As filed with the Securities and Exchange Commission on December 23, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
THE KROLL-O'GARA COMPANY
(Name of the Issuer)
THE KROLL-O'GARA COMPANY
KROLL-O'GARA HOLDINGS, INC.
KER ACQUISITION, INC.
JULES B. KROLL
MICHAEL G. CHERKASKY
BCP/KROG MERGER CORP.
BCP/KROG ACQUISITION COMPANY L.L.C.
BLACKSTONE CAPITAL PARTNERS III MERCHANT BANKING FUND L.P.
BLACKSTONE OFFSHORE CAPITAL PARTNERS III L.P.
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP III L.P.
BLACKSTONE MANAGEMENT ASSOCIATES III L.L.C.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
50105018
(CUSIP Number of Class of Securities)
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Jules B. Kroll Robert L. Friedman
Chief Executive Officer Michael G. Cherkasky BCP/KROG Merger Corp.
and Chairman of the Board President and Chief BCP/KROG Acquisition
The Kroll-O'Gara Company Operating Officer Company L.L.C.
President Kroll Associates, Inc. Blackstone Capital
KER Acquisition, Inc. President Partners III
900 Third Avenue Kroll-O'Gara Holdings, Merchant Banking
New York, New York 10022 Inc. Fund L.P.
(212) 832-2798 900 Third Avenue Blackstone Offshore
New York, New York 10022 Capital Partners III
(212) 832-2798 L.P.
Blackstone Family
Investment
Partnership III L.P.
Blackstone
Management Associates
III L.L.C.
c/o Blackstone
Management Partners
III L.L.C.
345 Park Avenue --
31st Floor
New York, New York
10154
(212) 583-5000
<PAGE>
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of Person(s) Filing Statement)
---------------------
Copies to:
Peter S. Kolevzon, Esq. Ron Hopkinson, Esq.
Kramer Levin Naftalis & Frankel LLP Latham & Watkins
919 Third Avenue 885 Third Avenue - Suite 1000
New York, New York 10022-3852 New York, New York 10022
(212) 715-9100 (212) 751-4864
J. Michael Schell, Esq. Wilson S. Neely, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP Simpson Thacher & Bartlett
919 Third Avenue New York, New York 10022 425 Lexington Avenue
(212) 735-2000 New York, New York 10017
(212) 455-2000
---------------------
This statement is filed in connection with (check the appropriate box):
a. /X/ The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C or
Rule 13e-3(c) under the Securities Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities
Act of 1933.
c. / / A tender offer.
d. / / None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: /X/
(cover page continued on the following page)
-ii-
<PAGE>
(continued from cover page)
CALCULATION OF FILING FEE
Transaction Valuation* Amount of Filing Fee
$409,336,840.00 $81,867.37
/X/ Check box if any part of the fee is offset as provided by Rule 0-
11(a)(2) under the Securities Exchange Act of 1934 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.
Amount Previously Paid: $81,867.37 Filing Party: The Kroll-O'Gara
Company
Form or
Registration No.: Schedule 14-A Date Filed: December 23, 1999
* For purposes of calculation of the filing fee only. The
"Transaction Valuation" amount referred to above is the sum of (i)
the product of 22,273,352, the number of outstanding shares of
common stock, par value $.01 per share (the "Shares"), of The
Kroll-O'Gara Company as of December 21, 1999, and $18, the cash
price per Share to be paid in the Mergers (as defined herein), and
(ii) cash consideration of $8,416,504 to be paid for options
being surrendered in connection with the Mergers. In accordance
with Rule 0-11 under the Securities Exchange Act of 1934, the
filing fee is determined by multiplying the amount calculated
pursuant to the preceding sentence by 1/50th of one percent.
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 NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
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<PAGE>
EXPLANATORY NOTE
This Rule 13e-3 Transaction Statement (the "Transaction
Statement") is being filed by The Kroll-O'Gara Company, an Ohio corporation
("Kroll-O'Gara"), Kroll-O'Gara Holdings, Inc., a Delaware corporation and a
wholly owned subsidiary of Kroll-O'Gara ("Kroll-O'Gara Holdings"), KER
Acquisition, Inc., an Ohio corporation ("KER Acquisition") and an indirect
wholly owned subsidiary of Kroll-O'Gara Holdings, Jules B. Kroll, the Chief
Executive Officer and Chairman of the Board of Directors of Kroll-O'Gara and
President of KER Acquisition, Michael G. Cherkasky, the President and Chief
Operating Officer of Kroll Associates, Inc., an indirect wholly owned
subsidiary of Kroll-O'Gara and the President of Kroll-O'Gara Holdings,
BCP/KROG Merger Corp., a Delaware corporation and a wholly owned subsidiary
of BCP/KROG Acquisition Company L.L.C. ("BCP/KROG"), BCP/KROG Acquisition
Company L.L.C., a Delaware limited liability company that is 79.76% owned by
Blackstone Capital Partners III Merchant Banking Fund L.P., 14.22% owned by
Blackstone Offshore Capital Partners III L.P. and 6% owned by Blackstone
Family Investment Partnership III L.P. ("BCP/KROG Acquisition Company"),
Blackstone Capital Partners III Merchant Banking Fund L.P., a Delaware
limited partnership ("Blackstone Capital Partners III"), Blackstone
Offshore Capital Partners III L.P., a Cayman Islands exempted limited
partnership ("Blackstone Offshore Capital Partners III"), Blackstone Family
Investment Partnership III L.P., a Delaware limited partnership
("Blackstone Family Investment Partnership III," and, collectively with
Blackstone Capital Partners III and Blackstone Offshore Capital Partners
III, the "Blackstone Funds") and Blackstone Management Associates III
L.L.C., a Delaware limited liability company and the general partner of
each of the Blackstone Funds ("Blackstone Management Associates III"). The
Transaction Statement relates to an Agreement and Plan of Mergers, dated as
of November 15, 1999 (the "Merger Agreement"), among Kroll-O'Gara, Kroll
Electronic Recovery, Inc. (the prior name of Kroll-O'Gara Holdings), KER
Acquisition and BCP/KROG. The Merger Agreement contemplates, subject to the
satisfaction or waiver of the conditions stated therein, the consummation of
the following two mergers:
(i) KER Acquisition will merge with and into Kroll-
O'Gara (the "Reorganization Merger"), with Kroll-O'Gara
surviving the Reorganization Merger, such that Kroll-O'Gara will
become an indirect wholly owned subsidiary of Kroll-O'Gara
Holdings; and
(ii) following the consummation of the Reorganization
Merger, BCP/KROG will merge with and into Kroll-O'Gara Holdings
(the "Recapitalization Merger" and, together with the
Reorganization Merger, the "Mergers") with Kroll-O'Gara Holdings
surviving the Recapitalization Merger, such that, subject to the
terms and effects of the Merger Agreement, (a) BCP/KROG
Acquisition Company will own up to approximately 92.3% of the
outstanding shares of common stock, par value $0.01 per share,
of Kroll-O'Gara Holdings and (b) Jules B. Kroll, Michael G.
Cherkasky, and other members of the management of Kroll-O'Gara and
its subsidiaries will own not less than approximately 7.7%
of the outstanding shares of common stock, par value $0.01 per
share, of Kroll-O'Gara Holdings.
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<PAGE>
Prior to the Reorganization Merger, Jules Kroll, Michael Cherkasky,
other members of the management of Kroll-O'Gara and its subsidiaries and
American International Group, Inc. will sell some of their shares of the
common stock, par value $0.01 per share, of Kroll-O'Gara (the "Kroll-O'Gara
Common Stock") to BCP/KROG Acquisition Company pursuant to a Voting, Sale
and Retention Agreement dated as of November 15, 1999 (the "Voting, Sale and
Retention Agreement") among BCP/KROG Acquisition Company, Kroll-O'Gara Holdings,
the Retaining Shareholders listed therein and the O'Gara Shareholders
listed therein. The Merger Agreement, the Mergers and, as applicable,
the Voting, Sale and Retention Agreement have been approved by all the parties
to the Merger Agreement. The Merger Agreement and the Voting, Sale and
Retention Agreement, which have been filed as Appendix A and Appendix D,
respectively, to the preliminary proxy statement on Schedule 14-A of the
Kroll-O'Gara Company (the "Proxy Statement"), which is being filed with the
Securities and Exchange Commission (the "Commission") in preliminary form on
the date hereof, are incorporated herein by reference as Exhibit 17(c)(1)
hereto and Exhibit 17(c)(2)hereto, respectively.
This Transaction Statement is being filed with the
Commission pursuant to Rule 13(e)-3 of the Securities Exchange Act of
1934, as amended. The cross-reference sheet below is included herein
pursuant to General Instruction F to Schedule 13E-3 and shows the
location in the Proxy Statement of the information required to be
included herein. The information in the Proxy Statement, including
all appendices thereto, is hereby expressly incorporated herein
by reference and the responses to each item in this Transaction Statement
are qualified in their entirety by the information contained in the Proxy
Statement.
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<PAGE>
CROSS-REFERENCE SHEET
Item in
Schedule 13E-3 Location in Proxy Statement
- -------------- ---------------------------------------
Item 1(a) "Notice of Special Meeting of Shareholders,"
"Summary -- The Companies -- The Kroll-O'Gara
Company" and "Information About Kroll-O'Gara,
Kroll-O'Gara Holdings, KER Acquisition,
Jules B. Kroll and Michael G. Cherkasky -- Kroll-
O'Gara."
Item 1(b) "Summary -- The Special Meeting" and "Special
Meeting -- Record Date; Quorum; Voting Rights;
Proxies -- Record Date."
Item 1(c) "Summary -- Market Price and Dividend Information."
Item 1(d) "Summary -- Market Price and Dividend Information"
and "The Mergers -- Merger Financing."
Item 1(e) "Transactions in Kroll-O'Gara Common Stock."
Item 1(f) "Transactions in Kroll-O'Gara Common Stock."
Item 2(a)-(d), (g) "Summary -- The Companies," "Information About
Kroll-O'Gara, Kroll-O'Gara Holdings, KER
Acquisition, Jules B. Kroll and Michael G.
Cherkasky" and "Information About Blackstone,
BCP/KROG Acquisition Company and BCP/KROG."
Item 2(e)-(f) *
Item 3(a)(1) "The Voting, Sale and Retention Agreement."
Item 3(a)(2) "Special Factors -- Background of the Mergers."
Item 3(b) "Special Factors -- Background of the Mergers."
Item 4(a) "Summary -- The Mergers," "-- What You Will Receive
in the Mergers," "-- Conditions to Completion of
the Mergers," "-- Termination of the Merger Agreement"
and "-- Termination Fees and Expenses," "Special
Factors -- Purpose and Structure of the Mergers" and
"-- Accounting Treatment," "The Mergers," "The Merger
Agreement" and "The Voting, Sale and Retention
Agreement."
1
<PAGE>
Item in
Schedule 13E-3 Location in Proxy Statement
- -------------- ---------------------------
Item 4(b) "Summary -- The Mergers," "-- What You Will Receive
in the Mergers" and "-- Interests of Certain
Persons; Conflicts of Interest," "Special Factors --
Background of the Mergers," "-- Purpose and
Structure of the Mergers," "-- Interests of Certain
Persons; Conflicts of Interests," "-- Effects of the
Mergers," "-- Operations of Kroll-O'Gara Holdings
After the Mergers" and "-- Delisting and
Deregistration," "The Mergers -- Merger
Consideration" and "-- Treatment of Options," "The
Voting, Sale And Retention Agreement," "The
Stockholders' Agreement" and "Description of Kroll-
O'Gara Capital Stock."
Item 5(a) *
Item 5(b) Amendment No. 2 to the Annual Report on Form 10-K/A
of Kroll-O'Gara (the "10-K/A") for the year ended
December 31, 1999 under the caption "-- Business --
Discontinued Operations" and "Where You Can Find
More Information -- Kroll-O'Gara Documents
Incorporated by Reference."
Item 5(c) "Summary -- Interests of Certain Persons; Conflicts
of Interests," "Special Factors -- Interests of
Certain Persons; Conflicts of Interests,"
"-- Severance Agreements," "-- Employment
Agreements" and "The Mergers -- Board of Directors
and Executive Officers of Kroll-O'Gara Holdings
Following the Mergers."
Item 5(d) "Summary -- Sources and Uses of Funds," "-- Selected
Historical and Unaudited Pro Forma Condensed
Consolidated Financial Information" and "-- Market
Price and Dividend Information," "Special Factors
-- Effects of the Mergers" and "-- Operations of
Kroll-O'Gara Holdings After the Mergers," "The
Mergers -- Merger Financing," "-- Unaudited Pro
Forma Condensed Consolidated Financial Information,"
"Comparison of the Rights of Holders of Kroll-O'Gara
Common Stock and Kroll-O'Gara Holdings Common Stock"
and "Description of Kroll-O'Gara Holdings Capital
Stock."
Item 5(e) "Special Factors -- Effects of the Mergers."
Item 5(f)-(g) "Special Factors -- Delisting and Deregistration."
2
<PAGE>
Item in
Schedule 13E-3 Location in Proxy Statement
- -------------- ---------------------------
Item 6(a) "Summary -- Sources and Use of Funds" and
"-- Selected Historical and Unaudited Pro Forma
Condensed Consolidated Financial Information," "The
Mergers -- Merger Financing" and "Unaudited Pro
Forma Condensed Consolidated Financial Information."
Item 6(b) "The Mergers -- Merger Financing -- Overview."
Item 6(c) "The Mergers -- Merger Financing -- Senior
Subordinated Notes," "-- New Senior Credit Facility"
and "-- Arrangements to Repay Debt."
Item 6(d) *
Item 7(a) "Summary -- Reasons for the Mergers; Recommendations
to Shareholders," "Special Factors -- Background of
the Mergers," "-- Purpose and Structure of the
Mergers" and "-- Reasons for the Mergers;
Recommendation to Shareholders."
Item 7(b) "Special Factors -- Background of the Mergers."
Item 7(c) "Summary -- Reasons for the Mergers; Recommendations
to Shareholders," "Special Factors -- Background of
the Mergers," "-- Purpose and Structure of the
Mergers" and "-- Reasons for the Mergers;
Recommendations to Shareholders."
Item 7(d) "Summary -- The Mergers," "-- What You Will Receive
in the Mergers," "-- Material Federal Income Tax
Consequences" and "-- Interests of Certain Persons;
Conflicts of Interests," "Special Factors --
Purpose and Structure of the Mergers," "-- Reasons
for the Mergers; Recommendations to Shareholders,"
"--Interests of Certain Persons; Conflicts of
Interests," Certain Effects of the Mergers"
"-- Operations of Kroll-O'Gara Holdings After the
Mergers," "-- Delisting and Deregistration" and
"-- Material Federal Income Tax Consequences."
3
<PAGE>
Item in
Schedule 13E-3 Location in Proxy Statement
- -------------- ---------------------------
Item 8(a) "Summary -- Procedural and Substantive Fairness" and
-- "Opinion of Financial Advisor" and "Special
Factors -- Background of the Mergers," "-- Purpose
and Structure of the Merger" and "-- Reasons for the
Mergers; Recommendations to Shareholders."
Item 8(b) "Summary -- Reasons for the Mergers; Recommendations
to Shareholders" and "-- Opinion of Financial
Advisor," "Special Factors -- Reasons for the
Mergers; Recommendations to Shareholders" and
"-- Opinion of Financial Advisor."
Item 8(c) "Questions and Answers About the Mergers -- What
Vote is Required to Approve the Merger Agreement,"
"Summary -- Shareholder Vote Required" and "The
Special Meeting -- Record Date; Quorum; Voting
Rights; Proxies -- Proxies."
Item 8(d) "Summary -- Opinion of Financial Advisor" and
"Special Factors -- Background of the Mergers,"
"-- Reasons for the Mergers; Recommendation to
Shareholders" and "-- Opinion of Financial Advisor."
Item 8(e) "Special Factors -- Background of the Mergers" and
"-- Reasons for the Mergers; Recommendation to
Shareholders."
Item 8(f) *
Item 9(a)-(c) "Summary -- Opinion of Financial Advisor," "Special
Factors -- Background of the Mergers" and "-- Opinion
of Financial Advisor."
Item 10(a) "Security Ownership of Five Percent Beneficial
Owners and Management."
Item 10(b) *
Item 11 "The Voting, Sale and Retention Agreement."
4
<PAGE>
Item in
Schedule 13E-3 Location in Proxy Statement
- -------------- ---------------------------
Item 12(a) "Summary -- The Mergers," "--Interests of Certain
Persons; Conflicts of Interests" and "--Percentage
of Shares Held by Directors and Executive Officers,"
"Special Meeting -- Other Information," "Special
Factors -- Purpose and Structure of the Mergers" and
"-- Interests of Certain Persons; Conflicts of
Interest," "The Mergers -- Merger Consideration" and
"Voting, Sale and Retention Agreement."
Item 12(b) "Special Factors -- Background of the Mergers,"
"-- Reasons for the Mergers; Recommendations to
Shareholders" and "The Voting, Sale and Retention
Agreement."
Item 13(a) "Summary -- Dissenter's and Appraisal Rights" and
"The Mergers -- Dissenter's and Appraisal Rights."
Item 13(b)-(c) *
Item 14 (a) The 10-K/A and Form 10-K (with respect to the
financial data contained therein), which is
incorporated by reference in the Proxy Statement,
the Quarterly Report on Form 10-Q of
Kroll-O'Gara for the period ended September 30, 1999
(with respect to the financial data contained
therein), which is incorporated by reference in
the Proxy Statement, and "Summary --
Selected Historical and Unaudited Pro Forma Condensed
Consolidated Financial Information."
Item 14(b) "Summary -- Selected Historical and Unaudited Pro
Forma Condensed Consolidated Financial Information."
