December 2007

Equity Financing Alternatives

NIRI Atlanta Chapter

2

3

Equity Financing Needs

Many reasons:

Fund acquisitions, projects and subsidiaries

Add working capital for expansion

Debt reduction (at-the-market debt for equity swap)

Adjust leverage ratios to comply with credit facility or regulatory covenants

Manage a Balance Sheet to retain or enhance credit ratings

4

Equity Financing Alternatives

Many alternatives:•Underwritten / “traditional” Secondary Offerings•144A

• QIBs

•Private Investment in Public Equity (PIPE)• QIBs• AI’s

•Equity Line • ATM / CEO / SAFE• S-3 eligible issuers that offer shares for sale from their existing Shelf

Registrations.

•Dutch Auction•Direct Equity

• S-3 eligible issuers that offer shares for sale from their existing Shelf Registrations via modified DSPP

5

Equity Financing Alternatives

Equity Line

N/A

Registered

High

Issuer

Low

2 - 4 weeks

> $10MM

None

High

N/A

1 - 2%

1-2%

Secondary

Institutional

Registered

Very low

Issuer

High

3 - 4 Months

> $50MM

None

High

11%

5%

16%

PIPE

HF / PE / LBO / VC

Unregistered

Medium

Dealer / Investor

Moderate

1 month

$1MM – $200MM

1 month+

Low

10%+

6%

16%+

144a

HNW / HF / PE

Unregistered

Medium

Dealer / Investor

Moderate

2 - 3 Months

Avg $5MM

1 year

Low

5%+

6%

11%+

Characteristics

Investor Type

Security Type

Confidentiality

Sets Terms / Price

Market Impact

Lead Time

Sizes

Investor Lockup

Inv. Legal Protection

Discount

Fees (% of Cap)

Total Issuance Cost

Dutch Auction

Retail

Registered

Very low

Issuer / Investor

High

2 - 3 Months

$35MM – Open

None

High

15%

4%

19%

1

1) Houlihan Lokey “Private Investment in Public Equity (PIPE) 2) Financial Management Association, “The Impact of Rule 144a …” Winter

20023) IT Investors Journal: “Why the pox is on SCOX” August 15, 20044) Overview: Private Investment in Public Equity Friedland Capital White Paper

July 2005) Target price is daily VWAP – not guaranteed6) Tied to VWAP

2 3Direct Equity

Institutional

Registered

High

Issuer

Low

2 - 6 weeks

> $10MM

None

High

0 - 2%

1%

1-3%

4

5 6

6

Documentation Comparison Grid

Documentation

Offering Circular / Prospectus Supp.

Purchase/Sale Agreement between Issuer &

underwriter

Due Diligence

Syndication Group

QIB Questionnaire

Legal Opinion

Reg. Rights Agreement

Reg. Statement

Road Shows (Rule 433)

Credit ratings req.

Press releases

Direct Equity

Plan

NO

NO

NO

NO

NO

NO

NO

NO

NO

OPTIONAL

Secondary

YES

YES

YES

YES

NO

NO

NO

YES

YES

YES

YES

144a

YES

OPTIONAL

YES

OPTIONAL

YES

YES

YES

NO

YES

NO

YES

PIPE

YES

OPTIONAL

YES

OPTIONAL

YES

YES

YES

YES

YES

NO

YES

Dutch Auction

YES

OPTIONAL

YES

OPTIONAL

NO

NO

NO

YES

NO

YES

YES

2

2. Overview: Private Investment in Public Equity (“PIPES”)

Equity Line

YES

YES

YES

NO

NO

NO

NO

NO

NO

NO

OPTIONAL

1

1. File form 8k of Agreement and supplements to prospectus

7

Equity Lines and Direct Equity

• Can be implemented quickly (typically 2-6 weeks) with no road shows

• Clients have access to financing to supplement other forms of funding when needed

• Fees and commissions are substantially less than all other avenues of equity financing

• High degree of confidentiality

• Negligible market impact

• Company’s Management controls the selling of shares into the market by setting:

