Strategies for Growth: Access to Capital in Volatile Capital Markets

Stefan Shaffer, Managing PartnerSPP Capital Partners, LLC

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THESIS STATEMENT

Historically, Macroeconomic Conditions Dictate Market Conditions…..But Not Necessarily in December of 2010.

Accordingly, Unique Borrowing Opportunities of Historic Proportions Currently Exist, and Most Likely will not Continue.

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SPP CAPITAL PARTNERS• A private investment bank specializing in the private placement of senior debt,

mezzanine debt and equity capital.

• Formed in 1989, as SPP Hambro, a subsidiary of Hambros Bank plc.

• Reconstituted as SPP Capital Partners, LLC through an MBO in 1998.

• Since the firm’s inception, it has completed more than 400 transactions aggregating in excess of $18.0 billion.

• SPP manages the Private Capital Formation operations of 12 major banks and financial institutions in North America and Europe, through exclusive JV relationships, eight of these institutions are shareholders of SPP, including CoBank.

• Has extensive relationships throughout the equity sponsor community.

• Created SPP Mezzanine Partners in 2004 to make direct mezzanine investments. Currently approximately $50 million in assets under management through SPP Mezzanine Funding I & II.

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Leveraged Finance / Debt Capital Markets• Acquisitions and recapitalizations

• Asset-based and cash flow senior debt

• Uni-tranche “one-stop” solutions

• Subordinated / mezzanine debt

Waiver and Amendment Advisory• Out-of-court advisory for turn-around situations

• Amendments and waivers

• Solvency opinions

• Secondary securities sales / repurchases

• Credit ratings advisory

PRODUCTS AND INDUSTRIESIndustry Closed Transactions

Agricultural / Food

BasicMaterials

ConsumerGoods

Financial

Healthcare

Industrials

Services

Technology

Utilitiesand Energy

Transportation

Retail

Tortoise Energy Capital Corp.

American-De Rosa Lamparts, LLC

Dealers’ FinancialService, LLC

Hirschfeld Holdings LPJason Incorporated

SHL Systemhouse

$50 ,00 0,000

Wells Dairy, Inc.

Lea ding pr odu cer a nd mar kete r o f ice cr eam and fre sh fluid dairy pr oduc ts

$7,500,000 $24,500, 000 $70,000,000

Kelley-Clarke, Inc.

One of the lar gest food brokers in the western U.S.

Dairy cooper ative tha t

produces che ese, butter and whey fractions, in addition to other dairy -bas ed products

One of the largest food whol esalers in the U.S.

CPM Acquisition Corp.CPM Acquisition Corp.

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ADVISORY: INVESTOR RELATIONSHIPS AND MARKET EXPERTISE

Investor Type Description Closed Transactions

Commercial Banks ABL and CF debt

InsuranceCompanies Investment gradedebt

Hedge Funds /Non-Bank Entire capital structure

Mezzanine Funds Mezzanine debt

Private Equity Funds Equity capital

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SELECT AGRICULTURAL TRANSACTIONS$11,000,000 $15,000,000 $60,000,000 $50,000,000 $50,000,000 $30,000,000

Advantage Mayer, Inc.

One of the largest food brokers in the U.S.

Mfg of fertilizer and chemical spreading machinery used in

agricultural industry Leading regional grocery

wholesaler and retailer Leading sugarbeet producer and sugar processor Leading Utah retailer-owned

food wholesaler Leading producer of

dehydrated onions, garlic and other vegetables

$9,500,000 $225,000,000 $27,000,000 $35,000,000 $95,000,000

CPM Acquisition Corp.CPM Acquisition Corp.

Mfg of palletizing equipment for the animal feed industry

Leading provider of agronomy and petroleum products and

services in the U.S. Leading producer of premium

pastas Leading producer of walnuts in the U.S. Multi-regional food distributor

$7,500,000 $24,500,000

Kelley-Clarke, Inc.

One of the largest food brokers in the western U.S.

Dairy cooperative that produces cheese, butter and whey fractions, in addition to other dairy-based products

$50,000,000

Wells Dairy, Inc.

