<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
SCHEDULE TO
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
SPANLINK COMMUNICATIONS, INC.
(NAME OF SUBJECT COMPANY)
SPANLINK COMMUNICATIONS, INC. (SUBJECT COMPANY)
SPANLINK ACQUISITION, CORP. (OFFEROR)
<TABLE>
<S> <C>
BRETT A. SHOCKLEY (OFFERORS AND AFFILIATES OF
LOREN A. SINGER, JR. BOTH SPANLINK
TODD A. PARENTEAU COMMUNICATIONS, INC. AND
SPANLINK ACQUISITION,
CORP.)
</TABLE>
(NAMES OF FILING PERSONS)
------------------------
COMMON SHARES, NO PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
------------------------
846492 10 6
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
BRETT SHOCKLEY
CHIEF EXECUTIVE OFFICER
SPANLINK COMMUNICATIONS, INC.
7125 NORTHLAND TERRACE
MINNEAPOLIS, MN 55428
TELEPHONE: (612) 971-2114
FACSIMILE: (612) 971-2314
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF FILING PERSONS)
------------------------
COPY TO:
ROBERT RANUM
FREDRIKSON & BYRON, P.A.
1100 INTERNATIONAL CENTRE
900 SECOND AVENUE SOUTH
MINNEAPOLIS, MN 55402
------------------------
CALCULATION OF FILING FEE*
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<TABLE>
<S> <C>
TRANSACTION VALUATION AMOUNT OF FILING FEE
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$39,370,000 $7,875
</TABLE>
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* ESTIMATED FOR PURPOSES OF CALCULATING THE AMOUNT OF THE FILING FEE ONLY. THIS
AMOUNT ASSUMES THE PURCHASE OF 3,750,000 SHARES OF COMMON STOCK, NO PAR VALUE
(THE "COMMON SHARES"), OF SPANLINK COMMUNICATIONS, INC., AT A PRICE OF $10.50
PER COMMON SHARE IN CASH. THE AMOUNT OF THE FILING FEE CALCULATED IN
ACCORDANCE WITH REGULATION 240.0-11 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, EQUALS 1/50TH OF ONE PERCENT OF THE VALUE OF THE TRANSACTION.
[X] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11 (A)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM
OR SCHEDULE AND THE DATE OF ITS FILING.
<TABLE>
<S> <C> <C> <C>
AMOUNT PREVIOUSLY FILING PARTY............
PAID.................. $7,875 SPANLINK COMMUNICATIONS, INC.
FORM OR REGISTRATION DATE FILED..............
NO. .................. SCHEDULE TO FEBRUARY 29, 2000
</TABLE>
[ ] CHECK THE BOX IF THE FILING RELATES SOLELY TO PRELIMINARY COMMUNICATIONS
MADE BEFORE THE COMMENCEMENT OF A TENDER OFFER.
CHECK THE APPROPRIATE BOXES BELOW TO DESIGNATE ANY TRANSACTIONS TO WHICH THE
STATEMENT RELATES:
<TABLE>
<S> <C>
[X] THIRD PARTY TENDER OFFER SUBJECT TO RULE [X] GOING PRIVATE TRANSACTION SUBJECT TO RULE
14d-1. 13e-3.
[ ] ISSUER TENDER OFFER SUBJECT TO RULE 13e-4. [ ] AMENDMENT TO SCHEDULE 13D UNDER RULE 13d-2.
</TABLE>
CHECK THE FOLLOWING BOX IF THE FILING IS A FINAL AMENDMENT REPORTING THE RESULTS
OF THE TENDER OFFER: [ ]
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<PAGE> 2
This Amendment No. 1 amends the Tender Offer Statement on Schedule TO filed
by Spanlink Acquisition Corp., a Minnesota corporation ("Purchaser"), on
February 29, 2000, relating to the offer by Purchaser to purchase all of the
outstanding common shares, no par value per share (each a "Common Share"), of
Spanlink Communications, Inc., a Minnesota corporation (the "Company"), not
already owned by the Purchaser at $10.50 per Common Share, net to the seller in
cash, without interest (the "Per Share Amount"), upon the terms and subject to
the conditions set forth in the Offer to Purchase dated February 29, 2000 (the
"Offer to Purchase"), and in the related Letter of Transmittal (the "Letter of
Transmittal"), copies of which were attached as Exhibit (a)(1) to the Schedule
TO filed February 29, 2000. Unless otherwise defined herein, all capitalized
terms used herein shall have the respective meanings given such terms in the
Offer to Purchase or the Schedule TO.
ITEM 12. MATERIALS TO BE FILED AS EXHIBITS.
Item 12 is hereby amended and supplemented as follows:
<TABLE>
<S> <C>
(a)(1) First Amendment to Offer to Purchase dated March 29, 2000.
(a)(5)(iii) Press Release issued by the Purchaser regarding the
extension of the termination date of the Offer to Purchase.
(c)(2) Report of Dougherty & Company LLC delivered to Special
Committee of the Board of Spanlink Communications, Inc. in
support of fairness opinion.
*(c)(3) Report of Dougherty & Company LLC delivered to the Board of
Spanlink Communications, Inc. in connection with February
23, 1999 valuation analysis.
(d)(1) Agreement and Plan of Merger, dated as of February 25, 2000,
among the Company, Purchaser and Cisco Systems, Inc.
(incorporated by reference to Annex B of the Offer to
Purchase attached hereto as Exhibit (a)(1)).
(d)(2) Stock Purchase Agreement, dated as of February 25, 2000,
between Purchaser and Cisco Systems, Inc. (incorporated by
reference to Annex C of the Offer to Purchase attached
hereto as Exhibit (a)(1)).
</TABLE>
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* To be filed by Amendment.
<PAGE> 3
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: March 30, 2000
SPANLINK ACQUISITION CORP.
By: /s/ BRETT A. SHOCKLEY
------------------------------------
Name: Brett A. Shockley
Title: Chief Executive Officer
SPANLINK COMMUNICATIONS, INC.
By: /s/ BRETT A. SHOCKLEY
------------------------------------
Name: Brett A. Shockley
Title: Chief Executive Officer
/s/ BRETT A. SHOCKLEY
--------------------------------------
Brett A. Shockley
/s/ LOREN A. SINGER, JR.
--------------------------------------
Loren A. Singer, Jr.
/s/ TODD A. PARENTEAU
--------------------------------------
Todd A. Parenteau
<PAGE> 1
EXHIBIT (A)(1)
FIRST AMENDMENT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SPANLINK COMMUNICATIONS, INC.
AT
$10.50 NET PER SHARE
BY
SPANLINK ACQUISITION CORP.
SPANLINK ACQUISITION CORP. HAS AMENDED ITS OFFER TO PURCHASE FOR CASH AS
FOLLOWS:
THE OFFER AND WITHDRAWAL RIGHTS HAVE BEEN EXTENDED. THE OFFER AND WITHDRAWAL
RIGHTS PERIOD ORIGINALLY EXPIRING MARCH 30, 2000 WILL NOW EXPIRE AT 5:00 P.M.
MINNESOTA TIME ON APRIL 12, 2000, UNLESS THE OFFER IS EXTENDED.
SHAREHOLDERS WHO HAVE PREVIOUSLY VALIDLY TENDERED SHARES PURSUANT TO THE
INITIAL OFFER TO PURCHASE AND WHO HAVE NOT WITHDRAWN THOSE SHARES NEED NOT TAKE
ANY FURTHER ACTION IN ORDER TO TENDER SHARES PURSUANT TO THE OFFER, AS AMENDED.
SHAREHOLDERS WHO HAVE TENDERED SHARES ON OR PRIOR TO MARCH 30, 2000 PURSUANT TO
GUARANTEED DELIVERY PROCEDURES SHOULD COMPLY WITH THE REQUIRED PROCEDURES. SEE
"PROCEDURES FOR TENDERING SHARES" IN THE ORIGINAL OFFER TO PURCHASE.
Questions and requests for assistance or for additional copies of this
amended Offer to Purchase, the original Offer to Purchase, the Letter of
Transmittal or other tender offer materials may be directed to Corporate
Investor Communications, Inc. (the "Information Agent") at its addresses and
telephone numbers set forth on the back cover of this First Amendment to the
Offer to Purchase. Shareholders may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE INFORMATION AGENT FOR THE OFFER IS:
CORPORATE INVESTOR COMMUNICATIONS, INC.
THE DEPOSITARY FOR THE OFFER IS:
NORWEST BANK, N.A.
March 30, 2000
<PAGE> 2
The Offer to Purchase is hereby amended and supplemented as follows:
1. "SUMMARY TERM SHEET -- HOW MUCH ARE YOU WILLING TO PAY AND WHAT IS THE FORM
OF PAYMENT?" on page 1 of the Offer to Purchase is hereby amended and
supplemented to restate the paragraph as follows:
HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
We, the Purchaser, are offering to pay $10.50 per share, net to you in
cash. If you tender your Shares to us in the Offer, you will not have to
pay brokerage fees or similar expenses.
2. "SPECIAL FACTORS -- BACKGROUND OF THE OFFER" is hereby amended and
supplemented to restate the third paragraph on page 6 of the Offer to Purchase
as follows:
On September 29, 1998, a special meeting of the board of directors was
convened to discuss a proposal by Dougherty & Company to seek a strategic
investor or acquiror for the Company. At this meeting, the board listened
to a presentation by Dougherty & Company regarding the alternatives the
Company had available to raise additional funds. Dougherty & Company
recommended that the Company seek a strategic investor or acquiror and
presented a proposal for Dougherty & Company to act as investment banker
for the Company in such a search. In connection with its consideration of
Dougherty & Company's proposal, the board considered other alternatives to
maximize shareholder value, including an additional public offering of the
Company's equity, additional debt financing and new areas of focus for the
Company's business. The board concluded that the relatively low trading
price of the Company's common stock precluded an additional public equity
offering and that it was inadvisable to place additional pressure on the
Company's cash flow and operations by adding debt. Regarding new areas of
focus, the board determined that the Company's existing business with its
key customer could be placed at risk if resources were diverted to new
areas. Following this discussion, Mr. Shockley recommended that Dougherty &
Company be retained to do a preliminary valuation and explore the
possibility of finding an acceptable investor or acquiror. The board
unanimously voted to retain Dougherty & Company to begin such an analysis.
3. "SPECIAL FACTORS -- RECOMMENDATION OF THE SPECIAL COMMITTEE AND BOARD OF
DIRECTORS; FAIRNESS OF THE OFFER -- Market Price and Premium; Factors; Affecting
Stock Price" is hereby amended and supplemented to restate the last paragraph on
page 11 of the Offer to Purchase as follows:
Market Price and Premium; Factors Affecting Stock Price. The Special
Committee considered the historical market prices and recent trading
activity of the Common Stock with a particular emphasis on the relationship
between the $10.50 per Share cash price offered and the trading history of
the Common Stock. In particular, the Special Committee noted that the
$10.50 per Share cash price offered represents a premium of (x)
approximately 9.1% over the $9.625 per Share closing price on the Nasdaq
SmallCap Market on February 18, 2000, one week before the Merger Agreement
was publicly announced, and (y) approximately 30.8% over the $8.03 per
Share closing price on the Nasdaq SmallCap Market on January 25, 2000, one
month prior to the announcement. The Special Committee also considered
certain factors that, in the analysis presented by Dougherty & Company,
were believed to be causing the Common Stock to trade at prices higher than
the Company's minority interest trading value at such times. The Special
Committee and Dougherty & Company believed that the Company's stock was
trading above the publicly-traded minority value that would be supported by
any rational analysis. Before the public announcement of the Merger
Agreement, the Company observed some comments on internet message boards
speculating that the Company might be acquired and believes the price was
driven by speculation of a possible transaction. Because it is the
Company's policy not to comment on rumors, the Company did not issue a
press release or otherwise respond to these rumors. Moreover, Cisco had
advised the Company that Cisco did not wish for the Company to disclose the
transaction until the Merger Agreement was signed and the tender offer
materials were prepared for distribution. The Company could not announce
the transaction earlier without placing the transaction at risk. The
Company completed the Merger Agreement and drafts of the tender offer
materials by February 25. On that date the parties executed the Merger
Agreement and issued a press release announcing the transaction. The
Special Committee did not consider it necessary to update their
recommendation when the February 24 market
1
<PAGE> 3
price temporarily exceeded $10.50 per share based on (a) the February 25,
2000 opinion of Dougherty & Company, and (b) because the Special Committee
was of the view, supported by advice from Dougherty & Company, that the
market price was driven by speculation and therefore not an accurate
indication of value.
4. "SPECIAL FACTORS -- RECOMMENDATION OF THE SPECIAL COMMITTEE AND BOARD OF
DIRECTORS; FAIRNESS OF THE OFFER -- Dougherty & Company Fairness Opinion and
Valuation Data" is hereby amended and supplemented to restate the fourth
paragraph on page 12 of the Offer to Purchase as follows:
Dougherty & Company Fairness Opinion and Valuation Data. The Special
Committee also considered the financial presentation of Dougherty & Company
and their oral opinion delivered at the Special Committee meeting held on
the morning of February 20, 2000 (and subsequently confirmed in writing) to
the effect that, as of the date of such opinion and based upon and subject
to the assumptions, factors and limitations set forth therein, the $10.50
per Share in cash being offered in the Offer and to be received in the
Merger is fair, from a financial point of view, to the Company's
Non-Affiliated Shareholders. A copy of Dougherty & Company's written
opinion setting forth the assumptions made, matters considered and
limitations on the review undertaken by Dougherty & Company is attached as
Annex A to this Offer to Purchase and is incorporated herein by reference.
