© Confidential, All Rights Reserved. November 2013 The Arizona Commerce Authority & Arizona Innovation Accelerator Fund

© Confidential, All Rights Reserved. What is the Arizona Commerce Authority (ACA)?  The ACA is the state’s leading economic development organization  Our mission is to strengthen Arizona’s economy using a three-pronged approach: Recruit, Grow, Create 1. Recruit out-of-state companies to expand their operations in Arizona 2. Work with existing companies to Grow their business in Arizona 3. Partner with entrepreneurs and companies to Create new jobs and businesses in targeted industries  Key Teams within the ACA: Business Attraction, Business Expansion, Business Creation, Workforce, Small Business  Annually administers ~$1Billion of incentives including grants, tax incentives & credits, bonds, and loans

© Confidential, All Rights Reserved. Targeted Industries, Partners & Benefits  Targeted Industries – Science & technology, renewable energy & sustainability, manufacturing, aerospace & defense, semiconductors, optics, and bioscience  Targeted Lenders / Partners – Regional & community banks, CDFI, IDA, local economic developers – Arizona Associations, Chambers of Commerce – Angel Investors, Private Equity and Venture Capital firms –Small and large businesses  Partnership Benefits –Access to AZ growth oriented programs such as: Quality Jobs Tax Credit - $90.0mm annually Job Training Grants - $13.6mm available (reimbursable) Angel Investment Tax Credit – Up to 35%

What is the Arizona Innovation Accelerator Fund? © Confidential, All Rights Reserved.  Program Basics –$18.2 million Loan Participation Program – Participation up to 49.9% – Loans range from $50k up to $2,000,000 – Potential to provide subordinated financing – Potential “Grace Period” which may defer P&I payments for up to 2 yrs – Interest rate reduction for every net new “quality job” created (up to 2.50%)  Loan Terms – Maturities typically inside 5 yrs (Revolvers and Term Loans) – Commitment and annual fees of 1-3% of the participation amount or loan balance – If pari passu, interest rate is equal to or less than bank – If subordinated, interest rate is at bps above the bank’s rate – After any grace period, interest rate is no less than 1% above the bank

© Confidential, All Rights Reserved. Traditional Lender Arizona Commerce Authority Borrower Private Capital Equity and/or Debt Debt AIAF Funds Traditional Lender Arizona Commerce Authority Borrower Debt AIAF Funds Traditional Lender as Partner (Bank, Credit Union, CDFI, IDA) Non-Traditional Lender as Partner (Angels, PE, VC ) Paths for Loan Participation…How It Works

© Confidential, All Rights Reserved. Progress To Date  Timeline – Nov Received 1 st of 3 tranches of $6M each – Feb Launched AIAF program – Aug First deals close (~$1M of AIAF deployed, 73 FTEs) – Sept Received 2 nd of 3 tranches of funding – Oct deals closed (~$7.0M of AIAF $ deployed, 791 FTEs)  Current Status – Continue to reach out to lending and investing partners (one-on-ones, board meetings, lending associations, local economic developers) – Reached 70+ potential lending partners (Bank, CDFI, IDA, ABL, Angel, PE, etc…) – Several new lenders and investors are actively working deals to partner with the AIAF program – Over 2 dozen deals in the pipeline

Traklight Business: Provides small businesses, entrepreneurs, and investors with services that help identify and protect IP within their businesses Goals: Complete product development Finance working capital Challenge: Company in early growth stage Deal Details: $250k line of credit ($50k AIAF / $200k Lead Lender) AIAF pari passu with bank Loan secured by stocks Results: 5.0x SSBCI Leverage 52 New FTEs ($962/job) $35k Average salary © Confidential, All Rights Reserved.

Serious Integrated Business: Tech company focusing on enabling manufacturers to add user friendly graphics and touch screen panels to products; AIC winner Goal: To finance working capital and support company’s growth Challenges: Early stage/start-up status Company needed additional financial flexibility Deal Details: $150k Total RLOC: (100% AIAF participation) $400k+ Equity investment from angel investors 80% Advance on A/R; 60% Advance on inventory Results: 3.7x SSBCI Leverage 29 New FTEs ($5.2k/job) $40k Average salary © Confidential, All Rights Reserved.

Composite Mirror Applications Business: Defense contractor specializing in lightweight optics and optic systems Goals: Consolidate debt Purchase new equipment Make tenant improvements Challenges: Aggressive loan to value ratio Deal Details: $499,000 term loan ($249k AIAF/ $250k Bank) 60 month term loan with 9 month interest only draw period AIAF subordinated to bank Results: 2.0x SSBCI Leverage 10 New FTEs ($24.9k/job) $70k Average salary © Confidential, All Rights Reserved.

Kirin Manufacturing Business: Manufacturer and finisher for OEMs Goal: Purchase the building in which it operates Challenges: Loan exposure above bank’s threshold prior to AIAF participation Kirin was acquired a year earlier, rendering it a “new” company Deal Details: $552.5k term loan (41% AIAF/ 59% Bank) 20 year amortization with AIAF portion maturing in 5 years $65k provided by owner and $32.5k financed by seller carry-back note Results: 2.9x SSBCI Leverage 25 New FTEs ($9.1k/job) $31.2k Average salary $147K Follow-on RLOC financing closed Oct © Confidential, All Rights Reserved.

Pride Group Business: Special events management provider Goal: Expand operations by acquiring equipment Consolidate debt Challenges: “New” company Historical financial noise Deal Details: $3.5M term loan: (50% AIAF/ 50% bank) 54 months fully amortizing with 6 months interest only $500k RLOC: (100% Bank) Results: 2.3x SSBCI Leverage 202 New FTEs ($8.7k/job) $50k Average salary Up to 500 PTEs ($17.5/hr) © Confidential, All Rights Reserved.

333 North Central Avenue, Suite 1900 Phoenix, AZ