• Amount of shares to be sold

• Timing of sales

• Length of selling period

• Minimum sale (floor) prices

8

Sample Company

Key Fundamentals Key Ratios

Price a/o 12/14/2007 $22.15

Volume on 12/13/2007 2.1 Million

10 Day Avg Volume 2.2 Million

Shares Outstanding 225 Million

13 week Price Range $19.50-$23.25

Market Capitalization 4.9 Billion

Float 211 million

Book Value Per Share $14.98

Short Interest Shares 19.1 Million

Institutional Ownership 77.3%

Price to Book 1.5

Price to Sales 1.0

Price to Cash Flow 6.5

Price to Free Cash Flow -16.3

Price to Earnings 17.3

Debt to Equity 1.3

Return on Equity 8.8

Dividend $0.22

Yield 4.2%

Beta 0.5

9

Equity Line & Direct Equity

Features & Implementation

10

Typical Equity Line Features*

The issuer targets the dollar amount (or share amount) to raise. Entering into a Sales Agency Agreement to sell shares.

Shares are sold, with daily reporting, and can be settled T+3 or at the end of a selling period (1-20 days) utilizing securities lending. Funds are wired to the company upon settlement. Regulatory filings are updated when the issuance is deemed to be “material” or at quarter end.

• Efficient and cost effective solution for issuing equity, similar to the operation of a stock repurchase plan or Medium Term Note program.

• Transforms the stock issuance process into an execution service, by selling shares directly on the Exchange (or OTC), exploiting market strength and restraining upon market weakness. Sales methodology designed to minimize pressure on the stock price.

• Issuer determines 1) amount of issuance, 2) timing of issuance, 3) floor price and 4) duration of selling period. Issuer may stop or start issuance at any time intraday.

• No issuance information “leakage”. Discreet selling strategy.• Allows a public company to issue shares, at its discretion, over a period of time (up to 3

years), rather than having to announce a massive sale of shares and be obligated to sell them all at once.

• Sale proceeds based on actual sales price (less commission); VWAP target.• Sales are typically executed through electronic trading systems (i.e., B-Trade, ITG Posit,

SONIC, Anonymous SuperDot, Direct+, or BNY ConvergEx).• Share issuance amount limited only to Shelf availability.

*(modeled on BNYCMI SAFE product)

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Example – Execution Liquidity

DailyVolume Px Last VWAP $Volume Shares $Volume Shares

10/16/2007 2,495,100 $21.44 $21.43 $8,024,429 374,265 $10,699,238 499,020 10/17/2007 1,758,700 $21.51 $21.46 $5,663,603 263,805 $7,551,471 351,740 10/18/2007 1,926,500 $21.35 $21.40 $6,186,550 288,975 $8,248,734 385,300 10/19/2007 3,617,300 $21.02 $21.27 $11,544,360 542,595 $15,392,480 723,460 10/22/2007 2,484,300 $21.19 $21.06 $7,850,400 372,645 $10,467,201 496,860 10/23/2007 2,797,100 $21.10 $21.12 $8,866,499 419,565 $11,821,999 559,420 10/24/2007 3,927,700 $21.04 $20.97 $12,360,708 589,155 $16,480,943 785,540 10/25/2007 6,826,300 $21.86 $21.65 $22,177,830 1,023,945 $29,570,439 1,365,260 10/26/2007 3,737,400 $22.10 $22.05 $12,369,691 560,610 $16,492,922 747,480 10/29/2007 3,093,800 $22.12 $22.14 $10,277,758 464,070 $13,703,678 618,760 10/30/2007 2,939,000 $22.17 $22.26 $9,815,702 440,850 $13,087,602 587,800 10/31/2007 2,372,800 $22.55 $22.39 $7,973,106 355,920 $10,630,808 474,560 11/1/2007 4,046,400 $21.76 $22.02 $13,370,418 606,960 $17,827,224 809,280 11/2/2007 4,453,800 $21.63 $21.60 $14,438,997 668,070 $19,251,996 890,760 11/5/2007 3,899,353 $21.65 $21.55 $12,607,876 584,903 $16,810,501 779,871 11/6/2007 3,625,800 $22.00 $21.71 $11,811,388 543,870 $15,748,517 725,160 11/7/2007 3,734,425 $21.66 $21.81 $12,224,341 560,164 $16,299,122 746,885 11/8/2007 3,668,797 $22.20 $22.06 $12,144,727 550,320 $16,192,969 733,759 11/9/2007 3,462,955 $22.15 $22.16 $11,515,018 519,443 $15,353,357 692,591

