EFTA00803963.pdf

KAIN CAPITAL 19 ImageOne M.1.1 INDUSTRIES Bridge Financing EFTA00803963 KAIN CAPITAL Brief review of the story so far... n ImageOne Kain Capital completed the the ImageOne transaction in November • BAML financed the transaction; Kain Capital personnel hit the ground running on the 3rd week of November • Kain Capital appointed a Board of Directors with deep experience in retail (inc. Steven Heyer, former Coca-Cola COO, Starwood Hotel Group CEO, and Lazard Director and Sandeep Chugani who is the North American retail head for BCG ) Investment thesis is already exceeding expectations • Organic growth, aided by an enhanced bidding process and network connections, is leading to rapid growth that will surpass forecast • Diversification of customer base quickly reducing reliance on DSG expected to fall below 30% of 2016 revenue • Kain Capital has been able to add value to ImageOne by gaining a more granular understanding of the business and launching numerous value-enhancing initiatives (process overhauls, performance evaluation and incentive structure, cost/efficiency improvements expected to produce —300 bps EBITDA gain) We have further increased our confidence in company's financial performance • Completing implementation of EPICOR will allow for an integrated system to manage project planning, estimating, execution, and review of profitability at a job and part level • Completing audit of financial statements will give greater confidence around its controls and processes February will require key investments to be made in the business • The first two months of the year are a traditionally slow time for the business • Kain Capital views this as a one-time opportunity to implement key investments in preparation for business to grow several-fold EFTA00803964 KAIN CAPITAL Accelerated growth expectations are creating funding needs ahead of schedule n Nal ImageOne Post-acquisition engagement with ImageOne has led to accelerated growth potential • Enhanced bidding process has produced several large wins in last two months of 2015 (e.g. CST Remodel program, CVS/Target Pharmacy roll-out) • Kain Capital network has provided in-roads to multiple blue-chip accounts that we expect to yield significant opportunities in 2016 (SEG, AIG, Citi, PE portfolios) Thorough financial and operational reviews have identified shortcomings that must be addressed prior to scaling • Short-term cash needs: significant reduction in AR in Dec-Jan will reduce borrowing base, precisely when it is most needed to fund upcoming growth • Personnel shortage: major talent and resource gaps identified that put performance at risk (most significantly in One Construction division), particularly for new business • Infrastructure improvements: significant investments needed in IT infrastructure, ERP systems improvements and expansion of Bensalem facility Additional financing will help support short-term needs and secure medium-term growth potential • Short-term liquidity needs: reasonable adjustments to borrowing terms could provide quick-fix (e.g. Adjust borrowing base calculation or convert portion of LOC to term loan) • Additional financing will be used to strengthen operations and provide buffer for large contracts that are expected to come in over the next several months EFTA00803965  47-70% Growth possible in 2016, fueled by new KAIN CAPITAL customers in rapidly diversifying customer base n ImageOne - 1/3 of 2016 revenue generated from new clients Revenue breakdown All values in $M El Additional upside 79.22 al Non-DSG 10.50 El Service (13%) k, . DSG 47.70 46.61 C47 47) - r- 2014 2015 2016 (Forecast) New accounts in both 2015 and 2016 balancing out DSG and Santander decline and spurring new growth, with significant additional upside opportunity • 2015: Six new customers accounted for $4.39M, with growth in other Non-DSG and Service accounts balancing out DSG/Santander decline • 2016 Forecast: Additional new customers (Corner Store, Bloomin' Brands, Bridgestone, CVS, Target, Burlington Stores and Rent-A-Center) fueling strong growth in rapidly diversifying customer base • 2016 Additional upside: Discussions with several other large potential new accounts are in progress (Southeastern Grocers, AIG, Citi, and others) Source: Nov. YTD Financials and 2016 Budget/Forecast EFTA00803966 KAIN CAPITAL To accommodate the coming growth, ImageOne needs to make Q1investments of "$3m U ImageOne Aggressive hiring underway across all divisions (annualized expense increase $1.8m, $450k in Q1) • VP, 2PMs, 4 Field Supervisors, and Estimator in Construction (also investigating potential platform acquisition to accelerate growth in construction division) Personnel • Director & two PMs in Impact Decor division • Two Senior and three Junior PMs in Identification Specialist division • Two Junior PMs in Total Support division • Additional support: Director of field supervisors, sub-contractor database manager, fleet admin. Plans are underway to expand facilities and improves systems (expected Q1 investment of $600k) • Developing "Building #2", an expansion of its Bensalem facility is needed to accommodate growing staff ($350k investment) Infrastructure Numerous investments in systems improvements ($250k investment) and systems - Epicor (ERP system) was only partially implemented and requires full roll-out to close reporting gaps and improve employee efficiency - Server redundancy risk identified with urgent need to mitigate through cloud back-up Additional materials and equipment will front-load costs to accommodate growth (expected Q1 Inventory, investment of $2m+) • —50% increase in inventory needed to fulfill orders (- 52m investment) equipment • New equipment needed to efficiently and cost effectively manage diversifying work scope (e.g. and other power washers, crane truck, fleet vehicles) (- 5500k investment) cost of sales Additional sales expenses will be incurred to service diversifying customer base (e.g. travel, sales materials, entertainment) (- 5100k investment) EFTA00803967 KAIN CAPITAL The funding need is short-term El ImageOne This cash need is caused by the seasonality of the business, but slow season is when it is needed most • The funding need is due to the fact that over 70% of the revenue will be realized in the second half of the year • A/R for that revenue will be collateralized to expand senior debt facility by Q3 • Cash projections expect to have a cushion of $5m during the time bridge loan is needed • Cash balance is expected to climb over $7.5m by the end of the year (inc. all P&I payments) • Over $35m of work is already specified and in production at ImageOne (as of Feb. 1) $27,500,000 $25,000,000 $22,500,000 $20,000,000 $17,500,000 $15,000,000 ,A mProj. AIR $12,500,000 $10,000,000 Proj. Cash (inc Bridge $7,500,000 Payoff) $5,000,000 $2,500,000 5- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec EFTA00803968 KAIN CAPITAL Unsecured Note Terms ImageOpe • Value: $5,000,000 • Rate: 13% (annualized) • Issue Date: 3/15/2016 • Maturity Date: 11/15/2016 • Duration: 8 months • Structure: Bullet (Principal & interest paid at end of investment period) EFTA00803969