Providence Group, L.P.

INVESTMENT GUIDELINES

 

The Partnership investment guidelines, subject to General Partner discretion, are as follows:

 

• “Microcap” companies, as generally described herein;

 

• Domestic companies located within an approximate radius of 1,000 miles from NYC,near travel centers;

 

• Generally in basic, well established industries;

 

• A minimum 10-year operating history;

 

• A strong asset base, with an asset-to-debt ratio of approximately 3-to-1;

 

• An owner who is preparing to retire, but who is available for a transition;

 

• Generally, non-union employees (unless if union employees are necessary to the nature of the business);

 

• A market niche that makes the company unique or gives it a proprietary advantage;

 

• A purchase price (excluding real estate) in the general range of 3x earnings (based on a weighted 3-year average);

 

• An acquisitions structure that generally consists of approximately 1/3 of the purchase price in the form of equity; 1/3 of the purchase price in the form of debt and 1/3 of the purchase price in the form of Seller financing;

 

• A combined EBITDA of approximately $10,000,000 per year, achieved as follows:

       - For the first portfolio company, EBITDA in the range of $1,000,000 + per year

       - For the second portfolio company, EBITDA in the range of $3,000,000 + per year

       - For the third portfolio company, EBITDA in the range of $5,000,000 + per year

 

• A performance analysis prior to acquisition to be completed by the General Partner for each targeted portfolio company on an independent “stand-alone” basis to project returns to the Limited Partners in the range of not less than 20% (IRR) and a multiple of capital invested of not less than 2.5x based upon conservative management expectations (generally consisting of 3 years’ historical performance adjusted and carried forward);

 

• A combined enterprise value in the range of $50,000,000;

 

• Exit consisting of a sale, liquidation or refinance of the Limited Partner’s Interest at the end of the Commitment Period, or a buyout by the General Partner at Fair Market Value.

 

The Limited Partners shall vote “yes” or “no” for any Partnership acquisition, with a Majority in Interest prevailing.