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Capital Resource Partners’ new brochure is made up of three areas of focus. Click on the link below to view each segment: Family-Owned Businesses Middle Market Companies Later-Stage Growth Companies FAMILY- OWNED businesses investing capital to help companies achieve their growth, acquisition, and liquidity goals 1 Our investment approach Capital Resource Partners has extensive experience investing in both family-owned and founder-led businesses. Our mezzanine investment approach fits well with companies that are focused on growth or in need of restructuring their ownership but are sensitive to dilution. Because we have worked with families and founders through the years, we appreciate the strong ties that exist when a business has been in a family for generations or when a company has been nurtured by a founder who personally identifies with its mission. 2 We also understand some of the key dilemmas management teams in these kinds of companies face: How can I achieve my growth objectives and preserve my company as a family business? How do I achieve some liquidity without having to sell my company? At CRP, we’re committed to helping families and management teams answer those questions – and, in the process, we’re committed to earning their trust. Capital Resource Partners invests $5 million to $30 million of capital in the form of subordinated debt with warrants or a combination of subordinated debt with warrants and preferred equity. We recognize that every company is different and not every deal structure is right for everyone. Our ability to provide either mezzanine or a hybrid structure of mezzanine and equity is intentional; it allows us to tailor the best capital solution for each company. The benef its of our capital Our capital can be effectively used in a number of scenarios. The benefits: maximum flexibility, cost-efficient capital, and a partner with aligned goals. ■ Recapitalizations to enable founder’s liquidity, generational transfer, estate planning, repurchase of an uninvolved family member’s ownership, or to alleviate asset concentration. ■ Later-stage growth companies focused on expansion but where dilution is an issue. ■ Incremental acquisitions for companies which have a strong equity base, where mezzanine is a better, less dilutive alternative. ■ Recapitalizations of companies that are seeking flexibility for expansion or a more comfortable level of leverage. A key attribute to our mezzanine investment is that it can accomplish a business’ capital raising or liquidity needs without forcing a CEO to take the company public or sell the business. In addition, for a management team that is weighing its options, an infusion of mezzanine capital is a compelling solution – potentially 3 to 5 times less dilutive than the same dollar of traditional private equity. Finally, we understand that the ultimate goal for a family-owned business is not to have outside capital in the company forever – it is there to accomplish an objective. Our goals are aligned. We are focused on helping a company position itself to achieve successful performance in growth and profitability and then repay or refinance our capital. Through the years we have worked with families and management teams in a range of businesses throughout the U.S. With particular sensitivity to the privacy of a family-owned business, on the following pages we have highlighted three companies with their permission and protected the identity of three others. Ultimately, all six offer examples of how our capital has been effectively used to help companies in various industries achieve their growth, acquisition, and liquidity goals. π 3 Case studies POLAR BEVERAGES Worcester, Massachusetts Polar Beverages is an independent soft drink bottler generating revenue from three product categories: Polar brands, private label brands, and national franchise brands. Capital Use: Fund acquisition of Adirondack Bever- 4 ages, a competitor in a neighboring market, in order to position Polar as the dominant independent soft drink bottler in New England and Upstate New York. Result: Polar was able to eliminate its primary competition in its growing private label business, double its manufacturing capacity, and expand its distribution area and customer base. The Crowley family founded Polar Beverages in 1916 and has been the primary owner and operator of the business since its inception. Prior to the acquisition, the family had led the company through tremendous organic growth. Given the management team’s experience and knowledge of the beverage industry, the company was positioned well to grow by acquisition but needed more capital to execute its strategy. The Crowley family wanted to maintain control of the company. A combination of subordinated notes and redeemable preferred stock offered a lower dilution alternative for the company to capitalize on the acquisition opportunity and, at the same, offered liquidity for a member of the family. How can I achieve my growth objectives and preserve my company as a family business? Case studies ROWLAND COFFEE ROASTERS Miami, Florida Rowland Coffee Roasters is one of the largest privately-owned producers of coffee products sold primarily to Caribbean Hispanic (Cuban, Puerto Rican, and Dominican) consumers in the U.S. Capital Use: Finance Rowland’s acquisition of its largest competitor, Bustelo, a subsidiary of Tetley USA, along with related brands, Medaglia d’Oro, Oquendo, and El Pico. Result: This acquisition made Rowland the market leader with a 70% share of the $100 million to $200 million Caribbean Hispanic coffee market. The company’s founding family, the Soutos, has been involved in the production, distribution, and marketing of coffee for over 150 years. Given the history and involvement of current family members, it was very important to the Souto family to maintain control of the business. A structured mezzanine investment offered a lower dilution alternative to an all-equity round and allowed the company to complete the acquisition. COYNE TEXTILE SERVICES Syracuse, New York Coyne