Confidential Presentation on:

Hydromatic Technologies October 30, 2009

Executive Summary

„ Loop Capital is pleased to continue our productive dialogue with

Hydromatic Technologies regarding strategic and financing
alternatives for the Company

„ Hydromatic’s unique hydronic technology provides multiple

avenues to create value for the Company’s stakeholders
– Multiple potential end-user applications
– Patent and trademark protection provides barriers to competition

„ Attractive secular trends - amidst the clamor for higher efficiency,

lower energy consuming appliances – favors wide scale adaptation
of Hydromatic’s technology, both in the U.S and globally

„ Loop Capital is prepared to assist Hydromatic in maximizing value

for its stakeholders by:
– Evaluating a broad spectrum of strategic and financing alternatives
for the Company
– Identifying and approaching potential investors on the Company’s
behalf
– Valuing, structuring and negotiating any potential investments in
the Company

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Executive Summary (continued)

„ Loop Capital has carried out a preliminary analysis of the

competitive landscape for household appliance manufacturers, with
a particular focus on makers of clothes dryers
– Sector dominated by large, well capitalized OEMs
– Recent economic downturn – especially the decline in house prices
– has adversely impacted the sector
– Increasing focus on energy efficiency as a key growth driver, as
manufacturers seek to appeal to both consumers’ and legislators’
demand for “greener” products

„ This backdrop provides multiple ways for Hydromatic to maximize

value for its stakeholders, including:
– Continuing to develop hydronic technology on a stand-alone basis
and pursuing licensing opportunities with OEMs (status quo)
– Partnering with a major OEM to develop technology in exchange
for preferential or exclusive rights
– Exploring an outright sale to an OEM, at the “right” value

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Executive Summary (continued)

„ There are multiple pools of potential investors that could provide

near-term funding to enable Hydromatic to continue the pursuit of
growth opportunities
– Green-tech focused venture funds
– Corporations with strategic interests in potential end-applications
– Traditional venture capital and private equity funds
– Angel investors

„ Hydromatic would benefit from Loop Capital’s deep financial

advisory experience
– The team has collectively executed over 50 transactions for clients,
including large public corporations as well as early-stage companies
– Loop’s team members have also raised and invested venture and
private equity capital

„ Loop Capital is prepared to immediately commence a strategic and

financial advisory review for Hydromatic

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Hydromatic Investment Highlights

Hydromatic has many attributes that investors would find compelling

„ Proprietary DryerMiser technology offers
Unique significant savings in energy consumption
Technology while also improving safety

„ Multiple potential applications including

Broad End User residential (clothes dryers), commercial and
Applications industrial

„ Addresses critical requirement for improved

Green energy efficiency (and consequent reduction
in emissions)

Significant „ US and international patent (applications)

Barriers to provide significant barriers to competition
Competition

Multiple „ Ability to drive value through licensing,

Avenues to strategic partnerships or eventual sale to
multiple potential strategic suitors
Maximize Value

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Key Macro Trends/Business Drivers
Macro trends driving product demand and shaping the competitive
landscape for Hydromatic include:
Issue Commentary

Energy „ Government and consumers focused on more energy efficient appliances and
energy cost savings
Efficiency

„ Increased home foreclosure filings amid the subprime mortgage crisis and
declining home prices has made it tougher for homeowners to refinance
loans or borrow money to buy goods like new household appliances
Housing Market
„ However, it seems that the housing crisis has bottomed, with a modest
rebound anticipated in the near term
– Projected 2% volume CAGR over the next 5 years

„ Highly competitive sector with competitors having a strong global presence

Sector and robust brand equity
Consolidation/
„ Cost savings and scale likely to fuel consolidation
Scale – E.g., Whirlpool’s acquisition of Maytag

„ Global competitors like LG (South Korea) and Haier (China) are able to
manufacture their products at lower costs
Low Cost
„ Global partnerships are likely to grow to take advantage of lower costs and
Country penetration opportunities
Manufacturing – Ex.- Joint venture between Whirlpool and Chinese company, Hisense
Kelon, for refrigerators and washing machines for Chinese and export
markets
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How Investors Would Evaluate Hydromatic
Potential investors would consider the following key factors
prior to investing in Hydromatic
Product/Service
„ Differentiation of product from
alternatives
„ Protectable rights (IP)
„ Addressable market size
„ Growth potential
„ Buying power of potential
customers
Management
„ Strength/depth of management
team
„ Coverage of key job functions
„ Relevant sector or start-up
experience
„ Ability to control the company
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Investment Considerations
„ Investment amount/ownership
„ Expected returns
„ Current financing/sources and
uses of funds
„ Company projections
„ Preemptive rights in later round
investments
„ Special voting rights
Exit Strategy
„ Exit Valuation
„ Potential strategic acquirors
„ IPO Potential
„ Acquisition Targets
Financing alternatives

Loop Capital would consider the following types of potential investors

Overview Potential Merits and Considerations
Targeted approach 9Large pool of investors focused around “green”
focused on firms secular trend
Venture
with specific 9Ability to provide current and future financing
interest in “green” as well as other resources (e.g., introductions)
Capital tech 8Would likely seek significant economic or
controlling interest

Large corporations 9Adds credibility and could provide engineering

with products in resources to perfect product(s)
Hydromatic’s value 9More open to passive/minority interest
Strategic chain, e.g. track 8Could limit scope of opportunities, e.g. with
Investors record of supplying competitors
major dryer OEMs

Individuals and 9Ability to provide current and future financing

family offices with 9Structure and terms could be more favorable
significant funds to 8Potentially less value-added if no specific
Angel invest product angle or ties to sector
Investors

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Perspectives on Valuation

Based on illustrative projections, potential investors could expect an

ownership stake in a range between 13%-22% and 34%-56% for a $2
million or $5 million investment in Hydromatic respectively
($ in millions)
December 2014
2010 2011 High Low
Net Revenue $2.5 $11.8 $25.0 $20.0

Margins 44% 40% 40% 40%

EBITDA $1.1 $4.7 $10.0 $8.0

Valuation Multiple 6.0x - 8.0x 6.0x - 8.0x

Enterprise Value $60 - $80 $48 - $64

Required Ownership to Achieve 40% IRR

$2mm Investment 13%-18% 17%-22%
Implied Pre-Money Valuation $9 - $13 $7 - $10

$5mm Investment 34%-45% 42%-56%

Implied Pre-Money Valuation $6 - $10 $4 - $7

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Illustrative Process Timeline

November December January February

Preparation
–Loop Capital due diligence
–Build financial model
–Prepare offering docs
–Draft term sheet

Marketing
–Screen potential investors
–Send teaser
–Send preliminary term sheet
–Management presentations
–Collect indicators of interest

Investor Due
Diligence
–Investor due diligence

Final Negotiations/
Closing
–Negotiate final terms
–Close

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Engaging Loop Capital Markets

Loop Capital is prepared to provide a full roster of investment banking

services to Hydromatic
„ Critical input on organizational structure and strategy
„ Industry and competitive analysis, i.e. identify sector
trends, outlook and potential opportunities/
implications for Hydromatic
Strategic Advice „ Evaluation/review of alternatives to provide
Hydromatic’s management and board with guidance
on key issues

„ Developing detailed financial models and valuation

analysis
„ Preparation of marketing materials, e.g. prospectus
and management presentation, and overseeing of
Financial Advice marketing efforts
„ Screening and approaching potential investors
„ Structuring, negotiating and closing financing and
other transactions

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