: • Support LBO transactions due to reduced levels of senior debt • De-leverage companies that have excess senior debt • Perform dividend recapitalizations to replace failed M&A sale processes

16. Mezzanine Financing – A Changing Landscape Leverage and pricing have tightened over the past three years Overview of Transaction Terms (2007 – 2009) Source: PNC Mezzanine Capital 2009 Mezzanine Market Survey

17. Private Equity Funds – Tightened Liquidity The global credit crunch has even impacted private equity groups U.S.-Based Fundraising by Quarter Fund Sizes through April, 2008 and 2009 Source: Reuters’ Buyouts Source: Dow Jones Private Equity Analyst Market Dynamics • After years of robust fund raising, private equity groups are finding LPs reluctant to commit additional capital to the sector; as a result, private equity groups are having trouble raising new funds • Private equity groups are also encountering issues in deploying capital: • The “denominator” effect is causing some limited partners to back away from funding their original commitments – an unprecedented event • Many groups have found that difficulty in finding leverage makes traditional investing problematic • A trend has developed towards more creative investing that offsets leverage issues; an example of this is minority investments

18. LBO Middle Market Activity Current conditions in the leveraged loan market are influencing M&A activity Average Purchase Price and Equity Contribution (Issuers with EBITDA of Less Than $50 million) Market Dynamics • Overall M&A activity has slowed significantly • Equity as a percentage of total capitalization is at an all time high • Financial buyers are having to commit higher levels of equity with a view of refinancing when credit markets recover • The following have become useful methods of bridging the financing gap: • Seller notes • Earn outs • Purchasing less than 100% of the company • Minority equity investments Source: Factset Mergerstat; Note: Transaction Values between $10 million and $250 million Note: Data on Purchase Price and Equity Contribution is not available for 1Q09 due to lack of market activity Average Equity Contribution by Sponsors of LBO Loans Source: Standard & Poor’s Leveraged Commentary and Data Note: Data on Purchase Price and Equity Contribution is not available for 1Q09 due to lack of market activity

19. Leveraged Loan Markets - Conclusion Current and forthcoming market conditions call for specific keys to complete a financing Predictions and Key Take Aways