ADFA Supports Rural Venture Capital Fund

AIF Invests $2M in Meritus Ventures

October 30, 2006 | Little Rock, AR -- The Arkansas Development Finance Authority (ADFA) today closed on a $2,000,000 commitment to invest in Meritus Ventures, L.P. an expansion stage rural small business venture capital fund headquartered in London, KY and Oak Ridge, TN.

The announcement is being made prior to the Fifth Annual Arkansas Venture Capital Conference to be held in Rogers, Arkansas November 16 & 17. Meritus is one of several institutional venture capital fund sponsors of the conference. Meritus participated in the selection process for the conference and will participate in a panel discussion on how the private equity firms that serve this region seek to deploy their capital.

Meritus has a total of $36.4 million to invest in expansion stage smaller companies in rural areas of Arkansas and in Southern and Central Appalachia. The most likely targets for investment are companies that anticipate positive cash flow within 12 – 24 months of the fund’s first investment. The fund is licensed by the United States Department of Agriculture (“USDA”) and the United States Small Business Administration as a Rural Business Investment Company under USDA’s Rural Business Investment Program.

The key managers of Meritus, Ray Moncrief and Grady Vanderhooven, anticipate actively building their deal origination effort in Arkansas by participating in venture forums, business gatherings, and university sponsored entrepreneurial events as sponsors or speakers or both. In addition, they plan to share their knowledge of venture investing with rural entrepreneurs by helping to teach seminars on venture capital in towns within rural areas of the state.

ADFA Vice President of Development Finance President, Gene Eagle, indicated that, “this investment in Meritus Ventures is a continuation of our commitment to the development of rural Arkansas.”

ADFA’s investment was made through the Arkansas Institutional Fund (AIF). AIF is a $70 million fund of funds, supported by ADFA, that invests to help build the professional venture capital industry that serves Arkansas entrepreneurs.

“We were pleased to recommend the investment in Meritus as we think this investment will meet ADFA’s investment and strategic objectives,” said Michael Tharp, managing director of Cimarron Capital Partners, AIF’s Fund Manager.

About the Arkansas Development Finance Authority

The Arkansas Development Finance Authority is committed to responding to the changing needs of Arkansas’ growing, increasingly diverse population and business community. Since its creation in 1985, ADFA has become the state’s largest source of low-cost financing for low-to-moderate income housing development, small industries, government, education, agricultural business enterprises and healthcare. Through the issuance of taxable and tax-exempt bonds and notes, the administration of private and public grants and partnerships with state and federal agencies, ADFA gives Arkansans the most cost-effective financing choices possible. In 2001, bond guaranty legislation was modified to allow ADFA to utilize credit enhancement and state tax credits to finance “fund of funds” venture capital investments. At this time the $70 million Arkansas Institutional Fund (AIF) was created.

About the Arkansas Institutional Fund

In an effort to strengthen the venture capital network in Arkansas and promote economic growth within the State, the Arkansas Institutional Fund (AIF) is authorized to invest in professionally managed venture capital funds that in turn make risk capital more accessible to promising Arkansas firms.

About Cimarron Capital Partners

Cimarron is a leading national investment management firm specializing in regional private equity. The firm serves as fund manager for the Arkansas Institutional Fund (AIF).