The Minority Recapitalization Revised 5/1/2017

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Non-Control Capital Definition of Non-Control Capital The use of third-party subordinated debt, preferred stock and/or minority common equity in a business where shareholders retain (or obtain) majority control after the investment Owners maintain economic, operational and board-level control The investor of new capital will typically have either a board seat or a board observation right The Primary Uses of Non-Control Capital Dividends to shareholders/owners (a/k/a Minority Recapitalization) Acquisition financing Growth/expansion Buyout of inactive shareholders/partners De-lever and/or restructure the balance sheet Family ownership transitions from one generation to the next Management buyouts & buy-ins Employee Stock Ownership Program (ESOP) transactions

Junior Capital Example Capital Structure Capital Stack Junior Capital Example Capital Structure Common Equity Preferred Stock Subordinated Debt 2nd Lien Senior Debt Junior Capital Expected Return

Minority Recapitalization Example1 Minority Recapitalization Exhibit **Please note that the following example is hypothetical and is intended for illustration purposes only** Minority Recapitalization Example1 7x 6x 5x 4x 3x 2x 1x Active Shareholders / Management Team Ownership = 65% Inactive Shareholder Ownership = 35% Active shareholders boost equity from 65% to 95% through a leveraged recapitalization Active Shareholders / Management Team Ownership = 95% Junior Capital 1.0x EBITDA Ownership = 5% Senior Debt 3.0x EBITDA Junior Capital 1.0x EBITDA Ownership = 5% Senior Debt 3.0x EBITDA Multiple of EBITDA Pre-Transaction Leveraged Recapitalization Post-Transaction 1Subject to the preferences of the issuer or the total amount of outside capital required to facilitate a minority recapitalization, common equity can also be substituted for or used in conjunction with junior capital.

Recapitalization Characteristics Non-Control vs. Control: Features Recapitalization Characteristics Lower debt/leverage levels Current owners retain operational and economic control Owners perceive meaningful potential share value appreciation Industry prospects attractive Other family members are active in the business Investor selection and fit is critical Financial leverage benefit stays with majority owners Strategic buyers are not involved Owners/sellers can refinance or recapitalize to own 100% again Less concern about future leverage PE firm uses leverage to create value Control transfers to new majority owner More cash to owner at close Benefits owners at/near retirement Valuation is primary sale criteria Owners less concerned about legacy Owner/CEO impartial to control Strategic buyers prominent in process Competitors may be a buyer Financial engineering benefits goes to buyer All employees must be justified, including family members Minority Recap Majority Recap

Minority Recapitalization vs. Control Scenarios Non-Control vs. Control: The Numbers Junior Capital Example Capital Structure Minority Recapitalization vs. Control Scenarios Please double-click graphic to open, explore and modify the embedded Excel file as necessary.

At the End of the Day… A Non-Control investment could be useful when: The company has significant future growth potential Company owners are not yet ready to retire Owners want to lower their personal risk in the business yet keep a majority ownership stake Family owners care about their legacy and want to continue keeping the business in the family name Owners are attracted to the “multiple bites at the apple” scenario typically employed by non- control investors Owners and/or their intermediaries can identify investors that specialize in non-control investments and who can bring more than just capital to the transaction