Item 15(a) *
Item 15(b) "Special Meeting -- Solicitation of Proxies" and
"-- Record Date; Quorum; Voting Rights; Proxies."
Item 16 *
Item 17(a) Commitment Letter dated November 12, 1999, from The
Chase Manhattan Bank and Chase Securities Inc. to
BCP/KROG Acquisition Company L.L.C. (filed
herewith).
5
<PAGE>
Item in
Schedule 13E-3 Location in Proxy Statement
- -------------- ---------------------------
Item 17(b)(1) Opinion dated November 14, 1999 of Bear, Stearns &
Co. Inc. (hereby incorporated herein by reference to
Appendix B to the Proxy Statement).
Item 17(b)(2) Written Board Presentation Materials dated
November 14, 1999 prepared by Bear, Stearns & Co.
Inc.
Item 17(c)(1) Agreement and Plan of Mergers, dated November
15, 1999, among The Kroll-O'Gara Company, Kroll
Electronic Recovery, Inc., KER Acquisition, Inc. and
BCP/KROG Merger Corp. (hereby incorporated herein
by reference to Appendix A to the Proxy Statement).
Item 17(c)(2) Voting, Sale and Retention Agreement, dated as of
November 15, 1999, among BCP/KROG Acquisition
Company L.L.C., Kroll Electronic Recovery, Inc., the
Retaining Shareholders listed therein and the O'Gara
Shareholders listed therein (hereby incorporated
herein by reference to Appendix D to the Proxy
Statement).
Item 17(c)(3) Form of Stockholders' Agreement to be entered into
among Kroll-O'Gara Holdings, Inc., BCP/KROG
Acquisition Company L.L.C., and the Management
Stockholders listed therein (hereby incorporated
herein by reference to Appendix G to the Proxy
Statement).
Item 17(d) Proxy Statement of the Kroll-O'Gara
Company filed with the Securities and Exchange
Commission on December 23, 1999.
Item 17(e)(1) Summary of Dissenter's Rights Under Ohio General
Corporate Law (hereby incorporated herein by
reference to Appendix C-1 to the Proxy Statement).
Item 17(e)(2) Summary of Appraisal Rights Under Delaware General
Corporate Law (hereby incorporated herein by
reference to Appendix C-2 to the Proxy Statement).
Item 17(f) *
________________
*The Item indicated by the asterisk is inapplicable or the answer thereto is
in the negative.
6
<PAGE>
SECTION 13E-3 TRANSACTION STATEMENT
Item 1. Issuer and Class of Security Subject to the Transaction
(a) The information set forth on the cover page of the
Proxy Statement, in the "Notice of
Special Meeting of Shareholders" and under the
captions "Summary -- The Companies -- The Kroll
O'Gara Company" and "Information About Kroll-O'Gara,
Kroll-O'Gara Holdings, KER Acquisition, Jules B.
Kroll and Michael G. Cherkasky -- Kroll-O'Gara" is
hereby incorporated herein by reference.
(b) The information set forth on the cover page to the
Proxy Statement and under the captions
"Summary -- The Special Meeting" and "Special
Meeting -- Record Date; Quorum; Voting Rights;
Proxies -- Record Date" is hereby incorporated herein
by reference.
(c) The information set forth in the Proxy
Statement under the caption "Summary --
Market Price and Dividend Information" is hereby
incorporated herein by reference.
(d) The information set forth in the Proxy
Statement under the captions "Summary --
Market Price and Dividend Information" and "The
Mergers -- Merger Financing" is hereby incorporated
herein by reference.
(e) The information set forth in the Proxy Statement
under the caption "Transactions in
Kroll-O'Gara Common Stock" is hereby incorporated
herein by reference.
(f) The information set forth in the Proxy Statement
under the caption "Transactions in
Kroll-O'Gara Common Stock" is hereby incorporated
herein by reference.
7
<PAGE>
Item 2. Identity and Background
This Statement is filed jointly by Kroll-O'Gara (the
issuer of the securities which are the subject of the
Rule 13e-3 transaction), Kroll-O'Gara Holdings, KER
Acquisition, Jules B. Kroll, Michael G. Cherkasky,
BCP/KROG, BCP/KROG Acquisition Company, the
Blackstone Funds and Blackstone Management
Associates III (collectively, the "Filers").
(a)-(d), (g) The information set forth in the Proxy Statement
under the captions "Summary -- The
Companies," "Information About Kroll-O'Gara, Kroll-
O'Gara Holdings, KER Acquisition, Jules B. Kroll and
Michael G. Cherkasky" and "Information About
Blackstone, BCP/KROG Acquisition Company and
BCP/KROG" is hereby incorporated herein by
reference.
(e)-(f) None of the Filers or any executive officer,
director or person controlling any of the Filers has
during the last five years (i) been convicted in a
criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) been a party to a
civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of
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.
Item 3. Past Contacts, Transactions or Negotiations
(a)(1) Not applicable. The Filers note, however, the
information set forth in the Proxy Statement
under the caption "The Voting, Sale and
Retention Agreement."
(a)(2) The information set forth in the Proxy
Statement under the caption "Special
Factors -- Background of the Mergers" is hereby
incorporated herein by reference.
(b) The information set forth in the Proxy
Statement under the caption "Special
8
<PAGE>
Factors -- Background of the Mergers" is hereby
incorporated herein by reference.
Item 4. Terms of the Transaction
(a) The information set forth in the Proxy
Statement under the captions "Summary --
The Mergers," "-- What You Will Receive in the
Mergers," "-- Conditions to Completion of the
Mergers," "-- Termination of the Merger Agreement"
and "-- Termination Fees and Expenses," "Special
Factors -- Purpose and Structure of the Mergers" and
" -- Accounting Treatment," "The Mergers," "The
Merger Agreement" and "The Voting Sale and Retention
Agreement" is hereby incorporated herein by
reference.
(b) The information set forth in the Proxy
Statement under the captions "Summary --
The Mergers," "-- What You Will Receive in the
Mergers" and "-- Interests of Certain Persons;
Conflicts of Interest," "Special Factors --
Background of the Mergers," "-- Purpose and
Structure of the Mergers," "-- Interests of Certain
Persons; Conflicts of Interests," "-- Effects of the
Mergers," " -- Operations of Kroll-O'Gara Holdings
after the Mergers" and "-- Delisting and
Deregistration," "The Mergers -- Merger
Consideration" and "-- Treatment of Options," "The
Voting, Sale And Retention Agreement," "The
Stockholders' Agreement" and "Description of Kroll-
O'Gara Holdings Capital Stock" is hereby
incorporated herein by reference.
Item 5. Plans or Proposals of the Issuer or Affiliate
(a) Not applicable.
(b) The information set forth in the 10-K/A under the
caption "-- Business Discontinued Operations"
(regarding the possible sale of the Voice and Data
Communications Group), which 10-K/A is incorporated
by reference in the Proxy Statement, is
hereby incorporated herein by reference.
9
<PAGE>
(c) The information set forth in the Proxy
Statement under the captions "Summary --
Interests of Certain Persons; Conflicts of
Interest," "Special Factors -- Interests of Certain
Persons; Conflicts of Interest,"
"-- Severance Agreements," "-- Employment
Agreements" and "The Mergers -- Board of Directors
and Executive Officers of Kroll-O'Gara Holdings
Following the Mergers" is hereby incorporated herein
by reference.
(d) The information set forth in the Proxy
Statement under the captions "Summary --
Sources and Uses of Funds," "-- Selected Historical
and Unaudited Pro Forma Condensed Consolidated
Financial Information" and "-- Market Price and
Dividend Information," "Special Factors -- Effects
of the Mergers" and " -- Operations of Kroll-O'Gara
Holdings After the Mergers," "The Mergers -- Merger
Financing," "Unaudited Pro Forma Condensed
Consolidated Financial Information," "Comparison of
the Rights of Holders of Kroll-O'Gara Common Stock
and Kroll-O'Gara Holdings Common Stock" and
"Description of Kroll-O'Gara Holdings Capital Stock"
is hereby incorporated herein by reference.
(e) The information set forth in the Proxy
Statement under the caption "Special
Factors -- Effects of the Mergers" is hereby
incorporated herein by reference.
(f)-(g) The information set forth in the Proxy
Statement under the caption "Special
Factors -- Delisting and Deregistration" is hereby
incorporated herein by reference.
Item 6. Source and Amounts of Funds or Other Consideration
(a) The information set forth in the Proxy
Statement under the captions "Summary --
Sources and Uses of Funds" and " -- Selected
Historical and Unaudited Pro Forma Condensed
Consolidated Financial Information," "The Mergers --
Merger Financing," and "Unaudited Pro Forma
Condensed Consolidated Financial Information" is
hereby incorporated herein by reference.
10
<PAGE>
(b) The information set forth in the Proxy Statement
under the caption "The Mergers -- Merger
Financing -- Overview" is hereby incorporated herein
by reference.
(c) The information set forth in the Proxy Statement
under the captions "The Mergers -- Merger
Financing -- Senior Subordinated Notes," "-- New
Senior Credit Facility" and "-- Arrangements to
Repay Debt" is hereby incorporated herein by
reference.
(d) Not applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects
(a) The information set forth in the Proxy
Statement under the captions "Summary --
Reasons for the Mergers; Recommendations to
Shareholders," "Special Factors -- Background of the
Mergers," "-- Purpose and Structure of the Mergers"
and "-- Reasons for the Mergers; Recommendations to
Shareholders" is hereby incorporated herein by
reference.
(b) The information set forth in the Proxy Statement
under the caption "Special Factors --
Background of the Mergers" is hereby incorporated
herein by reference.
(c) The information set forth in the Proxy Statement
under the captions "Summary -- Reasons
for the Mergers; Recommendations to Shareholders,"
"Special Factors -- Background of the Mergers,"
"-- Purpose and Structure of the Mergers" and
"-- Reasons for the Mergers; Recommendations to
Shareholders" is hereby incorporated herein by
reference.
(d) The information set forth in the Proxy
Statement under the captions "Summary --
The Mergers," "-- What You Will Receive in the
Mergers," "-- Material Federal Income Tax
Consequences" and "-- Interests of Certain Persons;
Conflicts of Interests" and "Special Factors --
Purpose and Structure of the Mergers," "-- Reasons
for the Mergers; Recommendations to Shareholders,"
11
<PAGE>
"-- Interests of Certain Persons; Conflicts of
Interests," "-- Certain Effects of the Mergers,"
"-- Operations of Kroll-O'Gara Holdings After the
Mergers," "-- Delisting and Deregistration" and
"-- Material Federal Income Tax Consequences" is
hereby incorporated herein by reference.
Item 8. Fairness of the Transaction
(a) The information set forth in the Proxy
Statement under the captions "Summary --
Procedural and Substantive Fairness" and
"-- Opinion of Financial Advisor," "Special Factors
-- Background of the Mergers," "-- Purpose and
Structure of the Mergers" and "-- Reasons for the
Mergers; Recommendations to Shareholders" is hereby
incorporated herein by reference.
(b) The information set forth in the Proxy
Statement under the captions "Summary --
Reasons for the Mergers; Recommendations to
Shareholders" and "-- Opinion of Financial Advisor"
and "Special Factors -- Reasons for the Mergers;
Recommendations to Shareholders" and "-- Opinion of
Financial Advisor" is hereby incorporated herein by
reference.
(c) The mergers are not structured so that approval of
at least a majority of unaffiliated security holders
is required. In addition, the information set forth
in the Proxy Statement under the captions
"Questions and Answers About the Mergers -- What
Vote is Required to Approve the Merger Agreement,"
"Summary -- Shareholder Vote Required" and "The
Special Meeting -- Record Date; Quorum; Voting
Rights; Proxies -- Proxies" is hereby incorporated
herein by reference.
(d) A Special Committee of the Board of Directors,
a majority of which the directors who are
not employees of Kroll-O'Gara, retained Skadden,
Arps, Slate, Meagher & Flom LLP, as its counsel to
act solely on behalf of the unaffiliated holders of
the Kroll-O'Gara Common Stock for the purposes of
12
<PAGE>
advising the Special Committee and negotiating
certain terms of the Merger Agreement, the Mergers
and certain related provisions of the Voting, Sale
and Retention Agreement. In connection therewith,
the Special Committee retained Bear, Stearns & Co.
Inc. to act as its financial advisor. In addition,
the information in the Proxy Statement under
the captions "Summary -- Opinion of Financial
Advisor" and "Special Factors -- Background of the
Mergers," "-- Reasons for the Mergers;
Recommendations to Shareholders" and "-- Opinion of
Financial Advisor" is hereby incorporated herein by
reference.
(e) The Merger Agreement and the Mergers were unanimously
approved by the Special Committee and approved by
the Board of Directors of Kroll-O'Gara, including by
a majority of the Board of Directors who are not
employees of Kroll-O'Gara. In addition, the
information set forth in the Proxy Statement under
the captions "Special Factors -- Background of the
Mergers" and "-- Reasons for the Mergers;
Recommendations to Shareholders" is hereby
incorporated herein by reference.
(f) Not applicable.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations
(a)-(c) The information set forth in the Proxy
Statement under the captions "Summary --
Opinion of Financial Advisor," "Special Factors
-- Background of the Mergers" and "-- Opinion of
Financial Advisor" is hereby incorporated herein by
reference.
13
<PAGE>
Item 10. Interest in Securities of the Issuer
(a) The information set forth in the Proxy
Statement under the caption "Security
Ownership of Five Percent Beneficial Owners And
Management" is hereby incorporated herein by
reference.
(b) None.
Item 11. Contracts, Arrangements or Understandings with
Respect to the Issuer's Securities
The information set forth in the Proxy
Statement under the caption "The Voting,
Sale And Retention Agreement" is hereby incorporated
herein by reference.
Item 12. Present Intention and Recommendation of Certain
Persons with Regard to the Transaction
(a) The information set forth in the Proxy
Statement under the captions "Summary --
The Mergers," "--Interests of Certain Persons;
Conflicts of Interests" and "--Percentage of Shares
Held by Directors and Executive Officers," "Special
Meeting -- Other Information," "Special Factors --
Purpose and Structure of the Mergers" and
"-- Interests of Certain Persons; Conflicts of
Interest," "The Mergers -- Merger Consideration" and
"The Voting, Sale and Retention Agreement" is hereby
incorporated herein by reference.
(b) The information set forth in the Proxy Statement
under the captions "Special Factors --
Background of the Mergers," "--Reasons for the
Mergers; Recommendations to Shareholders" and "The
Voting, Sale and Retention Agreement" is hereby
incorporated herein by reference.
14
<PAGE>
Item 13. Other Provisions of the Transaction
(a) The information set forth in the Proxy
Statement under the captions "Summary --
Dissenter's and Appraisal Rights" and "The Mergers
-- Dissenter's and Appraisal Rights" is hereby
incorporated herein by reference.
(b)-(c) Not applicable.
Item 14. Financial Information
(a) The 10-K/A (with respect to the financial data
contained therein), which is incorporated by
reference in the Proxy Statement, the
Quarterly Report on Form 10-Q of Kroll-O'Gara for
the period ended September 30, 1999 (with
respect to the financial data contained therein),
which is incorporated by reference in the Proxy
Statement, and the information set forth
in the Proxy Statement under the caption
"Summary -- Selected Historical and Unaudited Pro
Forma Condensed Consolidated Financial Information"
are hereby incorporated herein by reference.
(b) The information set forth in the Proxy
Statement under the caption "Summary --
Selected Historical and Unaudited Pro Forma
Condensed Consolidated Financial Information" is
hereby incorporated herein by reference.
Item 15. Persons and Assets Employed, Retained or Utilized
(a) Not Applicable.
(b) The information set forth in the Proxy Statement
under the caption "Special Meeting --
Solicitation of Proxies" and "-- Record Date;
Quorum; Voting Rights; Proxies" is hereby
incorporated herein by reference.
Item 16. Additional Information
Not applicable.
15
<PAGE>
Item 17. Material to Be Filed as Exhibits
(a) Commitment Letter dated November 12, 1999, from The
Chase Manhattan Bank and Chase Securities Inc. to
BCP/KROG Acquisition Company L.L.C. (filed
herewith).
(b)(1) Opinion dated November 14, 1999 of Bear, Stearns &
Co. Inc. (hereby incorporated herein by reference to
Appendix B to the Proxy Statement).
(b)(2) Written Board Presentation Materials dated
November 14, 1999 prepared by Bear, Stearns & Co.
Inc. (Filed herewith).
(c)(1) Agreement and Plan of Mergers, dated as of November
15, 1999, among The Kroll-O'Gara Company, Kroll
Electronic Recovery, Inc., KER Acquisition, Inc. and
BCP/KROG Merger Corp. (hereby incorporated herein by
reference to Appendix A to the Proxy
Statement).
(c)(2) Voting, Sale and Retention Agreement, dated as of
November 15, 1999, among BCP/KROG Acquisition
Company L.L.C., Kroll Electronic Recovery, Inc., the
Retaining Shareholders listed therein and the O'Gara
Shareholders listed therein (hereby incorporated
herein by reference to Appendix D to the Proxy
Statement).
(c)(3) Form of Stockholders' Agreement to be entered among
Kroll-O'Gara Holdings Inc., BCP/KROG Acquisition
Company L.L.C. and the Retaining Stockholders listed
therein (hereby incorporated herein by reference to
Appendix G to the Proxy Statement).
(d) Proxy Statement of The Kroll-O'Gara
Company filed with the Securities and Exchange
Commission on December 23, 1999 (hereby
incorporated herein by reference).
(e)(1) Summary of Dissenter's Rights Under Ohio General
Corporation Law (hereby incorporated by reference to
Appendix C-1 to the Proxy Statement).
(e)(2) Summary of Appraisal Rights Under Delaware General
Corporation Law (hereby incorporated by reference to
Appendix C-2 to the Proxy Statement).
(f) Not applicable.
16
<PAGE>
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.
