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WINTER 2006

News and Views from NachmanHaysBrownstein, Inc. A Team of Leaders

NachmanHaysBrownstein, Inc. Named One of the Nation's Outstanding Turnaround Firms for the Eleventh Consecutive Year.

NachmanHaysBrownstein, Inc. has been recognized as one of the few "Outstanding Turnaround Firms" in the country by the nationally respected publication Turnarounds & Workouts. The NHB team was honored in 2005 with a record 11th consecutive appearance on the list, cementing the firm's reputation as "The Premier Middle Market Turnaround Firm". NHB's 2005 performance stands in stark contrast to the reported general malaise in the turnaround profession. Principals Harvey L. Nachman, CTP, Thomas D. Hays III, CTP, Howard Brod Brownstein, CTP and Leland B. Goldberg, CTP led fifty active engagements, and added to their professional staff in the face of downsizing by other turnaround firms. This 2005 NHB Update highlights select examples of growth, progress, measurable results and value realization achieved for the benefit of clients in both the public and private sectors.

M ANAGEMENT P ROGRESS

In 2005, NHB was once again Turnaround Firm".

"The Premier Middle Market

NHB measures its clients' progress by many factors, including a strong focus on cash flow, strengthening management, improvement in operating profit, and long-term overall profitability. Since abundant time is seldom available in a turnaround situation, NHB prides itself in quickly identifying and implementing the needed changes. Management Transition An international designer, manufacturer and importer of prestige jewelry products retained NHB to provide leadership and advisory services during a management transition. A caseteam led by Principal Howard Brownstein, CTP, included Managing Director Brendan Kissane, who served as Interim CFO. Brendan continues to advise the company on issues relating to operational and financial performance improvement.

Howard Brownstein

Brendan Kissane

G ROWTH

John Bambach

Philadelphia - John Bambach Jr., formerly a Director in the Restructuring and Insolvency Group of Parente Randolph, a leading regional accounting and consulting services firm, was named Managing Director of NHB. Keith Northern, formerly a senior executive at Realization Services, Inc. and a longtime lender at Wachovia Bank and its predecessors, was also named Managing Director.

Michael Savage

Boston ­ Michael Savage, formerly a Director in the Corporate Finance and Restructuring practice of FTI Consulting, was named a Managing Director of NHB. NHB Managing Director Larry Sax successfully completed the stringent accreditation process sponsored by the Association of Certified Turnaround Professionals and earned the coveted CTP credential. New York ­ Jeff Jonas, an experienced chief financial officer and former consultant with FTI Consulting was named a Senior Consultant of NHB.

Larry Sax

Keith Northern

Teresa Sav Kohl, a Senior Consultant in the NHB Philadelphia office was named Director of Marketing.

Teresa Sav Kohl Jeff Jonas

Bob Iommazzo

Restructuring A leading supplier of exclusive, high-end decorator fabric and wallpaper called on NHB Managing Director Bob Iommazzo and Senior Consultant Roseanne Sweeney to restructure its borrowing capacity and advise the company on the development of an offshore manufacturing joint venture. The elimination of excess inventory and other operational improvements were key factors in the successful evolution of this international icon. Operational Improvement A bakery business counted on an NHB caseteam led by Principal Harvey Nachman, CTP to provide the financial and cash management required to restore support by lenders and suppliers. Based on NHB's recommendations, an organizational development schedule was established, enabling the Company to meet its early-stage profit targets.

The NHB client portfolio has grown to include lenders, lender groups and creditors who reach out for NHB when they want advisors who understand management and can manage the business, if it becomes necessary. NHB can also help elevate the level of interaction between creditor/lender and the management team. Viability Principal, Lee Goldberg, CTP and Managing Director Brendan Kissane served as Financial Advisor to a leading lender. NHB provided the lender with due diligence and business plan Leland B. analysis concerning the viability of a frozen food Goldberg processor in Chapter 11. This analysis afforded the lender a sufficient comfort level to enable the Company to operate under new management and eventually repay the lender's obligations. Principal Lee Goldberg, CTP and Managing Director Tony Howard were engaged by a national financial services firm to assess the viability of one of their portfolio loans, a Floridabased health food manufacturer that was in the process of outsourcing its manufacturing operations. NHB assisted the Company during the transition process to make sure that the outsourcing plan was completed smoothly, while monitoring cash flow and operations. This allowed the Company the ability to convert a losing manufacturing operation into a profitable distribution business and provided a strong comfort level to the lender. Bankruptcy NHB continued its role as Plan Administrator in Montgomery Ward, the largest retail liquidation in history. The efforts of Managing Director, John Palmer, CTP, backed up by Principal Howard John Palmer Brownstein, CTP have resulted in the distribution so far of 32¢ to the unsecured creditors--far more than anyone had anticipated, and additional distributions are expected. NHB has returned over $65 million in collateral to GE and distributed over $118 million to Ward's other creditors. NHB's superior performance convinced GE to retain NHB to manage assets it acquired as a result of the litigation settlement between Ward's creditors and GE Capital. Ted Gavin, CTP Managing Director in NHB's Wilmington office served as Financial Advisor to the Creditors Committee in Waterlink, and was subsequently retained to serve as Liquidating Agent. The unsecured creditors had been Ted Gavin expecting only a 10% recovery based upon the Debtor's debt structure, however NHB executed a liquidation plan that dramatically increased the funds available for distribution, and creditors should now recover close to 40% of their unsecured claims.