Leading producer and marketer of ice cream and fresh fluid dairy products

$45,000,000 $17,000,000 $20,000,000 $20,000,000 $115,000,000 $43,000,000

Stokely, USA, Inc.

Twin Country Grocers, Inc.

Universal Foods Corporation

Wakefern Food Corporation

Waterfield AG Services, Inc.

Mfg of canned vegetables and fruit and frozen food products

Retailer -owned wholesaler engaged primarily in the

grocery distribution business Manufacturer of a variety of

food products

Leading producer of amateur gardening seeds

Largest retailer-owned food cooperative and fifth largest food wholesaler in the U.S.

Markets, sells and distributes fertilizers, chemicals, seed and related products to the

wholesale and retail agricultural markets

$45,000,000 $17,000,000 $20,000,000 $20,000,000 $115,000,000 $43,000,000

Stokely, USA, Inc.

Twin Country Grocers, Inc.

Universal Foods Corporation

Wakefern Food Corporation

Waterfield AG Services, Inc.

Mfg of canned vegetables and fruit and frozen food products

Retailer -owned wholesaler engaged primarily in the

grocery distribution business Manufacturer of a variety of

food products

Leading producer of amateur gardening seeds

Largest retailer-owned food cooperative and fifth largest food wholesaler in the U.S.

Markets, sells and distributes fertilizers, chemicals, seed and related products to the

wholesale and retail agricultural markets

$7,500,000 $24,500,000 $70,000,000

Kelley-Clarke, Inc.

One of the largest food brokers in the western U.S.

Dairy cooperative that produces cheese, butter and whey fractions, in addition to other dairy-based products

One of the largest food whol esalers in the U.S.

$45,000,000 $17,000,000 $20,000,000 $20,000,000 $115,000,000 $43,000,000

Stokely, USA, Inc.

Twin Country Grocers, Inc.

Universal Foods Corporation

Wakefern Food Corporation

Waterfield AG Services, Inc.

Mfg of canned vegetables and fruit and frozen food products

Retailer-owned wholesaler engaged primarily in the

grocery distribution business Manufacturer of a variety of

food products

Leading producer of amateur gardening seeds

Largest retailer-owned food cooperative and fifth largest food wholesaler in the U.S.

Markets, sells and distributes fertilizers, chemicals, seed and related products to the

wholesale and retail agricultural markets

Effects of a Weak Economy

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Effects of a Weak Economy

• Flight to Quality

• Low Treasury Rates

• High Spreads Relative to Treasury Rates

• No Interest in Risk

• High Yield Activity Ceases to Exist

• “Risk Premium” for Leveraged Credits, Smaller Credits Exaggerated

• General “Lack of Access” to Capital Across the Board

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Effects of a Weak Economy

December 2007 – June 2009

March 2001 – November 2001

U.S. 10-YEAR TREASURY YIELD GRAPH / CREDIT SPREADS FOR U.S. CORPORATES, RATED BBB-A (PREVIOUS TWO RECESSIONS)

Source: Bloomberg

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Effects of a Weak EconomyHIGH YIELD PRICES AND YIELDS

Current Economic Conditions

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Current Economic Conditions• Continued economic growth

- 2009 Q4 growth in real GDP of 5.0%- 2010 Q1 growth in real GDP of 3.7%- 2010 Q2 growth in real GDP of 1.7%- 2010 Q3 growth in real GDP of 2.0%

- Forecasted growth of 2.0% through 2011 Q4

Quarter-to-Quarter Growth in Real GDP Growth

Source: ISI Weekly Economic ReportSource: U.S. Bureau of Economic Analysis

ISI Forecast2010 2011

2Q 3Q 4Qe 1Qf 2Qf 3Qf 4QfReal GDP* 1.7% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%GDP Price Deflator* 1.9% 2.3% 1.0% 1.0% 1.0% 1.0% 1.0%Nominal GDP* 3.6% 4.2% 3.0% 3.0% 3.0% 3.0% 3.0%10-Year Bond Yield** 3.0% 2.5% 2.4% 2.5% 2.7% 2.8% 2.9%Fed Funds Rate** 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%*Q/Q % A.R. **End of period

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Current Economic Conditions• Unemployment hovering at 9.6%