THE KROLL-O'GARA COMPANY
By: /s/ NAZZARENO E. PACIOTTI
Name: Nazzareno E. Paciotti
Title: Chief Financial Officer
KROLL-O'GARA HOLDINGS, INC.
By: /s/ NAZZARENO E. PACIOTTI
Name: Nazzareno E. Paciotti
Title: Vice President, Treasurer and
Chief Financial Officer
KER ACQUISITION, INC.
By: /s/ STEVEN SHARPE
Name: Steven Sharpe
Title: Vice President, Treasurer
and Secretary
JULES B. KROLL
/s/ JULES B. KROLL
MICHAEL G. CHERKASKY
/s/ MICHAEL G. CHERKASKY
Dated: December 23, 1999
17
<PAGE>
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.
BCP/KROG MERGER CORP.
By: /s/ ROBERT L. FRIEDMAN
Name: Robert L. Friedman
Title: President
BCP/KROG ACQUISITION COMPANY L.L.C.
By: Blackstone Capital Partners III
Merchant Banking Fund L.P., as sole
member
By: Blackstone Management Associates
III L.L.C., its general partner
By: /s/ ROBERT L. FRIEDMAN
Name: Robert L. Friedman
Title: Member
BLACKSTONE CAPITAL PARTNERS III MERCHANT
BANKING FUND L.P.
By: Blackstone Management Associates III
L.L.C., its general partner
By: /s/ ROBERT L. FRIEDMAN
Name: Robert L. Friedman
Title: Member
Dated: December 23, 1999
18
<PAGE>
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.
BLACKSTONE OFFSHORE CAPITAL PARTNERS III
L.P.
By: Blackstone Management Associates III
L.L.C., its general partner
By: /s/ ROBERT L. FRIEDMAN
Name: Robert L. Friedman
Title: Member
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP
III L.P.
By: Blackstone Management Associates III
L.L.C., its general partner
By: /s/ ROBERT L. FRIEDMAN
Name: Robert L. Friedman
Title: Member
BLACKSTONE MANAGEMENT ASSOCIATES III L.L.C.
By: /s/ ROBERT L. FRIEDMAN
Name: Robert L. Friedman
Title: Member
Dated: December 23, 1999
19
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
(a) Commitment Letter dated November 12, 1999, from The
Chase Manhattan Bank and Chase Securities Inc. to
BCP/KROG Acquisition Company L.L.C. (filed
herewith).
(b)(1) Opinion dated November 14, 1999 of Bear, Stearns &
Co. Inc. (hereby incorporated herein by reference to
Appendix B to the Proxy Statement).
(b)(2) Written Board Presentation Materials dated
November 14, 1999 prepared by Bear, Stearns & Co.
Inc. (filed herewith).
(c)(1) Agreement and Plan of Mergers, dated as of November
15, 1999, among the Kroll-O'Gara Company, Kroll
Electronic Recovery, Inc., KER Acquisition, Inc. and
BCP/KROG Merger Corp. (hereby incorporated herein by
reference to Appendix A to the Proxy
Statement).
(c)(2) Voting, Sale and Retention Agreement, dated as of
November 15, 1999, among BCP/KROG Acquisition
Company L.L.C., Kroll Electronic Recovery, Inc. and
Retaining Shareholders listed therein and the O'Gara
Shareholders listed therein (hereby incorporated
herein by reference to Appendix D to the Proxy
Statement).
(c)(3) Form of Stockholders' Agreement to be entered into
among Kroll-O'Gara Holdings, Inc., BCP/KROG
Acquisition Company L.L.C. and the Management
Stockholders listed therein (hereby incorporated
herein by reference to Appendix G to the Proxy
Statement).
(d) Proxy Statement of the Kroll-O'Gara
Company filed with the Securities Exchange
Commission on December 23, 1999 (hereby
incorporated herein by reference).
(e)(1) Summary of Dissenter's Rights Under Ohio General
Corporation Law (hereby incorporated by reference to
Appendix C-1 to the Proxy Statement).
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<PAGE>
(e)(2) Summary of Appraisal Rights Under Delaware General
Corporation Law (hereby incorporated by reference to
Appendix C-2 to the Proxy Statement).
(f) Not applicable.
ii
November 12, 1999
BCP/KROG Acquisition Company L.L.C.
c/o Blackstone Management Partners III
L.L.C.
345 Park Avenue
New York, New York 10154
Attention of Robert Friedman
David Blitzer
Project Armor
$200,000,000 Senior Secured Credit Facilities
$150,000,000 Senior Subordinated Credit Facility
Commitment Letter
Ladies and Gentlemen:
You have advised The Chase Manhattan Bank ("Chase") and
Chase Securities Inc. ("CSI") that you, Blackstone Management Partners III
L.L.C. ("BMP") and the other Investors (such term and each other capitalized
term used but not defined herein having the meaning assigned to it in the
Term Sheets (as defined below)) intend to effect the Recapitalization and the
other Transactions. You have further advised Chase and CSI that, in
connection with the Transactions, (a) the Borrower will obtain the Senior
Secured Facilities (as defined in the Summary of Principal Terms and
Conditions attached hereto as Exhibit A (the "Senior Secured Facilities Term
Sheet")) and (b) the Borrower and the Co-Issuer will either (i) issue not
less than $150,000,000 in aggregate principal amount of their senior
subordinated notes (the "Senior Subordinated Notes") in a public offering or
in a Rule 144A or other private placement or (ii) if the Borrower and the Co-
Issuer are unable to issue the Senior Subordinated Notes on or prior to the
Closing Date, borrow not less than $150,000,000 in senior subordinated loans
from one or more lenders under the Senior Subordinated Facility (as defined
in the Summary of Principal Terms and Conditions attached hereto as Exhibit B
(the "Senior Subordinated Facility Term Sheet" and, together with the Senior
Secured Facilities Term Sheet, the "Term Sheets")). The Senior Secured
<PAGE>
Facilities and the Senior Subordinated Facility are collectively referred to
herein as the "Facilities".
In connection with the Transactions, Chase is pleased to
advise you of its commitments (the "Commitments") to provide (a) the entire
principal amount of the Senior Secured Facilities, upon the terms and subject
to the conditions set forth or referred to in this Commitment Letter (this
"Commitment Letter") and in the Senior Secured Facilities Term Sheet, and
(b) the entire principal amount of the Senior Subordinated Facility, upon the
terms and subject to the conditions set forth or referred to in this
Commitment Letter and in the Senior Subordinated Facility Term Sheet. You
hereby appoint CSI to act, and CSI hereby agrees to act, as sole and
exclusive advisor, lead arranger and sole book manager for each of the
Facilities on the terms and subject to the conditions set forth or referred
to in this Commitment Letter and in the Term Sheets.
Chase will act as the sole and exclusive Administrative
Agent for the Facilities and as the sole and exclusive Collateral Agent for
the Senior Secured Facilities (the "Agent"), and CSI will act as the sole and
exclusive advisor, lead arranger and sole book manager for the Facilities,
and each will, in such capacities, perform the duties customarily associated
with such roles. No other agents or co-agents, book managers or arrangers
will be appointed, and no other titles will be awarded to any Lender (as
defined below), unless approved by Chase, CSI and you.
Chase reserves the right, prior to or after the execution of
definitive documentation for the Facilities, to syndicate all or a portion of
each of its Commitments to one or more financial institutions, reasonably
acceptable to the Agent and you, that will become parties to such definitive
documentation pursuant to syndications to be managed by CSI in consultation
with you (the financial institutions becoming parties to such definitive
documentation being collectively called the "Lenders"). You understand that
each of the Facilities will be separately syndicated and that CSI intends to
commence such syndication efforts promptly after execution of the Merger
Agreement by the parties thereto and you agree actively to assist CSI and
Chase in achieving timely and orderly syndications (at times mutually agreed
upon) of the Facilities that are satisfactory to CSI, Chase and you. This
will be accomplished by a variety of means, including direct contact during
the syndications (at times mutually agreed upon) among the senior officers,
representatives and advisors of you, BMP, the Fund, Investco, the Borrower
and the Company, on the one hand, and the proposed Lenders, on the other
hand. Such assistance shall also include your using reasonable efforts to
have the syndication and arrangement efforts benefit from your, BMP's, the
Fund's and the Company's existing lending relationships.
It is understood and agreed that CSI will, in consultation
with you, manage all aspects of the syndications, including selection of
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<PAGE>
Lenders reasonably acceptable to you, determination of when CSI will approach
potential Lenders and of the time of acceptance of the Lenders' commitments,
any naming rights and the final allocations of the commitments among the
Lenders. It is also understood and agreed that the amount and distribution
of fees among the Lenders will be at CSI's sole discretion, after
consultation with you. To assist CSI in its syndication efforts, you agree,
upon CSI's reasonable request, (a) promptly to provide, and to cause your
affiliates and advisors to provide (and to use reasonable efforts to cause
the Borrower and the Company to provide), to CSI and Chase financial and
other information in your or their possession with respect to you, the
Borrower, the Company and its subsidiaries, the Recapitalization, the other
Transactions and any other transactions contemplated hereby, including but
not limited to information and projections prepared by you, the Borrower (to
the extent available to you), the Company (to the extent available to you),
the Fund or BMP or by your or their advisors on your or their behalf relating
to you, the Borrower, the Company and its subsidiaries, the Recapitalization,
the other Transactions or the other transactions contemplated hereby, (b) to
make your senior officers, and to cause BMP's, the Borrower's and the
Company's senior officers (including its chief executive officer) to be made,
available to prospective Lenders, (c) to assist, and to use reasonable
efforts to cause BMP's, the Borrower's and the Company's and your affiliates
and advisors to assist, CSI in the preparation of Confidential Information
Memoranda and other marketing materials to be used in connection with the
syndications and (d) to host, with CSI, a meeting or series of meetings of
prospective Lenders (either individually or in groups).
As consideration for the Commitments and CSI's agreement to
structure, arrange and syndicate the Facilities and to provide advisory
services in connection therewith, you agree to pay (or cause the Borrower to
pay) the fees as set forth in the Term Sheets and in the Fee Letter dated the
date hereof and delivered herewith with respect to the Senior Secured
Facilities and the Senior Subordinated Facility (the "Fee Letter"). Once
paid, such fees shall not be refundable under any circumstances except as
otherwise contemplated thereby.
You hereby represent and covenant that (a) to the best of
your knowledge, all information (excluding information of a general economic
nature and financial projections) concerning you, Investco, the Borrower, the
Company and its subsidiaries, the Recapitalization, the other Transactions
and the other transactions contemplated hereby (the "Information") that has
been or will be prepared by or on behalf of you, the Borrower, the Company,
Investco, BMP or any of your or their authorized representatives and that has
been made or will be made available to CSI or Chase by you, the Borrower, the
Company, BMP or any of your or their authorized representatives in connection
with the transactions contemplated hereby, when taken as a whole, will be
true and correct in all material respects (after giving effect to all written
updates thereto delivered to Chase or CSI prior to the Closing Date) and will
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<PAGE>
not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein not
materially misleading in light of the circumstances under which such
statements are made and (b) to the best of your knowledge, all financial
projections concerning you, Investco, the Borrower, the Company and its
subsidiaries, the Recapitalization, the other Transactions and the other
transactions contemplated hereby (the "Projections") that have been prepared
by or on behalf of you, the Borrower, the Company, Investco, BMP or any of
your or their authorized representatives and that have been or will be made
available to CSI or Chase by you, the Borrower, the Company, BMP or any of
your or their authorized representatives in connection with the transactions
contemplated hereby have been and will be prepared in good faith based upon
assumptions believed by you to be reasonable. You agree to supplement the
Information and the Projections from time to time until the closing of the
Facilities so that the representations and covenants in the preceding
sentence remain correct. In arranging the Facilities, including the
syndications of the Facilities, CSI and Chase will be using and relying
primarily on the Information and the Projections without independent
verification thereof.
Each Commitment is subject to (a) there not having occurred
any material adverse effect on the business, financial condition, results of
operations or prospects of the Company and its subsidiaries, taken as a
whole, since December 31, 1998, (b) there not having occurred and being
continuing any material disruption of, or material adverse change in, the
financial, banking or capital markets (including, without limitation, high
yield market) conditions since the date hereof that, in Chase's reasonable
judgment, would reasonably be expected to materially impair the syndication
of any of the Facilities or the issuance and sale of the Securities (as
defined in the Fee Letter), (c) Chase's satisfaction that prior to and during
the syndications of the Facilities, there shall be no competing issues of
debt securities or commercial bank or other credit facilities of you, the
Borrower, the Company, Holdco or any of your or their respective subsidiaries
(other than the Senior Subordinated Notes) and (d) the other conditions set
forth herein and in the Term Sheets.
In addition, each of the Commitments is subject to the
negotiation, execution and delivery of definitive documentation with respect
to the Facilities reasonably satisfactory to Chase and you. Such
documentation shall contain such indemnities, covenants, representations and
warranties, events of default (including but not limited to Change in Control
(to be defined)), conditions precedent, security arrangements (in the case of
the Senior Secured Facilities only) and other terms and conditions that are
customary for facilities and transactions of this type and reasonably
satisfactory to Chase and you. Those matters that are not covered by or made
clear under the provisions hereof or of the Term Sheets are subject to the
approval and agreement of Chase and you (it being understood that the terms
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<PAGE>
and conditions of the definitive documentation with respect to the Facilities
shall not be inconsistent with the terms and conditions set forth herein or
in the Term Sheets).
You agree to cause to be deposited into escrow on the
Closing Date the Warrants referred to in the Warrant Letter of even date
herewith among Chase, CSI and you (the "Warrant Letter").
By executing this Commitment Letter you agree (a) to
indemnify and hold harmless CSI, Chase and the other Lenders and their
respective officers, directors, employees, affiliates, agents and controlling
persons from and against any and all losses, claims, damages, liabilities and
expenses, joint or several, to which any such persons may become subject
arising out of or in connection with this Commitment Letter, the Fee Letter,
the Term Sheets, the Recapitalization, the other Transactions, the Facilities
or any related transaction or any claim, litigation, investigation or
proceeding relating to any of the foregoing, regardless of whether any of
such indemnified parties is a party thereto, and to reimburse each of such
indemnified parties upon demand for any legal or other expenses reasonably
incurred in connection with investigating or defending any of the foregoing,
provided that the foregoing indemnity will not, as to any indemnified party,
apply to losses, claims, damages, liabilities or related expenses to the
extent they result primarily from the wilful misconduct or gross negligence
of any indemnified party, and (b) to reimburse CSI and Chase from time to
time, upon presentation of a summary statement in reasonable detail, for all
reasonable out-of-pocket expenses (including but not limited to expenses of
due diligence investigation, local counsel and other consultants' fees (if
such local counsel or consultants are engaged with your prior written
consent), syndication expenses, travel expenses and reasonable fees,
disbursements and other charges of counsel) incurred in connection with the
Facilities and the preparation of this Commitment Letter, the Term Sheets,
the Fee Letter, the definitive documentation for the Facilities and the
security arrangements in connection with the Senior Secured Facilities. No
person indemnified under this paragraph shall be responsible or liable to any
other person for damages arising from the use by others of Information or
other materials obtained through electronic, telecommunications or other
information transmission systems or for consequential damages that may be
alleged as a result of this Commitment Letter, the Fee Letter, the Term
Sheets, the Recapitalization, the other Transactions, the Facilities or any
related transaction. Subject to the provisions of the fourteenth paragraph
of this Commitment Letter, the provisions contained in this paragraph shall
remain in full force and effect notwithstanding the termination of this
Commitment Letter or any Commitment.
You agree that you will not disclose this Commitment Letter,
the Term Sheets, the Fee Letter, the contents of any of the foregoing or the
activities of CSI or Chase pursuant hereto or thereto to any person without
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<PAGE>
the prior approval of CSI and Chase, except that (a) you may disclose this
Commitment Letter, the Term Sheets, the Fee Letter and the contents hereof
and thereof (i) to your officers, employees, attorneys and advisors and to
the respective officers, employees, attorneys, advisors and members of The
Blackstone Group L.P. and its affiliates, in each case on a confidential and
need-to-know basis, and (ii) as required by applicable law or compulsory
legal process or in the prosecution of any proceeding initiated by you, the
Fund, Holdco, the Borrower or the Company, provided that you may disclose
this Commitment Letter, the Term Sheets and the contents hereof and thereof
to the Borrower and the Company and their respective directors, officers,
employees, agents, attorneys and advisors in connection with the consummation
of the Transactions contemplated hereby; (b) you may disclose this Commitment
Letter and the Term Sheets and the contents hereof and thereof on a
confidential basis to the Investors and their attorneys and advisors in
connection with the transactions contemplated hereby; (c) you may disclose
the Senior Subordinated Facility Term Sheet and this Commitment Letter on a
confidential basis to lead purchasers or underwriters of the Senior
Subordinated Notes or agents under the Senior Subordinated Facility; and
(d) after your acceptance of the terms of this Commitment Letter and of the
Fee Letter, you may disclose the existence of this Commitment Letter and a
summary of the principal terms and conditions of the Commitments of Chase
hereunder (or the full Commitment Letter if advisable in the reasonable
opinion of the Company and its counsel) in any public filings to be made in
connection with the Company's solicitation of proxies from its stockholders
for purposes of obtaining the approval of such stockholders for the
Transactions, provided that any such disclosure that is in writing shall be
subject to Chase's prior review and approval (such approval not to be
unreasonably withheld), it being expressly understood and agreed that neither
the Fee Letter nor the contents thereof may be so disclosed pursuant to the
proviso in clause (a) above or pursuant to clause (b), (c) or (d) above
without the consent of CSI and Chase. The provisions contained in this
paragraph shall remain in full force and effect notwithstanding the
termination of this Commitment Letter or any Commitment.