11/12/2007 2,820,568 $21.93 $22.14 $9,371,676 423,085 $12,495,568 564,114 67,688,098 $21.72 $220,595,077 10,153,215 $294,126,770 13,537,620

Average Daily Volume

3,384,405 507,661 676,881

Average Price/Share

% of Outstanding Shares

SAFE Commission 1%

Traditional Secondary 4%

$2,205,951

$8,823,803

$2,941,268

$11,765,071

$21.73 $21.73

3.22%2.42%

Sales Agency Financing for Equity ("SAFE")Sample 20-Day Draw-Down

15% 20%

12

Equity Line Implementation

Term Sheet

• Defines Material Terms

• Customizes program to meet client needs

Due Diligence

• Management meetings

• Business review• Legal review• Follows MTN model

review throughout life of program

Agreement

• Standardized Agreement

• Comfort Letters• Settlement

Procedures

Regulatory Filings

• File Supplements to prospectus (424B5)

• File Form 8-K with Sales Agency Agreement

Execution

• Adjustable selling terms

• Managed selling of shares

• Daily reporting of executions

• Settlement at end of selling periods

Timeline: 2-4 Weeks

13

Direct Equity Features

• An extremely efficient and cost effective solution for issuing equity by leveraging a Direct Stock Purchase Plan vehicle, combined with sophisticated targeting techniques.

• Allows the issuer to place shares with targeted investors.

• Issuer control mitigates volatility, the impact of the artificial negative money flow caused by arbitrage activity and may result in less dilution.

• Allows public companies to offer shares to institutional investors at the companies’ discretion over a period of time, rather than having to announce a massive sale of shares and be obligated to sell them all at once.

The issuer targets the dollar amount to raise. Mellon Securities LLC, as agent for the Issuer, notifies qualified investors that the Issuer will be granting Waivers to the monthly cap detailed in the Plan document. Investors perform due diligence, submit a RFW and state a discount from market price.  The plan details the permissible discount level 0% - 3%.  Once Waivers are granted, funds are due to the Plan Administrator on the day prior to the commencement of the pricing window (generally 10 business days).  A threshold price is set for the window period and the Issuer is not obligated to sell stock below the threshold.  At the end of the window period, agent calculates the price of the stock, based on VWAP less the discount granted and shares are issued to the investor.  

14

Program Implementation

Documentation

• Agreement• Define plan

parameters• Draft / review DSPP

Preparation

• Print & distribute• Investor

identification

Agreement

• File Plan • Register Shares via

S-3

Timeline: 2-6 Weeks

Prior to Pricing3 - 6 Days before Pricing

Notify of intent to activate

Analyzes threshold parameters

Determine investor interest

2 Days before Pricing

Bids due 10am EST

Bids Presented

Issuer Grants Waivers

1 Day before Pricing

Notify bidders

Funds wired by 2pm

Pricing Period (Standard or

Dynamic Duration)

Agent calculates price

Agent calculates share allocation

Pricing Summary 1pm

Funds invested or

delivered - 4pm

DWAC Shares

Pricing Period

15

Targeting Methodologies - Peer Overlay

Selected PeersSignificant Weightings Significant Weightings

Exclude EAS

High Match, No ABC, 2 + Peers

State Street Global Advisors (US) VIPT Franklin Income Securities

ABC Corp T. Rowe Price Associates Inc. iShares Dow Jones Select Dividends Index Fund

Enhanced Investment Technologies Inc. Advisory Research Inc.

DEF Corp American Century Investment Mgmt. Vanguard Equity Income Fund

Vanguard 500 Index Fund Templeton Investment Counsel LLC

GHI Corp JPMorgan Mid Cap Value Fund Franklin Income Fund

Duff & Phelps Investment Management Co MacKay Shields LLC

JKL Corp Vanguard Mid-Cap Index Fund EARNEST Partners LLC

Utilities Select Sector SPDR Fund Epoch Investment Partners Inc.