Shareholders are urged to, and should, read the opinion of Dougherty &
Company carefully and in its entirety (see "Annex A -- Opinion of the
Special Committee's Financial Advisor"). In considering this information,
the Special Committee took into account the presentation of Dougherty &
Company regarding their analysis of the Company's value based upon
comparable public company, comparable merger and acquisition transaction,
and discounted cash flow data. The Special Committee did not consider the
Company's value from a net book value or liquidation standpoint. The
Special Committee and Dougherty & Company believed that these methods were
irrelevant in valuing a technology company such as the Company due to the
potentially significant values embodied in intangible assets and the low
values likely to be realized upon a liquidation. Moreover, Dougherty &
Company believed that net book value and liquidation value were
inappropriate for measuring the going concern value of the Company.
5. "SPECIAL FACTORS -- RECOMMENDATION OF THE SPECIAL COMMITTEE AND BOARD OF
DIRECTORS; FAIRNESS OF THE OFFER -- Value of Potential Technology or
Opportunities" is hereby amended and supplemented to restate the fifth full
paragraph on page 13 of the Offer to Purchase as follows:
Value of Potential Technology or Opportunities. The Special Committee
investigated and considered the Company's technology and opportunities to
determine whether there was additional value not know by the members or
reflected in the Company's stock price. Following their investigation, the
Special Committee concluded that there was no technology or other value in
the Company not known to the Special Committee or reflected in the
Company's stock price. The Special Committee took into consideration the
knowledge of its members regarding the Company's business, technology and
opportunities developed through their long association with the Company.
The Special Committee believed that this investigation supported the
determination of fairness by confirming that the Company's technology and
opportunities had been appropriately evaluated by the Special Committee and
Dougherty & Company.
6. "SPECIAL FACTORS -- OPINION OF FINANCIAL ADVISOR -- Stock Trading History" is
hereby amended and supplemented to restate the last paragraph on page 17 of the
Offer to Purchase as follows:
Stock Trading History
Dougherty & Company reviewed the historical market prices and trading
volumes of the Common Stock from February 18, 1999 to February 18, 2000.
Dougherty & Company also compared the Company's closing stock price with an
index composed of the Comparable Public Companies. This information was
presented solely to provide the Special Committee of the Board with
background information regarding the price of the Common Stock over the
period indicated. Dougherty & Company noted that over the indicated
periods, the high and low prices for shares of Common Stock were $9.63 per
share and $2.00 per share, respectively, and that the average daily trading
volume of the market price of the Common Stock was approximately 32,364
shares. Dougherty & Company also observed that the
2
<PAGE> 4
market price of the Common Stock increased 133.3%, but had underperformed
the market value weighted index of the Comparable Public Companies over the
one-year period analyzed. Dougherty & Company believed that in the weeks
preceding announcement of the Merger Agreement, certain factors were
causing the Common Stock to trade at prices higher than the Company's
minority interest trading value at such times. Dougherty & Company believed
the Company's stock was trading above the publicly-traded minority value
that would be supported by any rational analysis as a result of speculation
that the Company might be acquired.
7. "SPECIAL FACTORS" is hereby amended and supplemented to add, immediately
prior to "Opinion of Financial Advisor" on page 15, the following:
FEBRUARY 23, 1999 VALUATION ANALYSIS
In the fall of 1998, the Company engaged Dougherty & Company to
prepare a valuation analysis and assist the Company in seeking a strategic
investor or acquiror. Dougherty & Company, as part of its investment
banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements, and valuations for estate, corporate and
other purposes. Dougherty & Company is a recognized investment banking firm
experienced in providing advice in connection with mergers and acquisitions
and related transactions.
In connection with its engagement in the fall of 1998, Dougherty &
Company (i) reviewed certain publicly available financial statements and
other information of the Company, (ii) reviewed certain internal financial
statements and other financial and operating data concerning the Company
prepared by the Company's management, (iii) analyzed certain financial
projections prepared by the Company's management, (iv) discussed the past
and current operations and financial condition and the prospects of the
Company with the Company's management, (v) reviewed the reported prices and
trading activity of the Company's Common Stock, (vi) compared the financial
performance of the Company and the prices and trading activity of the
Common Stock with that of certain other comparable publicly-traded
companies and their securities, (vii) reviewed the financial terms, to the
extent publicly available, of certain comparable acquisition transactions,
(viii) performed such other analyses as it deemed appropriate. No
limitations were imposed by the Board upon Dougherty & Company with respect
to the investigations made or procedures followed by it in preparing the
February 23, 1999 valuation analysis.
The valuation analysis was presented to the Company's Board on
February 23, 1999, about one year before the execution of the Merger
Agreement on February 25, 2000. During that one-year period, the Company's
business declined materially from revenues of $11,083,239 and net income of
$263,953 for the year ended December 31, 1998 to revenues of $9,602,882 and
a net loss of $1,369,938 for the year ended December 31, 1999.
The Company's outlook for future operations was significantly more
optimistic in February, 1999 than it was in February, 2000. In February,
1999 the Company projected 1999 revenues of $18,000,000, almost double the
actual 1999 revenues of $9,602,882, and projected 1999 net income of
$1,189,000, about $2,500,000 greater than the actual 1999 net loss of
$1,369,938. In February 1999, the Company expected revenues to grow from
$18,000,000 in 1999 to $27,000,000 in 2000 and $37,800,000 in 2001. In
February 1999 the Company expected net income would grow from $1,189,000 in
1999 to $2,716,000 in 2000 and $4,382,000 in 2001. As set forth below under
the heading "Opinion of Financial Advisor -- Other Matters", the
projections which the Company provided to Dougherty for its February 25,
2000 fairness opinion are significantly more conservative. The Company
acknowledges that its February 1999 projections were, in hindsight,
inaccurate and do not reflect the Company's current expectations for future
performance. Because these inaccurate projections were used in the
Comparable Public Company Analysis and the Discounted Cash Flow Analysis
performed in connection with the February 23, 1999 valuation analysis and
described below, these analyses should not be relied upon.
Although the Company's operating results deteriorated in 1999, the
market values of companies in the computer telephony/call center software
industry were generally increasing, resulting in improved valuation
multiples in February, 2000 as compared to February, 1999. The Comparable
Public Company Analysis and the Comparable Merger and Acquisition
Transaction Analysis performed for the
3
<PAGE> 5
February 23, 1999 valuation analysis and described below were based on
multiples that, in general, have improved materially since February 1999.
As a result, these analyses should not be relied upon.
Because of the significant changes in the Company's historical and
projected operating results and in the market for comparable companies from
February, 1999 to February, 2000, the Special Committee did not rely on the
February 23, 1999 valuation analysis in making its determination to approve
and recommend the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger.
In preparing the February 23, 1999 valuation analysis, Dougherty &
Company performed certain procedures, including each of the analyses
described below, and reviewed with the Board the assumptions on which such
analyses were based as well as other factors.
Comparable Public Company Analysis
Using publicly available information, Dougherty & Company analyzed and
compared certain operating, financial and market trading information of the
Company with that of six publicly traded companies operating in the
computer telephony/call center software industry deemed by Dougherty &
Company to be generally comparable to the Company. The selected comparable
companies were Brite Voice Systems, Inc., DaVox Corporation, Edify
Corporation, Geneysis Telecommunications Laboratories, Inc., GeoTel
Communications, Inc., InterVoice, Inc., Melita International Corporation,
Periphonics Corporation, Syntellect Inc. and Talk Corporation
(collectively, the "Comparable Public Companies").
Dougherty & Company reviewed, among other things, the equity market
values plus net debt (the "Enterprise Value") as multiples of latest twelve
month ("LTM") and estimated 1999 revenues, LTM earnings before interest,
taxes, depreciation and amortization ("EBITDA") and LTM earnings before
interest and taxes ("EBIT") for the Comparable Public Companies. Dougherty
& Company also reviewed the Comparable Public Companies' multiples of
equity market value to LTM, and estimated 1999 and estimated 2000 earnings
per share ("EPS"). All multiples were based on closing stock prices as of
January 22, 1999. Due to the Company's LTM results, multiples based on
EBITDA, EBIT and EPS did not yield meaningful results. Applying an
Enterprise Value to 1999 projected revenue multiples for the Comparable
Public Companies of 2.0x to the 1999 projected revenue for the Company
resulted in an equity value for the Company of $6.94 per share. To obtain
an estimate of control value, Dougherty & Company applied control premiums
ranging from 20.0% to 40.0%, resulting in values of $8.47 to $9.88 per
share. Because this analysis was conducted in February 1999 using
inaccurate projections and multiples which do not reflect current market
conditions, it should not be relied upon.
Dougherty & Company performed a price to earnings (P/E) based
valuation of the Company based on projected 2000 net income using financial
projections prepared by the management of Spanlink. Dougherty & Company
discounted to present value the projected share price of the Company's
Common Stock at December 31, 2000. The projected stock prices were based
upon a range of P/E ratios of 20 to 28 times projected 2000 EPS. Dougherty
& Company used a range of discounts rates of 22.0% to 26.0% which were
based on an analysis of the Company's cost of equity capital, competitive
position and industry conditions. These assumptions produced stock prices
with present values ranging between $5.80 and $8.65 per share (without
giving effect to a change in control premium). Because this analysis was
conducted in February 1999 using inaccurate projections and P/E ratios
which do not reflect current market conditions, it should not be relied
upon.
Comparable Merger Value and Acquisition Transactions
Using publicly available information, Dougherty & Company analyzed,
among other things, the Enterprise Value paid in selected transactions of
public companies operating in the computer telephony/ call center software
industry deemed by Dougherty & Company to be generally comparable to the
4
<PAGE> 6
Company (collectively, the "Comparable Merger and Acquisition
Transactions"). The Acquirers/ Acquirees were as follows:
<TABLE>
<CAPTION>
ACQUIRER ACQUIREE
-------- --------
<S> <C>
DaVox Corp. AnswerSoft, Inc.
Seibel Systems, Inc. Scopus Technology, Inc.
Oracle Corporation Versatility, Inc.
Aspect Telecommunications, Inc. Voicetek Telecommunications, Inc.
</TABLE>
Dougherty & Company analyzed and compared, among other things, the
Enterprise Value in each transaction as a multiple of LTM revenues, EBITDA
and EBIT. Applying an Enterprise Value to LTM revenue multiple and a P/E
multiple to LTM EPS for the Comparable Merger and Acquisition Transactions
to the corresponding financial data for the Company, resulted in an equity
reference range for the Company of $7.46 to $8.36 per share. Dougherty &
Company noted that its Comparable Merger and Acquisition Transaction
analysis gave effect to a change in control premium, therefore no control
premium was required. Because this analysis was conducted in February 1999
using revenue and P/E multiples which do not reflect current market
conditions, it should not be relied upon.
Discounted Cash Flow Analysis
Dougherty & Company performed a discounted cash flow analysis of the
Company based upon estimates of projected financial performance prepared by
the management of the Company in February 1999. Dougherty & Company
calculated a range of implied equity values of the Company based upon the
discounted present value of the sum of (i) the projected five-year stream
of unleveraged free cash flow and (ii) the projected terminal value at the
year 2004. In conducting this analysis, Dougherty & Company applied
discount rates ranging from 22.0% to 26.0% and multiples of 2004 EBITDA of
between 8.0 and 12.0. The range of discount rates and terminal multiples of
EBITDA used in the analysis described above were chosen to reflect the
growth prospects and risks of the Company including an assessment of, among
other things, the Company's weighted average cost of capital, competitive
position and industry conditions.
Based on this analysis, Dougherty & Company derived an implied equity
value per share of between $5.99 and $10.17 per share. To obtain an
estimate of control value, Dougherty & Company applied control premiums
ranging from 20% to 40% resulting in values of $9.52 to $11.10 per share.
Because this analysis was conducted in February 1999 using inaccurate
projections and multiples which do not reflect current market conditions,
it should not be relied upon.
Stock Trading History
Dougherty & Company reviewed the historical market prices and trading
volumes of the Company's Common Stock during 1998 and year-to-date through
February 23, 1999. Dougherty & Company noted that based on its valuation
analysis and using the projected financial information prepared by the
management of the Company the current and historical stock prices were well
below the final range of $8.00 to $10.00 indicated by the valuation
analysis. However, because the valuation analysis was conducted in February
1999 using inaccurate projections and market data which does not reflect
current market conditions, it should not be relied upon.
The foregoing summary of the February 23, 1999 valuation analysis is
provided only for historical information regarding the actions taken by the
Company's Board and Dougherty & Company in connection with their attempt to
find a strategic investor or acquiror for the Company. All of the valuation
conclusions arising from the February 23, 1999 valuation analysis should
not be relied upon. For providing its services in assisting the Company in
a search for a strategic investor or acquiror, the Company paid Dougherty &
Company a $25,000 retainer fee. The Company also agreed to indemnify
Dougherty & Company and certain related persons against certain liabilities
arising out of or in conjunction with its engagement, including certain
liabilities under federal securities laws. Additional fees would have been
payable in the event a transaction was closed, but since no transaction was
closed, the Company did not pay Dougherty & Company any additional fee in
connection with this engagement
5
<PAGE> 7
8. "SPECIAL FACTORS -- OPINION OF FINANCIAL ADVISOR" is hereby amended and
supplemented to add, immediately prior to the first full paragraph on page 18 of
the Offer to Purchase, the following:
Other Matters
In conducting its review and analysis and in arriving at its opinion,
Dougherty & Company relied upon the management of the Company as to the
reasonableness and achievability of the Company's financial projections
(and the assumptions therefor) provided to Dougherty & Company. These
financial projections were not prepared for public disclosure and do not
comply with either the published guidelines of the SEC regarding
projections or forecasts or the American Institute of Certified Public
Accountants' Guide for Prospective Financial Statements. The projections
provided to Dougherty & Company were not audited or reviewed by independent
accountants.