Neither this Commitment Letter nor any Commitment shall be
assignable by you without the prior written consent of Chase, and any
attempted assignment shall be void, provided that this Commitment Letter and
the Commitments hereunder may be assigned by you pursuant to a document
reasonably satisfactory to Chase to the Borrower, so long as you remain
liable for all your obligations hereunder. This Commitment Letter may not be
amended or any provision hereof waived or modified except by an instrument in
writing signed by each of CSI, Chase and you. This Commitment Letter may be
executed in any number of counterparts, each of which shall be an original
and all of which, when taken together, shall constitute one agreement.
Delivery of an executed counterpart of a signature page of this Commitment
Letter by facsimile transmission shall be effective as delivery of a manually
executed counterpart of this Commitment Letter. This Commitment Letter is
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<PAGE>
intended to be solely for the benefit of the parties hereto and is not
intended to confer any benefits upon, or create any rights in favor of, any
person other than the parties hereto. This Commitment Letter shall be
governed by, and construed in accordance with, the laws of the State of New
York. Chase may perform certain of the duties and activities described
hereunder through any of its affiliates, including, without limitation, CSI.
The provisions of the second preceding paragraph shall apply with equal force
and effect to any of such affiliates so performing any of such duties or
activities.
Your obligations and representations under this Commitment
Letter, other than those arising under the fourth, fifth and twelfth
paragraphs of this Commitment Letter, shall automatically terminate and be
superseded by the provisions of the definitive documentation for the
Facilities upon the closing of any of the Facilities and the consummation of
the Recapitalization.
Please indicate your acceptance of the terms hereof and of
the Fee Letter by signing in the appropriate space below and in the Fee
Letter and returning to CSI and Chase the enclosed duplicate originals of
this Commitment Letter and the Fee Letter not later than 5:00 p.m., New York
City time, on November 15, 1999. The Commitments will expire at such time in
the event that Chase has not received such executed duplicate originals in
accordance with the immediately preceding sentence. In the event that the
initial borrowing in respect of the Facilities does not occur on or before
April 30, 2000 (or such later date as may be agreed to among Chase, CSI and
you), then this Commitment Letter and the Commitments shall automatically
terminate unless each of CSI and Chase shall agree to an extension. You
understand that CSI intends to commence syndication efforts with respect to
the Facilities promptly after execution of the Merger Agreement by the
parties thereto.
-7-
<PAGE>
CSI and Chase are pleased to have been given the opportunity
to assist you in connection with the financing for the Recapitalization.
Very truly yours,
THE CHASE MANHATTAN BANK,
by /s/ DEBORAH DAVEY
Name: Deborah Davey
Title: Vice President
CHASE SECURITIES INC.,
by /s/ DEBORAH DAVEY
Name: Deborah Davey
Title: Vice President
Accepted and agreed to as of the date
first written above:
BCP/KROG ACQUISITION COMPANY L.L.C.
by /s/ ROBERT L, FRIEDMAN
Name: Robert L. Friedman
Title: President
-8-
Presentation to: [PRES1]
Special Committee of
the Board of Directors
Regarding the Blackstone Proposal
November 14, 1999
<PAGE>
Table of Contents
Section
1 Overview of the Blackstone Proposal
2 Historical and Projected Results
3 Stock Price Performance
4 Valuation Analysis
A Trading Multiples of Selected Comparable Companies
B Present Value of Hypothetical Future Stock Price Analysis
C Discounted Cash Flow Analysis
D Acquisition Multiples of Selected Precedent Transactions
E Sum-of-the-Parts Valuation Analysis
Appendices
A Wall Street Commentary
B Discounted Cash Flow Methodology and Weighted Average Cost of
Capital Calculation
C Preferred Stock Valuation Analysis
D LBO Analysis
E Platinum Ownership Profile
F Trading Multiples of Selected Comparable Companies-ISG
G Additional Financial Data
-2-
<PAGE>
Section 1
Overview of the Blackstone Proposal
-3-
<PAGE>
Summary of the Blackstone Proposal
Transaction Structure Acquisition of controlling interest in Platinum by
Blackstone through the following steps:
1. Platinum will be reorganized into New Platinum,
a Delaware Corporation
2. Recapitalization Merger Sub organized by
Blackstone will be merged with and into
New Platinum
3. New Platinum will be the surviving company in the
merger and be owned by Blackstone and the
Retaining Shareholders
Consideration $18 cash per share of Platinum Common Stock, except for
3,611,111 common shares representing approximately 16%
of total shares outstanding:
- 833,333 common shares owned by Jules B. Kroll
("JBK") and certain other management
("Retained Shares") which will remain outstanding
- 1,111,111 common shares owned by AIG(1)
("Series A-1 Conversion Shares") which will be
converted into Series A-1 Preferred Stock; and
- 1,666,667 common shares owned by JBK(2)
("Series B-1 and B-2 Conversion Shares") which
will be converted into Series B-1 and B-2
Preferred Stock
Accounting Treatment Recapitalization for financial accounting purposes
(i.e., no new goodwill on New Platinum's balance sheet)
Tax Treatment Taxable transaction for public shareholders receiving
cash
Shareholder Approval Requires approval of a majority of the shareholders
of Platinum
-4-
<PAGE>
Voting Agreement JBK, certain other management, Tom and Bill O'Gara and
AIG, representing approximately 36% of shares
outstanding, would agree to vote in favor of the
proposed transaction
_____________
(1) Out of total common shares owned by AIG of 1,444,212. The remainder
(333,111) will be purchased for $18 cash.
(2) Out of total common shares owned by JBK of 3,072,551. Approximately
667,000 shares owned by JBK will be Retained Shares. Approximately
739,000 shares owned by JBK will be sold for cash ($13.3 million).
-5-
<PAGE>
Summary of Consideration to JBK and AIG
<TABLE>
<CAPTION>
($ in thousands, except per share amounts)
Shares Value @ $18/share
--------------- -----------------
JBK
- ----------------------------------
<S> <C> <C>
Retained Shares 666,667 $12,000
Series B-1 and B-2 Conversion Shares 1,666,667 30,000
Shares sold for $18 cash 739,217 13,306
--------- -------
Total JBK 3,072,551 $55,306
--------- -------
AIG
Retained Shares - -
Series A-1 Conversion Shares 1,111,111 $20,000
Shares sold for $18 cash 333,101 5,996
--------- -------
Total AIG 1,444,212 $25,996
--------- -------
</TABLE>
-6-
<PAGE>
13% Cumulative Participating Pay-In-Kind Preferred Stock, Series A-1
Security 20,000 shares of 13% Cumulative
Participating Pay-In-Kind Preferred
Stock, Series A-1, stated value $1,000
per share, for an aggregate initial
value of $20 million.
Dividends Cumulative dividends payable in cash or
Series A-2 Preferred Stock<F1> annually
as declared by the Board of Directors
in an aggregate amount equal to 13% of
the liquidation preference at the
beginning of the annual dividend period
plus the amount of dividends, if any,
paid on 173,062 shares of Common Stock
during the corresponding period.
Common Equity Participation 8.65 common shares per share. (Total of
173,062 common shares representing
approximately 1.5% of New Platinum
common shares.)
Ranking Pari passu with Series A-2 Preferred
Stock and Series B-1 and B-2 Preferred
Stock and preferred over Common Stock
as to dividends and upon liquidation.
Liquidation Preference $1,000 per share plus accrued and
unpaid dividends plus either 8.65
shares of Common Stock or the amount
that 8.65 shares of Common Stock would
be entitled to receive in liquidation.
_____________
[FN]
<F1> 13% cumulative Pay-In-Kind Preferred Stock, Series A-2 is not
participating, but otherwise has features similar to the Series A-1
Preferred Stock.
-7-
<PAGE>
Optional Redemption At the issuer's option at any time in
an amount equal to $1,000 per share
plus accrued and unpaid dividends plus
8.65 shares of Common Stock.
Mandatory Redemption At the end of 12 years at the optional
redemption price.
Voting Rights Non-voting, except for amendments to
the certificate of designations adverse
to the holders of Preferred Stock.
Approval of at least 66 2/3% of the
shares of this series and other
Preferred Stock ranking on parity is
required to approve any new series of
preferred stock ranking senior to the
Preferred Stock.
-8-
<PAGE>
9% Cumulative Non-redeemable Participating Preferred Stock, Series B-1
Security 15,000 shares of 9% Cumulative
Participating Preferred Stock, stated
value $1,000 per share, for an
aggregate initial value of $15 million.
Dividends Cumulative dividends payable in cash or
in kind annually as declared by the
Board of Directors in an aggregate
amount equal to 9% of the liquidation
preference at the beginning of the
annual dividend period plus the amount
of dividends, if any, paid on 44,209
shares of Common Stock during the
corresponding period.
Common Equity Participation 2.96 common shares per share. (Total
of 44,419 common shares representing
approximately 0.385% of New Platinum
common shares.)
Ranking Pari passu with Series A-1 and A-2
Preferred Stock and Series B-2
Preferred Stock and preferred over
Common Stock as to dividends and upon
liquidation.
Liquidation Preference $1,000 per share plus accrued and
unpaid dividends plus either 2.96
shares of Common Stock or the amount
that 2.96 shares of Common Stock would
be entitled to receive in liquidation.
Optional Redemption At the issuer's option at any time in
an amount equal to $1,000 per share
plus accrued and unpaid dividends plus
2.96 shares of Common Stock.
-9-
<PAGE>
Mandatory Redemption At the end of 12 years at the optional
redemption price.
Mandatory Conversion At any time at the option of the
issuer, all of the shares of the Series
B Preferred Stock will be automatically
converted into a number of shares of
Common Stock equal, for each such share
of Series B-1 Preferred Stock, to (i)
the sum of $1,000 plus accrued and
unpaid dividends, divided by $18, plus
(ii) 2.96.
Voting Rights Full voting rights with number of votes
equal to number of shares of Common
Stock issuable upon mandatory
conversion. Approval of 66 2/3% of the
outstanding shares is required to
approve any amendments to the
certificate of designations adverse to
the holders of Preferred Stock or new
series of preferred stock ranking
senior to the Preferred Stock.
Tax Treatment Conversion of common into preferred
non-taxable for JBK
-10-
<PAGE>
9% Cumulative Participating Preferred Stock, Series B-2
Security 15,000 shares of 9% Cumulative
Participating Preferred Stock, stated
value $1,000 per share, for an
aggregate initial value of $15 million.
Dividends Same as Series B-1 Preferred Stock.
Common Equity Participation Same as Series B-1 Preferred Stock.
Ranking Same as Series B-1 Preferred Stock.
Liquidation Preference Same as Series B-1 Preferred Stock.
Optional Redemption None
Mandatory Redemption Same as Series B-1 Preferred Stock.
Mandatory Conversion Same as Series B-1 Preferred Stock.
Voting Rights Same as Series B-1 Preferred Stock.
Tax Treatment Conversion of common into preferred
non-taxable for JBK
-11-
<PAGE>
Exchange Agreement After Investors (Blackstone) have
realized a 30% IRR on some portion of
their original cash equity investment,
JBK may elect to convert a pro rata
portion of the number of shares
issuable upon mandatory conversion.
-12-
<PAGE>
Potential Transaction Timetable
November
- ------------------------------------------
S M T W T F S
1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30
December
- ------------------------------------------
S M T W T F S
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30 31
January
- ------------------------------------------
S M T W T F S
1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31
February
- ------------------------------------------
S M T W T F S
1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29
-13-
<PAGE>
Action Estimated Time Needed Est. Date
----------- --------------------- ---------
- - Sign merger agreement Issue N.A. 11/15/99
press release
- - File HSR document Signing + approximately 11/22/99
7 days
- - File merger proxy (initiates Signing + approximately 11/29/99
SEC review period) 14 days
- - HSR waiting period expires Filing + approximately 12/22/99
30 days
- - SEC comments on merger proxy Proxy filing + approximately 12/29/99
30 days
- - Distribute merger proxy to Proxy filing + approximately 01/16/00
shareholders 45 days
- - Shareholder vote Proxy mailing + approximately 02/28/00
45 days
- - Closing Day after shareholder vote 02/29/00
Note: Timing variable depending on SEC review process.
-14-
<PAGE>
Sources and Uses of Funds and Pro Forma Capitalization
Sources and Uses of Funds<F1> ($ in millions)
<TABLE>
<CAPTION>
Sources Uses
- ---------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
Revolving Credit Facility<F2> $0.0 0.0% Purchase of Common Stock $343.6 72.0%
Senior Debt 75.0 15.7 Repayment of Existing Debt 40.0 8.4
Senior Subordinated Notes/Facility 150.0 31.4 Fees and Expenses 28.4 6.0
Sponsor Equity Contribution 187.0 39.2
Total Cash Sources $412.0 86.4% Total Cash Uses $412.0 86.4%
PIK Preferred Stock (AIG, JBK) 50.0 10.5 Exchange of Common Stock 65.0 13.6
Management Retained Equity 15.0 3.1
Total Non Cash Sources $65.0 13.6% Total Non Cash Uses $65.0 13.6%
Total Sources $477.0 100.0% Total Uses $477.0 100.0%
<CAPTION>
Pro Forma Capitalization ($ in million)
- ------------------------- -------------
<S> <C> <C>
$ %
--- ---
Total Debt $ 225.0 47.2%
PIK Preferred Stock 50.0 10.5
Common Equity 202.0 42.3
-------- ------
Total Equity $ 252.0 52.8%
Total Capitalization $ 477.0 100.0%
</TABLE>
- ------------------
[FN]
<F1> Based on Blackstone's Proposal.
<F2> $125 million facility for acquisitions and working capital
requirements.
-15-
<PAGE>
Implied Transaction Value @ $18.00 Per Share
<TABLE>
<CAPTION>
($ in millions, except per share amounts)
<S> <C>
Common Shares Outstanding<F1> . . . . . . . . . . . . . . 22.173
In the Money Options<F1> . . . . . . . . . . .. . . . . . 1.023
Fully-Diluted Shares Outstanding . . . . . . . . . . . . 23.196
Price per Share . . . . . . . . . . . . . . . . . . . . . $18.00
Gross Equity Value . . . . . . . . . . . . . . . . . . . $417.5
Less: Option Proceeds<F1>. . . . . . . . . . . . . . . (8.9)
Equity Value . . . . . . . . . . . . . . . . . . . . . . $408.6
Plus: Debt<F2>. . . . . . . . . . . . . . .. . . . . . . 62.5
Less: Cash<F2>. . . . . . . . . . . . . . . . . . . . . (11.4)
Enterprise Value . . . . . . . . . . . . . . . . . . . . $459.8
</TABLE>
- -------------
[FN]
<F1> Source: Company share and option schedule dated August 24, 1999.
<F2> As of September 30, 1999.
-16-
<PAGE>
Implied Premiums and Transaction Multiples for Platinum @ $18.00
<TABLE>
<CAPTION>
($ millions, except per share amounts)
<S> <C>
Premium to:
Platinum Price on 11/11/99 of $15.50 16.1%
Last 20 trading days average of $14.95 20.4
One month prior price of $13.19 (10/12/99) 36.5
52 week high of $41.38 (1/22/99) (56.5)
52 week low of $11.50 (10/18/99) 56.5
Total Equity Value $408.6
Total Enterprise Value 459.8
</TABLE>
<TABLE>
<CAPTION>
Data<F1> Multiple<F4>
-------- ------------
<S> <C> <C> <C>
Enterprise Value to:
Revenue: LTM $305.0 1.51x
1999E<F2> 311.6 1.48
2000E<F3> 397.7 1.28
EBITDA: LTM $ 43.9 10.5x
1999E<F2> 43.8 10.5
2000E<F3> 60.8 8.4
EBIT: LTM $ 30.5 15.1x
1999E<F2> 30.0 15.3
2000E<F3> 45.0 11.3
-17-
<PAGE>
<CAPTION>
Company First Company
Price Per Share to: First Call Projections Call Projections
<S> <C> <C> <C> <C> <C>
EPS: LTM -- $0.74 -- 24.3x
1999E $0.89 0.72 20.2x 25.1
2000E<F2> 1.05 1.00 17.1 18.0
</TABLE>
____________________
[FN]
<F1> Latest twelve months ("LTM") ended September 30, 1999. Pro
forma to include full year operations of Buchler Phillips and
Fact Finders. Excludes restructuring and merger expenses of
$13.6 and $7.9 million for LTM and 1999E, respectively, and
Calvi recovery of $1.6 million for LTM and 1999E.
<F2> Source: Company management.
<F3> Source: Company Projections.
<F4> Enterprise Value adjusted to reflect $50 million of incremental
capital required to finance year 2000 acquisitions.
-18-
<PAGE>
Section 2
Historical and Projected Results
-19-
<PAGE>
Historical and Projected Results-Consolidated Company
Based on Company Projections<F1> ($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Historical Projected
--------------------------- -----------------------------------------
1996- 1999E- 1999E-
Estimated 1999E 2001E 2004E
1996 1997 1998 1999<F2> CAGR 2000 2001 2002 2003 2004 CAGR CAGR
--- --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Organic
Revenues $ 237.4 $ 250.9 $ 301.6 $ 311.6 9.5% $ 346.4 $ 378.5 $ 406.9 $ 436.5 $ 468.6 10.2% 8.5%
Growth -- 5.7% 20.2% 3.3% 11.2% 9.3% 7.5% 7.3% 7.4%
EBITDA NA NA NA 43.8 $ 51.2 $ 56.8 $ 61.8 $ 67.2 $ 73.2 13.9% 10.8%
Margin % NA NA NA 14.1 14.8% 15.0% 15.2% 15.4% 15.6%
Total
Revenues $ 158.9 $ 192.9 $ 254.5 $ 306.5 24.5% $ 397.7 $ 485.0 $ 572.8 $ 667.2 $ 769.3 25.8% 20.2%
% Growth 21.4% 32.0% 20.4% 29.7% 22.0% 18.1% 16.5% 15.3%
EBITDA $ 18.7 $ 24.3 $ 37.8 $ 42.5 31.6% $ 60.8 $ 76.7 $ 92.6 $ 109.7 $ 128.1 34.3% 24.7%
Margin % 11.7% 12.6% 14.9% 13.9% 15.3% 15.8% 16.2% 16.4% 16.7%
Earnings per
Share $ 0.52 $ 0.51 $ 0.90 $ 0.72 $ 1.00 $ 1.30 $ 1.62 $ 2.00 $ 2.43 34.6% 27.6%
% Growth (3.5%) 77.5% (20.0%) 13.2% 39.9% 29.5% 24.9% 23.0% 21.6%
</TABLE>
[FN]
Note: Organic results include full year credit for acquisitions
accounted for as purchases from 1996-1999 (including Buchler
Phillips). Years 2000-2004 are adjusted to exclude future
acquisitions.