MNO Corp Vanguard Total Stock Market Index Fund Tradewinds Global Investors LLC

Vanguard Institutional Index Fund David J. Greene & Company LLC

PQR Corp Franklin Utilities Fund T. Rowe Price Mid-Cap Value Fund

Franklin Advisers Inc. Horizon Asset Management Inc.

STU Corp MFS Investment Management David Vaughan Investments Inc.

Geode Capital Management L.L.C. Thompson Siegel & Walmsley LLC

VWX Corp MFC Global Investment Management (US) Franklin Portfolio Associates L.L.C.

Edge Asset Management Inc. Moody Aldrich Partners LLC

YZ Corp Principal Investors Equity Income I Lord Abbett Mid Cap Value Fund

High Match, ABC + Peers

16

Potential Investors (Valuation Model Analysis)

Peer Tickers DEF GHI JKL MNO PQR STU VWX YZ ABC Average

Cap ($ mil.) 2,863 5,240 10,899 3,459 5,148 8,266 12,129 3,718 9,044 6,751.78

Historic Beta 0.47 0.53 0.48 0.44 0.42 0.56 0.55 0.42 0.64 0.50

Dividend Yield 4.08% 3.84% 4.83% 4.74% 4.24% 4.37% 5.20% 3.73% 4.27% 0.04

Price/Earnings 15 20.85 17.47 12.49 15.38 10.08 15.36 17.35 17.88 15.76

Price/Book 1.31 1.42 1.64 1.9 3.05 1.4 1.47 2.25 1.5 1.77

Price/Cash Flow 0 0 0 0 0 0 0 0 0 0.00

Price/Sales 0.91 0.59 1.49 1 0.54 0.9 1.23 1.07 0.91 0.96

1 Month Return 4.89 -2.87 3.39 3.72 -1.17 1.32 2.11 6.23 4.51 2.46

3 Month Return 1.2 -3.97 7.12 -4.37 -7.87 0.46 2.76 7.27 5.23 0.87

12 Month Return 7.66 12.04 -0.55 4.98 11.94 16.69 3.24 4.35 4.31 7.18

Peer Tickers DEF GHI JKL MNO PQR STU VWX YZ ABC Average

Cash Plow Back -0.42 -0.79 -0.77 -0.82 -0.37 -0.16 -0.81 -0.71 -0.54 -0.60

Dividend Discount Model -0.73 -0.35 -0.6 -0.69 -0.72 -0.55 -0.67 -0.62 -0.69 -0.62

Earnings Momentum 0.2 0.23 0.58 0.13 0.1 0.9 0.65 0.34 0.21 0.37

Estimate Change 0.42 0.08 0.08 0.08 0.08 0.08 0.08 0.62 0.39 0.21

Estimate Revisions Model 0.2 0.08 0.36 0.24 0.09 -0.02 0.27 0.28 0.27 0.20

Historical Alpha 0.04 -0.06 0.01 0.34 0.12 0.05 0.16 -0.2 -0.47 0.00

Neglect -1.2 -1 -1.25 -1.37 -1.28 -1.49 -2.12 -0.66 -1.51 -1.32

Historical Earnings To Price 0.53 0.34 0.45 0.41 0.55 0.68 0.47 0.45 0.49 0.49

Predicted Earnings To Price 0.44 0.44 0.42 0.42 0.48 0.37 0.37 0.37 0.58 0.43

Relative Strength Model -0.17 -0.08 -0.33 -0.22 -0.08 0.01 -0.25 -0.23 -0.23 -0.18