With the Company's consent, Dougherty & Company assumed that the
Company's projections reflect the best currently available estimates and
judgments of the Company's management and that such projections and
forecasts will be realized in the amounts and in the time periods currently
estimated by management. Dougherty & Company was not engaged to assess the
achievability of such projections or assumptions. In addition, Dougherty &
Company did not conduct an evaluation or appraisal of any of the assets,
properties or facilities of the Company nor was it furnished with any such
evaluation or appraisal.
The following is a summary of the projections provided by the Company
to Dougherty & Company that Dougherty & Company reviewed and relied upon in
connection with rendering its fairness opinion.
<TABLE>
<CAPTION>
FOR THE YEARS ENDING DECEMBER 31
($000S)
---------------------------------------------------
2000E 2001E 2002E 2003E 2004E
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales.......................... $12,897 $21,000 $30,000 $38,000 $46,000
Cost of Sales.................. 5,159 9,450 12,600 14,820 16,560
------- ------- ------- ------- -------
Gross Margin................... 7,738 11,550 17,400 $23,180 29,440
Operating Expenses............. 7,738 10,500 14,400 17,100 20,700
------- ------- ------- ------- -------
Operating Income............... $ 0 $ 1,050 $ 3,000 $ 6,080 $ 8,740
======= ======= ======= ======= =======
</TABLE>
In preparing the foregoing projections, the Company assumed that sales
would grow 34% from 1999 to 2000; 63% from 2000 to 2001; 43% from 2001 to
2002; 27% from 2002 to 2003 and 21% from 2003 to 2004. The projections
assume the second half of 2000 will show stronger year-to-year improvement
than the first half as the Company recovers from deteriorating revenue
trends in the second half of 1999. The Company expects this year-to-year
improvement to continue throughout 2001. The declining rate of sales growth
in subsequent years reflects the larger revenue base. The projections do
not assume any increased sales attributable to Cisco or its business
partners. Cost of sales were forecast to decline as a percentage of revenue
due to the improved product pricing, infrastructure improvements which were
anticipated to increase custom programming efficiencies and changes in
revenue mix. The Company assumed that operating expenses would increase at
a rate much slower than sales due to the effect of spreading higher revenue
levels over certain operating expenses which are relatively fixed in
nature.
The projections set forth above constitute forward-looking statements
under the federal securities laws. The assumptions and estimates underlying
the projections are inherently uncertain and, though considered reasonable
by the Company's management, are subject to a wide variety of significant
business, economic, and competitive risks and uncertainties that could
cause actual results to differ materially from those projected, including,
among others, the following risks and uncertainties:
- The Company's expectation that revenues from packaged software will
continue to increase as a percentage of total revenues while revenues
from custom software decrease as a percentage of total revenues
depends upon (i) increasing marketplace acceptance and demand of the
packaged software products; (ii) continuing ability of the Company to
develop new packaged products to keep pace with technological
advancements; and (iii) availability of financing to support marketing
and distribution.
6
<PAGE> 8
- The Company's expectation that it will continue to increase revenues
and improve operating performance is subject to the highly competitive
nature of the computer telecommunications marketplace, the Company's
dependence on certain significant customers, the loss of which would
have an adverse effect on the Company, the possibility of adverse
changes in the general business and economic environment and the
availability of sufficient financing.
- The accuracy of the Company's belief that its current capital
resources will be sufficient to fund current and anticipated business
operations depends, in part, on meeting anticipated revenue goals,
operating efficiencies and effective expense management, in addition
to renewal of the Company's bank line of credit and general and
competitive conditions.
The inherent uncertainties in projections increase materially for
years closer to the end of the projection periods. Accordingly, there can
be no assurance that projected results are indicative of the Company's
future performance or that actual results will not be materially higher or
lower than those projections. Inclusion of these projections in this Offer
to Purchase should not be regarded as a representation by any person that
the projected results will be achieved.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description.
Selecting portions of the analysis or of the summary set forth above,
without considering the analysis as a whole, could create an incomplete
view of the processes underlying Dougherty & Company's opinion. In arriving
at its opinion, Dougherty & Company considered the results of all such
analyses. The analyses were prepared solely for purposes of providing its
opinion to the Special Committee that the Per Share Amount to be received
by the Non-Affiliated Shareholders pursuant to the Offer and the Merger was
fair to such holders from a financial point of view.
Pursuant to the engagement letter dated February 16, 2000 between the
Company and Dougherty & Company, the Company has agreed to pay Dougherty &
Company a fee for its evaluation of the fairness of the transaction of
$100,000. In addition, Dougherty & Company will receive an additional fee
of $40,000 for acting as financial advisor to the Special Committee and
assisting in negotiations. Neither of these fees is conditioned upon the
closing of the Merger. In addition, the Company has agreed to reimburse
Dougherty & Company for its reasonable out-of-pocket expenses incurred in
connection with its activities under the letter agreement, regardless of
whether the Merger is consummated. The Company has also agreed to indemnify
Dougherty & Company and certain related persons against certain liabilities
arising out of or in conjunction with its engagement, including certain
liabilities under federal securities laws.
LEGAL PROCEEDINGS RELATED TO THE OFFER
On March 14, 2000, the Company, the Purchaser and the Founding
Shareholders were served with a summons and complaint regarding a legal
action with respect to the proposed going private transaction. The
plaintiff in the lawsuit is Stephen M. Russell, a holder of 2,000 shares of
the Company's common stock. The lawsuit was filed in Hennepin County
District Court and names as defendants Spanlink Communications, Inc.,
Spanlink Acquisition Corp., Brett A. Shockley, Loren A. Singer, Jr., Todd
A. Parenteau, Bruce E. Humphrey, Thomas R. Madison, Joseph D. Mooney and
Timothy E. Briggs. The plaintiff asserts that the individual defendants
breached their fiduciary duty to shareholders in approving the Offer and
Merger and that the Company and the Purchaser have aided and abetted the
alleged violations of fiduciary duty. The plaintiff has requested
certification of a class action on behalf other Company shareholders and
that Mr. Russell serve as the representative of that class. The plaintiff
initially sought, among other things, a court order enjoining the
defendants from proceeding with the Merger, as well as compensatory
damages, costs and attorney's fees. On March 20, 2000 the Court in this
matter heard arguments from the parties on a motion for expedited discovery
and took the matters presented under advisement. On March 23, 2000 the
Court issued a ruling denying the plaintiff's motion. Discovery in the
matter is expected to proceed according to normal timing and procedure. The
Company believes the plaintiff's claims lack merit and intends to defend
itself vigorously.
7
<PAGE> 9
9. "SPECIAL FACTORS" is hereby amended and supplemented to add, immediately
prior to the POSITION OF THE PURCHASER REGARDING FAIRNESS OF THE OFFER paragraph
on page 20 of the Offer to Purchase, the following:
PAST CONTACTS AND TRANSACTIONS
The Purchaser was formed on February 24, 2000 by the Founding
Shareholders for the purpose of conducting the Offer and the Merger and
therefore has engaged in no prior contacts or transactions with the
Company. The Founding Shareholders, however, have served the Company as
founders, employees and directors throughout the Company's history. Except
for serving as employees and directors and receiving compensation in
connection with such services and except as otherwise described in this
Offer to Purchase, during the past two years none of the Founding
Shareholders have purchased any Company securities, engaged in any material
transactions with the Company, or engaged in negotiations with respect to
any proposed transaction with the Company.
10. "SPECIAL FACTORS -- POSITION OF THE PURCHASER REGARDING FAIRNESS OF THE
OFFER" is hereby amended and supplemented to restate the paragraphs on page
20-21 of the Offer to Purchase as follows:
POSITION OF THE PURCHASER AND THE FOUNDING SHAREHOLDERS REGARDING FAIRNESS
OF THE OFFER
The Purchaser and the Founding Shareholders believe that the
consideration to be received by the Company's Non-Affiliated Shareholders
pursuant to the Offer and the Merger is fair to the Non-Affiliated
Shareholders. The Purchaser and the Founding Shareholders base their belief
on the following facts: (i) the fact that the Special Committee concluded
that the Offer and the Merger are fair to, advisable and in the best
interests of, the Company's Non-Affiliated Shareholders, (ii)
notwithstanding the fact that Dougherty & Company's opinion was addressed
to the Special Committee and that neither the Company nor Purchaser is
entitled to rely on such opinion, the fact that the Special Committee
received an opinion from Dougherty & Company that, as of the date of such
opinion and based on and subject to certain matters stated in such opinion,
the consideration to be paid in the Offer and the Merger is fair to the
Non-Affiliated Shareholders from a financial point of view, (iii) the fact
that the per Share price to be paid in the Offer and the Merger represents
a large premium over the closing price of the Shares in calendar year 1999,
(iv) the fact that the same consideration will be paid in both the Offer
and the Merger, (v) the Offer and the Merger will each provide
consideration to the Company's Shareholders entirely in cash and (vi) the
other factors enumerated by the Special Committee as supporting their
recommendation of the Offer and the Merger. The Purchaser and the Founding
Shareholders did not find it practicable to assign, nor did they assign,
relative weights to the individual factors considered in reaching their
conclusion as to fairness.
The Purchaser and the Founding Shareholders believe that the fairness
of the transaction to the Non-Affiliated Shareholders is supported by
procedural safeguards used to protect the Non-Affiliated Shareholders.
Before discussions regarding the Offer and the Merger began, the Company
retained an investment banker who undertook a search for a potential buyers
and received no serious indications of interest. When discussion regarding
the Offer and Merger developed, the Company's Board of Directors formed the
Special Committee, thereby removing from the decision making process Brett
Shockley and Loren Singer, who face a conflict of interest as directors and
affiliates of the Purchaser. The Special Committee retained Dougherty &
Company to render an opinion as to the fairness of the Offer and the Merger
to the Non-Affiliated Shareholders. The Special Committee also retained its
own legal counsel. The Purchaser and the Founding Shareholders believe that
these procedural steps protected the Non-Affiliated Shareholders by leaving
approval of the Offer and Merger in the hands of an independent committee
of directors with qualified professional guidance. The Purchaser and the
Founding Shareholders also believe that the earlier unsuccessful search for
potential buyers for allowed the Special Committee to fairly assess the
alternatives available to the Company.
The Offer and the Merger are not structured to require the approval of
a majority of the Non-Affiliated Shareholders. Assuming that the Purchaser
purchases shares tendered in the Offer, the Purchaser will be able to
approve the Merger even if all remaining Non-Affiliated Shareholders vote
against the Merger. Non-Affiliated Shareholders will have the right to
dissent from the Merger under the
8
<PAGE> 10
Minnesota Business Corporation Act. One of the conditions to the Merger
provides that the Purchaser is not obligated to proceed with the Merger if
holders of more than 5% of the Company's outstanding shares have exercised
dissenters' rights.
In reaching its determination that the Offer and Merger are fair to
the Non-Affiliated Shareholders, the Purchaser and the Founding
Shareholders relied significantly upon the determinations of the Special
Committee and their financial advisor, Dougherty & Company. In addition to
the preceding discussion, the Purchaser and the Founding Shareholders adopt
the analysis and conclusions of the Special Committee set forth above under
the heading "Special Factors -- Recommendation of the Special Committee and
Board of Directors; Fairness of the Offer" and the analysis and conclusions
of Dougherty & Company's set forth above under the heading "Special
Factors -- Opinion of Financial Advisor."
11. "THE OFFER -- SPANLINK COMMUNICATIONS, INC. BALANCE SHEET -- LIABILITIES AND
SHAREHOLDERS' EQUITY -- Total liabilities and shareholders' equity" on page 42
of the Offer to Purchase is hereby corrected to state the accurate totals as
follows:
<TABLE>
<S> <C> <C> <C>
Total liabilities and shareholders' equity..... $6,504,195 $7,261,074 $5,854,627
========== ========== ==========
</TABLE>
12. "THE OFFER -- CERTAIN INFORMATION CONCERNING PURCHASER" is hereby amended
and supplemented to restate the paragraphs on page 42-43 of the Offer to
Purchase as follows:
CERTAIN INFORMATION CONCERNING PURCHASER AND THE FOUNDING SHAREHOLDERS
Purchaser is a Minnesota corporation organized in connection with the
Offer and the Merger and has not carried on any significant activities
other than in connection with the Offer and the Merger. Until immediately
prior to the time Purchaser purchases Shares pursuant to the Offer, it is
not anticipated that Purchaser will have any significant assets or
liabilities or engage in any significant activities other than those
incident to its formation and capitalization and the transactions
contemplated by the Offer and the Merger.
The principal offices of Purchaser are located at 7125 Northland
Terrace, Minneapolis, MN 55428. The telephone number of Purchaser at such
location is (612) 971-2000.
Except as set forth in this Offer to Purchase, neither Purchaser nor
any of the persons listed on Schedule II, or any associate or majority
owned subsidiary of any of the foregoing, beneficially owns or has a right
to acquire any Shares, and neither Purchaser nor any of the persons or
entities referred to above, or any of the respective executive officers,
directors or subsidiaries of any of the foregoing, has effected any
transaction in the Shares during the past 60 days.
Except as set forth in this Offer to Purchase, Purchaser has no
contracts, arrangements, understandings or relationships with any other
person with respect to any securities of the Company, including, but not
limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any securities of the Company,
joint ventures, loan or option arrangements, puts or calls, guarantees of
loans, guarantees against loss or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, none of Purchaser, any
of its affiliates, or any of the persons listed on Schedule II, has had,
since the second fiscal year preceding the date of this Offer to Purchase,
any business relationships or transactions with the Company or any of its
executive officers, directors or affiliates that would be required to be
reported under the rules of the Commission. Except as set forth in this
Offer to Purchase, there have been no contacts, negotiations or
transactions between Purchaser, any of its affiliates or, to the best
knowledge of Purchaser, any of the persons listed on Schedule II, and the
Company or its affiliates concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, election of
directors or a sale or other transfer of a material amount of assets.
During the last five years, neither Purchaser nor any of the persons
listed on Schedule II hereto, have been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or was a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of
9
<PAGE> 11
such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws.