Textile Services is one of the largest industrial laundry and uniform rental companies in the U.S. Its customers represent a variety of industries and markets, from convenience stores and local gas stations to large utilities, manufacturing facilities, and service providers. Capital Use: Refinance Coyne’s balance sheet in order to reduce its senior debt. Result: With a more comfortable level of leverage, Coyne was better positioned to take advantage of growth opportunities in its market. Coyne was founded in 1929 by J. Stanley Coyne at the age of 20 on a site which remains the company’s headquarters. Recognizing a market opportunity, Stanley started his laundry business to provide gas stations and similar operations with clean garments, towels, and mops on a regular basis. The company grew over time expanding into contiguous markets, building new processing facilities, and making acquisitions in a highly fragmented marketplace. However, even as the company grew with Stanley’s son, Tom, as CEO, the Coyne family was always hesitant to take on a private equity partner or go public because preserving their ownership position was so important. A subordinated debt investment with minimally dilutive warrants allowed the family to remain true to its goal but not at the cost of growth. 5 Case studies 6 JEWELRY COMPANY Florida Leading upscale retailer of fine jewelry, watches, and giftware located in regional shopping malls across the country. CARPET COMPANY California Manufacturer and marketer of high quality solid color wall-to-wall carpet sold to carpet retailers, interior designers, and home centers. Capital Use: Recapitalize balance sheet to provide liquidity for founder and generational transfer to his four sons, two of whom were active in the business. Result: Founder achieved liquidity and family equity was preserved. Capital Use: Provide founder with substantial liquidity and recapitalize the business into a newly formed corporation, jointly owned by CRP, an equity sponsor, and management. Result: Founder was able to take a significant equity stake out of the business but stay involved. Two new institutional partners helped the company achieve aggressive growth in its fragmented market. The company was founded in the early 1900’s and opened its first store in Florida in 1937. After 19 years, the founder passed the business on to his son, who led the company’s expansion. As he grew older, he wanted to do as his father had done, and pass the company on to his sons. A subordinated debt investment allowed him to gain liquidity and keep the business in the family. The company was founded in 1977 and achieved profitability in its first full year of operation and remained profitable thereafter. It was able to achieve consistent results through the quality of its carpet products, good customer service, and a commitment to faster turnaround than its larger competitors. The new transaction in the form of subordinated debt and equity achieved two goals. Founder was able to gain substantial liquidity but stay involved financially and operationally in the business with a meaningful equity stake. Management’s incentives were newly tied to performance with the creation of a stock option pool based on per annum growth. Case studies How do I achieve some liquidity without having to sell my company? COLLECTION COMPANY New Jersey Provider of consumer debt collection services and accounts receivable management of past due accounts for credit grantors such as American Express, Bank of America, and others. Capital Use: Provide founder and CEO partial liquid- ity, create a stock option pool for management, and provide the company with growth capital. Result: Both CEO’s financial planning and company’s growth goals were successfully aligned. Because of the capital raise, the company was able to roll out its aggressive marketing effort and execute its acquisition growth strategy. Since its inception in 1980, the founder built the company into one of the largest credit collection agencies in the country. He accomplished this by expanding its core customer base, effectively utilizing technology, and identifying attractive, growing segments of the credit collections industry. A subordinated debt and equity investment allowed the founder to liquefy some of his equity stake without selling his business. At the same time, he was able to align management’s incentives with the growth and success of the company. 7 MIDDLE MARKET companies investing capital for acquisitions, recapitalizations, and buyouts 1 Capital Resource Partners has extensive experience investing mezzanine and equity capital in a wide range of privately-owned middle market companies. We work closely with management teams to help them accomplish their strategic objectives whether it is a recapitalization to reduce the company’s level of leverage or refinance current institutional capital, a change-ofcontrol or management buyout financing, or the execution of an acquisition growth strategy. CRP invests $5 million to $30 million of capital in the form of subordinated debt with warrants or a combination of subordinated debt with warrants and preferred equity in eight industry verticals: consumer products and services, financial services, healthcare, information services, manufacturing, distribution and industrial services, media, communications and cable, retail and restaurants, and software. Our mezzanine investment approach works well for established businesses seeking cost-efficient, long-term capital. We have invested in over 75 privately-owned companies since 1987 and have experience working with companies trying to acquire competitors, expand their geographic coverage, enhance their customer bases, build new facilities, finance incremental acquisitions, identify operational improvements, and fund internal growth initiatives. I need f lexibility for expansion and a more comfortable 1 level of leverage. 