Biographies

1. Navigating the Capital Markets: An Entrepreneur’s Guide to Raising CapitalJohn Kraska, Managing PartnerLou Caltavuturo, PartnerHales & Company | Hales Capital Securities

2. Biographies John Kraska Managing Partner P: (212) 592-5709 jkraska@halesgroup.com • Led management buyout of Hales from Arch Capital Group, Ltd in 2004 • Over 15 years experience as an investor and banker, having completed over 75 transactions, representing over $1.5 billion in transaction value • Graduate of Wharton School and University of Pennsylvania • Over 20 years experience as a banker and regulatory to the financial services industry with an emphasis in insurance and healthcare • Prior experience with Fox-Pitt Kelton focusing on capital raising and Deutsche Bank focusing on lending and structured finance • Graduate of Columbia Business School and Colgate University Louis Caltavuturo Partner P: (212) 592-5707 lcaltavuturo@halesgroup.com

3. Overview of Hales Leading Advisor to the Insurance Industry • Founded in 1973, we are one of the oldest and most experienced advisors specializing in the insurance industry • Hales Capital Securities is our registered broker-dealer that engages in securities related transactions on behalf of its clients • Our core business is advising agents, brokers, service providers and companies on corporate finance matters: merger & acquisition transactions and accessing equity and debt capital • We offer additional financial and strategic advisory services such as due diligence representation, valuation and perpetuation planning

4. Overview of Hales Leadership Position Among Advisors We ranked as the #1 leading advisor in each of the last five years – advised on over 150 completed transactions since 2004. Source: Hales and SNL DataSource, SNLi. Represents summary of insurance broker / agency sell-side transactions announced or completed in 2005, 2006, 2007, 2008 and 2009.

5. Overview of Hales Why We Are Different We are Specialists We focus on the insurance industry and have unique insights into the business and transactions. We focus on the insurance industry and have unique insights into the business and transactions. Seasoned and senior professionals are involved from beginning to end. Our Partners Execute Every Deal We leverage our expertise and data on industry transactions to represent our clients effectively. Technical and Negotiating Expertise We have a well-earned reputation for “getting deals done” and strive to achieve a successful outcome for all clients We Don’t Quit

6. The Surety Division of The Ohio, Kentucky and Missouri offices of National City Insurance Group Inc. has been acquired by has been acquired by has been acquired by have been acquired by 2010 2010 2010 2010 Hales advised USI Holdings Corp. Hales advised Risk Transfer Insurance Alliance Hales advised IRUS Corporation Hales advised Insurance Company of the West Bowen, Miclette, Britt & Merry of Arkansas Inc. a subsidiary of has been acquired by has been acquired by has been acquired by has been acquired by 2010 2010 2010 2010 Hales advised Bowen, Miclette, Britt & Merry of Arkansas Inc. Hales advised Hedden Insurance Hales advised Confie Seguros Hales advised Stone Insurance Agencies Overview of Hales Representative Transactions

7. The Gardner-Kirby Corporation has been acquired by has been acquired by has been acquired by has been acquired by 2010 2010 2010 2010 Hales advised Endorsed Administrators, Inc./ J.J. Jerome Associates, Inc. Hales advised McCutcheon Burr & Sons Hales advised Confie Seguros Hales advised The Gardner-Kirby Corporation Trident IV, L.P. selected assets of a fund managed by have provided equity and debt capital to has been acquired by has been acquired by has been acquired by 2009 2009 2009 2009 Hales advised The Maksin Group Hales advised Higginbotham & Associates Hales advised MeyersDining LLC Hales advised Caruso Benefits Group, Inc. Overview of Hales Representative Transactions Financial Associates LLC

8. Slapin-Lieb & Co. Key & Piskuran Insurance Agency has been acquired by has been acquired by has been acquired by has been acquired by 2009 2009 2009 2009 Hales advised BridgeStreet Consulting & Ins. Svcs., Inc. Hales advised Key & Piskuran Insurance Agency Hales advised Edgewood Partners Insurance Center Hales advised Slapin-Lieb & Co. has been acquired by have been acquired by has been acquired by has been acquired by Select assets of 2009 2009 2009 2009 Hales advised John Grady Insurance, Inc. Hales advised Boston Insurance Brokerage, Inc. Hales advised Irving Weber Associates Hales advised Unland Companies Overview of Hales Representative Transactions

9. Guide to Raising Capital Complex Map of Capital Providers – Where to Begin? EQUITY DEBT • Private equity firms • Venture capital • Hedge funds • Business development cos. • Insurance Companies • Friends & family • Commercial banks • Specialty lenders • Insurance Companies

