1. What is the fully diluted share count at exit?

Instructions On January 1, 2017, the management of manufacturing firm Driscoll Plastics, along with Bluestone Partners, a private equity firm, buys out the existing Driscoll shareholders. See the Excel table for the sources of funds in the deal. Preferred stock The $100 million in preferred stock pays no dividend, is convertible 1 to 1 into shares of common stock at the discretion of the convertible holder with a participating 1.0x liquidation preference. A participating 1.0x liquidation preference means that in the case of an exit, the preferred shareholder gets their initial capital back along with their full share of proceeds in line with their as-converted equity stake. Subordinated debt As part of the financing, subordinated lenders will receive warrants amounting to 3% of the fully diluted share count at exit. The warrants have an exercise price of $2.00 per share. Assume no warrants are exercised until an exit and that any unvested warrants automatically vest upon the change in control. Assume option proceeds add to the company's cash balance. The subordinated notes pay an 8% annual cash coupon at year end. Management share based compensation In addition to the initial equity investment provided by management, management will also receive restricted stock amounting to 5% of the fully diluted share count. Assume these restricted shares will all vest upon a change of control. Projections Attached is a forecast for the company's EBITDA, debt and cash forecasts through 2022. There will be no dividends or share repurchases during the period. Sources of funds on January 1, 2017 Sponsor equity (common) Management equity (common) Preferred stock Revolver Term Loan B Term Loan C Senior Note Subordinated Note (8% annual coupon) Total sources of funds 1,094,593,940 882,700,000 100,000,000 449,000,000 6,490,000,000 3,990,000,000 767,000,000 2,746,700,000 16,519,993,940 Each share of common stock is valued at $2 per share on the issuance date. Management projections For the year ended: 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 EBITDA 3,454,500,000 3,627,225,000 3,808,586,250 3,999,015,563 4,198,966,341 4,408,914,658 Revolver Term Loan B Term Loan C Senior Note Subordinated Note (8% annual coupon) Preferred stock 449,000,000 6,490,000,000 3,990,000,000 767,000,000 2,746,700,000 100,000,000 362,000,000 6,180,000,000 3,990,000,000 767,000,000 2,746,700,000 100,000,000 421,000,000 5,840,000,000 3,990,000,000 767,000,000 2,746,700,000 100,000,000 498,000,000 5,520,000,000 3,990,000,000 767,000,000 2,746,700,000 100,000,000 572,000,000 0 3,990,000,000 767,000,000 2,746,700,000 100,000,000 532,000,000 0 2,990,000,000 767,000,000 2,746,700,000 100,000,000 Cash (not including cash from warrant proceeds) 681,894,946 1,088,479,020 877,510,249 645,536,600 1,062,599,213 845,985,798 Instructions On January 1, 2017, the management of manufacturing firm Driscoll Plastics, along with Bluestone Partners, a private equity firm, buys out the existing Driscoll shareholders. See the Excel table for the sources of funds in the deal. Preferred stock The $100 million in preferred stock pays no dividend, is convertible 1 to 1 into shares of common stock at the discretion of the convertible holder with a participating 1.0x liquidation preference. A participating 1.0x liquidation preference means that in the case of an exit, the preferred shareholder gets their initial capital back along with their full share of proceeds in line with their as-converted equity stake. Subordinated debt As part of the financing, subordinated lenders will receive warrants amounting to 3% of the fully diluted share count at exit. The warrants have an exercise price of $2.00 per share. Assume no warrants are exercised until an exit and that any unvested warrants automatically vest upon the change in control. Assume option proceeds add to the company's cash balance. The subordinated notes pay an 8% annual cash coupon at year end. Management share based compensation In addition to the initial equity investment provided by management, management will also receive restricted stock amounting to 5% of the fully diluted share count. Assume these restricted shares will all vest upon a change of control. Projections Attached is a forecast for the company's EBITDA, debt and cash forecasts through 2022. There will be no dividends or share repurchases during the period. Sources of funds on January 1, 2017 Sponsor equity (common) Management equity (common) Preferred stock Revolver Term Loan B Term Loan C Senior Note Subordinated Note (8% annual coupon) Total sources of funds 1,094,593,940 882,700,000 100,000,000 449,000,000 6,490,000,000 3,990,000,000 767,000,000 2,746,700,000 16,519,993,940 Each share of common stock is valued at $2 per share on the issuance date. Management projections For the year ended: 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 EBITDA 3,454,500,000 3,627,225,000 3,808,586,250 3,999,015,563 4,198,966,341 4,408,914,658 Revolver Term Loan B Term Loan C Senior Note Subordinated Note (8% annual coupon) Preferred stock 449,000,000 6,490,000,000 3,990,000,000 767,000,000 2,746,700,000 100,000,000 362,000,000 6,180,000,000 3,990,000,000 767,000,000 2,746,700,000 100,000,000 421,000,000 5,840,000,000 3,990,000,000 767,000,000 2,746,700,000 100,000,000 498,000,000 5,520,000,000 3,990,000,000 767,000,000 2,746,700,000 100,000,000 572,000,000 0 3,990,000,000 767,000,000 2,746,700,000 100,000,000 532,000,000 0 2,990,000,000 767,000,000 2,746,700,000 100,000,000 Cash (not including cash from warrant proceeds) 681,894,946 1,088,479,020 877,510,249 645,536,600 1,062,599,213 845,985,798