<F1> Company Projections represent current management base case
projections.
<F2> Excludes Calvi recovery.
-20-
<PAGE>
Historical and Projected Results-KRCS
Based on Company Projections for KRCS
($ in millions)
<TABLE>
Historical Projected
----------------------- ----------------------------------------------------------------
1996- 1999- 1999-
Estimated 1999 2001 2004
1996 1997 1998 1999 CAGR 2000 2001 2002 2003 2004 CAGR CAGR
--- --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Organic $ 128.4 $ 135.7 $ 163.1 $ 181.8 12.3% $ 185.6 $ 199.1 $ 213.5 $ 229.2 $ 246.0 4.6% 6.2%
% Growth 5.7% 20.2% 11.4% 2.1% 7.3% 7.1% 7.5% 7.3%
Total $ 79.8 $ 87.3 $ 117.6 $ 176.8 30.4% $ 226.7 $ 284.4 $ 346.7 $ 414.1 $ 486.9 26.8% 22.5%
% Growth 9.5% 34.6% 50.3% 28.2 25.5% 21.9% 19.4% 17.6%
EBIT
Organic NA NA $ NA $ 23.7 NA $ 26.4 $ 28.7 $ 31.1 $ 33.7 $ 36.6 12.9% 10.2%
Margin% NA NA NA 13.0% 14.2% 14.4% 14.6% 14.7% 14.9%
Total $ 6.3 $ 6.2 $ 15.3 $ 21.1 49.6% $ 32.6 $ 41.4 $ 51.0 $ 61.4 $ 72.7 39.7% 27.9%
Margin% 7.9% 7.1% 13.0% 11.9% 14.4% 14.6% 14.7% 14.8% 14.9%
</TABLE>
- --------------
[FN]
Note: Organic results include full year credit for acquisitions
accounted for as purchases from 1996-1999 (including Buchler
Phillips). Years 2000-2004 are adjusted to exclude future
acquisitions.
-21-
<PAGE>
Historical and Projected Results-SPSG
Based on Company Projections for SPSG
<TABLE>
<CAPTION>
Historical Projected
----------------------- ----------------------------------------------------------------
1996- 1999- 1999-
Estimated 1999 2001 2004
1996 1997 1998 1999 CAGR 2000 2001 2002 2003 2004 CAGR CAGR
--- --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Organic $ 109.1 $ 115.2 $ 138.4 $ 125.8 4.9% $ 140.1 $ 146.4 $ 155.3 $ 165.4 $ 176.5 7.9% 7.0%
% Growth 5.6% 20.1% (9.1%) 11.4% 4.5% 6.1% 6.5% 6.7%
Total $ 79.2 $ 105.6 $ 136.8 $ 125.8 16.7% $ 150.3 $ 167.5 $ 188.0 $ 211.2 $ 236.3 15.4% 13.4%
% Growth 33.3% 29.6% (8.1%) 19.5% 11.4% 12.2% 12.3% 11.9%
EBIT
Organic NA NA $ NA $ 19.4 NA $ 20.4 $ 22.1 $ 24.1 $ 26.3 $ 28.8 6.7% 8.2%
Margin% NA NA NA 15.4% 14.6% 15.1% 15.5% 15.9% 16.3%
Total $ 7.0 $ 11.5 $ 21.3 $ 19.4 40.8% $ 21.9 $ 25.3 $ 29.0 $ 33.2 $ 37.8 14.1% 14.2%
Margin% 8.8% 10.9% 15.6% 15.4% 14.6% 15.1% 15.4% 15.7% 16.0%
</TABLE>
- -------------------
[FN]
Note: Organic results include full year credit for acquisitions accounted
for as purchases from 1996-1999 (including Buchler Phillips).
Years 2000-2004 are adjusted to exclude future acquisitions.
-22-
<PAGE>
Historical and Projected Results ISG
Based on Company Projections for ISG
<TABLE>
Historical Projected
----------------------- ----------------------------------------------------------------
1996- 1999- 1999-
Estimated 1999 2001 2004
1996 1997 1998 1999 CAGR 2000 2001 2002 2003 2004 CAGR CAGR
--- --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Organic NA NA NA $ 4.0 NA $ 20.7 $ 33.1 $ 38.1 $ 41.9 $ 46.1 189.1% 63.3%
% Growth NA NA NA NM 422.2% 60.0% 15.0% 10.0% 10.0%
Total NA NA NA 4.0 NA $ 20.7 $ 33.1 $ 38.1 $ 41.9 $ 46.1 189.1% 63.3%
% Growth NA NA NA NM 422.2% 60.0% 15.0% 10.0% 10.0%
EBIT
Organic -- NA ($1.8) ($0.6) NA $ 0.5 $ 2.3 $ 3.0 $ 4.6 $ 5.6 NM NM
Margin % NA NM NM 2.4% 6.9% 7.9% 11.0% 12.1%
Total NA NA ($1.8) ($0.6) NA $ 0.5 $ 2.3 $ 3.0 $ 4.6 $ 5.6 NM NM
Margin % NA NA NM NM 2.4% 6.9% 7.9% 11.0% 12.1%
</TABLE>
- ---------------------
[FN]
Note: Organic results include full year credit for acquisitions
accounted for as purchases from 1996-1999 (including Buchler
Phillips). Years 2000-2004 are adjusted to exclude future
acquisitions.
-23-
<PAGE>
Section 3
Stock Price Performance
-24-
<PAGE>
Relative Stock Price Performance
Indexed Stock Price Performance Since 8/1/97-(K/O Deal Announced on 8/7/97)
[Graphic chart]
<TABLE>
<CAPTION>
Name Date Index
<S> <C> <C>
Platinum 8/1/97 100.00
12/1/97 136.19
5/1/98 158.10
9/1/98 184.29
2/1/99 283.81
6/1/99 159.05
11/1/99 130.00
S&P 400 8/1/97 100.00
12/1/97 102.41
5/1/98 131.91
9/1/98 106.96
2/1/99 122.43
6/1/99 127.02
11/1/99 122.58
Business Information/Consulting Group<FN1> 8/1/97 100.00
12/1/97 107.73
5/1/98 121.26
9/1/98 106.67
2/1/99 120.51
6/1/99 130.56
11/1/99 125.46
Security Products/Services Group<FN2> 8/1/97 100.00
12/1/97 105.53
5/1/98 118.98
9/1/98 95.40
2/1/99 96.08
6/1/99 83.34
11/1/99 73.95
<FN>
- --------------------
(1) Includes FTI Consulting, ChoicePoint, Landauer, Navigant Consulting
Corp., Gartner Group, The Dun & Bradstreet Group and Shared Medical
Systems and ICTS International.
(2) Includes Armor Holdings, Burns International Service Corp., Checkpoint
Systems, ITI Technologies, Pittston-Brinks and Wackenhut.
</TABLE>
-25-
<PAGE>
[Graphic chart]
Platinum Stock Price Performance
Platinum Stock Price Performance
Platinum Historical Stock Price and Volume Traded:
August 1, 1997 - November 11, 1999
Volume Price
------ -----
A. 08/07/97 Announced agreement to merge with 9,200 $12.375
Kroll Associates
B. 10/01/97 Signed $1.87M contract to supply U.S. 18,600 17.875
Air Force with HMMWV Vehicles
C. 12/01/97 Completed Kroll-O'Gara merger 500 17.250
D. 01/16/98 Announced intention to acquire Lindquist 28,900 17.625
Avey MacDonald Baskerville Inc.
E. 05/05/98 Public Offering of 5,060,000 shares for 66,300 22.250
$20.50/share
F. 05/14/98 Agrees to acquire Protec SA, a Colombian 67,800 21.750
car armoring firm
G. 06/16/98 Announced closing of acquisition of 247,000 22.000
Lindquist Avey MacDonald Baskerville, Inc.
H. 08/24/98 Signed a definitive agreement to buy 77,700 24.000
InPhoto Surveillance
I. 10/22/98 Announced acquisition of Laboratory 52,100 24.500
Specialists
J. 12/31/98 Announced acquisition of Schiff & 61,200 39.438
Associates
K. 01/04/99 Announced acquisition of Securify 274,300 35.875
L. 01/21/99 Announced agreement to buy Background 37,800 37.250
America
M. 05/03/99 U.S. Army exercises its option to purchase 574,400 25.000
245 additional up-armored HMMWVs
N. 06/03/99 Company agrees to acquire Buchler Philips 85,200 21.813
O. 07/20/99 Board meeting to review strategic 39,700 19.875
alternatives
P. 07/26/99 Initiated contacts with potential investors 65,500 19.500
Q. 09/16/99 Receipt of preliminary proposals 41,100 24.063
R. 09/22/99 Board meeting to review preliminary 342,500 26.313
proposals
S. 09/23/99 Announced revised earnings expectations and 493,700 25.813
strategic alternatives process
T. 09/29/99 PWC Press Release 687,100 17.563
-26-
<PAGE>
Section 4
Valuation Analysis
-27-
<PAGE>
Section 4-A
Trading Multiples of Selected Comparable Companies
-28-
<PAGE>
Current Valuation of Comparable Companies
($ in millions, except per share data)
<TABLE>
<CAPTION>
Enterprise Value/LTM<F4> P/E Ratios<F5>
----------------------- --------------
Stock Equity Enterprise
Price<F1> 52 Week 52 Week % of Value<F2> Value<F3>
High Low High Revenue EBITDA EBIT CY1999E CY2000E
-------- ------- ------- ---- ------- -------- ------- ------ ---- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Business
Information/Consulting
ChoicePoint $64.19 $71.25 $45.38 90.1% $1,009.3 $1,196.6 2.82x 10.3x 15.4x 24.9x 19.8x
The Dun & Bradstreet
Group<F6> 28.13 40.00 23.38 70.3 4,580.9 4,935.8 2.51 8.1 10.5 17.1 16.0
Gartner Group 11.75 25.75 9.56 45.6 1,042.5 1,203.6 1.64 6.2 7.5 12.4 12.5
ICTS International N.V. 4.88 6.63 3.63 73.6 30.5 32.0 0.23 5.0 6.6 11.9 9.4
Landauer Inc. 26.13 32.75 23.69 79.8 230.1 229.5 5.24 10.1 11.6 19.9 17.2
Navigant Consulting<F7> 25.25 54.25 19.38 46.5 1,056.4 990.8 2.39 8.8 9.5 17.3 13.2
Shared Medical Systems 39.81 73.50 35.50 54.2 1,063.4 1,227.6 0.99 6.6 8.9 14.1 12.3
Harmonic Mean 0.96x 7.4x 9.3x 15.8x 13.6x
Security Products/Services
Armor Holdings, Inc. $10.19 $14.94 $8.50 68.2% $250.9 $231.9 1.50x 8.7x 10.9x 15.2x 11.8x
Burns International Services
Corp. 9.44 22.06 8.25 42.8 185.9 292.6 0.21 4.0 4.7 7.7 7.0
Checkpoint Systems 7.94 14.00 7.00 56.7 240.8 331.3 0.93 5.7 10.2 13.0 9.8
ITI Technologies 27.00 37.25 19.50 72.5 242.1 238.2 2.03 8.4 9.8 13.9 11.8
Pittston-Brinks 18.94 32.00 18.13 59.2 775.9 893.8 0.56 3.7 6.2 9.0 7.9
Wackenhut Corporation 13.60 25.46 13.14 53.4 207.5 223.1 0.11 3.8 6.1 10.5 8.8
Harmonic Mean 0.33x 5.0x 7.2x 10.9x 9.2x
Overall Harmonic Mean 0.52x 6.1x 8.2x 13.1x 11.1x
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
Company
First Call Projection(8)
---------- -------------
1999E 2000E 1999E 2000E
Platinum P/E P/E P/E P/E
- --------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current Price $15.50 $41.38 $11.50 37.5% $350.5 $401.6 1.31x 9.3x 13.0x 17.4x 14.8x 21.5x 15.5x
At $18 $18.00 $41.38 $11.50 43.5% $408.6 459.8 1.51x 10.5x 15.1x 20.2x 17.1x 25.1x 18.0x
</TABLE>
____________________
[FN]
<F1> Based on closing stock prices as of November 11, 1999.
<F2> Equity value defined as diluted number of shares times closing stock
price on November 11, 1999.
<F3> Enterprise value defined as equity value plus debt, minority interests
and preferred stock minus cash.
<F4> Adjusted to exclude non-recurring items.
<F5> Source: First Call.
<F6> On August 19, 1999, Dun & Bradstreet announced that third-quarter and
full year profits would drop from a year ago and it would not meet
analyst estimates because of falling US sales.
<F7> On September 9, 1999, Navigant (formerly the Metzler Group, Inc.)
announced that it had retained DLJ as its financial advisor to
assist it in exploring strategic alternatives.
<F8> Company Projections represent current management base case
projections.
-34-
<PAGE>
Description of Comparable Public Companies-KRCS
($ in millions)
<TABLE>
<CAPTION>
LTM Equity
Company Sales Value<F1> Business Description
- ------- ----- --------- --------------------
<S> <C> <C> <C>
ChoicePoint $415.3 $1,009.3 ChoicePoint's Business and Government Services Group generated $108M
in 1998 revenues. Services include verification, due diligence
information, uniform commercial code searches, background and drug
screenings, public record searches, credential verification and people
and shareholder locator searches. The Company's Insurance Services
Group generated $298M in 1998 revenues. Services include claims
history databases, motor vehicle records, credit information and
modeling, customized policy rating and issuance software, property
inspections and audits to the commercial insurance market and
laboratory testing services.
The Dun & Bradstreet 1,967.6 4,580.9 Dun & Bradstreet's Credit Information services include commercial
Group credit, loan, insurance underwriting and client evaluation, as well as
predictive payment and bankruptcy modeling. The Company's Moody's
division is a leading global credit rating agency and generated
$495.5M of revenue in 1998. The Company also provides marketing
information services, purchasing information services and receivables
management advice.
Gartner Group 734.2 1,042.5 Gartner Group, Inc. performs detailed analysis of developments in
technology industries such as computer hardware, software and
communications (collectively, the information technology, or IT,
industry). Such analysis is then packaged into annually renewable
subscription-based products and distributed through print and
electronic media, including the Internet.
ICTS International N.V. 136.9 30.5 ICTS is a provider of advanced aviation security services, and
operates primarily in Europe and the United States, providing
passenger handling related services to major carriers. The Company,
with 7,000 employees, has offices in nearly 90 airports, most of which
are international gateways that inherently have security demands.
ICTS also performs security consulting, training and auditing for
airlines and airports, including recommending the adoption of
specified security procedures, developing recruitment and training
programs and working with airport authorities to ensure that clients
comply with local requirements
Landauer Inc. $43.8 $230.1 Landauer offers a service for measuring, primarily through film and
thermoluminescent badges worn by client personnel, the dosages of
X-rays, gamma radiation and other penetrating ionizing radiation to
which the wearer has been exposed. While most revenues are derived
from US customers, services are also marketed in the UK and Canada.
-35-
<PAGE>
Navigant Consulting 414.1 1,056.4 Navigant Consulting (formerly the Metzler Group, Inc.) is a leading
provider of consulting services to energy-based and other network and
regulated industries. The Company offers litigation support services,
expert testimony and financial analysis through its LECG, Inc.
subsidiary. In addition, the Company's Metzler Associates subsidiary
offers information technology services including information systems
planning, software and hardware solutions evaluation, tailored
software integration and systems implementation management. The
Company's Peterson Consulting L.L.C. subsidiary also specializes in
providing information services, data processing functions,
quantitative damage assessment and process operations management.
Shared Medical Systems 1,236.2 1,063.4 SMS develops hospital and physician information systems software. The
software runs on a variety of hardware and technology platforms.
Parent/holding company of high-tech units involved in accounting and
healthcare software, web site development services and health
information webcasting services. Products are sold to the healthcare
industry. The bulk of revenue is derived from activity in the
software industry.
</TABLE>
___________________
[FN]
<F1> Based on closing stock prices on November 11, 1999.
-36-
<PAGE>
Description of Comparable Public Companies-SPSG
($ in millions)
<TABLE>
<CAPTION>
Equity
Company LTM Sales Value<F1> Business Description
------- --------- --------- --------------------
<S> <C> <C> <C>
Armor Holdings $142.5 $250.9 Armor Holding is an armor products business and a security
equipment company. The former business mainly involves the
development, manufacture and distribution of bullet and
projectile resistant garments. These include bullet
resistant sharp instrument penetration resistant vests,
bullet resistant blankets, bomb disposal suits and helmets,
bomb protection and disposal equipment and load bearing
vests. The latter business develops, manufactures and
distributes other ballistic protection and security
equipment, including explosive ordinance device (EOD)
handling and detection equipment, EOD suppression and
disposal equipment, helmets, face masks, shields, hard armor
ballistic plates, customized armor for vehicles and other
custom armored products.
Burns International 1,323.1 185.9 Burns International provides guard services, background
Services Corp. screenings, contract employment and investigative services.
