1. Hampton Roads Association for Financial Professionals December 14, 2010 Confidential – For Discussion & General Information Purposes Only Borrowing 101 A high level overview of why companies borrow and how they go about it. Tips to help navigate where to turn, and what should be provided.

2. Eastern VA Regional Commercial Banking 2 Wide variety – type, size, credit profile  Public & Privately held  Government, Institutional, Non-Profits, Banks...  Start ups – early stage – emerging  Established – growing  Challenged – difficult times / cyclical, economic, industry  Event driven – ownership changes, mergers and acquisitions, buyouts Who borrows?

3. Eastern VA Regional Commercial Banking 3 Why do companies borrow? Short term needs  General working capital  Seasonal  To fulfill large orders  Dividends / distributions / taxes  Liquidity Long term needs  Capital expenditures  Technology equipment  Plant / distribution machinery & equipment  Real estate  Research and development  Expansion  Liquidity

4. Eastern VA Regional Commercial Banking 4 Capital Structure Basics: Debt vs. Equity - Owners - Public / shareholders - Cooperatives – members - Angel - Mezzanine - Private Equity Groups Investors - Owners’ equity or members’ capital - Retained earnings - Mezzanine / Junior Capital - Subordinated Debt Equity Assets – Liabilities = Equity

5. Eastern VA Regional Commercial Banking 5 Borrowings: Term, Tenor, Type  Secured vs. Unsecured  Collateralized / Cross-Collateralized  Structures - Revolving Lines of Credit 364 day, 1 year, 2 year, 3 year, + Borrowing base, non borrowing base - Term loans 5-7 year Loan to values, advance rates, formulas Lease vs. Loan: obsolescence, tax impact, reporting - Mortgages 10, 15, 20 year amortizations, bullets - Senior Notes / High Yields / Bonds - IPOs / Secondary Offerings - Tax Exempt Financing / Special Programs

6. Eastern VA Regional Commercial Banking 6 Borrowings…  Guarantors - Affiliated companies, parent companies - Owners - Collateralized guarantees  Covenants - Liquidity: earnings or profits, CA/CL, cash or excess availability - Net worth: tangible net worth - Leverage: TL/NW, D/TNW, Sr Debt / EBITDA - Coverage: Interest, Fixed Charge Coverage

7. Eastern VA Regional Commercial Banking 7 Time to Borrow: Starting Point - Amount needed - Sources – collateral, cash flow, other - Uses – What will proceeds be used for, and over what time period? - Financial statement condition - Business trends, outlook - Owner plans long term / strategy Self Assessment

8. Eastern VA Regional Commercial Banking 8 Time to Borrow: Where to Turn  Banks: local, regional, national, global  Commercial finance companies  Specialty lenders  Equipment finance providers  Factors  Asset based lenders  Purchase order finance providers  Investment bankers  Government backed programs / SBA

9. Eastern VA Regional Commercial Banking 9 Time to Borrow: Where to Turn (continued)  Trusted advisors – CPAs, Attorneys, Bankers  Other companies – referrals / testimonials  Industry associations  Signs / Media  Internet

10. Eastern VA Regional Commercial Banking 10 Be prepared: Questions Asked Company structure Ownership Key management team History Locations / domestic, international Operations: buys from, sells to, processes (sales, mfg, delivery) Internal vs. external contributors Contracts, Bids Financial performance / trends / past and future Competitors Differentiation / Niche / Strengths Weaknesses Outlook / strategy

11. Eastern VA Regional Commercial Banking 11  You may be asked to provide: - Financial statements: 3 years, 4 years, more - Budgets or projections: 1 year or more, monthly/quarterly - Tax Returns - Personal financial statements: owners / principals - Top customers - Accounts Receivable - Accounts Payable - Inventory - Machinery & Equipment - Real estate / Locations - Appraisals Be Prepared: Information Requested

12. Eastern VA Regional Commercial Banking 12 Be Prepared: Ongoing Reporting Requirements  You may be asked to provide ongoing: - Financial statements – monthly, quarterly, annually - Financial statements preparation – compiled, reviewed, audited (firm utilized) - Covenant compliance certificates - monthly, quarterly - Borrowing base certificates - daily, weekly, monthly, quarterly - Asset listings / verifications - Collateral reports - Field exams / collateral audits or appraisals

13. Eastern VA Regional Commercial Banking 13 Be prepared: Questions to Ask  Fit / Match - Ability to address need - Culture, institution - Short term or long term solution  Solution Analysis - Is need provided for - What costs are involved - Can company continue to meet requirements: whether reporting, management interaction, covenant compliance  Approval Process - Steps involved - Who approves: signatures or committee - Timing  Closing Process / Funding - Documentation - Appraisals, Other - Timing

14. Western Mid-Atlantic Commercial Banking 14 Questions & Answers Susan L. Miller Vice President, Regional Business Development 804-697-6748 Office / 770-235-4488 Cell Susan.l.miller@wellsfargo.com Wells Fargo Bank, N.A. Eastern VA Regional Commercial Banking Office 440 Monticello Avenue, 11 th Floor Norfolk, VA 23510-2372