Certain information concerning the directors and executive officers of
the Company is set forth in Schedule II hereto.
Available Information. Purchaser is a privately-held company and is
generally not subject to the informational filing requirements of the
Exchange Act, and is generally not required to file reports, proxy
statements and other information with the Commission relating to its
businesses, financial condition and other matters. However, pursuant to
Rule 14d-3 under the Exchange Act, Purchaser filed with the Commission the
Schedule TO, together with exhibits, including this Offer to Purchase and
the Merger Agreement, which provides certain additional information with
respect to the Offer. The Schedule TO and any amendments thereto, including
exhibits, should be available for inspection and copies should be
obtainable at the public reference facilities of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of such information
should also be obtainable (i) by mail, upon payment of the Commission's
customary charges, by writing to the Commission's principal office at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission located at Seven World Trade Center, Suite 1300, New York,
NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
IL 60661 and (ii) by accessing the Commission's website on the Internet at
http://www.sec.gov.
10
<PAGE> 12
The Information Agent for the Tender Offer is:
CORPORATE INVESTOR COMMUNICATIONS, INC.
Questions and requests for assistance may be directed to Corporate Investor
Communications, Inc. at (877) 977-6194. Corporate Investor Communications, Inc.
is acting as the Information Agent for the Offer.
<PAGE> 1
EXHIBIT (A)(5)(III)
[ LOGO ]
FOR IMMEDIATE RELEASE Contact: Brett Shockley, CEO
Spanlink Communications
(612) 971-2114
[email protected]
Tim Briggs, CFO
Spanlink Communications
(612) 971-2135
[email protected]
SPANLINK ACQUISITION CORP. ANNOUNCES
EXTENSION OF TENDER OFFER RELATING TO
GOING PRIVATE TRANSACTION
MINNEAPOLIS, March 30, 2000 -- Spanlink Acquisition Corp. today announced
the extension of the expiration date of its previously announced $10.50 per
share cash tender offer for all outstanding shares of Spanlink Communications,
Inc. As extended, the offer will expire at 5:00 p.m. Minnesota time on
Wednesday, April 12, 2000.
The expiration date is being extended to allow Spanlink Acquisition Corp.
to mail to all shareholders of Spanlink Communications, Inc. a First Amendment
to the Offer to Purchase and to allow shareholders an opportunity to review the
First Amendment. The First Amendment to the Offer to Purchase sets forth
additional information regarding the going private transaction.
In connection with the previously announced lawsuit, Stephen M. Russell vs.
Spanlink Communications, Inc. et al., Spanlink Acquisition Corp. also announced
today that the court denied the Plaintiff's motion for expedited discovery.
Shareholders of Spanlink Communications, Inc. may obtain copies of the
Offer to Purchase and the First Amendment to the Offer to Purchase from the
Information Agent for the Tender Offer, Corporate Investor Communications, Inc.
The telephone number for Corporate Investor Communications, Inc. is (877)
977-6194.
Spanlink Communications is a leading provider of computer telephony
software solutions and integration services that help call centers rapidly
automate and manage the customer interaction process -- via the telephone or the
Internet. Founded in 1988, Spanlink has more than 90 employees and more than
2,000 customers using its call center products and services. Spanlink offers its
products and services in the U.S. and internationally through a direct sales
force, channel partners and OEMs. Visit the company online at
http://www.spanlink.com.
<PAGE> 1
FAIRNESS OPINION REPORT PREPARED FOR
THE DISINTERESTED COMMITTEE OF
THE BOARD OF DIRECTORS OF
PROJECT BRIDGE
FEBRUARY 21, 2000
[DOUGHERTY & COMPANY LLC LOGO]
<PAGE> 2
THE FOLLOWING INFORMATION IS CONFIDENTIAL AND PROPRIETARY TO DOUGHERTY & COMPANY
LLC. THE INFORMATION HAS BEEN PREPARED FOR THE BENEFIT OF THE INDEPENDENT
COMMITTEE OF THE BOARD OF DIRECTORS OF SPANLINK COMMUNICATIONS, INC. AND IS
PROVIDED UPON THE UNDERSTANDING THAT ANY PERSON ACCEPTING IT WILL NOT, WITHOUT
THE PRIOR PERMISSION OF DOUGHERTY & COMPANY LLC, UTILIZE THE INFORMATION FOR ANY
PURPOSE OTHER THAN AS DESCRIBED HEREIN.
[DOUGHERTY & COMPANY LLC LOGO]
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TAB PAGE
--- ----
<S> <C> <C>
I. EXECUTIVE SUMMARY..................................................................................1
II. STOCK PRICE AND VOLUME DATA........................................................................4
III. COMPARABLE PUBLIC COMPANY ANALYSIS.................................................................8
IV. ANALYSIS OF COMPARABLE MERGER AND ACQUISITION TRANSACTIONS........................................21
V. DISCOUNTED CASH FLOW ANALYSIS.....................................................................29
VI. SHARE PRICE MULTIPLES AND ACQUISITION PREMIUMS....................................................34
VII. CONCLUSION........................................................................................35
</TABLE>
[DOUGHERTY & COMPANY LLC LOGO]
<PAGE> 4
I. EXECUTIVE SUMMARY
Dougherty & Company LLC ("Dougherty") has been retained by the Disinterested
Committee of the Board of Directors of Spanlink Communications, Inc. ("Spanlink"
or the "Company") to render a fairness opinion regarding the proposed offer
price of $10.50 per share (the "Offer Price") for the purchase of approximately
53% of the outstanding shares of Spanlink (the "Acquisition"); 47% of which is
held by the non-affiliated public shareholders (the "Public Shareholders"), the
remaining 6% of outstanding shares represents 10% of the Spanlink management
group's (the "Management Group") holdings of Spanlink common stock.
We understand that the Acquisition Transaction is to be financed through a
preferred stock investment by Cisco Systems, Inc. ("Cisco") in a new company to
be formed by the Management Group and Cisco. The Management Group will
contribute all of their remaining stock holdings in Spanlink as equity in the
new company. We further understand that the Acquisition Transaction is to take
the form of a tender offer followed by a merger assuming a minimum of 66.67% of
the Spanlink shares are tendered, including those tendered by management.
Furthermore, it is understood that such an obligation to complete a merger would
not be in force if more than 5% of the shares held filed dissenting rights
claims.
In rendering our fairness opinion of the consideration to be received by the
Public Shareholders of Spanlink, Dougherty has reviewed, among other things:
- - A draft of the Purchase Agreement and Plan of Merger dated February 19,
2000;
- - Unaudited financial data for the year ended December 31, 1999;
[DOUGHERTY & COMPANY LLC LOGO]
1
<PAGE> 5
- - Audited financial data for the Company for the years ended December 31,
1996 through 1998;
- - Certain projected financial information for the Company for the years ending
December 31, 2000 through 2004;
- - Historical stock price and volume trading information for the Company's
shares;
- - We held discussions with senior management of the Company (including Brett
Shockley, CEO, President and Management Group member) concerning the historical
and current operations of the business, its financial condition and prospects,
as well as the present strategic and operating issues facing the Company.*
- - We have assumed (i) the accuracy of the Company's historical financial
statements and (ii) that the financial forecasts as provided by Spanlink's
management were reasonably prepared on a basis reflecting the best currently
available estimates and good faith judgements of the management of Spanlink.
* The Management Group consists of three officers and founding shareholders, two
of which are directors of Spanlink, who collectively hold 2,700,000 shares of
Spanlink stock equal to 53% of the outstanding shares, while the Public
Shareholders hold the remaining 47%.
[DOUGHERTY & COMPANY LLC LOGO]
2
<PAGE> 6
Based upon our review of the Company's historical and projected operating
performance and certain other qualitative factors associated with the Company,
we used three valuation techniques to determine a range of value for the
Company.
-Our methodologies included:
-A review and comparison of certain financial and stock market data of
publicly traded companies deemed by us to be similar to Spanlink's
business;
-A review of recently completed precedent transactions and financial
data for control acquisitions in the computer telephony/call center
industry;
-A discounted cash flow analysis of the Company including sensitivity
analyses utilizing a range of assumptions;
Based on our analysis and review as presented in this report, in our
opinion, the Offer Price and the Acquisition Transaction, taken together,
are fair from a financial point of view to the Public Shareholders of
Spanlink.
[DOUGHERTY & COMPANY LLC LOGO]
3
<PAGE> 7
II. STOCK PRICE AND VOLUME DATA
Spanlink has been a public company since April 24, 1996 and is traded on the
Nasdaq Stock Market. A total of 7.77 million shares traded during 1999,
equal to 152% of the outstanding shares and 268% of the public float. The 30
day, 60 day, 90 day and one-year average daily volume of Spanlink shares
were 87,125; 86,747; 99,061; and 32,364; respectively.
The high and low per share bid price of Spanlink common stock during the
last twelve months (LTM) ended February 18, 2000, was $9.88 and $2.00,
respectively. Over the last three months, Spanlink's bid price per share
increased 228% from $2.94 on November 18, 1999 to $9.63 on February 18,
2000. This latest closing bid price is 141% higher than the IPO price of
$4.00 (on April 29, 1996).
[DOUGHERTY & COMPANY LLC LOGO]
4
<PAGE> 8
SUPPLEMENTAL STOCK PRICE
AND VOLUME DATA
[DOUGHERTY & COMPANY LLC LOGO]
<PAGE> 9
Spanlink Communications, Inc.
Price and Volume
Daily: 2/18/1999 to 2/18/2000
5
[DOUGHERTY & COMPANY LLC LOGO]
<PAGE> 10
[LINE CHART]
[DOUGHERTY & COMPANY LLC LOGO]
<TABLE>
<CAPTION>
Date Open High Low Close Volume
<S> <C> <C> <C> <C> <C>
18-Feb-00 9.9375 10.1875 9.625 9.875 126200
17-Feb-00 9.5625 10 9.375 9.75 224600
16-Feb-00 10.25 10.25 9.25 9.5 145300
15-Feb-00 9 10.75 9 10.125 311500
14-Feb-00 8.1875 9.3125 8.0625 9 148500
11-Feb-00 8 8.5 8 8.0625 45200
10-Feb-00 8.3125 8.375 7.875 7.875 64100
9-Feb-00 8.3125 8.3125 7.625 7.6875 46900
8-Feb-00 8 8.5 8 8.125 48000
7-Feb-00 7.9375 8.25 7.5 8.1875 51800
4-Feb-00 7.5 8.5 7.25 8.0625 92500
3-Feb-00 7.0625 7.5 7 7.25 23900
2-Feb-00 7.25 7.25 6.75 7.125 16900