Security officers patrol and monitor commercial, financial,
industrial, residential and government facilities. In May,
Borg Warner sold its electronic security services business,
Wells Fargo Alarm Services, to ADT Security Services. On
June 18, the Company postponed its 4.8M share secondary
offering after receiving an unsolicited indication of
interest in a business combination from another company.
Checkpoint Systems 364.3 240.8 Checkpoint provides retailers, commercial and industrial
businesses, and systems integrators with comprehensive radio
frequency technology-based supply chain management and
security solutions. Radio frequency products include those
associated with identification (RFID), such as automatic
identification, supply chain management and item tracking, as
well as radio frequency electronic article surveillance
systems. Other products include Impulse source tagging, for
use in retail stores, closed circuit televisions, fire and
intrusion alarm systems, central station monitoring, and
electronic access control systems.
-37-
<PAGE>
ITI Technologies 109.6 242.1 ITI designs, manufactures, and markets electronic security
systems and access control systems, selling to its
independent dealer network, large security companies, and
other private label customers and electric and gas utility
companies. The Company currently competes in the burglar
alarm segment, the electronic access control segment, and the
commercial fire detection segment. The Company competes in
both primary types of security systems: hardwire systems,
operating under the CADDX label, operate with control panel
and sensor communication through wires; ITI Supervised
Wireless Security systems utilize digitized voice technology,
touch-tone telephone interface, and superior supervised radio
technology.
Pittston-Brinks 1,526.8 775.9 Pittston Brink's Group operates the famous Brink's armored
cars. In addition to armored cars, PZB provides automated
teller servicing, currency and deposit processing, coin
wrapping, air courier services and residential security
systems. It operates in 48 countries, generating 49% of its
1998 revenues outside of North America.
Wackenhut Corporation 1,856.6 207.5 The Company is a leading international provider of security
services, a developer and manager of correctional facilities
and a temporary staffing provider. Through its services
division (74% of 1997 revenues), the company provides
security services and food services to commercial and
governmental customers. The correctional services segment
(18%) designs, develops and manages prisons for government
agencies. The employee leasing business (8%) has an employee
base in excess of 22,100 personnel.
</TABLE>
[FN]
<F1> Based on closing stock prices on November 11, 1999.
-38-
<PAGE>
Section 4-B
Present Value of Hypothetical Future Stock Price Analysis
-39-
<PAGE>
Present Value of Hypothetical Future Stock Price
<TABLE>
<CAPTION>
Without Acquisitions With Acquisitions
Assumed P/E Multiple Assumed P/E Multiple
----------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
15.0x<F1> 17.6x<F2> 20.0x 15.0x<F1> 17.6x<F2> 20.0x
Potential Future Stock Price
One Year Hence (c. November 2000) $13.05 $15.32 $17.41 $15.04 $17.65 $20.06
Two Years Hence (c. November 2001) 15.96 18.73 21.28 19.49 22.86 25.98
PV
of Potential Future Stock Price at 14%<F3>
One Year Hence (c. November 2000) $11.45 $13.44 $15.27 $13.19 $15.48 $17.59
Two Years Hence (c. November 2001) 12.28 14.41 16.38 14.59 17.59 19.99
EPS (Company Projections) Without Acquisitions With Acquisitions
2000E $0.87 $1.00
2001E 1.06 1.30
</TABLE>
____________________
[FN]
<F1> Based on Platinum closing stock price of $13.31 on October 25, 1999.
<F2> Based on Platinum closing stock price of $20.75 on July 16, 1999.
<F3> Estimated cost of equity for Platinum based on the Capital Asset
Pricing Model.
-40-
<PAGE>
Section 4-C
Discounted Cash Flow Analysis
-41-
<PAGE>
Discounted Cash Flow Methodology
We applied a discounted cash flow analysis to the Company Projections. The
following outlines our approach:
- - The annual after-tax unlevered free cash flows for the years from
2000 through 2004 were discounted back to December 31, 1999 using
discount rates ranging from 12.0% to 14.0%, based on the estimated
weighted average cost of capital derived through the Capital Asset
Pricing Model
- - The terminal value was calculated using an assumed trailing EBITDA
multiple of 7.5-9.5x, applied to 2004 EBITDA. At a 13.0% weighted
average cost of capital, Platinum's implied trailing net income
multiple ranges from 16.0x to 20.3x, and the implied perpetual growth
rate in free cash flow ranges from 5.7% to 7.1%
-42-
<PAGE>
DCF Analysis
Implied Value Per Share at 12/31/99 ($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Without Acquisitions With Acquisitions
Discount Exit Multiple of 2004E EBITDA Exit Multiple of 2004E EBITDA
Rate ----------------------------- -----------------------------
(WACC) 7.5x 8.5x 9.5x 7.5x 8.5x 9.5x
-------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PV of Free Cash (2000E-2004E) 12.0% $ 107.5 $ 107.5 $ 107.5 ($ 10.4) ($ 10.4) ($ 10.4)
PV of Terminal Value 311.5 353.1 394.6 545.2 617.8 690.5
Implied Enterprise Value $ 419.0 $ 460.6 $ 502.1 $ 534.7 $ 607.4 $ 680.1
Implied Gross Equity Value $ 385.8 $ 432.8 $ 478.8 $ 512.9 $ 585.6 $ 674.5
Implied Perpetual Growth Rate in FCF 5.2% 6.0% 6.6% 4.7% 5.5% 6.2%
Implied Trailing Unlevered Net Income
Multiple 15.8x 17.9x 20.1x 16.0x 18.2x 20.3x
Implied Value Per Share $ 16.83 $ 18.63 $ 20.41 $ 21.80 $ 24.89 $ 27.96
PV of Free Cash Flow (2000E-2004E) 13.0% $ 104.7 $ 104.7 $ 104.7 ($10.8) ($10.8) ($10.8)
PV of Terminal Value 298.0 337.7 377.4 521.5 591.0 660.5
Implied Enterprise Value $ 402.7 $ 442.4 $ 482.1 $ 510.7 $ 580.0 $ 649.7
Implied Gross Equity Value $ 369.4 $ 413.8 $ 454.4 $ 487.7 $ 558.4 $ 628.2
Implied Perpetual Growth Rate in FCF 6.2% 6.9% 7.5% 5.7% 6.5% 7.1%
Implied Trailing Unlevered Net Income
Multiple 15.8x 17.9x 20.1x 16.0x 18.2x 20.3x
Implied Value Per Share $ 16.12 $ 17.84 $ 19.55 $ 20.78 $ 23.73 $ 26.69
PV of Free Cash Flow (2000E-2004E) 14.0% $ 102.0 $ 102.0 $ 102.0 ($11.1) ($11.1) ($11.1)
PV of Terminal Value 285.1 323.2 361.2 499.0 565.5 632.0
Implied Enterprise Value $ 387.1 $ 425.2 $ 463.2 $ 487.9 $ 554.4 $ 621.0
Implied Gross Equity Value $ 353.9 $ 391.9 $ 435.4 $ 460.1 $ 532.6 $ 599.2
Implied Perpetual Growth Rate in FCF 7.1% 7.9% 8.5% 6.6% 7.4% 8.1%
Implied Trailing Unlevered Net Income
Multiple 15.8x 17.9x 20.1x 16.0x 18.2x 20.3x
Implied Value Per Share $ 15.44 $ 17.10 $ 18.74 $ 19.80 $ 22.64 $ 25.47
____________________
<FN>
Source: Derived from Company Projections.
</TABLE>
-43-
<PAGE>
Section 4-D
Acquisition Multiples of Selected Precedent Transactions
-44-
<PAGE>
Selected Precedent M&A Transactions
No truly comparable precedent M&A transactions
($ in millions)
<TABLE>
<CAPTION>
Enterprise Enterprise Enterprise Equity
Date Enterprise Equity Value/LTM Value/LTM Value/LTM Value/LTM
Target Name Acquiror Name Announced Value Value Revenues EBITDA EBIT Net Income
- ---------------------------- ------------- --------- ---------- ------ ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Business
Information/Consulting
Pinkerton Inc Securities AB 2/23/99 $ 406.9 $ 383.8 0.4x 11.5x 21.0x 57.2x
LECG Inc. Metzler Group 7/1/98 277.4 294.4 5.0 25.9 28.3 48.0
Kroll Associates O'Gara 8/7/97 95.9 84.8 1.3 9.4 14.9 NM
AT Kearney EDS 2/17/95 560.7 560.7 1.5 NA NA NA
Market Facts Aegis 4/30/99 289.5 296.9 2.0 14.3 18.6 30.8
Harmonic Mean<F1> 0.9x 11.4x 17.8x 40.1x
Home Security Monitoring
Holmes Protection Group Tyco 12/29/97 $ 145.2 $ 117.1 2.3x 33.0x NM NM
International
Ltd.
ADT Ltd. Tyco 3/17/97 5,731.5 5,154.9 3.4 13.0 26.5 NM
International
Ltd.
Republic Security Co. Ameritech Corp. 9/29/97 610.0 610.0 6.0 NA 36.6 NA
Holdings
Westinghouse Security Systems Western Resources 12/16/96 425.0 368.0 3.9 NA NA NA
Inc.
Harmonic Mean 3.5x 18.6x 30.7x --
Specialty Vehicle Components
Excel Dura Automotive 1/19/99 $ 486.5 $ 332.8 0.5x 7.0x 13.7x 22.8x
Lund
International
Deflecta-Shield Corp. Holdings, Inc. 11/28/97 86.8 76.8 1.2 9.0 12.7 17.7
Harmonic Mean 0.7x 7.9x 13.2x 19.9x
Overall Harmonic
Mean<F1> 1.2x 11.2x 18.2x 26.6x
Platinum At $18 $ 459.8 $ 408.6 1.5x 10.5x 15.1x 24.3x
-45-
<PAGE>
____________________
<FN>
Source: Securities Data Company, company filings.
<F1> Harmonic means exclude LECG.
</TABLE>
-46-
<PAGE>
Selected Precedent M&A Transactions-KRCS
Business Information/Consulting
<TABLE>
<CAPTION>
Target Name Acquiror Name Date Announced Target Description
----------- ------------- -------------- ------------------
<S> <C> <C> <C>
Pinkerton Securitas AB 2/23/99 The second largest operator in the US guard services
industry, and has about 5,000 clients to which it offers
guard services, alarm installation and monitoring and
security consulting and investigative services
LECG Inc. Metzler Group 7/1/98 A group of business consultants, specializing in antitrust,
industry deregulation, business valuation, damages
analyses, economic and financial modeling, intellectual
property valuation, environmental economics, marketing
economics and public policy
Kroll Associates O'Gara 8/7/97 New York-based investigation and intelligence firm
AT Kearney EDS 2/17/95 Accounting firm known for operational expertise in
management consulting practices
Market Facts Aegis 4/30/99 A leading provider of custom market research services
</TABLE>
-47-
<PAGE>
Selected Precedent M&A Transactions-SPSG
Home Security Monitoring Services
<TABLE>
<CAPTION>
Target Name Acquiror Name Date Announced Target Description
----------- ------------- -------------- ------------------
<S> <C> <C> <C>
Holmes Protection Group Tyco International Ltd.12/29/97 Provider of electronic-security systems to more than
65,000 customers in the US
ADT Ltd. Tyco International Ltd.3/17/97 The nation's largest burglar-alarm company
Republic Security Co. Ameritech Corp 9/29/97 Republic Industries' security division ranks seventh in
a survey of the country's top security monitoring firms
Westinghouse Security Western Resources 12/16/96 Westinghouse Security Systems was Westinghouse Electric
Systems Inc. Corp.'s residential burglar-alarm business
</TABLE>
Specialty Vehicle Components
<TABLE>
Target Name Acquiror Name Date Announced Target Description
----------- ------------- -------------- ------------------
<S> <C> <C> <C>
Excel Industries Dura Automotive 1/19/99 Excel produces plastic and metal encapsulated window
assemblies, door systems, seat systems and injection
molded plastic products for the light vehicle segment
Deflecta-Shield Corp. Lund International 11/28/97 Deflecta-Shield Corporation manufactures plastic,
Holdings fiberglass and aluminum appearance accessories for
light trucks and heavy trucks
</TABLE>
-48-
<PAGE>
Sum-of-the-Parts Valuation Analysis
The sum-of-parts valuation below does not reflect the corporate level taxes
that would be incurred on a sale by the Company of individual business units,
but provides an indication of total firm value.
<TABLE>
<CAPTION>
Valuation Range Selected Benchmarks
--------------------- ----------------------------------------
Low High KRCS:
<S> <C> <C> <C>
Segment: - Revenue, EBITDA and net income multiples
KRCS $250.0 $325.0 (trading and acquisition)
SPSG 125.0 175.0 - Particular reference to ChoicePoint
ISG 30.0 70.0 - DCF
Voice & Data 5.0 12.0
-------- --------
Enterprise Value $410.0 $582.0 SPSG:
Less: Debt as of September 30, 1999 (62.5) (62.5) - EBITDA and net income multiples
Plus: Cash as of September 30, 1999 11.4 11.4 - Particular reference to Armor Holding
Plus: Options Proceeds<F1> 4.2 15.6 - Specialty Vehicle Components acquisitions
Gross Equity Value $363.1 $546.5 - DCF
-------- --------
Gross Diluted Shares<F1> 22.923 23.528
-------- --------
Implied Value Per Share $15.84 $23.23 ISG:
- Yr. 2000 revenue multiples--review of
Platinum Stock Price on 11/11/99 $15.50 $15.50 broad group of technology consulting
and security software companies
Premium/(Discount) 2.2% 49.9% - DCF
</TABLE>
[FN]
<F1> Source: Company share and option schedule dated August 24, 1999.
-49-
<PAGE>
Section 4-E
Sum-of-the-Parts Valuation Analysis
-50-
<PAGE>
Sum-of-the-Parts Valuation Range-Implied Multiples
($ in millions)
<TABLE>
<CAPTION>
KRCS SPSG ISG
--------------------------- --------------------------- ----------------------------
Data<F1> Low High Data<F1> Low High Data<F1> Low High
------- --- ---- ------- --- ---- ------- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Valuation Range $250.0 $325.0 $125.0 $175.0 $30.0 $70.0
Revenues
1999E $181.8 1.4x 1.8x $125.8 1.0x 1.4x $ 4.0 7.6x 17.7
2000E<F2> 226.7 1.3 1.6 150.3 0.9 1.2 20.7 1.4 3.4
EBIDTA
1999E $ 26.4 9.5x 12.3x $ 18.2 6.9x 9.6x ($0.8) NM NM
2000E<F2> 38.0 7.6 9.6 22.8 5.9 8.1 -- NM NM
Unlevered Net Income
1999E $ 9.4 26.5x 34.4x $ 9.0 13.9x 19.4x ($0.5) NM NM
2000E<F2> 15.8 18.4 23.1 10.8 12.5 17.1 -- NM NM
____________________
<FN>
<F1> Based on Company Projections, pro forma to include full year
operations of Buchler Phillips for 1999E.
<F2> Value range adjusted to reflect additional capital required to finance
year 2000 acquisition of $40 million and $10 million for KRCS and
SPSG, respectively.
</TABLE>
-51-
<PAGE>
Appendices
-52-
<PAGE>
Appendix A
Wall Street Commentary
-53-
<PAGE>
Wall Street Earnings Estimates
<TABLE>
<CAPTION>
EPS Pre-9/23
Announcement Current EPS % Change
--------------------- ------------------- --------------------
Firm/Analyst 1999 2000 1999 2000 1999 2000
- ------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Sun Trust Equitable/Brian Ruttenbur $ 1.17 NA $ 0.90 NA (23.1%) NA
SBC Warburg Dillon Read/Thomas
O'Halloran 1.17 1.55 0.88 1.05 (24.8) (32.3)
Monness Crespi 1.18 1.55 0.88 1.05 (25.4) (32.3)
</TABLE>
-54-
<PAGE>
Recent Wall Street Analyst Commentary
<TABLE>
<CAPTION>
Rating Before 12 Month
Analyst/ Earnings Current Price Recent
Company Report Date Update Rating Target Commentary
- ------------------- ----------- ------------- --------- --------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brian Ruttenbur (9/24/99) Strong Buy Attractive NA -"Given uncertainty we are reducing our rating
(SunTrust): Long-Term to Attractive Long-Term from Strong Buy."
-We are concerned regarding the guidance
management has given to adjustments reflecting
postponement of acquisitions. We estimate that
acquisitions would have contributed $0.08 to
$0.10 in both 3Q99 and 4Q99, thereby leaving a
gap of approximately $0.02 to $0.06, raising
questions about internal growth."
Thomas O'Halloran (9/24/99) Strong Buy Hold $21 -We are reducing our rating on the KROG shares
(WDR): to Hold from Strong Buy, and our price target
to $21 (it was $39)."
-"The Company's explanation for the shortfall
[in earnings] does not jibe with our model. We
had not assumed an acquisition contribution in
the third quarter. Hence, we can only conclude
that the earnings level for the company has
been overestimated."
-"The new 3Q estimate assumes a lower revenue
growth estimate for the 3Q (32% vs. 39%) and a
cut in the operating profit margin of 450 basis
points."
-"The earnings shortfall suggests that the
company has had a difficult time integrating
its acquired companies, and/or controlling its
SG&A expenses."
-"We have no factual basis to determine whether
an acquisition proposal is pending or is likely
to occur. We would surmise that potential
interested parties would include security
services companies (possibly European),
consulting companies, or a financial buyer."
"It is possible that the company could be sold
separately or as a whole; if so, it could be
because Tom O'Gara and Jules Kroll have not
settled their differences after all. A rough
sum of the parts valuation: KRCS ($250-$300M),
SPSG ($150-$200M), ISG ($75-$100M). This
implies a range of $19 to $24 per share."
