FOCUS Mezzanine provides acquisition equity to those Companies that satisfy its general investment criteria for mezzanine debt plus the added criteria of:

• Reasonable purchase price (if an acquisition).
  
• Sufficient common equity.
  
• Seller take-back debt, if any, fully subordinated to the liquidation preference.
  
• Sufficient free cash flow being generated by the business to redeem the preferred equity within five years.

Financial Terms

FOCUS Mezzanine will invest $1 to $5 million of equity in a portfolio company based on the following terms:

• Investment takes the form of preferred stock with a formula liquidation preference.
  
• Formula for the liquidation preference is the greater of (A) twice the invested amount or (B) the invested amount plus cumulative and compounded dividends of 8 to 15 percent per annum.
  
• No dividends need to be paid currently.
  
• Liquidation preference is payable by the company within the first five years.
  
• Detachable penny warrants are issued by the company to bring FOCUS Mezzanine's annual internal rate of return to at least 35 percent.