• Disappointing Private Sector Hiring

- 64,000 non-farm jobs added in September- 93,000 non-farm jobs added in August- 116,000 non-farm jobs added in July

Seasonally Adjusted Unemployment Rate

Source: Bureau of Labor Statistics, “Employment Situation – September 2010”

Nonfarm Payroll Employment Over-the-Month ChangeSeasonally Adjusted

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Current Economic Conditions• Fed announces “QE2” on November 3rd

- Outlines plans to purchase $600 billion of Treasuries through June 2011

- Intended to lower interest rates and spur increased lending and investment

- Large Banks, flush with new proceeds from Fed purchases will be anxious to make loans

- Which will spur investment by corporate borrowers

- Which will result in greater production and employment

• Possible Outcomes- Increased cash in the system and higher priced bonds with diminished yields

could lead to allies in riskier asset classes and drive up commodity prices

- Corporations could “sit” on cash—not deploy it

- Could lead to increased inflation and a “fixed income bubble”

- Material declines in the dollar

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Cash on corporate balance sheets is at an all time high already

Source: BofAML Credit Strategy

Current Economic Conditions

Current Market Conditions

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Current Market ConditionsGenerally, when U.S. Treasuries compress to such low levels, investors expand spreads to maintain a modicum of return.

- In this market, while the Fed is essentially subsidizing long term treasuries to keep rates artificially low, investors are compressing spreads to entice borrowers.

- In fact, for high quality issuers (the “Slam Dunks” - typically larger credits) are getting done across a wide range of maturities and are well oversubscribed with increasingly liberal covenant packages.  Spreads on some of these deals have been in the mid to low 100’s.

Low US Treasury rates are usually the result of a “flight to quality” with treasuries acting as a hedge to deteriorating credit conditions.

- In this market, low US Treasures and potentially deteriorating credit conditions (a potential “double dip”), have not up-tiered investors portfolio needs.

- To the contrary, because competition for high quality credits have driven returns to such low levels, investors are eagerly bidding transactions that have greater risk profiles in an attempt to gain some modest level of return.

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Current Market ConditionsU.S. 10-YEAR TREASURY YIELD GRAPH / CREDIT SPREADS FOR U.S. CORPORATES, RATED BBB-A (11/2007 – 11/2010)

Source: Bloomberg

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Investment grade borrowing spreads are already at their lows

Credit Spreads Over U.S. Treasuries for November, 2010 NAIC Rating 5 years 7 years 10 years

1 125 – 175 100 – 175 100 – 175 2 175 – 300 140 – 300 140 – 300 3 400+ (if available) NA NA

UST 1.14% 1.84% 2.55% CreditSpreadsOverU.S.TreasuriesforJanuary,2009

NAIC Rating 5 years 7 years 10 years1 245 – 300 245 – 300 255 – 3002 290 – 400 300 – 400 300 – 4003 395 – 500 420 – 600 NA

UST 1.49% 1.90% 2.51%

Current Market Conditions

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North American High Yield CDX Index

Current Market ConditionsHIGH YIELD PRICES AND YIELDS

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Current Market ConditionsHigh Yield Issuance Up Dramatically

- Year to date, high yield bond issuance is $237,126 million, comprised of 487 issues

- 97.2% increase from 2009

- Year to date, leveraged loan issuance is $298 billion

- 80% increase from 2009

Source: S&P Loan StatsSource: Markit.com

Volume of Institutional Loans and High-Yield Bonds

Middle Market Leveraged Loan Volume(EBITDA < $50 million)

Middle Market Issuance Up dramatically

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Current Market ConditionsInvestors actively seeking risk

Source: Piper Jaffray Debt Capital Markets Update

C&I Loan Holdings of Commercial Banks ($ in bil)

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Current Market ConditionsMezzanine investors are extremely hungry

• Pricing consistently 14%-18% for Subordinated Notes- <$15MM EBITDA deals pricing 16%-18%

- > $50 MM EBITDA deals pricing at 13%-15%

• Leverage tolerances in excess of 4X for deals commonplace on large end (> $20MM of EBITDA) of the market

- 3.5X for Leveraged Recaps or “Storied” Credits;- Continued Competitive Landscape- Credit Opportunity Funds, BDCs all actively bidding deals

- Insurance company participants creating pricing pressure;

• “Coupon only” deals readily available;

• Prepayment provisions highly negotiable, very investor specific.- Slight tightening of non-call provisions where investors are “cutting book” to attract assets

• Greater scrutiny on retail sector deals in light of potential weak 2010 Christmas expectations.