1-Feb-00 6.625 7 6.25 7 14300
31-Jan-00 7.25 7.5 6.625 7.25 19000
28-Jan-00 7.6875 7.6875 7 7.125 28800
27-Jan-00 7.8438 7.9375 7.625 7.625 36500
26-Jan-00 8.2031 8.3125 7.5 7.75 58600
25-Jan-00 8 8.25 7.5938 8.1875 111500
24-Jan-00 7.25 8.375 6.9375 8 316500
21-Jan-00 5.75 6.5 5.75 6.5 44700
20-Jan-00 6.25 6.5 5.75 5.7812 48300
19-Jan-00 6.5625 6.5625 6.25 6.375 35700
18-Jan-00 6.5938 6.875 6.25 6.375 31700
14-Jan-00 6.4688 7 6.375 6.6875 31700
13-Jan-00 7.375 7.5 6 6.5625 69500
12-Jan-00 7.25 7.5 7.125 7.25 41000
11-Jan-00 7.7344 7.75 7.25 7.375 48700
10-Jan-00 7.75 7.875 7.5 7.6875 49500
7-Jan-00 7.8125 7.875 7.625 7.875 70400
6-Jan-00 7.1406 8 6.875 7.5625 87300
5-Jan-00 7.5938 7.75 7.0625 7.75 68000
4-Jan-00 7.4219 7.875 6.75 7 128600
3-Jan-00 8 8.25 6.625 7.25 244900
31-Dec-99 6.7812 8 6.7812 7.875 164900
30-Dec-99 5.7188 7.25 5.6875 6.875 242800
29-Dec-99 5.75 5.75 5.5 5.75 43800
28-Dec-99 5.7812 6 5.375 5.5625 32000
27-Dec-99 5.4375 5.75 5.25 5.625 96900
23-Dec-99 5.3125 5.75 5.25 5.625 57700
22-Dec-99 5.625 5.625 5.25 5.375 61000
21-Dec-99 5.5 5.625 5.25 5.5 25900
20-Dec-99 5.625 5.8125 5.25 5.2812 74500
17-Dec-99 5.4375 5.5 5.25 5.3125 14300
16-Dec-99 5.375 5.5 5 5.25 88500
15-Dec-99 5.0625 5.375 4.9375 5.25 79800
14-Dec-99 5.0312 5.125 4.9375 5.125 32100
13-Dec-99 4.8125 5.1875 4.625 5 91200
10-Dec-99 4.75 4.9375 4.625 4.625 29300
9-Dec-99 4.875 5 4.6562 4.8125 46800
8-Dec-99 4.9375 4.9375 4.6875 4.875 25600
7-Dec-99 4.8125 5 4.75 4.75 42400
6-Dec-99 5.3125 5.375 4.75 4.875 70200
3-Dec-99 4.9062 5.25 4.625 5.25 66300
2-Dec-99 4.8438 5.1875 4.75 4.9375 95500
1-Dec-99 5.1875 5.1875 3.6875 4.75 180600
30-Nov-99 6 6 4.75 5.125 358000
29-Nov-99 3.875 8 3.7812 6 1057300
26-Nov-99 3.5 3.875 3.5 3.875 48600
24-Nov-99 3.4375 3.625 3.4375 3.5 19300
23-Nov-99 3.375 3.5 3.25 3.375 30000
22-Nov-99 3.375 3.5 2.8125 3.1875 86500
19-Nov-99 3 3.4375 2.9688 3.4375 122700
18-Nov-99 2.875 3 2.875 3 24800
17-Nov-99 2.8438 3 2.5 2.75 98600
16-Nov-99 2.5625 3.0625 2.5625 2.6875 47400
15-Nov-99 2.5938 2.5938 2.5625 2.5625 8000
12-Nov-99 2.625 2.6875 2.5625 2.5625 21300
11-Nov-99 2.5 2.625 2.3125 2.5469 10000
10-Nov-99 2.4375 2.5 2.375 2.5 3800
9-Nov-99 2.4375 2.5625 2.3125 2.5 8500
8-Nov-99 2.375 2.5 2.25 2.5 26000
5-Nov-99 2.3125 2.375 2.25 2.25 3000
4-Nov-99 2.3125 2.375 2.25 2.375 10600
3-Nov-99 2.3125 2.375 2.1875 2.3125 24900
2-Nov-99 2.125 2.375 2.125 2.3125 55100
1-Nov-99 2.0625 2.1875 2.0625 2.1875 4000
29-Oct-99 2.125 2.1875 2.0625 2.1875 2000
28-Oct-99 2.375 2.375 2 2.0625 18500
27-Oct-99 2.3125 2.625 2.1875 2.1875 61000
26-Oct-99 2 2.3125 2 2.3125 2500
25-Oct-99 2 2.1875 2 2 1600
22-Oct-99 2.0625 2.0625 2 2.0625 1000
21-Oct-99 2.0625 2.0625 2.0625 2.0625 3300
20-Oct-99 2.1406 2.1562 2 2.0625 4300
19-Oct-99 2.0625 2.0625 2.0625 2.0625 3000
18-Oct-99 2.2188 2.3125 2.0625 2.3125 18200
15-Oct-99 2.0625 2.1875 2.0625 2.125 3100
14-Oct-99 2.5 2.5 2.125 2.125 16900
12-Oct-99 2.4375 2.5625 2.4375 2.5 14400
11-Oct-99 2.4688 2.4688 2.4375 2.4375 2200
8-Oct-99 2.4375 2.4375 2.4375 2.4375 1000
7-Oct-99 2.5 2.5 2.5 2.5 200
6-Oct-99 2.5469 2.5469 2.4375 2.4375 5200
5-Oct-99 2.3125 2.8125 2.3125 2.5 23000
4-Oct-99 2.4375 2.4688 2.375 2.4688 12000
1-Oct-99 2.6875 2.75 2.5 2.5 6900
30-Sep-99 2.625 2.75 2.625 2.75 500
29-Sep-99 2.5625 2.75 2.5625 2.6875 2400
28-Sep-99 2.75 2.8125 2.5 2.8125 16600
27-Sep-99 2.75 2.875 2.5625 2.8281 8800
24-Sep-99 2.6875 2.6875 2.625 2.625 4500
23-Sep-99 2.625 2.875 2.625 2.625 3900
22-Sep-99 2.8125 2.8125 2.625 2.625 5800
21-Sep-99 2.7812 2.7812 2.75 2.75 4700
20-Sep-99 2.8125 3 2.75 2.875 11400
17-Sep-99 2.8125 3 2.75 2.75 11100
16-Sep-99 2.75 2.9688 2.75 2.9688 8000
15-Sep-99 2.7188 2.875 2.6875 2.75 31400
14-Sep-99 2.625 2.6875 2.625 2.6875 1100
13-Sep-99 2.625 2.8125 2.625 2.8125 9300
10-Sep-99 2.625 2.8125 2.625 2.8125 5000
9-Sep-99 2.625 2.8125 2.5625 2.8125 12300
8-Sep-99 2.6875 2.75 2.625 2.625 7100
7-Sep-99 2.75 2.8125 2.625 2.8125 14000
3-Sep-99 2.75 2.75 2.75 2.75 1000
2-Sep-99 2.75 2.875 2.75 2.75 2400
1-Sep-99 2.75 2.75 2.75 2.75 500
31-Aug-99 2.75 2.875 2.75 2.875 5200
30-Aug-99 2.6875 2.6875 2.6875 2.6875 2000
26-Aug-99 2.75 2.875 2.75 2.875 2500
25-Aug-99 2.75 2.75 2.75 2.75 3800
24-Aug-99 2.8125 2.875 2.75 2.875 3600
23-Aug-99 2.75 2.8125 2.75 2.8125 7700
20-Aug-99 2.8125 2.8125 2.8125 2.8125 600
19-Aug-99 2.875 2.875 2.875 2.875 200
18-Aug-99 2.8125 2.8125 2.8125 2.8125 3100
17-Aug-99 2.9375 2.9375 2.8125 2.8125 1300
16-Aug-99 2.875 2.875 2.875 2.875 100
13-Aug-99 2.8125 2.9375 2.8125 2.9375 2700
12-Aug-99 2.8125 2.875 2.8125 2.875 2600
11-Aug-99 2.9375 2.9375 2.8125 2.9375 1300
10-Aug-99 2.875 2.9375 2.875 2.875 4100
9-Aug-99 3.0312 3.0312 2.875 2.875 15700
6-Aug-99 3 3 2.9375 2.9375 5600
5-Aug-99 3 3 3 3 12200
4-Aug-99 3.0625 3.125 3 3 18700
3-Aug-99 3.125 3.125 3 3 2900
2-Aug-99 3 3.125 3 3.125 3200
30-Jul-99 3 3.125 3 3.125 5200
29-Jul-99 2.9375 3.0625 2.875 3 16700
28-Jul-99 2.875 3.0625 2.875 3 18600
27-Jul-99 2.9375 3.0625 2.875 3.0625 10300
26-Jul-99 2.875 3.0625 2.875 3.0625 19600
23-Jul-99 3.0156 3.0625 2.9375 3.0625 7900
22-Jul-99 2.875 3.0938 2.875 3.0938 7000
21-Jul-99 3.125 3.1875 2.875 3.125 14600
20-Jul-99 3.1562 3.1875 3.0625 3.0625 4500
19-Jul-99 3.25 3.25 3.0625 3.2188 11400
16-Jul-99 3.125 3.125 3.0625 3.0625 2700
15-Jul-99 3.1094 3.1094 3.0625 3.0625 1600
14-Jul-99 3.1875 3.1875 3 3 4000
13-Jul-99 3.1875 3.1875 3.1875 3.1875 100
12-Jul-99 3.0312 3.1875 3.0312 3.1875 1300
9-Jul-99 3 3.2188 3 3.2188 2600
8-Jul-99 3 3.2188 3 3 1600
7-Jul-99 3.25 3.375 3 3 20500
6-Jul-99 3.25 3.25 3 3.25 3600
2-Jul-99 3 3.25 3 3.25 19200
1-Jul-99 3 3.125 3 3 6700
30-Jun-99 3 3 3 3 2200
29-Jun-99 3 3 3 3 4600
28-Jun-99 3.25 3.25 3 3 1100
25-Jun-99 3 3.2188 3 3.2188 11600
24-Jun-99 3 3.25 3 3.25 19700
23-Jun-99 3.1562 3.1562 3 3 18200
22-Jun-99 3.1875 3.1875 3.1875 3.1875 100
21-Jun-99 3.375 3.375 3.125 3.125 200
18-Jun-99 3.125 3.5 3.125 3.5 2800
17-Jun-99 3.125 3.25 3.125 3.25 4000
16-Jun-99 3.1875 3.25 3.1875 3.25 1700
14-Jun-99 3.25 3.25 3.0625 3.25 10500
11-Jun-99 3.0625 3.25 3 3.25 20700
10-Jun-99 3.0312 3.0312 2.9375 3 3900
9-Jun-99 3.1875 3.1875 2.875 3 3500
8-Jun-99 3 3 3 3 2900
7-Jun-99 2.9375 3.1875 2.875 3 35500
4-Jun-99 2.875 3 2.875 2.875 10400
3-Jun-99 3 3 2.875 3 3800
2-Jun-99 2.9375 3 2.9375 3 14600
1-Jun-99 2.9688 3 2.8125 2.875 32400
28-May-99 2.9219 3 2.75 3 34600
27-May-99 2.9062 2.9375 2.75 2.75 5500
26-May-99 2.3125 2.9375 2.25 2.875 13300
25-May-99 2.875 3 2.75 3 13400
24-May-99 2.875 3 2.875 3 14200
21-May-99 3 3 2.8125 3 16400
20-May-99 3 3 2.75 2.875 5100
19-May-99 2.8125 2.875 2.75 2.875 33300
18-May-99 2.9375 2.9375 2.8125 2.875 2700
17-May-99 2.875 3 2.875 2.875 11100
14-May-99 2.875 3 2.875 3 27600
13-May-99 2.9375 2.9375 2.8125 2.9375 6600
12-May-99 2.9375 2.9375 2.8125 2.9375 8300
11-May-99 2.8125 2.9375 2.8125 2.9375 13300
10-May-99 2.875 2.9375 2.8125 2.9375 37600
7-May-99 2.9375 2.9375 2.9375 2.9375 1000
6-May-99 2.875 2.9375 2.8125 2.9375 18600
5-May-99 2.9375 2.9375 2.8125 2.9375 4400
4-May-99 2.9375 2.9375 2.9375 2.9375 700
3-May-99 2.8125 2.9375 2.8125 2.9375 5500
30-Apr-99 2.9375 2.9375 2.8125 2.8125 5700
29-Apr-99 2.8125 2.9375 2.8125 2.9375 24800
28-Apr-99 2.875 2.9375 2.8125 2.9375 13700
27-Apr-99 2.8125 2.9375 2.8125 2.875 1800
26-Apr-99 2.9375 2.9375 2.8125 2.9375 3400
23-Apr-99 2.8125 2.9375 2.8125 2.9375 11300
22-Apr-99 2.9375 2.9375 2.9375 2.9375 1200
21-Apr-99 2.8125 2.9375 2.8125 2.9375 10200
20-Apr-99 2.8125 2.9375 2.8125 2.9375 4800
19-Apr-99 2.8125 2.9375 2.8125 2.9375 10700
16-Apr-99 2.875 3 2.8125 2.9375 22900
15-Apr-99 3.125 3.25 2.75 3 43800
14-Apr-99 3.3125 3.4375 3.25 3.25 13900
13-Apr-99 3.3125 3.4375 3.3125 3.3125 9400
12-Apr-99 3.5 3.5 3.3125 3.3125 22600
9-Apr-99 3.25 3.375 3.25 3.375 5000
8-Apr-99 3.375 3.375 3.25 3.25 3700
7-Apr-99 3.25 3.25 3.25 3.25 7000
6-Apr-99 3.3125 3.5 3.25 3.25 19100
5-Apr-99 3.375 3.5 3.3125 3.3125 11200
1-Apr-99 3.5 3.5 3.375 3.375 2000
31-Mar-99 3.5 3.5 3.375 3.375 800
30-Mar-99 3.4375 3.4375 3.4375 3.4375 1000
29-Mar-99 3.5 3.5 3.375 3.375 5000
26-Mar-99 3.3125 3.5 3.3125 3.375 4900
25-Mar-99 3.375 3.375 3.25 3.375 18300
24-Mar-99 3.4375 3.5 3.25 3.375 20300
23-Mar-99 3.375 3.375 3.375 3.375 4600
22-Mar-99 3.5 3.5 3.375 3.375 2500
19-Mar-99 3.375 3.5 3.3125 3.375 33100
18-Mar-99 3.375 3.625 3.375 3.375 3000
17-Mar-99 3.5625 3.5625 3.375 3.375 1600
16-Mar-99 3.375 3.375 3.25 3.375 500
15-Mar-99 3.375 3.5 3.375 3.375 3800
12-Mar-99 3.5 3.5 3.375 3.375 900
11-Mar-99 3.5625 3.5625 3.375 3.375 1400
10-Mar-99 3.625 3.625 3.375 3.5 2500
9-Mar-99 3.4375 3.4375 3.4375 3.4375 3300
8-Mar-99 3.5 3.625 3.375 3.5 4200
5-Mar-99 3.375 3.5625 3.375 3.5625 2300
4-Mar-99 3.1875 3.5 3.1875 3.5 8200
3-Mar-99 3.625 3.625 3.125 3.375 12900
2-Mar-99 3.625 3.625 3.1875 3.375 19100
26-Feb-99 3.4375 3.5 3.375 3.5 1300
25-Feb-99 3.375 3.5625 3.375 3.5625 600
24-Feb-99 3.375 3.625 3.375 3.625 600
23-Feb-99 3.5 3.625 3.375 3.5 12500
22-Feb-99 3.75 3.75 3.375 3.625 15900
19-Feb-99 4.25 4.25 3.5 3.875 36200
18-Feb-99 4.125 4.25 4.125 4.25 3800
</TABLE>
[DOUGHERTY & COMPANY LLC LOGO]
Source: Big Charts.com
6
<PAGE> 11
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
PRICE VOLUME
2/14 2/15 2/16 2/17 2/18 Total
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 3/4 4,700 4,700
10 23/32 1,700 1,700
10 11/16 200 200
10 5/8 1,100 1,100
10 19/32 400 400
10 9/16 100 100
10 1/2 4,400 4,400
10 7/16 2,500 2,500
10 13/32 500 500
10 3/8 4,400 4,400
10 5/16 1,700 1,700
10 1/4 8,500 800 9,300
10 3/16 1,600 400 400 2,400
10 1/8 4,600 4,700 2,200 11,500
10 1/16 5,800 100 5,900
10 16,800 15,400 10,400 46,900 89,500
9 15/16 7,100 6,000 17,500 29,900 60,500
9 7/8 7,300 15,700 102,300 27,100 152,400
9 27/32 300 100 400
9 13/16 1,600 17,100 28,700 47,400
9 3/4 5,800 22,000 44,300 5,100 77,200
9 11/16 17,600 6,700 13,400 4,600 42,300
9 21/32 1,000 1,000
9 5/8 34,200 25,700 1,600 7,300 68,800
9 19/32 200 200
9 9/16 2,100 300 100 2,500
9 1/2 59,200 21,000 5,600 85,800
9 7/16 20,100 900 21,000
9 3/8 31,300 2,200 400 33,900
9 11/32 100 100
9 5/16 1,900 1,900
9 1/4 39,500 3,000 42,500
9 3/16 500 500
9 5/32 3,200 3,200
9 1/8 8,100 8,100
9 1,700 1,700
8 3/4 2,000 2,000
8 11/16 13,100 13,100
8 5/8 17,200 17,200
8 33/64 800 800
8 1/2 33,900 33,900
8 3/8 9,100 9,100
8 5/16 700 700
8 1/4 3,500 3,500
8 3/16 8,000 8,000
8 1/16 200 200
- ----------------------------------------------------------------------------------------
</TABLE>
[DOUGHERTY & COMPANY LLC LOGO]
7
<PAGE> 12
III. COMPARABLE PUBLIC COMPANY ANALYSIS
The Comparable Public Company Analysis involves comparing certain fundamental
data and performance measures of Spanlink to a group of publicly traded peers to
determine an implied market trading value of a minority interest.