Residual Reversal 0.11 0.18 -0.01 0.07 0.18 0.25 0.04 0.06 0.06 0.10

Sector Momentum -0.16 -0.16 -0.16 -0.16 -0.16 -0.16 -0.16 -0.16 -0.16 -0.16

Cash Flow To Price - - - - - - - - - 0.00

Yield 1.61 1.48 2.02 1.97 1.7 1.77 2.22 1.42 1.71 1.77

Size 1.07 1.37 1.61 1.12 1.41 1.59 1.69 1.15 1.59 1.40

Trading Activity -0.17 -0.12 0.42 -0.07 -0.06 0.38 0.25 -0.18 -0.08 0.04

Growth / Value 0.61 0.45 0.2 -0.02 -0.55 0.48 0.39 -0.24 0.35 0.19

Valuation Scores: 3 = Highest, -3 = Lowest, 0 = Average-2 -1 0 1 2

Cash P low Back

Dividend DiscountModel

Earnings Momentum

Estimate Change

Estimate RevisionsModel

Historical Alpha

Neglect

Historical EarningsTo P rice

P redicted EarningsTo P rice

Relative StrengthModel

Residual Reversal

Sector Momentum

Cash Flow To P rice

Yield

Size

Trading Activity

Growth / Value

17

Investor Targeting Methodologies Valuation Model Analysis

Compatibility Score: 265 Moderately/High

Highland Capital Management L.P., Dallas, Texas

*Source Data Provided by Valuation Technologies

Company Compatability Score

150 - 250 moderate attractiveness

250 - 325 moderately high

325 - 450 high

450+ high attractiveness

$1,713 Million in Equity Assets

Current holdings : $0

Purchase Potential : $32.0 Million

Annualized Turnover : 15%

Owns 1 in Peer Group

Valuation Model Used

Model Match

Sector Momentum Very High

Size Very High

Neglect Very High

Historical Earnings To Price

Moderate

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Threshold Pricing- Market Neutral Design

• Investor selection methodology will help mitigate the impact of the artificial negative money flow caused by arbitrage activity

• Generally recommend laddered approach - combination of:

Established pricing periods

Demand driven dynamic duration pricing periods

Criteria Scenarios Deal Size Shares/Proceeds

Avg. Volume 2,420,000 Daily Volume 2,420,000

Outflow % 15.8% Daily Max. Outflow 381,150

Pricing Period - Days 10 Deal Share Outflow 3,811,500

Avg. Share Price $22.00 Deal Dollars Inflow 83,853,000$ Potential Annual Proceeds: 1,006,236,000$

19

Investor SummarySample Pricing Period

Large Fund Managers Hold 56,000,000$ 70% 1.65%Bulge Bracket Investment Bank Sell 8,000,000$ 10% 1.75%Regional Brokerage Firm Hold 2,400,000$ 3% 1.50%Large International Commerical Bank Hold 4,000,000$ 5% 1.80%Various Hedge Funds Sell 8,000,000$ 10% 1.40%Retail Investors Hold 1,600,000$ 2% 1.90%

% of deal estimated Trading 20% Capital % of deal estimated Holding 80% Raised 80,000,000$

Weighted Discount 1.643%

Pricing Period: 80,000,000$ 100%

Date Low High Average Threshold

Day 1 $22.00 $22.78 $22.39 $22.00Day 2 $22.01 $22.45 $22.23 $22.00Day 3 $22.02 $22.90 $22.46 $22.00Day 4 $21.99 $23.04 $22.52 $22.00Day 5 $22.04 $23.29 $22.67 $22.00Day 6 $22.13 $23.38 $22.76 $22.00Day 7 $22.13 $23.47 $22.80 $22.00Day 8 $22.18 $23.67 $22.93 $22.00Day 9 $22.19 $23.32 $22.76 $22.00

Day 10 $22.14 $22.82 $22.48 $22.00225.9759

Average Price (10 days): $22.60 2.716%

20

Example:

• December 2004 – filed a Direct Equity Plan with 5 million shares

• January 2006 – initial activation – accepted $10 million from retail and institutional investors through Plan.

• Used opportunistically over 3 quarters, raising $10 - $30 million each time.

Investment requests in excess of $500 million.

Client permitted investments totaling in excess of $125 million.

Discount range 1.35% - 1.75%.

• During credit crunch in September / October 2007 activated twice, raising $150 million at discount of 2%.

Market Cap $3 billion Hybrid thrift/mortgage bank.

Wanted an equity financing tool which would permit them to enter the market opportunistically.

Also wanted to increase retail base.

Avg Daily Vol 1 million shares