• Warrants routinely requested for- Storied credits- Greater than 4X TD/EBITDA

- Recaps;

• Upfront fees average 1%-2%;

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Current Market ConditionsLEVERAGE CASH FLOW MARKET AT A GLANCE

Deal Component Nov-10 Jan-09<$10MM EBITDA 1.50-2.00x 1.0-2.0x (non-recap) >$15MM EBITDA 2.00-3.25x 1.0x (recap) >25MM EBITDA 2..25-3.50x Less than $7mm: Not Available <$10MM EBITDA 3.00-3.75x 3.0-4.25x (non-recap)

>$15MM EBITDA 3.500-4.50x 2.75-3.25x (recap) >25MM EBITDA 3.50-5.00x

L+3.50%-4.50% (bank) L+5.0%-6.0% (bank) L+4.50%-6.50% (non-bank) L+6.0%-7.0% (non-bank)

Second Lien Pricing (Avg): L+10%-12%, (with 1%-2% floor) L+13%-15%

Subordinated Debt Pricing: 14%-18% 16%-19% “One Stop” Pricing 11%-13% Warrants Feature: Requested, not Required Required Most Deals LIBOR Floors: 1-2% Libor floor Requested on

most CF deals Common, with 3%-4% Floor,

CF Senior Debt (x EBITDA):

Total Debt Limit (x EBITDA):

Senior CASH Flow Pricing:

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Current Market ConditionsTYPICAL SUBORDINATED DEBT TERMSHEET

Security Senior Subordinated Notes (the “Subordinated Notes”)

Maturity Five years from Closing

PricingAggregate Internal Rate of Return (“IRR”) of Approximately 14%-18%

• IRR Components: 12% cash interest, 2% - 6% PIK interest.

Subordination Terms

The Subordinated Notes will be subordinated to prior payment in full of the principal of, and premium, if any, and interest on any senior debt, and senior to any subsequently issued subordinated indebtedness, and any convertible indebtedness, upon any distribution of the assets of the Company upon any dissolution, winding up, total or partial liquidation or reorganization of the Company.

Mandatory Prepayments

No amortization; payable in full at maturity.

Optional Prepayments

Pre-payable per the following indicative schedule:Year 1: No Prepayment Year 2: 2% of the principal amount outstandingYear 3: 1% of the principal amount outstandingYear 4: par

CovenantsFree Cash Flow to Fixed Charge Ratio of 1.05x growing to 1.10x in later yearsTotal Debt to EBITDA ratio of 4.50x, reducing to 4.00x in later year

Default Provisions

Cross Acceleration on all senior indebtedness of the Company

View of 2011 Market Conditions

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View of 2011 Market ConditionsSHORT TERM:

• Weak Growth, but Growth Nonetheless

• Weaker Dollar due to “QE2”

• Short Term: High commodity prices: “Yay For You!”

• Short Term: Continued Aggressive Risk Tolerance: “Yay For Me!”

LONGER TERM:• Gradual Restoration of a Traditional “Growth” Macroeconomic Conditions

- Upward Sloping Yield Curve with Higher Interest Rates for Longer Maturities- Increased Employment- Higher Housing Values

- Restoration of $12 Trillion Lost Value in American Household Wealth in Recession

• Unless, GDP goes negative, then its Run for the Exits For Everyone –- Flight to quality- Same market dynamics as December 2008 and 2009 Q1- Starting Point is a nation that is net loss of $8 Trillion in Household Wealth

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View of 2011 Market ConditionsFOMC TARGET FEDERAL FUNDS

• History has shown that the window of opportunity to arrange a financing when rates are favorable is actually quite narrow.

• When the FOMC makes a change in the target federal funds rate, there tends to be a series of subsequent changes that follow, and it happens very quickly

• In the past decade, the three largest changes have been approximately 500 bps and have occurred in roughly two years or less