We reviewed information on business operations, financial performance and
valuation multiples for publicly traded companies in the computer telephony/call
center industry and selected six companies as a basis for comparison.
Based on our analysis, we noted the following dissimilarities between Spanlink
and the comparable public companies:
- Spanlink had the lowest level of market capitalization at $46.1 million;
- Spanlink had the lowest revenue base at $11.3 million;
- Spanlink had the lowest stockholders' equity and cash at $2.9 million and
$100,000, respectively;
[DOUGHERTY & COMPANY LLC LOGO]
8
<PAGE> 13
- Spanlink and Syntellect each reported a net loss for the latest twelve
months while the other five companies reported profits. All six of the
comparable companies are estimated to produce profits in 2000. In contrast,
Spanlink is estimated by management to report a loss.
Due to Spanlink's current and estimated losses and negligible operating cash
flow, the only meaningful financial measure to capitalize is Spanlink's LTM
revenue. In selecting an appropriate enterprise value to revenue multiple to
apply to Spanlink's LTM revenue, we applied discounts ranging from 20% to 40% to
the 4.7x median multiple of the comparable public companies.
In estimating an appropriate discount to apply to the peer group mean and median
revenue multiple, we examined the relationship of revenue multiples to the
following factors:
-LTM EBITDA margin
-Market capitalization
-LTM revenue base
[Dougherty & Company LLC Logo]
9
<PAGE> 14
For all three factors there was generally a positive relationship between the
magnitude of EBITDA margins, market capitalization and revenue size and the
revenue multiples. Based on this evidence, we concluded that discounts to the
median multiple of the comparative group of 20% to 40% were reasonable for
valuing Spanlink.
Applying discounted multiples of 2.7x to 3.8x to Spanlink's LTM revenue of $11.3
million and then subtracting net debt of $1.0 million, produced a range of
common stock values of $5.98 to $8.19 per share.
[DOUGHERTY & COMPANY LLC LOGO]
10
<PAGE> 15
PROJECT BRIDGE
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
(dollars in millions, except per share data)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Price Earnings Per Share (a) Price/Earnings Ratio
Latest 52 Week Price As % Of ---------------------- ---------------------
Company Name (Ticker) FYE Quarter High Low 02/18/00 High LTM 1999 2000 LTM 1999 2000
- ------------------------------------------------------------------------------------------------------------ ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Syntellect, Inc. (SYNL) Dec 9/99 $5.44 $1.00 $4.81 88.4% ($0.13) $0.00 $0.18 nm nm 26.7
Remedy Corporation (RMDY) Dec 9/99 57.63 10.50 54.63 94.8% 1.01 1.31 1.69 54.1 41.7 32.3
Davox Corporation (DAVX) Dec 9/99 33.25 5.94 31.44 94.6% 0.85 0.60 0.88 37.0 52.4 35.7
eShare Technologies, Inc. (ESHR) Dec 9/99 29.13 3.44 17.13 58.8% 0.42 (0.19) 0.44 40.8 nm 38.9
Intervoice-Brite, Inc. (INTV) Feb 11/99 36.00 8.94 36.69 101.9% 0.76 0.75 1.18 48.3 48.9 31.1
Aspect Communications, Inc. (ASPT) Dec 9/99 69.94 6.00 59.19 84.6% 0.33 (0.34) 0.41 179.4 nm 144.4
--------------------
Mean 45.0 47.7 33.0
Median 44.5 41.7 32.3
Spanlink Communications, Inc
(SPLK)(c)Dec 9/99 $9.63 $2.00 $9.63 100.0% ($0.07)($0.03) na nm nm nm
OTC Composite 4485.63 2259.03 4411.74 98.4%
Russell 2000 Index 558.42 383.37 545.68 97.7%
</TABLE>
<TABLE>
<CAPTION>
Book
(b) Value Market
Shares Market Per Value/ Div.
Out. Valu Share BVPS Yield
---------------------------------------------
<S> <C> <C> <C> <C>
Syntellect, Inc. (SYNL) 12.08 $58.1 $1.18 4.1 nm
Remedy Corporation (RMDY) 31.02 1,694.6 2.17 25.2 nm
Davox Corporation (DAVX) 13.21 415.3 5.09 6.2 nm
eShare Technologies, Inc. (ESHR) 21.32 365.1 2.45 7.0 nm
Intervoice-Brite, Inc. (INTV) 32.08 1,177.0 3.19 11.5 nm
Aspect Communications, Inc. (ASPT) 48.64 2,879.0 5.63 10.5 nm
-----------
10.7 nm
8.8 nm
Spanlink Communications, Inc (SPLK) (c) 5.12 $49.3 $0.57 17.0 nm
</TABLE>
NOTES
- -------------
(a) LTM = latest 12 months -- used LTM data if at least 6 months from fiscal
year-end (excludes extraordinary or one-time gains/losses) 1999 estimate and
2000 projection based on average of all estimates (reported by IBES
International, Inc.)
(b) Market Value = price times common shares outstanding (excludes options,
convertibles and other common stock equivalents)
(c) Dougherty research dept. estimate as published
Italicized data excluded from calculation
nm -- not meaningful
na -- not available
11
<PAGE> 16
PROJECT BRIDGE
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
(dollars in millions)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(a) (b) LTM Enterprise Value to:
Total Total Ent. ---------------------- EBIT EBITDA ---------------------
Company Name (Ticker) Debt Cash Value Rev. EBIT EBITDA Margin Margin Rev. EBIT EBITDA
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Syntellect, Inc. (SYNL) $0.6 $7.1 $51.6 $49.1 ($2.9) ($0.6) -6.0% -1.2% 1.1 nm nm
Remedy Corporation (RMDY) 0.4 138.6 1,556.4 206.4 34.8 45.3 16.9% 21.9% 7.5 44.7 34.4
Davox Corporation (DAVX) 0.0 57.6 357.7 85.8 7.8 11.3 9.1% 13.2% 4.2 45.9 31.7
eShare Technologies, Inc. (ESHR) 0.3 22.3 343.1 98.2 9.0 12.4 9.2% 12.6% 3.5 38.1 27.7
Intervoice-Brite, Inc. (INTV) 125.0 38.3 1,263.7 240.8 (4.0) 29.2 -1.7% 12.1% 5.2 nm 43.3
Aspect Communications, Inc. (ASPT) 160.7 225.1 2,814.6 477.0 (22.1) 17.8 -4.6% 3.7% 5.9 nm 158.1
--------------------------------------
Mean 3.8% 10.4% 4.6 42.9 34.2
Median 3.7% 12.4% 4.7 45.9 33.0
Spanlink Communications, Inc (SPLK) $1.7 $0.10 $50.9 $11.3 ($0.23) $0.32 -2.0% 2.8% 4.5 nm 159.0
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------
1999 vs. (d) 2000 P/E/
3 Year CAGR (c) 2000e Est. 5 yr Est. 5 yr
--------------------------- Net. Inc Net. Inc Net. Inc.
Rev. EBIT EBITDA EPS Growth Growth Growth
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Syntellect, Inc. (SYNL) -3.9% nm nm nm nm 5.0% 534.4%
Remedy Corporation (RMDY) 36.8% 21.2% 33.3% 34.3% 29.0% 26.7% 121.1%
Davox Corporation (DAVX) 17.0% -6.9% -0.4% 7.2% 46.7% 20.6% 173.4%
eShare Technologies, Inc. (E 27.4% 10.3% 20.8% nm -331.6% 30.0% 129.7%
Intervoice-Brite, Inc. (INTV 31.9% nm 9.4% 41.4% 57.3% 18.3% 169.9%
Aspect Communications, Inc. 15.6% nm nm nm -220.6% 52.0% 277.6%
------------------------------------------------------------
20.8% 1.1% 15.8% 27.6% -83.8% 25.4% 234.4%
22.2% 10.3% 15.1% 34.3% 29.0% 23.7% 171.7%
27.9% nm nm nm -100.0% 40.0% nm
</TABLE>
NOTES
- -------------
EBIT = earnings before interest and taxes (excludes interest income)
EBITDA = earnings before interest, taxes and depreciation & amortization
(a) Total debt includes interest bearing debt plus capital lease obligations
(b) Enterprise value defined as market value of equity plus total debt,
minority interest and preferred stock less cash and marketable securities
(c) As reported by IBES International, Inc.
CAGR = compound annual growth rate (rate computed for less than three years if
losses occurred)
Italicized data excluded from calculation
nm -- not meaningful
na -- not available
12
<PAGE> 17
PROJECT BRIDGE
VALUATION SUMMARY
Implied Valuation Analysis Utilizing Comparable Public Companies
(dollars in millions, except per share)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
MEDIAN MULTIPLES OF COMPARABLE PUBLIC COMPANIES - DISCOUNTED 40%
---------------------------------------------------------------------------------------------------------
IMPLIED DEBT IMPLIED
SPLK ENTERPRISE VALUE/ ENTERPRISE LESS EQUITY PER
VALUATION PARAMETER DATA LTM REVENUES VALUE CASH VALUE SHARE
- ------------------- ------ ---------------- ---------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
LTM Revenues $11.3 2.8 x $31.6 1.0 $30.6 $5.98
</TABLE>
<TABLE>
<CAPTION>
MEDIAN MULTIPLES OF COMPARABLE PUBLIC COMPANIES - DISCOUNTED 20%
---------------------------------------------------------------------------------------------------------
IMPLIED DEBT IMPLIED
SPLK ENTERPRISE VALUE/ ENTERPRISE LESS EQUITY PER
VALUATION PARAMETER DATA LTM REVENUES VALUE CASH VALUE SHARE
- ------------------- ------ ---------------- ---------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
LTM Revenues $11.3 3.8 x $42.9 1.0 $41.9 $8.19
</TABLE>
NOTES
_______________________________
na = not available
nm = not meaningful
All company financial data available at time of the initial announcement
Purchase Price = consideration paid for common stock
Enterprise Value = Purchase price plus debt less cash
Transactions represent change of corporate control
Unaffected price is trading price 5 days and one month prior to initial
announcement of the proposed transaction
Premium is based on the percent that the transaction price exceeds the stock
trading price 5 days and one month prior to announcement of the transaction
13
<PAGE> 18
Market Capitalization ($ in millions)
<TABLE>
<CAPTION>
46.1 58.1 412.8 509.1 1040.4 1681 3246.7
<S> <C> <C> <C> <C> <C> <C> <C>
SPLK 4.2
SYNL 1.1
DAVX 4.1
ESHR 5
INTV 4.7
RMDY 7.5
ASPT 6.7
</TABLE>
[DOUGHERTY & COMPANY LLC LOGO]
<PAGE> 19
LTM EBITDA Margin
<TABLE>
<CAPTION>
-0.012 0.028 0.037 0.121 0.126 0.132 0.219
<S> <C> <C> <C> <C> <C> <C> <C>
SYNL 1.1
SPLK 4.2
ASPT 6.7
INTV 4.7
ESHR 5
DAVX 4.1
RMDY 7.5
</TABLE>
[DOUGHERTY & COMPANY LLC LOGO]
<PAGE> 20
LTM Revenue ($ in millions)
<TABLE>
<CAPTION>
49.1 85.8 98.2 206.4 240.8 477
<S> <C> <C> <C> <C> <C> <C> <C>
SPLK 4.2
SYNL 1.1
DAVX 4.1
ESHR 5
RMDY 7.5
INTV 4.7
ASPT 6.7
</TABLE>
[DOUGHERTY & COMPANY LLC LOGO]
<PAGE> 21
TWELVE MONTH INDEXED COMPARABLE PUBLIC
COMPANY STOCK PRICE PERFORMANCE
[LINE GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SPLK 100 91.2 82.4 79.4 79.4 79.4 79.4 79.4 69.1 69.1 66.2 69.1 70.6 70.6 70.6 67.6
ESHR 100 103.8 113.2 99.6 94.7 71.4 72.2 76.3 77.1 80.1 72.2 74.4 72.9 78 96.2 87.6
INTV 100 98.6 82.5 95.7 92.9 94.3 90.5 86.3 71.1 80.6 75.8 75.6 73.9 86.7 91.5 84.4
ASPT 100 103.7 112.8 109.2 102.8 101.8 93.6 99.1 97.2 89.9 100.5 117 107.3 108.3 125.7 124.8
SYNL 100 90.9 88.6 84.1 70.5 65.9 52.3 52.3 52.3 50 54.5 53.4 59.1 52.3 63.6 54.5
RMDY 100 102.2 101.5 95.1 79 73.5 69.8 74.1 63.3 68.5 78.4 86.4 89.2 87.7 93.8 93.8
DAVX 100 100.7 100.7 90.5 81.8 71.5 77.4 75.2 73.7 94.9 106.6 99.3 96.4 94.2 92 97.8
SPLK 100 76.5 82.4 75.7 76.5 75.7 72.1 72.1 73.5 69.1 69.1 66.2 67.6 64.7 66.2 64.7
ESHR 100 91.7 87.2 74.1 78.6 75.6 71.1 70.7 63.9 69.2 60.5 57.5 54.5 53.8 62.4 58.8
INTV 100 101.4 97.9 100.9 92.9 104.7 110.9 119 107.1 114.7 108.1 106.2 106.6 113.5 91.9 93.8
