Managing Liquidity and Financing Relations

1

• Managing Liquidity and Financing Relations
• Med Tech Strategies for Perilous Times
• Lee Steele, Partner, Tatum LLC
  MassMEDIC Meeting
• March 5, 2009

2
Who Is Tatum?

• Tatum, LLC is the largest and only Executive
  Services firm in the U.S. with a singular focus
  on leveraging the Office of the CFO to solve
  problems, accelerate business performance and
  create more value. We work with companies of
  all sizes who need decisive leadership, talent,
  capacity, and execution on an urgent basis.
  Tatum understands the urgency of NOW and responds
  quickly to deliver the right executive and a
  highly flexible team of resources to address the
  clients most pressing financial and operating
  problems.
• 37 Offices
  1,000 professionals
  6,000 clients
• Executive Leadership, Consulting, and Search
• Strategic, Finance, IT, and Execution Expertise
• Velocity, Objectivity, and Focus
• Maximize the Office of the CFO

3
How distressed is the economy?
Chicago Fed National Activity Index

• Measures the economy based on 85 indicators
• Has accurately predicted the past six recessions

4
Whats it like out there?

• Financing Market is Tighter Than Weve Ever Seen
• gtgt BUT ltlt
• Access to credit depends, in part, on size of
  deal
• Mid to large middle market (deals 25 million to
  250 million) there is a market, but still
  difficult
• Lower middle market (deals 5 million to 25)
  some are getting done
• AND only the most creditworthy need apply
• New Venture Financing Rounds?
• Highly relationship-driven still takes forever
• Reserved for only the most promising, quickest
  time-to-money ventures
• Aggressive pricing take it or leave it
  prepare for down round
• MA Market?
• Dont count on it unless already in the partners
  deal pipeline

5
Ten questions to ask your CFO

• Explain our bank covenants. How close are we to
  default?
• Show me your rolling 13-week and 4-quarter cash
  projections, plus your prospective covenant
  tests.
• If we cant raise another dime, how long can we
  make our cash last?
• Fully explain the implications of a loan default.
  Could this threaten the company's existence?
  What discussions have you had with our bank and
  investors re our current credit relationship?
• Can the bank call our loan?
• What would be the covenant forbearance fee?
  100,000 or more?
• What are the terms of a loan reset? Could they
  raise our interest cost by 2 5?
• How invasively would we be monitored? Would our
  line be reduced? Would our VCs be asked for
  guarantees?

6
Ten questions to ask your CFO (contd)

• What reports and forecasts are we showing our
  bank? The same were showing to our Board? To
  our investors?
• Is our current spending budget reality-based? Do
  you have a downside scenario? Would THIS trip
  our covenants?
• What products make us money? How do you know?
• How involved are you in pricing and customer
  credit decisions?
• What metrics do you use to make such decisions?
• Whats the basis for these?

7
Ten questions to ask your CFO (contd)

• How much cash is tied up in working capital?
  What would it take to cut that by 25? By 50?
• Give me a list of everything not mission-critical
  we could sell, shut down, mothball, defer, slow
  down or whatever. How much would each save us?
• Has your team ever been through this before? Are
  you keeping other members of management fully
  informed and holding them accountable? Do you
  feel its your job to worry these issues for the
  company?

8
Conclusion Plan for the Worst and Good Things
Might Happen

• Take charge of the situation LEAD! Get out
  ahead
• Dont let events overtake you
• Survival doesnt happen by accident
• Hope is not a strategy!
• Now more than ever, cash is king
• Focus obsessively on your core business
• Eliminate all distractions from the main mission
• Use this time to get stronger and be better
  positioned for the (eventual) recovery
• Surround yourself with the best
• Best team Best suppliers Best customers Best
  advisors Best investors