</TABLE>
-55-
<PAGE>
Appendix B
Discounted Cash Flow Methodology and Weighted Average Cost of Capital
Calculation
-56-
<PAGE>
Discounted Cash Flow Methodology
Present Value of Projected Cash Flow Based on Company Projections--Without
Acquisitions
($ in millions)
<TABLE>
<CAPTION>
1999E 2000E 2001E 2002E 2003E 2004E
--------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 311.6 $ 346.4 $378.5 $ 406.9 $ 436.5 $ 468.6
% Growth 11.2% 9.3% 7.5% 7.3% 7.4%
EBITDA 51.2 56.8 61.8 67.2 73.2
% Margin 14.8% 15.0% 15.2% 15.4% 15.6%
Less: Depreciation and Amortization (9.9) (10.3) (10.6) (11.0) (11.4)
Goodwill Amortization (4.0) (4.0) (4.0) (4.0) (4.0)
-------- -------- --------- -------- ---------
EBIT 37.3 42.5 47.2 52.2 57.8
Taxes at 40% (14.9) (17.0) (18.9) (20.9) (23.1)
-------- -------- --------- -------- ---------
Unlevered Net Income $ 22.4 $ 25.5 $ 28.3 $ 31.3 $ 34.7
Less: Capital Expenditure (11.0) (11.0) (11.0) (11.0) (11.0)
Less: Purchase of Businesses, less
Cash Acquired -- -- -- -- --
Less: Working Capital Requirements (3.3) 0.9 (0.2) (2.2) (3.3)
Add: Depreciation and Amortization 13.9 14.3 14.6 15.0 15.4
-------- -------- --------- -------- ---------
Unlevered Free Cash Flow $ 22.0 $ 29.7 $ 32.1 $ 33.1 $ 35.8
Present Value<F1> $ 19.5 $ 23.3 $ 22.3 $ 20.3 $ 19.4
Present Value of Projected Cash Flow $ 104.7
</TABLE>
____________________
[FN]
<F1> Discounted at Platinum's weighted average cost of capital of 13%.
-57-
<PAGE>
Discounted Cash Flow Methodology-Without Acquisitions
Terminal EBITDA Multiple Methodology
($ in millions)
<TABLE>
<S> <C> <C> <C>
EBITDA Multiple 7.5x 8.5x 9.5x
------- ------- -------
Year 2004 EBITDA $ 73.2 73.2 $ 73.2
------- ------- -------
Terminal Value $549.0 622.2 $695.4
WACC 13.0% 13.0% 13.0%
Present value of terminal value $298.0 $337.7 $377.4
Present value of projected cash flows 104.7 104.7 104.7
------- ------- -------
Enterprise value $402.7 $442.4 $482.1
Less: Projected Net Debt at 12/31/99<F1> (46.0) (46.0) (46.0)
Plus: Assumed Net Proceeds from Sale of VDCG<F2> 8.5 8.5 8.5
Plus: Proceeds from Options 4.2 8.8 9.6
------- ------- -------
Gross equity value $369.4 $413.8 $454.4
Gross diluted shares<F3> 22.923 23.191 23.237
Equity value per share $16.12 $17.84 $19.55
____________________
<FN>
<F1> Source: Company management estimate.
<F2> Assumes purchase price at midpoint of the VDCG range of the
Sum-of-the-Parts valuation analysis.
<F3> Source: Company share and option schedule dated August 24, 1999.
</TABLE>
-58-
<PAGE>
Discounted Cash Flow Methodology
Present Value of Projected Cash Flow Based on Company Projections-With
Acquisitions
($ in millions)
<TABLE>
<CAPTION>
1999E 2000E 2001E 2002E 2003E 2004E
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Net Sales $311.6 $397.7 $485.0 $572.8 $ 667.2 $769.3
% Growth 27.6% 22.0% 18.1% 16.5% 15.3%
EBITDA $ 60.8 $ 76.7 $ 92.6 $ 109.7 $128.1
% Margin 15.3% 15.8% 16.2% 16.4% 16.7%
Less: Depreciation and Amortization ($10.0) ($10.5) ($11.0) ($11.5) ($12.0)
Goodwill Amortization (5.9) (7.7) (9.6) (11.4) (13.3)
------- ------- ------- ------- -------
EBIT 45.0 58.5 72.1 86.8 102.9
Taxes<F1> at 40% (18.4) (24.1) (29.9) (36.2) (43.0)
Effective Tax Rate 40.8% 41.3% 41.6% 41.7% 41.8%
------- ------- ------- ------- -------
Unlevered Net Income $ 26.6 $ 34.4 $ 42.1 $ 50.6 $ 59.9
Less: Capital Expenditures (11.0) (11.0) (11.0) (11.0) (11.0)
Less: Purchase of Businesses, net of Cash
Acquired (50.0) (50.0) (50.0) (50.0) (50.0)
Less: Change in Working Capital (3.3) 0.3 (1.2) (4.4) (6.4)
Add: Depreciation and Amortization 15.9 18.2 20.6 22.9 25.3
------- ------- ------- ------- -------
Unlevered Free Cash Flow ($21.8) ($ 8.1) $ 0.5 $ 8.1 $ 17.7
Present Value<F2> ($19.3) ($ 6.4) $ 0.3 $ 5.0 $ 9.6
Present Value of Projected Cash Flow ($10.8)
</TABLE>
[FN]
<F1> 50% of incremental goodwill amortization associated with acquisitions
is assumed to be deductible for tax purposes.
<F2> Discounted at Platinum's weighted average cost of capital of 13%.
-59-
<PAGE>
Discounted Cash Flow Methodology--With Acquisitions
Terminal EBITDA Multiple Methodology
<TABLE>
<CAPTION>
($ in millions)
7.5x 8.5x 9.5x
EBITDA Multiple ----------------- ------------------- ---------------
<S> <C> <C> <C>
Year 2004 EBITDA $128.1 $ 128.1 $ 128.1
------ -------- --------
Terminal Value $960.8 $1,088.9 $1,217.0
WACC 13.0% 13.0% 13.0%
Present value of terminal value $521.5 $ 591.0 $ 660.5
Present value of projected cash flows (10.8) (10.8) (10.8)
------ -------- --------
Enterprise value $510.7 $ 580.2 $ 649.7
Less: Projected Net Debt at 12/31/99<F1> (46.0) (46.0) (46.0)
Plus: Assumed Net Proceeds from Sale of VDCG <F2> 8.5 8.5 8.5
Plus: Proceeds from Options 14.4 15.6 15.9
------ -------- --------
Gross equity value $487.7 $ 558.4 $ 628.2
Gross diluted shares<F3> 23.471 23.528 23.537
Equity value per share $20.78 $ 23.73 $ 26.69
</TABLE>
____________________
[FN]
<F1> Source: Company management estimate.
<F2> Assumes purchase price at midpoint of the VDCG range of the
Sum-of-the-Parts valuation analysis.
<F3> Source: Company share and option schedule dated August 24, 1999.
-60-
<PAGE>
Weighted Average Cost of Capital Calculation
Calculation of Unlevered Beta
<TABLE>
<CAPTION>
($ in millions)
Mkt. Value Book Value Predicted Unlevered
Company Equity<F1> Debt<F2> Barra Beta Debt/Equity Beta<F3>
- ------------------------------------ ------------ ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Business Information/Consulting
- -------------------------------
ChoicePoint Inc. $1,009.3 $202.5 0.76 20.1% 0.67
Navigant Consulting 1,056.4 0.0 1.27 0.0 1.27
Dun & Bradstreet Corp. New 4,580.9 129.2 0.96 2.8 0.94
Gartner Group 1,042.5 250.0 0.92 24.0 0.80
Shared Medical Systems 1,063.4 229.7 1.01 21.6 0.89
Nielsen Media Research Inc. 2,588.1 215.0 1.05 8.3 1.00
Landauer Inc. 230.1 3.0 0.43 1.3 0.43
Arithmetic Average 11.2% 0.86
Security Products and Services
- ------------------------------
Armor Holdings Inc. $ 250.9 $ 4.0 0.78 1.6% 0.77
Pittston Brinks Group 775.9 133.7 0.83 17.2 0.75
Burns International Service Corp. 185.9 117.2 0.78 63.1 0.57
Wackenhut Corp. 207.5 8.4 0.56 4.0 0.55
ITI Technologies 242.1 0.0 0.85 0.0 0.85
Checkpoint Systems 240.8 173.8 0.98 72.2 0.68
Arithmetic Average 26.3% 0.69
Overall Arithmetic Average 18.2% 0.78
</TABLE>
-61-
<PAGE>
<TABLE>
Cost of Equity Calculation Weighted Average Cost of Capital Calculation
- ------------------------------------------------------------ -------------------------------------------------------
<S> <C> <C> <C>
Unlevered beta 0.78 Cost of Equity 14.1%
Industry Leverage Ratio (D/E) 18.2% Industry Average E/(E+D) 84.6
Relevered Beta 0.87 Weighted Avg. Cost of Equity Portion 12.0
Risk-free rate of return (Rf)<F4> 6.1 Cost of debt (Rd) 8.6%
Market risk premium (Rm-Rf)<F5> 8.0 Marginal tax rate (t) 35.0
Small-cap premium<F6> 1.1 After-Tax Cost of Debt 5.6
Cost of equity 14.1 Industry Average D/(E+D) 15.4%
Weighted Average Cost of Debt Portion 0.9
WACC 12.8%
____________________
<FN>
<F1> Based on fully diluted number of shares as per latest quarterly
financial statement and closing stock prices on November 11, 1999.
<F2> Book value of debt according to latest quarterly financial statement.
<F3> Unlevered betas = Beta/[1+D/E*(1-t)].
<F4> Yield on the 30-year Treasury Bond as of November 11, 1999.
<F5> Average historic spread between the return on stocks and T-bonds
(source: Ibbotson Associates).
<F6> Additional equity size risk premium on companies with equity
capitalization between $252 and $918 million (Ibbotson Associates).
</TABLE>
-62-
<PAGE>
Appendix C
Preferred Stock Valuation Analysis
-63-
<PAGE>
Series A-1 and A-2 Preferred Stock Valuation Analysis
<TABLE>
<CAPTION>
Fixed
Coupon Rate Yr. 0 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5
----------- ----- ----- ----- ----- ----- -----
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Principal Amount End of Period 13.0% $20,000 $ 22,600 $25,538 $28,858 $32,609 $36,849
Value of Common Equity Participation<F1> 9,680
-------
$46,528
</TABLE>
<TABLE>
<CAPTION>
Implied Value of Series A Preferred (% of Face)
- -----------------------------------------------------------------------------------------------------------------------------------
Required IRR
-----------------------------------------------
17.5% 20.0% 22.5%
------- ------- ------
<S> <C> <C> <C> <C>
7.0x 97.9 88.1 79.5
Assumed 2004 EBITDA 8.0 101.9 91.7 82.7
Exit Multiple 8.5 103.9 93.5 84.3
9.0 105.9 95.3 85.9
10.0 109.8 98.9 89.2
____________________
<FN>
<F1> Based on 1.5% of common equity (173,062 shares) and an assumed 2004
EBITDA exit multiple of 8.5x.
</TABLE>
-64-
<PAGE>
Series B-1 and B-2 Preferred Stock Valuation Analysis
<TABLE>
<CAPTION>
Fixed
Coupon Rate Yr. 0 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5
----------- ----- ----- ----- ----- ----- -----
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Principal Amount End of Period 9.0% $30,000 $32,700 $35,643 $38,851 $42,347 $46,159
Value of Common Equity Participation<F1> 4,969
-------
$51,128
</TABLE>
<TABLE>
<CAPTION>
Implied Value of Series B Preferred (% of Face)
- -----------------------------------------------------------------------------------------------------------------------------------
Required IRR <F2>
-----------------------------------------------------
17.5% 20.0% 22.5%
-------------- ----------------- ----------------
<S> <C> <C> <C> <C>
7.0x 74.1 66.7 60.1
Assumed 2004 EBITDA 8.0 75.4 67.9 61.2
Exit Multiple 8.5 76.1 68.5 61.8
9.0 76.8 69.1 62.3
10.0 78.1 70.3 63.4
</TABLE>
____________________
[FN]
<F1> Based 0.77% of common equity (88,838 shares) and an assumed 2004
EBITDA exit multiple of 8.5x.
<F2> Although for illustrative purposes the same range of required IRRs has
been used for calculating implied values of the Series A and Series B
Preferred Stocks, a higher IRR could be required for the Series B-1
and Series B-2 Preferred Stock given convertibility at the Company's
option.
-65-
<PAGE>
PIK Preferred Stock Spread Analysis
<TABLE>
<CAPTION>
When-
issued
Concurrent Spread
<F1> Premium<F2>
Issue Date Issuer Security Size(M) Maturity Coupon Yield (Y/N) (bps)
- ---------- -------------------------- ------------------------------ ------ -------- ------- ----- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/24/99 ZSC Specialty Chemical Sr. Exch. PIK Pref. with 0.7%
Holdings warrants $35.0 7/1/11 16.000% 16.000% Y 500<F3>
4/29/99 Dobson Communications Sr. Exch. PIK Pref. 170.0 5/1/09 13.000 13.000 N 361<F3>
4/15/99 R&B Falcon Corp Sr. Exch. PIK Pref. with 4%
warrants 300.0 5/1/09 13.875 13.875 N 251<F3>
12/16/98 Crown Castle International Sr. Exch. PIK Pref. 200.0 12/15/10 12.750 12.750 N 226<F4>
11/24/98 Global Crossing Sr. Exch. PIK Pref. 500.0 12/1/08 10.500 10.500 N 197<F3>
7/13/98 Clark Material Handling Sr. Exch. PIK Pref. 20.0 7/15/07 13.000 13.000 Y 300<F5>
6/26/98 Cumulus Media Sr. Exch. PIK Pref. 125.0 5/4/00 13.750 13.750 Y 337<F3>
6/3/98 Concentric Network Sr. Exch. PIK Pref. 150.0 6/1/10 13.500 13.500 N 227<F3>
5/13/98 Cluett American Corp Sr. Exch. PIK Pref. 50.0 5/15/10 12.500 12.500 Y 232<F5>
3/12/98 Day International Group Sr. Exch. PIK Pref. 35.0 3/15/10 12.250 12.307 Y 275<F5>
2/19/98 MCMS Inc. Sr. Exch. PIK Pref. 25.0 3/1/10 12.500 12.500 Y 274<F5>
1/16/98 Dobson Communications Sr. Exch. PIK Pref. 175.0 1/15/08 12.250 12.250 N 210<F3>
12/15/97 Tuesday Morning Sr. Exch. PIK Pref. with 6%
warrants 25.0 12/15/09 13.250 13.250 Y 223<F5>
7/21/97 Jordan Telecommunications Sr. Exch. PIK Pref. with 2%
warrants 25.0 8/1/09 13.250 13.250 Y 324<F3>
3/24/97 Spanish Broadcasting Systems Sr. Exch. PIK Pref. with 9.5%
warrants 175.0 3/15/05 14.250 14.250 Y 320<F3>
</TABLE>
____________________
[FN]
<F1> Indicates whether the Preferred stock was issued concurrently with a
bond offering.
-66-
<PAGE>
<F2> Represents the spread between the Issuer's Preferred and high yield
bonds at the Preferred issue date.
<F3> Issuer does not have senior subordinated notes, and therefore, we have
used the Issuer's senior notes to calculate the spread differential.
<F4> Issuer does not have senior or senior subordinated notes, and
therefore, we have used the Issuer's discount notes to calculate
the spread differential.
<F5> Spread differential calculated off of Issuer's senior subordinated
notes.
-67-
<PAGE>
Appendix D
LBO Analysis
-68-
<PAGE>
LBO Equity Return Calculations
<TABLE>
<CAPTION>
($ in millions)
$18 per Share with
$50.0 Million in PIK Preferred
------------------------------
<S> <C>
2004 EBITDA $ 128.1
Multiple 8.5x
-------
Implied 2004 Enterprise Value $1,088.9
Less: Net Debt (326.5)
Less: Preferred Stock (83.0)
Plus: Management Options Proceeds 17.6
--------
Implied 2004 Equity Value $ 696.9
Equity Investment at 12/31/99 (202.0)
Equity Value at 12/31/04 (assuming 8% management options) $ 627.7
IRR 25.5%
</TABLE>
-69-
<PAGE>
Summary of Potential Equity Returns
5 Year Internal Rate of Return on Common Equity (1)
2004 EBITDA Exit Multiple
Midpoint
7.0x 8.0x 8.5x 9.0x 10.0x
--- --- --- --- ---
17.6% 23.1% 25.5% 27.7% 31.7%
____________________
[FN]
(1) Assumes (i) option plan constituting 8% of pro forma common equity
(ii) $20 million of Series A Preferred Stock with a fixed coupon rate
of 13% and common equity participation of 1.5% of the pro forma common
equity (173,062 shares) and (iii) $30 million of Series B-1 and B-2
Preferred Stock with a fixed coupon rate of 9% and common equity
participation of 0.77% of the pro forma common equity (88,838 shares).
-70-
<PAGE>
Pro Forma Credit Statistics
<TABLE>
<CAPTION> ($ in millions)
Projected
---------------------------------------------------------------
Pro Forma
1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Financial Data
EBITDA $ 43.8 $ 60.8 $ 76.7 $ 92.6 $109.7 $128.1
Margin % 14.1% 15.3% 15.8% 16.2% 16.4% 16.7%
CapEx<F1> $ 16.0 $ 11.0 $ 11.0 $ 11.0 $ 11.0 $ 11.0
Debt 225.0 268.2 297.7 318.9 333.2 338.5
Credit Statistics
EBITDA/Interest Expense 1.7x 2.3x 2.5x 2.8x 3.2x 3.6x
(EBITDA-CapEx)/Interest Expense 1.0 1.9 2.2 2.5 2.9 3.3
Debt/EBITDA 5.1x 4.4x 3.9x 3.4x 3.0x 2.6x
</TABLE>
____________________
[FN]
<F1> Includes database expenditures.