ASPT 100 129.4 148.6 139.4 140.4 145.9 165.1 167 151.4 165.1 167.9 162.4 164.2 161.5 165.1 204.6
SYNL 100 54.5 50 52.3 47.7 45.5 43.2 46.6 54.5 59.1 70.5 72.7 73.9 81.8 89.8 75
RMDY 100 93.8 92.3 98.5 104.6 108 132.1 130.2 135.5 134.6 101.9 102.5 122.8 122.5 121 127.2
DAVX 100 108.8 103.6 135 132.1 146 163.5 165 175.2 188.3 172.3 165 154.7 175.9 162.8 156.9
SPLK 100 61.8 58.8 57.4 50 48.5 51.5 52.9 60.3 80.9 91.2 123.5 108.8 125 132.4 185.3
ESHR 100 51.9 48.1 46.6 57 43.6 41.4 29.3 22.9 52.8 63.2 63.5 52.6 59.4 88 138.3
INTV 100 84.4 80.6 81.5 85.8 84.1 72.7 93.8 106.6 112.3 120.9 119.4 117.5 122.7 147.4 172.5
ASPT 100 225.7 222.9 249.1 276.6 273.4 328.4 369.7 458.7 458.7 635.8 561.5 552.3 559.6 513.8 483.5
SYNL 100 77.3 84.1 79.5 79.5 79.5 77.3 56.8 75 77.3 84.1 81.8 88.6 104.5 102.3 104.5
RMDY 100 137 138.3 128.7 139.5 130.9 143.2 171.6 212.3 199.2 179.3 189.2 178.1 205.6 220.7 223.3
DAVX 100 144.5 118.2 148.2 173 165 162 150.4 170.8 185.4 197.1 198.5 280.3 245.3 275.9 239.4
SPLK 100 185.3 157.4 152.9 167.6 189.7 189.7 211.8 211.8
ESHR 100 102.6 109 101.1 113.5 101.5 122.6 142.1 145.5
INTV 100 176.3 180.6 203.8 216.1 203.1 209.5 255 248.8
ASPT 100 574.3 550.5 712.8 821.1 747.7 880.7 996.3 985.3
SYNL 100 109.1 127.3 136.4 136.4 122.7 170.5 172.7 172.7
RMDY 100 236.7 234 196.9 211.4 230.9 220.1 221.3 266.4
DAVX 100 229.2 251.1 270.8 315.3 338.7 348.9 356.2 374.5
</TABLE>
[DOUGHERTY & COMPANY LLC LOGO]
17
<PAGE> 22
THREE-MONTH INDEXED COMPARABLE PUBLIC COMPANY
STOCK PRICE PERFORMANCE
[LINE GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SPLK 100 134.1 151.2 204.9 180.5 207.3 219.5 307.3 307.3 261 253.7 278 314.6 314.6 351.2
ESHR 100 119.6 120.3 99.6 112.5 166.5 261.9 194.3 206.4 191.5 214.9 192.2 232 269 225.4
INTV 100 107.6 106.3 104.6 109.3 131.2 153.6 157 160.8 181.4 192.4 180.8 186.5 227 221.5
ASPT 100 138.6 122.4 120.4 122 112 105.4 125.2 120 155.4 179 163 192 217.2 214
SYNL 100 108.8 105.9 114.7 135.3 132.4 135.3 141.2 164.7 176.5 176.5 158.8 220.6 223.5 223.5
RMDY 100 105.5 99.3 114.6 123.1 124.5 132 130.5 109.8 117.9 128.7 122.7 123.4 148.5 149.2
DAVX 100 106.3 107.1 151.2 132.3 148.8 129.1 123.6 135.4 146.1 170.1 182.7 188.2 192.1 202
</TABLE>
18
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<PAGE> 23
DESCRIPTION OF COMPARABLE PUBLIC COMPANIES
ASPECT COMMUNICATIONS, INC. provides customer relationship management solutions
that enable companies worldwide to ensure consistent interactions with their
customers. The Company's customer relationship portal is a mixed-media contact
solution that manages customer interactions by telephone, Web, electronic mail
and fax.
DAVOX CORPORATION supplies inbound, outbound and call-blended solutions
for businesses involved in collections, telemarketing, customer service,
fund-raising and other customer contact activities. The Company markets suites
of call center management solutions under the names "Unison" and "Concerto" that
provide open system, client/server and relational database technology.
eSHARE TECHNOLOGIES, INC. provides customer contact and intelligent call
management systems that enable businesses to automate call center activities and
enhance their telephony-based computer interaction. The Company's principal
product is "PhoneFrame Explorer."
INTERVOICE-BRITE, INC. offers call automation
solutions to the enterprise and telecommunications markets. The Company also
provides enhanced network service solutions that enable telecommunications
service providers to offer flexible services to the end-user.
[DOUGHERTY & COMPANY LLC LOGO]
19
<PAGE> 24
REMEDY CORPORATION develops, markets and supports client/server and web-based
application software products and solutions. The Company offers adaptable
applications for information technology service management, customer
relationship management and employee workplace automation.
SYNTELLECT, INC. develops, markets and integrates voice, Internet and call
processing systems and services and applications software solutions worldwide.
The Company's product line includes voice processing, Internet transaction
processing, computer telephony integration and predictive dialing products.
Syntellect operates a worldwide distribution network.
[DOUGHERTY & COMPANY LLC LOGO]
20
<PAGE> 25
IV. ANALYSIS OF COMPARABLE MERGER AND ACQUISITION TRANSACTIONS
The Comparable Merger and Acquisition Transaction Method involves a
review of the purchase price and valuation multiples paid in selected
merger and acquisition transactions of similar public and, in certain
cases, private companies (to the extent that transaction and financial
information is disclosed). These transactions represent a
change-of-control, therefore a control value is reflected in the
multiples generated from this method.
We recognize that stock market and economic conditions can affect
merger values as well as individual company performance and perceived
synergies between two companies. Nonetheless, the values placed on
similar companies in sale/merger transactions does provide important
valuation parameters in the merger market. Due to the significant
number of transactions in the computer telephony/call center industry
during 1999, in our view, this method is particularly important in
estimating a control value for Spanlink.
We reviewed transactions announced since 1997 involving the sale or
merger of similar public companies. We identified thirteen
transactions listed on the following page that are relevant to our
analysis. Applying the 4.2x mean and the 4.7x median enterprise value
to revenue multiple (for the nine transactions under $500 million in
enterprise value) to Spanlink's LTM revenue of $11.3 million and then
subtracting net debt of $1.0 million produced a range of control
values of $9.07 to $10.18 per share. Due to the relatively large
number of comparable transactions and the target companies' overall
marginal EBIT and EBITDA, we determined that a discount to the mean
and median revenue multiples were not required in valuing Spanlink.
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21
<PAGE> 26
PROJECT BRIDGE
COMPARABLE MERGER & ACQUISITION TRANSACTIONS
(dollars in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium Over
Enterprise Value / LTM Unaffected Price
Date ENTERPRISE ------------------------- ------------------ Method of
Acquiror / Target Announced VALUE Rev. EBIT EBITDA 1 Week 1 Month Payment
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
SER Systeme AG 12/20/99 $94.8 1.8 118.5 14.1 35.1% 51.5% Cash
EIS International, Inc.
Nortel Networks LTD / 10/18/99 2,100 12.2 111.6 83.7 48.8% 52.9% Stock
Clarify, Inc.
PeopleSoft, Inc. / 10/11/99 385.0 2.1 190.8 41.9 67.4% 73.8% Stock
Vantive Corp.
Alcatel SA / 9/29/99 1,194 9.7 121.1 58.1 24.3% 57.0% Stock
Genesys Telecomm. Labs, Inc.
Nortel Networks LTD / 8/24/99 603.2 4.6 80.3 44.2 112.3% 137.6% Stock
Periphonics Corp.
Security First Technologies, Inc. 5/17/99 308.1 4.2 nm nm 16.8% 314.8% Stock
Edify Corporation
The Baan Company NV / 5/14/99 275.0 10.0 534.0 156.9 56.9% 83.0% Stock
Aurum Software, Inc.
InterVoice, Inc. / 4/27/99 164.0 1.2 53.8 21.8 33.2% 62.4% Combo
Brite Voice Systems, Inc.
Cisco Systems, Inc. / 4/13/99 1,730 38.6 119.6 111.0 40.3% 65.1% Stock
GeoTel Communications Corp.
Lucent Technologies, Inc. / 4/5/99 199.1 1.8 38.4 18.6 88.3% 92.9% Stock
Mosaix, Inc.
Davox Corp. / 3/10/98 82.5 12.1 nm nm nm nm Stock
AnswerSoft, Inc.
Seibel Systems, Inc. / 3/02/98 395.2 4.5 39.1 28.6 91.5% 87.5% Stock
Scopus Technology, Inc.
International Business Machines, 12/19/97 199.2 4.6 140.6 63.0 61.9% 60.7% Combo
Software Artistry, Inc.
- --------------------------------------------------------------------------------
High $2,100.0 38.6 534.0 156.9 112.3% 314.8%
Mean 594.6 8.3 119.1 49.4 52.1% 87.6%
Median 129.4 4.6 111.6 41.9 48.8% 65.1%
Low 82.5 1.2 38.4 18.6 16.8% 51.5%
</TABLE>
22
<PAGE> 27
PROJECT BRIDGE
COMPARABLE MERGER & ACQUISITION TRANSACTIONS
OVER $500 MILLION ENTERPRISE VALUE
(dollars in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium Over
Enterprise Value / LTM Unaffected Price
Date ENTERPRISE ------------------------ ------------------- Method of
Acquiror / Target Announced VALUE Rev. EBIT EBITDA 1 Week 1 Month Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nortel Networks LTD / 10/18/99 2,100 12.2 111.6 83.7 48.8% 52.9% Stock
Clarify, Inc.
Alcatel SA / 9/29/99 1,194 9.7 121.1 58.1 24.3% 57.0% Stock
Genesys Telecomm. Labs, Inc.
Nortel Networks LTD / 8/24/99 603.2 4.6 80.3 44.2 112.3% 137.6% Stock
Periphonics Corp.
Cisco Systems, Inc. / 4/13/99 1,730 38.6 119.6 111.0 40.3% 65.1% Stock
GeoTel Communications Corp.
- --------------------------------------------------------------------------------
High $2,100.0 38.6 121.1 111.0 112.3% 137.6%
Mean 1,406.7 16.3 108.2 74.3 56.4% 78.2%
Median $1,461.9 8.4 115.6 70.9 44.6% 61.1%
Low 603.2 4.6 80.3 44.2 24.3% 52.9%
</TABLE>
NOTES
- ------------------------
na = not available
nm = not meaningful
All company financial data available at time of the initial announcement
Purchase Price = consideration paid for common stock
Enterprise Value = Purchase price plus debt less cash
Transactions represent change change of corporate control
Unaffected price is trading price 5 days and one month prior to initial
announcement of the proposed transaction
Premium is based on the percent that the transaction price exceeds the stock
trading price 5 days and one month prior to announcement of the transaction
23
<PAGE> 28
PROJECT BRIDGE
COMPARABLE MERGER & ACQUISITION TRANSACTIONS
UNDER $500 MILLION ENTERPRISE VALUE
(dollars in millions)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Premium Over
Enterprise Value / LTM Unaffected Price
Date ENTERPRISE ------------------------ ------------------- Method of
Acquiror / Target Announced VALUE Rev. EBIT EBITDA 1 Week 1 Month Payment
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SER Systeme AG 12/20/99 $94.8 1.8 118.5 14.1 35.1% 51.5% Cash
EIS International, Inc.
PeopleSoft, Inc. / 10/11/99 385.0 2.1 190.8 41.9 67.4% 73.8% Stock
Vantive Corp.
Security First Technologies, Inc. 5/17/99 308.1 4.2 nm nm 16.8% 314.8% Stock
Edify Corporation
The Baan Company NV / 5/14/99 275.0 10.0 534.0 156.9 56.9% 83.0% Stock
Aurum Software, Inc.
InterVoice, Inc. / 4/27/99 164.0 1.2 53.8 21.8 33.2% 62.4% Combo
Brite Voice Systems, Inc.
Lucent Technologies, Inc. / 4/5/99 199.1 1.8 38.4 18.6 88.3% 92.9% Stock
Mosaix, Inc.
Davox Corp. / 3/10/98 82.5 12.1 nm nm nm nm Stock
AnswerSoft, Inc.
Seibel Systems, Inc. / 3/02/98 395.2 4.5 39.1 28.6 91.5% 87.5% Stock
Scopus Technology, Inc.