N H B U P DAT E

V ALUE R EALIZATION

Hedge, private equity and distressed debt funds play an increasing role in the troubled company space. The nation's leading funds engage NHB on behalf of their portfolio companies. Long Term Return Principal Tom Hays, CTP served as the long-term CEO of a specialty glass fabricator, leading it out of bankruptcy with a plan that paid 100% of claims, rebuilding it after a devastating fire, leading a management buyout, and finally leading a strategic sale. The subsequent sale of the business resulted in an outstanding 4,000% return to shareholders (including dividends). Private Equity Principal Lee Goldberg, CTP and Managing Director John Wall were retained by a Miami-based private equity fund to serve as Financial Advisor to one of its portfolio companies, a $300 million importer and manufacturer of consumer and hospitality furniture products. NHB completed an evaluation of the management team and the business plan, made recommendations to maximize borrowing availability, assisted the Company in completing a detailed, bottoms-up cash flow analysis and provided a written report of its findings to all the parties in interest. As a result, NHB was instrumental in the Company's ability to successfully complete a refinancing that provided significantly more capital to fund its business plan. Due Diligence A $5 billion hedge fund engaged Principal Lee Goldberg, CTP, Managing Director Brendan Kissane, and an NHB caseteam to serve as Financial Advisor in conjunction with a viability assessment, due diligence, and business plan development for

one of its portfolio companies, a Maryland-based designer and importer of clothing accessories. NHB designed an integrated cash flow model to drive the company's business plan and worked with the Company to improve its offshore sourcing procedures.

P UBLIC S ECTOR

NHB enhanced its client portfolio mix by expanding its public sector engagements in 2005. Delaware's most populous municipality, New Castle County, which includes the City of Wilmington, engaged NHB in the wake of a corruption scandal, to investigate an unexpected budget surplus and review longer-term financial stability. The assessment of systems and controls conducted by Principal Howard Brownstein, CTP and Managing Director Ted Gavin, CTP revealed a projected shortfall that received widespread media attention when the report was presented to the County Council. As a result of NHB's recommendations, the municipality instituted policy and law changes designed to improve the protection of public funds and ensure the highest level of transparency in government. Brownstein and Gavin also assisted the Delaware Department of Transportation in forecasting proposed changes to the existing toll schedule. DelDOT used NHB's models and scenarios as supporting evidence in its submission to the state legislature, and the toll changes were overwhelmingly approved.

Roseanne Sweeney

Harvey Nachman

M EASURABLE R ESULTS

NHB built its reputation by providing turnaround management and consulting services on behalf of middle market companies. The definition of success is different for each engagement but the results are measurable in returns, time frame and risk. Crisis Management Principal Tom Hays, CTP, and Managing Director Tony Howard, arrived at a $200 million manufacturer a few days after its primary plant burned down idling 6,000 production employees. Hays--who had Tom Hays rebuilt another manufacturing plant after a devastating fire--and the NHB team immediately focused on the viability of the interim manufacturing plans. Howard grappled with restructuring two money-losing plants amid interruptions of the cash cycle caused by the fire. In addition to the rebuilding challenges, the Company's bank loan was maturing. NHB was Tony Howard able to negotiate a resolution with the secured lender that resulted in a full payout of the loan. The Company was up and running within three weeks of the fire and is currently operating profitably on a reduced scale. Turnaround NHB served as Interim CEO and Financial Advisor to a bank servicing company in default of its loans. Principal Tom Hays, CTP, and Managing Director John Wall led a restructuring effort John Wall that returned the Company to profitability and included the sale of the business to a private equity firm. The sale resulted in substantial returns for the owners well in excess of what had been anticipated, and created significant roles for the owners in the new company.

IN THE PUBLIC EYE

Once again in 2005, NHB professionals contributed to the professional community through numerous publications and speaking engagements: "Focus on NachmanHaysBrownstein: Firm Marks its Tenth Year on Top Turnaround List", Turnarounds & Workouts, February 15, 2005 "Whereof What's Past is Prologue...", ABF Journal, March, 2005 "Preparing the Next Generation for Turnaround Management" (Review of A Casebook on Corporate Renewal by Harlan D. Platt & Marjorie B. Platt), The Journal of Corporate Renewal, March 2005 "The Hole Story: Case Study of Bess Eaton's Bankruptcy", The Journal of Private Equity, March 2005 "Fact or Fiction? Book Alleges Bankruptcy Court System is Corrupt" (Review of Courting Failure: How Competition for Big Cases is Corrupting Bankrutpcy Courts by Prof Lynn M. LoPucki), The Journal of Corporate Renewal, August, 2005 "Continuous Innovation: Certified Turnaround Professional Designation Now Available to Lenders", ABF Journal, September 2005 "The Next Wave: Lenders Look Beyond the Horizon", ABF Journal, October 2005 NHB Principal Howard Brownstein, CTP was elected to the Executive Committee of the International Board of Directors of TMA and as Vice President - International and Board member of ACTP. He continues to serve as a Contributing Editor of ABF Journal. NHB Principal Harvey Nachman, CTP chaired a Strategic Research Institute panel on the impact of amendments under the Bankruptcy Reform Act. NHB Principal Lee Goldberg, CTP chaired a panel for the Northeast Chapter of the Turnaround Management Association on the "Current State of Loan Workouts", which included Paul Kennedy, President of Strategic Solutions Group at Bank of America, Walter Schuppe, EVP, CapitalSource and David Aloise, Senior Workout Advisor to Eaton Vance and other non-bank lenders.

WINTER 2006

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