BMO Capital Corporation Mezzanine Debt and Equity for Mid-Market Companies October 2008 Eric K. Ehgoetz, CFA Managing Director

BMO Capital Corporation Who are we? BMO Capital is a well-established Canadian mid-market player: Founded in 1996 with a national mandate and an exclusive focus on the mid- market (offices in Vancouver, Edmonton, Calgary, Toronto, and Montreal) Committed evergreen fund of $400 million - currently $220+ million invested in 43 companies Closed over 150 transaction and deployed nearly $500 million since inception Investments include both Mezzanine/Subordinated Debt and Equity Our client approach brings unparalleled service: Lower execution risk via working relationships with other BMO partners that we can introduce to you (senior debt, asset based lending, M&A, etc.) Welcome opportunities to work with a client’s existing financial partners – no need to change established relationships

Mezzanine and Equity Characteristics What does an “average” BMOCC deal look like? Mezzanine Debt Typically $2 to $15 million financing Term typically up to 7 years Secured by a second charge and subordinated to senior lender Repayment is flexible, tied to cash flow and risk return of the instrument – today, typically a single bullet amount due at maturity Pricing made up of a mix of (some or all) current interest, deferred interest, fees and equity participation where appropriate Equity Ownership positions up to 49% (not controlling) Exit mechanics are structured for maturity in 5 to 7 years

Typical Mezzanine/Equity Opportunity Transformational events often need junior capital … Succession Shareholder Take-Out MBO/MBI Growth Acquisition Recapitalization Owner 55+ looking for liquidity options, diversifying net worth, dividend or equity strip Removing dissenting shareholder(s) or those with different focus. Management wants to acquire part/all ownership of a subsidiary/entire company (mgmt can be from inside/outside) Working capital needs that cannot be funded by senior debt History of growth by acquisitions or contemplating first Owner looking to leverage (pre or post) transaction

Mezzanine and Equity Investments Where do they fit in the Capital Structure? Equity Minority Control Senior Debt Operating Line Senior Term Loan Cashflow Loan Mezzanine Debt Straight sub debt Sub with upside kicker Convertible sub debt Secured Secured – but - subordinated security Typically low asset coverage Owner dilution Traditional: up to 3x EBITDA Expected Return: <10% Typical: up to x more Cumulative: x EBITDA Expected Return: 15% - 20% Expected Return: >20% Typical Balance SheetBMO Capital Corporation

Typical Company Profile What type of Company are we looking for? Revenues Manufacturing, Industrial, Distribution and Services Industry Stable, sustainable or fast growth EBITDA minimum $2 - $3MM Profitability Consumer retail, fashion related, resource extraction, real estate YesNo Early stage: R&D, starting- up operations, ramping-up sales, emerging profits Losses, Turnarounds (some exceptions), R&D companies Established $10-15MM+

Structure What we are looking for at a micro level Depth and breadth of management – number one issue –Experience through a downcycle –Vision & strong understanding of the competitive landscape –Strong reporting & accounting controls and forecasting capabilities –History of operating in leveraged environment Substantial sponsor/management investment – must have “skin in the game” Ability to withstand margin compression – pricing flexibility or a cost reduction focus Strong working capital and good operating flexibility Established “brand name” operation – i.e., industry leadership Cash flow predictability, sustainability, and quality – especially at the end of a long cycle

Case Study: Project BlueSkies The Business Case The Business The Opportunity The Challenges Corporate travel management and business meetings Company had 7 shareholders from past mergers Complex management and no consensus on future direction To grow the business further, 2 partners wanted to buy- out 5 and re-invest in growth: organic and acquisitions Limited senior debt borrowing capacity – receivables only Funding gap – both at senior and mezzanine level Alternative funding: lose control to an equity fund

Solution - Buyout of Partners Vision 2000 Travel Group Subordinated Debt August 2006 $4,000,000 Common Shares August 2006 $1,500,000 Full Junior Capital Solution Management Buy-Out of 5 of 7 business partners – One stop shop BMO Capital solution, no outside source of equity. &

Case Study: Project Retirement The Business Case The Business The Opportunity The Challenges Assisted Living Facility Established and proven acquisition team looking to acquire an existing operation Proven track record of creating value in acquired businesses Acquirer sought additional equity capital to complete the acquisition without losing control Limits to traditional mortgage funding sources

Solution - Equity Investment AgeCare Health Services Financed by Equity $2,300,000 has been acquired by and September 2007 Mortgage $17,325,000

Recapitalization Subordinated Debenture July 2007 $7,500,000 Growth Capital Subordinated Term Loan April 2007 $2,000,000 Recapitalization Financing Subordinated Debenture May 2007 $5,000,000 Recapitalization Financing Subordinated Debt & Equity May 2007 $10,000,000 Capital for Growth Subordinated Debt June 2007 $15,000,000 Acquisition Financing Subordinated Debenture October 2006 $10,000,000 Acquisition Financing Subordinated Debenture October 2006 $10,000,000 Western Canadian Based Distribution Company Special Purpose Financing Subordinated Debenture September 2006 $3,000,000 BC Based Holding Company Management Buyout Subordinated Debenture & Equity August 2006 $5,500,000 Acquisition Financing Subordinated Debenture June 2006 $3,000,000 Growth Capital Subordinated Debenture June 2006 $3,000,000 Alberta Based Manufacturing Company Acquisition Financing Subordinated Debenture May 2006 $3,400,000 Acquisition Financing Subordinated Debenture June 2007 $8,000,000 Acquisition Financing Subordinated Debenture July 2007 $10,000,000 Leveraged Recapitalization Subordinated Debenture April 2006 $10,000,000 Acquisition Financing Subordinated Debenture March 2006 $5,000,000 Management Buyout Subordinated Debenture & Equity June 2005 & February 2006 $6,000,000 Recapitalization Financing of Bellshire Limited and Van Wyck Packaging with Mid Oaks Investments LLC Subordinated Debt & Equity July 2007 $8,500,000 September 2007 Acquisition Financing Subordinated Debt April 2007 $5,000,000 Acquisition Financing Subordinated Debt & Equity December 2007 $8,360,000 Acquisition Financing Second Lien Loan $10,000,000 January 2008 Ontario Based Food Manufacturer Acquisition & Growth Capital Subordinated Debt November 2007 $9,000,000 Western Canadian Automotive Group Acquisition Financing Equity $2,300,000 September 2007 Acquisition Financing Subordinated Debenture & equity June & October 2005 $5,540,000 Acquisition Financing Subordinated Debenture & equity August 2004 $4,000,000 Healthcare Company Acquisition Financing Subordinated Debt May 2007 $3,000,000 Acquisition Financing Mezzanine Debt & Debenture October & September 2006 $4,850,000 Acquisition Financing Subordinated Debenture October 2005 $4,750,000 Acquisition Financing Subordinated Debenture July 2005 $8,000,000 Leveraged Recapitalization Equity & Subordinated Debt $12,900,000 March 2008 Recent Deals

Contact Information Eric K. Ehgoetz, CFA Managing Director BMO Capital Corporation Toronto