International Business Machines, I12/19/97 199.2 4.6 140.6 63.0 61.9% 60.7% Combo
Software Artistry, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
High $395.2 12.1 534.0 156.9 91.5% 314.8%
Mean $233.7 4.7 159.3 49.3 56.4% 103.3%
Median $199.2 4.2 118.5 28.6 59.4% 78.4%
Low $82.5 1.2 38.4 14.1 16.8% 51.5%
</TABLE>
NOTES
_______________________________
na = not available
nm = not meaningful
All company financial data available at time of the initial announcement
Purchase Price = consideration paid for common stock
Enterprise Value = Purchase price plus debt less cash
Transactions represent change of corporate control
Unaffected price is trading price 5 days and one month prior to initial
announcement of the proposed transaction
Premium is based on the percent that the transaction price exceeds the stock
trading price 5 days and one month prior to announcement of the transaction
24
<PAGE> 29
PROJECT BRIDGE
VALUATION SUMMARY
Valuation Analysis Using Comparable Merger & Acquisition Transactions (dollars
in millions, except per share)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIAN MULTIPLE OF COMPARABLE MERGER & ACQUISITION TRANSACTIONS
-------------------------------------------------------------------------------------------------------
IMPLIED DEBT IMPLIED
SPLK ENT. VALUE/ ENTERPRISE LESS EQUITY PER
VALUATION PARAMETER DATA LTM REVENUE VALUE CASH VALUE SHARE
- ------------------------ ------- --------------- ------------ -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
LTM REVENUE $11.3 4.2 x $47.46 $1.00 $46.5 $9.07
<CAPTION>
MEAN MULTIPLE OF COMPARABLE MERGER & ACQUISITION TRANSACTIONS
-------------------------------------------------------------------------------------------------------
IMPLIED DEBT IMPLIED
SPLK ENT. VALUE/ ENTERPRISE LESS EQUITY PER
VALUATION PARAMETER DATA LTM REVENUE VALUE CASH VALUE SHARE
- ------------------------ ------ --------------- ------------ -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
LTM REVENUE $11.3 4.7 x $53.11 $1.00 $52.1 $10.18
</TABLE>
Note: mean and median multiples of enterprise transaction values under $500
million
25
<PAGE> 30
DESCRIPTION OF TARGET COMPANIES
ANSWERSOFT, INC. provides software applications that helps integrate and
streamline call-center operations in large companies by linking Web-based
inquiries into companies' call-processing operations
AURUM SOFTWARE, INC. provides customer relationship management software. The
Company offers Aurum Customer Enterprise, a suite of client/server applications
that transforms an organization's sales, marketing and customer service
functions.
BRITE VOICE SYSTEMS, INC. designs, integrates, assembles, markets and supports
voice processing and call processing systems and services. The Company's
services and systems integrate voice recognition, voice/facsimile messaging,
audiotex and interactive computer applications.
CLARIFY, INC. makes software that automates front office functions such as help
desk, and customer sales and service. Large companies use Clarify FrontOffice to
manage sales leads, track workflow tasks, and route calls based on a database of
every interaction a company has made with a client. eFrontOffice integrates a
company's Web site, e-mail, and phone systems to enhance customer support.
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26
<PAGE> 31
EDIFY CORPORATION provides software and services designed to help enterprises
automate, integrate and personalize interactions with customers and employees
through multiple channels. The Company's solutions allow access to information
via the Internet, corporate intranets and the telephone.
EIS INTERNATIONAL, INC. provides systems, software and services of outbound and
integrated inbound/outbound applications for the call center industry. The
Company's systems are utilized in telemarketing, customer service, fund-raising,
market research and collections.
GENESYS TELECOMM LABS, INC. provides enterprise-wide interaction management
solutions for both traditional organizations and e-Businesses. The Company's
Genesys Suite product is an integrated suite of applications which enable
Internet and telephony-based interactions, enterprise routing, network routing,
outbound dialing, and workforce management capabilities.
GEOTEL COMMUNICATIONS CORPORATION is a provider of Computer Telephony
Integration (CTI) software solutions focused on enhanced voice and data routing
technology that enables customer-oriented companies to deliver responsive and
cost-effective customer service.
27
[DOUGHERTY & COMPANY LLC LOGO]
<PAGE> 32
MOSAIX, INC. is a global provider of software and services that integrate the
front and back office to automate and optimize an organization's interactions
with its customers. The company's products include predictive dialing and
blending, agent effectiveness solutions, and the innovative ViewStar customer
relationship management, workflow and business process automation applications.
PERIPHONICS CORP makes high-end hardware and software products that integrate
telephones and computers. People use its open-architecture, UNIX-based systems
when they dial up companies and agencies to get computerized account balances,
tax refunds, and lab test results.
SCOPUS TECHNOLOGY, INC. provides client/server software solutions for the
customer information management market. The Company also offers consulting,
training and post-sale maintenance and support services. Software Artistry, Inc.
sells two suites of enterprise applications (1) a complete help-desk suite that
combines decision support, problem management, asset and change management, and
network and system management (2) manages customer interaction by combining
components o f sales and marketing management to help manage all aspects of a
customer-relationship cycle.
VANTIVE CORPORATION provides front-office software. The Company's Vantive
Enterprise is an integrated office suite of Web-enabled software that increases
sales, marketing, call center, help desk and field service effectiveness.
28
[DOUGHERTY & COMPANY LLC LOGO]
<PAGE> 33
V. DISCOUNTED CASH FLOW ANALYSIS
The Discounted Cash Flow Method is based on projected earnings and capital
requirements and the subsequent cash flows generated by the assets of a
company. The premise underlying this method of analysis is that the value
of a business enterprise is equal to the present worth of the future
economic benefits of ownership.
Spanlink's stand-alone forecasted cash flows for the five-year period
2000-2004 and the terminal value in 2004 are discounted back to present
value at the weighted average cost of capital and then added together. The
weighted average cost of capital is the weighted average of the return on
debt capital and the return on equity capital given the company's long-term
or target capital structure. Spanlink is currently financed almost entirely
with equity capital (as are the comparable public companies). The
projections assume that retained earnings will finance growth, so the
weighted average cost of capital is equal to the cost of equity. Given our
assessment of Spanlink's investment risk, returns on micro-capitalization
common stocks and the level of interest rates, we estimated the cost of
equity capital to be between 22% and 26%.
29
[DOUGHERTY & COMPANY LLC LOGO]
<PAGE> 34
Because Spanlink will have the ability to generate cash flow well beyond the
five-year forecast period, we capitalized the value of the Company at the end of
2004. This terminal value is calculated by applying EBITDA multiples of between
9 and 13 to Spanlink's 2004 projected EBITDA. The EBITDA multiples were based on
consideration of EBITDA trading multiples of the comparable public companies and
our estimate of the industry and Spanlink's earnings growth outlook as of the
end of 2004.
Based on our discounted cash flow analysis, we derived minority interest values
of $4.96 to $8.30 per share.
30
[DOUGHERTY & COMPANY LLC LOGO]
<PAGE> 35
PROJECT BRIDGE SUMMARY OF SENSITIVITY ANALYSIS
DISCOUNTED CASH FLOW ANALYSIS
($000's, except per share)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TERMINAL VALUE EBITDA MULTIPLES
DISCOUNT RATE @ 22% -------------------------------------------------------------
<S> <C> <C> <C>
9.0 11.0 13.0
-------------------------------------------------------------
Present Value of 2000-2004 Cash Flows $2,789 $2,789 $2,789
Present Value of Terminal Value 28,105 34,351 40,596
-------------------------------------------------------------
Enterprise Value 30,894 37,140 43,385
Less Interest Bearing Debt (1,000) (1,000) (1,000)
Plus Cash and Equivalents 100 100 100
-------------------------------------------------------------
Common Equity Value $29,994 $36,240 $42,485
Shares Outstanding 5,120 5,120 5,120
Per Share $5.86 $7.08 $8.30
<CAPTION>
TERMINAL VALUE EBITDA MULTIPLES
DISCOUNT RATE @ 24% -------------------------------------------------------------
<S> <C> <C> <C>
9.0 11.0 13.0
-------------------------------------------------------------
Present Value of 2000-2004 Cash Flows $2,583 $2,583 $2,583
Present Value of Terminal Value 25,910 31,668 37,425
-------------------------------------------------------------
Enterprise Value 28,493 34,250 40,008
Less Interest Bearing Debt (1,000) (1,000) (1,000)
Plus Cash and Equivalents 100 100 100
-------------------------------------------------------------
Common Equity Value $27,593 $33,350 $39,108
Shares Outstanding 5,120 5,120 5,120
Per Share $5.39 $6.51 $7.64
<CAPTION>
TERMINAL VALUE EBITDA MULTIPLES
DISCOUNT RATE @ 26% -------------------------------------------------------------
<S> <C> <C> <C>
9.0 11.0 13.0
-------------------------------------------------------------
Present Value of 2000-2004 Cash Flows $2,394 $2,394 $2,394
Present Value of Terminal Value 23,920 29,235 34,551
-------------------------------------------------------------
Enterprise Value 26,314 31,629 36,945
Less Interest Bearing Debt (1,000) (1,000) (1,000)
Plus Cash and Equivalents 100 100 100
-------------------------------------------------------------
Common Equity Value $25,414 $30,729 $36,045
Shares Outstanding 5,120 5,120 5,120
Per Share $4.96 $6.00 $7.04
</TABLE>
31
<PAGE> 36
PROJECT BRIDGE PROJECTED NET DEBT-FREE CASH FLOW
For the Years Ending December 31
DISCOUNTED CASH FLOW ANALYSIS ($000's)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
2000E 2001E 2002E 2003E 2004E
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $12,897 $21,000 $30,000 $38,000 $46,000
Cost of Sales 5,159 9,450 12,600 14,820 16,560
-------------------------------------------------------------
Gross Margin 7,738 11,550 17,400 23,180 29,440
Operating Expenses 7,738 10,500 14,400 17,100 20,700
-------------------------------------------------------------
Operating Income 0 1,050 3,000 6,080 8,740
Income Taxes 0 0 0 2,432 3,496
-------------------------------------------------------------
Debt-Free Net Income 0 1,050 3,000 3,648 5,244
Depreciation and Amortization 528 300 300 300 300
-------------------------------------------------------------
Debt-Free Cash Flow $528 $1,350 $3,300 $3,948 $5,544
-------------------------------------------------------------
Change in Working Capital (495) (1,351) (1,500) (1,333) (1,333)
Capital Expenditures (432) (300) (300) (300) (300)
- --------------------------------------------------------------------------------------------------
NET DEBT-FREE CASH FLOW ($399) ($301) $1,500 $2,315 $3,911
- --------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 37
PROJECT BRIDGE ASSUMPTIONS
DISCOUNTED CASH FLOW ANALYSIS For the Years Ending December 31
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
2000E 2001E 2002E 2003E 2004E
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales Growth 33.9% 62.8% 42.9% 26.7% 21.1%
Operating Margin 0.0% 5.0% 10.0% 16.0% 19.0%
Tax Rate 0% 0% 0% 40% 40%
Unlevered Net Income Margin 0.0% 5.0% 0.0% 9.6% 11.4%
Unlevered Net Income Growth nm nm 185.7% 21.6% 43.8%
Depreciation & Amort. as a % of Sales 4.1% 1.4% 1.0% 0.8% 0.7%
Capital Expenditures as a % of Sales 3.3% 1.4% 1.0% 0.8% 0.7%
Change in WC as a % of Change in Sales 15.2% 16.7% 16.7% 16.7% 16.7%
</TABLE>
Note; due to $5.8 million NOL tax carryforward, no income taxes are payable in
2001 and 2002
33
<PAGE> 38
PROJECT BRIDGE
(SHARE PRICE MULTIPLES AND ACQUISITION PREMIUMS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRICE PER SHARE $9.00 $10.00 $11.00
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(000'S) Except Per Share Data
EQUITY PURCHASE PRICE Shares Out. 5,120 $ 46,080 $ 51,200 $ 56,320
PLUS DEBT ASSUMED $ 1,100 $ 1,100 $ 1,100
LESS CASH AND EQUIVALENTS $ 100 $ 100 $ 100
- ------------------------------------------------------------------------------------------------------------------------------------
IMPLIED ENTERPRISE VALUE $ 47,080 $ 52,200 $ 57,320
- ------------------------------------------------------------------------------------------------------------------------------------
ENTERPRISE VALUE: REVENUE
Latest Twelve Months (ended 9/30/99) $11,300 4.2 4.6 5.1
1999 9,633 4.9 5.4 6.0
Projected 2000 13,300 3.6 3.9 4.3
ENTERPIRSE VALUE: EBITDA
Latest Twelve Months (ended 9/30/99) $320 147.8 163.8 179.8
1999 (800) nm nm nm
Projected 2000 500 94.6 104.8 115.0
ENTERPRISE VALUE: EBIT
Latest Twelve Months (ended 9/30/99) ($230) nm nm nm
1999 (1,293) nm nm nm
Projected 2000 (793) nm nm nm
EQUITY PURCHASE PRICE: EPS / NET INCOME
Latest Twelve Months (ended 9/30/99) $0.03 $160 288.0 320.0 352.0
1999 (0.18) (1,000) nm nm nm
Projected 2000 (0.02) (350) nm nm nm
nm nm nm
EQUITY PURCHASE PRICE / STOCK PRICE
Current Stock Price (2/18/2000) $9.63 -6.5% 3.8% 14.2%
Price One Week Prior $8.06 11.7% 24.1% 36.5%
Price 30 Days Prior $6.19 45.4% 61.6% 77.7%
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</TABLE>
34
<PAGE> 39
VII. Conclusion
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
PREMIUM TO
METHODOLOGY VALUATION RANGES OFFER PRICE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMPARABLE PUBLIC COMPANY* $5.98 to $8.19 75.6% to 28.2%
COMPARABLE M&A TRANSACTIONS $9.07 to $10.18 15.8% to 3.1%
DISCOUNTED CASH FLOW* $4.96 to $8.30 111.7% to 26.5%
-------------------------------------------------------------------------------------------------------
</TABLE>
* Values represent minority interest values as opposed to control/sale values.
Therefore, the offer price premium is expected to be significantly higher when
compared to the premium derived from the comparable merger and acquisition
transaction method which already represents a control value.
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