10. Guide to Raising Capital Different Kinds of Capital • Amortizing and secured against stock or personal guarantees • 1.5 – 2.5x EBITDA; LIBOR + or Prime + pricing; strict financial covenants • Bullet loans • 15% - 25% total cost depending on leverage • Liquidation preferences, mandatory put options / redemption privileges • Generally priced to achieve 25% - 40% returns SENIOR DEBT (Revolver / Term Loan) SUBORDINATED DEBT (Bullet Loan w/Interest) PREFERRED SECURITIES (Dividends, Convertibility)

11. Guide to Raising Capital Common Misconceptions • “All Private Equity firms are the same” • “My company is worth X, so I can sell 33% of my company for 33% of X” • “Borrowing is always better than selling equity” • “I am only raising $10 million or less, that should be easy”

12. Guide to Raising Capital US Insurance Industry - Debt Market Source: Thomson Banker Source: Thomson Banker • Global financial crisis impacted debt raising by US Insurance companies. Amount raised fell to USD33 bn in 2008 and USD34 bn in 2009 from USD59 bn in 2007. • In 2007 and 2008 AIG, Inc. was the largest debt issuer raising 32% and 31% of the total amount raised, respectively. • In 2010, the scenario is looking much better both in terms of median transaction value and number of transactions.

13. Guide to Raising Capital US Insurance Industry - Private Equity Market PE Investment in Insurance PE Investments across Financial Services Source:Pitchbook Source:Pitchbook • Private Equity investments in the US Insurance sector fell sharply in 2008 following the global financial crisis and the attached credit freezing in the financial markets. • Composition of Investments into insurance remained flat in H1 2010 (6% versus 7% in 2009).

14. Guide to Raising Capital All Industries - Private Equity Market Total PE investments and No. of Deals Median PE investments by Type Source:Pitchbook Source:Pitchbook

15. Guide to Raising Capital PE Investment by Deal Size – 2003 to H1 2010 Source:Pitchbook

16. Guide to Raising Capital Four Simple Steps • Step One: The Business Plan – Why am I raising capital? • Step Two: The Financial Plan – How much capital do I really need? • Step Three: The Capital Structure – What kind of capital can I attract? • Step Four: The Execution – Show me the money!

17. Step One: The Business Plan Reasons for Seeking Capital $ Buy Out Shareholders Pay Debt • Perpetuation • Fund down payments • Debt or working capital obligations • Legal matters Growth • Hire new producers • Upgrade systems • Fund acquisitions

18. Step One: The Business Plan What Captures an Investor’s Attention? • Clear explanation for the use of capital • Investors never write blank checks or invest in blind pools • Differentiation in strategy or market – be specific • What advantage do you have over competitors? • What is happening in the market that may drive growth? • Honest self assessment of competitive threats • Management and track record

19. Step One: The Business Plan Why Will You Grow When Industry Isn’t?

20. Step One: The Business Plan Why Will You Grow When Industry Isn’t?

21. Step Two: The Financial Plan What Captures an Investor’s Attention? • Detailed set of financial projections with assumptions • Earnings, Cash Flow and Balance Sheet • Detail demonstrates understanding and gives confidence • Growth rates and margins that make sense • Anticipate questions from financial analyst types • They have to defend recommendations to an investment committee

22. Step Three: The Capital Structure Investor / Lender Expectations • What are Lenders demanding? • Collateral • Personal guarantees • Financial covenants • Co-investment of equity • Ability to get loans repaid • What are Equity Investors demanding? • Aggressive growth/margin hurdles • Control and governance (i.e., “Alignment”) • Liquidity

23. Step Three: The Capital Structure TODAY EBITDA $5 mil Value (7x) $35 mil YR 5 EBITDA $10 mil Value (7.5x) $75 mil $75 m NO LEVERAGE $35 m 2.1x multiple 16% annual ROI $75 m W/ LEVERAGE $10 m 3.0x multiple 25% annual ROI $25 m NOTE: Assumes debt prepaid out of CF

24. Step Four: Execution How to Successfully Complete a Capital Raise • Prepare before Contacting Investors • Determine needs and types of capital • Control information flow versus reacting to investor demands • Resources and Focus • Contact multiple sources simultaneously in a competitive process • Time consuming: Meetings / Presentations / Follow-up Requests • Due Diligence and Documentation • As rigorous and costly as a sale

25. Step Four: Execution 5 - 8 weeks 3 - 5 weeks 3 - 4 weeks 4 - 6 weeks Prepare for Market Due Diligence & Negotiation Hales in Market Execution • Information collection / diligence • Compile, screen and evaluate potential investors • Draft materials • Contact potential investors and sign NDA’s • Management presentations • Facilitate informational requests and queries • Solicit indications of interest • Coordinate due diligence • Analyze terms • Negotiate / execute documentation • Regulatory approval(s) • Announcement Closing

26. Conclusions • Raising capital is harder than you think • Lots of misconceptions; wide variety of capital sources • Preparation, process and focus are paramount to success