2 Middle market investments COYNE TEXTILE SERVICES Syracuse, New York Industrial laundry and uniform rental company. Capital Use: Recapitalize balance sheet to reduce senior debt. Result: With more comfortable level of leverage, company was able to take advantage of growth opportunities in its market. ePREDIX Minneapolis, Minnesota Provider of automated selection and assessment solutions for the human capital management industry. Capital Use: Fund two incremental acquisitions to expand company’s product line. Result: Extension of existing product line presented cross selling opportunities, increased value to customer base, and spurred growth. POLAR BEVERAGES Worcester, Massachusetts Independent soft drink bottler. Capital Use: Finance acquisition of competitor in a neighboring market and recapitalize balance sheet to restructure company ownership. Result: With doubling of manufacturing capacity and expansion of distribution area and customer base, company became dominant player in an extended region. PROMETHEUS LABORATORIES San Diego, California Specialty pharmaceutical company selling branded diagnostic and therapeutic products for digestive diseases and disorders. Capital Use: Fund acquisition of four branded phar- maceutical products from a large corporate divestiture. Result: Company’s market position strengthened with complementary product line offering a full continuum of care. ROWLAND COFFEE ROASTERS Miami, Florida Producer of coffee products sold primarily to Caribbean Hispanic Consumers in the U.S. Capital Use: Finance acquisition of company’s largest competitor and three related brands. Result: Company became market leader in its niche coffee market. 3 I want to make an acquisition but only so much senior debt is available and equity capital is expensive. Our capital can be effectively used for: ■ Private companies considering generational transfer or sale. ■ Companies undertaking acquisitions, restructurings or recapitalizations. ■ Businesses looking for capital to finance internal growth due to product expansion. Our investment strategy targets businesses, which have: ■ Well-established management. ■ Defensible market position. ■ Significant market share or are niche leaders. ■ Target revenues of $20 million to $350 million. 4 LATER- STAGE growth companies investing capital for businesses focused on growth but sensitive to dilution At Capital Resource Partners we realize that approach matters; that’s why ours is focused on partnering with companies as a minority growth investor. Our goal isn’t to run your company – it’s to maximize your ability to run your company successfully. 2 Different stages of a company’s life demand different kinds of capital. Our capital works effectively when a company reaches a point where it has accomplished its early-stage business goals and long-term capital is needed for growth. An equity investment will cause the existing investors in the company to risk substantial dilution and senior financing isn’t necessarily available. Our minority growth capital in the form of subordinated debt with warrants or a combination of subordinated debt with warrants and preferred equity is an effective alternative. CRP invests $5 million to $30 million in eight industry verticals: consumer products and services, financial services, healthcare, information services, manufacturing, distribution and industrial services, media, communications and cable, retail and restaurants, and software. We are creative in our structuring in order to provide the best long-term capital solution for each company. In some instances, this translates into making an initial investment with a commitment for a second tranche to be drawn down within a certain timeframe or based on specific hurdles the company achieves. This aligns interests and offers a comfortable source of capital for growth. I want to get some liquidity but continue to expand 1 my business. Later-stage growth investments L’OCCITANE New York, New York Luxury retailer of French cosmetics and home fragrance products. SEMPERCARE Plano, Texas Operator of long-term acute care “hospital-within-ahospital” (LTACH) units. Capital Use: Fund expansion of company’s U.S. retail Capital Use: Fund existing and future development presence and wholesale and mail order business. activities and working capital needs. Result: Expansion strategy executed. Increased sales, Result: Two tranche deal stuctured allowing company to profitability, and brand awareness. fund current growth initiatives and have flexibility for growth by drawing down additional capital based on operational and financial hurdles achieved. ODYSSEY HEALTHCARE (NASDAQ:ODSY) Dallas,Texas Provider of hospice care services. Capital Use: Finance growth strategy through acquisi- tion of existing hospice operations and start-up of new hospices in selected markets. Result: Scalability of company achieved with national, multi-site presence. Successful IPO executed. THE RICHARDSON COMPANY Philadelphia, Pennsylvania Customized sales training and consulting services company. Capital Use: Finance expansion of sales force and product line and pay down senior debt. Result: Company positioned to capitalize on favorable PAYSYS INTERNATIONAL Norcross, Georgia Leading third-party supplier of credit card processing software. Capital Use: Retire outstanding debt obligations, purchase software rights, and position company for long-term growth. Result: Growth achieved through product expansion and development of new technologies. Company sold to strategic acquirer. growth and outsourcing trends in market. Growth and profitability increased. 3 4 I already have a strong equity base but I need more capital to grow. Mezzanine capital is potentially 3 to 5 times less dilutive than the same dollar of equity. Our mezzanine investment works well for established, later-stage growth businesses, in particular, companies capable of servicing a debt instrument where: ■ Management is experienced and stable. ■ Demand for product or service is clear as demonstrated by historical revenues and earnings – no proof of concept risk. ■ Cash flow of company has been achieved. ■ Performance meets credit covenants. Specifically, companies that fit: ■ Entrepreneurially bootstrapped. ■ Venture-backed. ■ Family-owned. ■ Multiple rounds of institutional investment.