-71-
<PAGE>
Appendix E
Platinum Ownership Profile
-72-
<PAGE>
Share Ownership Schedule
<TABLE>
<CAPTION>
Shares Gross Shares
--------------------- ------------------------
Amount % Options(2) Amount %
------ --- ---------- ------ ---
<S> <C> <C> <C> <C> <C>
Directors and Executive Officers<F1>
Jules B. Kroll<F3> 3,072,551 13.9% -- 3,072,551 12.7%
Thomas and Wilfred O'Gara<F4> 3,531,380 15.9 135,597 3,666,977 15.2
All Other Directors and Executive Officers 54,303 0.2 364,750 419,053 1.7
---------- ----- --------- ---------- -----
Total Directors and Executive Officers 6,658,234 30.0% 500,347 7,158,581 29.6%
Total Other Employees<F5> 1,594,988 7.2 1,482,751 3,077,739 12.7
---------- ----- --------- ---------- -----
Total Insiders 8,253,222 37.2% 1,983,098 10,236,320 42.4%
---------- ----- --------- ---------- -----
A.I.G. 1,444,212 6.5% -- 1,444,212 6.0%
Institutional Ownership<F6>
Lord, Abbett & Company 1,848,185 8.3% -- 1,848,185 7.7%
Schroder Investment Mgmt Group 800,600 3.6 -- 800,600 3.3
Capital Research & Mgmt Co 628,700 2.8 -- 628,700 2,6
Citigroup Inc 514,654 2.3 -- 514,654 2.1
Palisade Capital Management 496,500 2.2 -- 496,500 2.1
---------- ----- --------- ---------- -----
Subtotal Top 5 Institutions 4,288,639 19.3% -- 4,288,639 17.8%
All Other 13F Institutions 5,423,441 24.5 -- 5,423,441 22.5
---------- ----- --------- ---------- -----
Total 13F Institutions 9,712,080 43.8% -- 9,712,080 40.2%
Other Public Shareholders 2,763,677 12.5 -- 2,763,677 11.4
---------- ----- --------- ---------- -----
Total Outstanding<F7> 22,173,191 100.0% 1,983,098 24,156,289 100.0%
---------- ----- --------- ---------- -----
</TABLE>
____________________
[FN]
<F1> Shareholdings of Directors and Executive Officers as of March 31, 1999
per the Company's Form 10K-A, except for shares held by Michael
Lennon, who is listed in the Certified Shareholder List dated July 31,
1999.
<F2> Options and common stock equivalents per Option Ownership Schedule
dated August 31, 1999.
<F3> Jules Kroll share ownership includes 192,560 shares held by trusts for
the benefit of Mr. Kroll's adult children, in which Mr. Kroll
disclaims any beneficial interest.
-73-
<PAGE>
<F4> Thomas and Wilfred O'Gara share ownership includes 496,595 shares held
under MeesPierson Management (Guernsey) Ltd. along with 373,524 shares
held by Union Federal Corporation, as indicated in the Prospectus
dated April 30, 1998.
<F5> Includes shareholdings of non-directors and non-executive officer
employees holders with ownership of at least 40,000 shares per the
Share Registration dated July 30, 1999 and Certified Shareholder List
dated July 31, 1999. List may not include shares owned by employees
and held at brokerage firms in Street name.
<F6> Holdings as of 9/30/99 based on 13F filings. Source: CDA Spectrum.
<F7> Outstanding shares as of August 24, 1999.
-74-
<PAGE>
Appendix F
Trading Multiples of Selected Comparable Companies--ISG
-75-
<PAGE>
Current Valuation of Comparable Companies-ISG
<TABLE>
<CAPTION>
Current Enterprise
Price Projected Sales(4) Value/Sales
%as of ------------------ -----------------
Stock 52 Week 52 Week 52 Week Equity Enterprise
Price<F1> High Low High Value<F2> Value<F3> CY1999E CY2000E CY1999E CY2000E
-------- ------- ------- ------- -------- ---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Computer Security Software and
Services
AXENT Technologies $22.38 $40.50 $7.69 55.2% $604.1 $497.4 $111.9 $143.6 4.44x 3.46x
Entrust Technologies 33.25 43.06 16.88 77.2 1.708.2 1,627.1 77.3 123.2 21.05 13.21
ISS Group, Inc. 40.00 46.25 14.19 86.5 1,683.6 1,550.0 70.3 106.4 22.05 14.56
Network Associates 21.81 67.69 10.06 32.2 3.011.2 3,138.3 676.4 909.5 4.64 3.45
Rainbow Technologies 19.69 26.38 7.94 74.6 246.4 224.8 120.6 133.7 1.86 1.68
RSA Security Inc. 37.81 39.63 10.13 95.4 1,666.0 1,426.5 216.0 249.2 6.60 5.72
VeriSign Inc. 155.00 181.63 16.50 85.3 9,049.8 8,895.6 79.0 122.5 112.66 72.64
5.69x 4.65x
Harmonic Mean
Technology Consulting Services
Answer Think Consulting $27.25 $36.63 $ 9.25 74.4% $990.2 $979.5 $204.5 $278.1 4.79x 3.52x
Cambridge Technology Partners,
Inc. 11.94 32.25 10.63 37.0 698.4 610.9 657.3 808.8 0.93 0.76
Cognizant Tech Solutions 53.25 58.25 17.75 91.4 520.2 490.9 82.9 112.0 5.92 4.38
Diamond Technology Partner
Incorporated 53.63 57.50 8.00 93.3 911.4 874.4 108.5 160.4 8.06 5.45
International Network Solutions 50.31 58.75 28.67 85.6 3,430.1 3,377.0 392.7 537.4 8.60 6.28
Sapient Corporation 73.25 75.00 19.28 97.7 2,317.7 2,233.0 265.9 394.3 8.40 5.66
-76-
<PAGE>
Scient Corp. 116.88 145.00 27.75 80.6 4,438.7 4,376.3 69.4 111.2 63.10 39.35
Superior Consultant 11.13 47.25 10.00 23.5 112.0 74.7 170.3 273.9 0.44 0.27
Technology Solutions Company 23.13 24.00 6.13 96.4 1,112.2 1,027.8 305.4 350.5 3.37 2.93
U.S. Web Corp. 37.13 47.00 17.00 79.0 3,360.5 3,283.7 451.5 759.9 7.27 4.32
Viant Corp 87.75 123.00 18.25 71.3 2,313.9 2,300.5 39.9 66.5 57.68 34.59
Whittman-Hart Inc. 49.00 49.94 17.00 98.1 3,142.9 3.014.7 453.6 621.0 6.65 4.85
2.55x 1.75x
Harmonic Mean
</TABLE>
____________________
[FN]
<F1> Prices as of November 11, 1999.
<F2> Equity value defined as diluted number of shares times closing stock
price on November 11, 1999.
<F3> Enterprise value defined as equity value plus debt, minority interests
and preferred stock minus cash.
<F4> Source: Wall Street Equity Research.
-77-
<PAGE>
<TABLE>
Description of Comparable Public Companies-ISG
Sales<F2>
-------------------------- Equity
Company 1998 1999 2000 Value<F1> Business Development
- ------- ---- ---- ---- -------- --------------------
($ in millions)
<S> <C> <C> <C> <C> <C>
AXENT $101.0 $111.9 $143.6 $604.1 AXENT Technologies makes security management software that lets
Technologies users analyze a computer network defense's strengths and
weaknesses, custom-design network-specific protection policies,
control remote and other access and react through system shutdowns
and other methods when a breach occurs.
Entrust 47.8 77.3 123.2 1,708.2 Targeting organizations and large governments that have
Technologies significant requirements for comprehensive public key
infrastructure (PKI) technology, Entrust Technologies develops,
markets and sells products and services that allow enterprises to
manage trusted, secure electronic communications and transactions
over advanced networks, including the Internet, extranets and
intranets. Its solutions automate the management of digital
certificates, which are similar to electronic passports, through
PKI technology designed to assure the privacy and authenticity of
internal and external electronic communications.
ISS Group, Inc. 35.9 70.3 106.4 1,683.6 ISS Group, Inc. is a provider of network security monitoring,
detection and response software that protects the security and
integrity of enterprise information systems. Products include
Internet Security Scanner, which was designed to help
administrators explore and log network security vulnerabilities
associated with TCP/IP host services and are sold to the high-tech
and financial industries.
Network 990.0 676.4 909.5 3,011.2 The company is a leading provider of network security and
Associates management software products. Network Associates is particularly
targeting enterprise customers using the Windows NT/Intel
platform. The company offers anti-virus, security, network
management and help desk software, which can be purchased in one
complete integrated suite, known as Net Tools.
Rainbow 109.2 120.6 133.7 246.4 Rainbow Technologies makes software anti-piracy and information
Technologies security products. Its antiparty products include software that
publishers incorporate into their products and a hardware key that
continuously interacts with the software. Rainbow's satellite and
network security products are marketed to government, military and
private businesses.
RSA Security Inc. 171.4 215.3 244.5 1,666.0 The company is a leading maker of software and hardware security
products that guard computer networks. Its main product, SecurID,
prevents unauthorized access by requiring users to enter a PIN and
a random-access code displayed on a card or token.
-78-
<PAGE>
VeriSign 38.9 79.0 122.5 9,049.8 VeriSign develops certificate management products and
is a provider of digital ID and private-label certificate services,
software-development services and digital authentication services.
It provides digital IDs (also called digital certificates) with
encrypted information to protect access to communications and
transactions sent over the Internet, intranets and extranets.
VeriSign's digital certification technology is available in
leading software packages, including Microsoft's and Netscape's
Web browsers.
AnswerThink $107.0 $204.5 $278.1 $990.2 The Company provides integrated consulting and technology enabled
Consulting solutions focused on the Internet and web-enabled electronic
commerce marketplace. AnswerThink delivers a wide range of
integrated services, or scalable solutions, including benchmarking
best practices, business process transformation (business
redesign, migration planning and performance assessment), packaged
software implementation, Internet commerce, decision support
technology, and Y2K solutions. These services, allow firms to
integrate divisions.
Cambridge 612.0 657.3 808.8 698.4 The Company's major service offerings are management consulting,
Technology interactive solutions, customer management solutions, enterprise
Partners resource solutions, custom software solutions and network
services. The company is known for including key client users,
executives and information technology professionals in the process
in order to ensure that the client's strategic goals are met
satisfactorily.
Cognizant 58.6 82.9 112.0 520.2 Cognizant delivers high-quality, cost-effective, full life cycle
Technology solutions for complex information technology software development
Solutions and technology maintenance problems. The Company offers these
services, which include application development and testing, Y2K
and Eurocurrency compliance, testing and quality assurance, and
re-hosting and re-engineering services (for functionality of
programs in new operating environments), to its customers through
both on-site teams at customer locations and through seven
development centers located in India.
Diamond 75.8 108.5 160.4 911.4 The Company helps its clients form "digital strategies," a
Technology synthesis of business planning and information technology (IT)
Partner, Inc. know-how. Diamond sends its customers small, multidisciplinary
teams with expertise in areas such as strategy consulting,
business processes and technology. The company focuses on
insurance, health care, financial services, telecommunications and
consumer products clients.
International 238.2 392.7 537.4 3,430.1 International Network Services provides computer network support
Network Solutions to "FORTUNE" 1000 corporations. The company has enjoyed a strong
growth spurt since 1992 thanks in part to a savvy relationship
with hardware giant Cisco (which owns 8% of the company). INS
helps customers design networking systems, choose the proper
equipment, install systems and manage performance. The company
does not resell networking equipment. INS also provides online
assistance and intranet management for its customers.
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<PAGE>
Sapient 160.4 265.9 394.3 2,317.7 Sapient develops client/server and Web-based software applications
to help organizations improve process and performance. Through
the delivery of integrated services, from strategy and business
transformation consulting through user-centered design and
technology implementation services, the Company helps emerging and
evolving businesses transform into e-businesses, combining the
reach and efficiency of the Internet with emerging and existing
technologies. Sapient delivers services through collaborative
multidisciplinary teams in six main industries: (i) financial
services, (ii) energy service, (iii) MRD (manufacturing, retail
and distribution), (iv) communications, (v) healthcare, and (vi)
government.
Scient Corp. 20.7 69.4 111.2 4,438.7 Scient is a leading provider of eBusiness system innovations
designed to enable companies to strengthen relationships with
customers and business partners, create new revenue opportunities,
improve operating efficiencies, shorten cycle times and improve
communications.
Superior 124.7 170.3 273.9 112. 0 Superior Consultant is a national healthcare consulting firm that
Consultant provides a wide range of information technology consulting and
strategic and operations management consulting services to a broad
cross-section of healthcare industry participants and healthcare
information systems vendors. Management consulting services
include strategy development and business planning, facility
planning, and operational and financial performance efficiency.
Information Technology outsourcing enables healthcare providers to
simplify their agenda and ensure access of clients to Superior's
labor pool. The majority of the skills of Superior's consultants
are in IT consulting services, which include technology and
product selection, systems implementation, integration and
implementation, and contract negotiation.
Technology 317.5 305.4 350.5 1,112.2 Technology Solutions offers information technology (IT) consulting
Solutions Company services and strategic business consulting services targeting IT
technology areas, specific software packages, along with specific
business processes or vertical markets, in large middle-market
firms located in major markets and countries around the world.
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<PAGE>
US Web 228.6 451.5 759.9 3,360.5 US Web is a firm with expertise in business strategy, marketing,
communications and internet technology solutions, for medium-size
and large companies. The Company's services are focused on
helping clients to differentiate their products and services,
improve business efficiency, enhance customer relationships, and
leverage human capital. The Internet Solution Development and
Deployment consists of six phases; (i) strategy consulting, (ii)
analysis and design of systems and processes, (iii) technology
development, (iv) implementation and integration of the full
systems, (v) E-Services (including back-office support functions,
communications and knowledge management and customer relationship
management, and (vi) audience development to fine-tune marketing
strategies and objectives.
Viant Corp. 20.0 39.9 66.5 2,313.9 Viant is a leading Internet professional services firm providing
strategic consulting, creative design and technology services to
companies seeking to capitalize on the Internet.
Whittman-Hart, 321.4 453.6 621.0 3,142.9 Providing strategic information technology business solutions to
Inc. improve the productivity and competitive position of its clients,
Whittman-Hart is a single source for a wide range of services
required to design, develop and implement integrated solutions in
the client/server, Internet and midrange computing environments.
The company has five business units: Solution Strategies, Package
Software Solutions, Custom Applications, Network Enables Solutions
and Interactive Solutions.
____________________
<FN>
<F1> Based on closing stock prices on November 11, 1999.
<F2> Source: Company SEC filings and Wall Street Research.
</TABLE>
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<PAGE>
Appendix G
Additional Financial Data
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Summary of Adjustments to 1999 Forecast--As Reported
<TABLE>
<CAPTION>
1999E Results
-----------------------------------------------------------------------
Revenue EBITDA EBIT Net Income EPS
------------- ------------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Project Trophy Projections $307.2 $48.1 $35.8 $20.0 $0.88
Adjustments:
KRCS 3.4 (2.9) (3.9) (2.4) (0.10)
SPSG (0.2) 1.0 0.7 0.4 0.02
ISG (3.8) (1.0) (1.0) (0.6) (0.03)
Corporate 0.0 (2.6) (2.6) (1.6) (0.07)
Interest (0.4) (0.02)
Taxes 0.9 0.04
------ ----- ----- ----- -----
Current Management Estimates<F1> $306.5 $42.5 $29.0 $16.2 $0.72
------ ----- ----- ----- -----
____________________
<FN>
<F1> Current Management Estimates excludes $1.576 million benefit
associated with the Calvi settlement.
</TABLE>
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<PAGE>
LTM Pro Forma Financial Results ($ in millions)
<TABLE>
<CAPTION>
1999
1998 ------------------------------------------ LTM
Q4 Q1 Q2 Q3 9/30/99
--------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue $74.4 $73.1 $76.5 $81.0 $305.0
EBIT $ 0.8 $ 6.2 $ 2.3 $ 7.3 $ 16.7
Add: Restructuring Expense -- 0.5 3.9 0.0 4.4
Merger Expense 5.7 0.2 2.9 0.4 9.3
Pro Forma Buchler Phillips 0.6 1.0 -- -- 1.6
Pro Forma Fact Finders 0.1 -- -- -- 0.1
----- ----- ----- ----- ------
Pro Forma EBIT (Including Calvi) $ 7.3 $ 8.0 $ 9.0 $ 7.8 $ 32.1
Less: Calvi Recovery -- -- -- (1.6) (1.6)
----- ----- ----- ----- ------
Pro Forma EBIT (Excluding Calvi) $ 7.3 $ 8.0 $ 9.0 $ 6.2 $ 30.5
Depreciation & Amortization 2.7 2.4 3.5 4.1 12.7
Depreciation & Amortization (Buchler Phillips) 0.3 0.3 -- -- 0.6
Depreciation & Amortization (Fact Finders) 0.0 -- -- -- 0.0
----- ----- ----- ----- ------
Pro Forma EBITDA (Excluding Calvi) $10.3 $10.7 $12.5 $10.3 $ 43.9
</TABLE>
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<PAGE>
1999 Pro Forma Financial Results--
Current Management Estimates (11/13/99) ($ in millions)
<TABLE>
<CAPTION>
1999 Results
------------------------------------------------------------------------------
Q1A Q2A Q3A 9 Months Q4E 1999E
---------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
KRCS $43.2 $46.5 $46.1 $135.7 $46.1 $181.8
SPSG 28.7 28.8 34.2 91.6 34.2 125.8
ISG 1.2 1.3 0.7 3.2 0.7 4.0
----- ----- ----- ------ ----- ------
Total $73.1 $76.5 $81.0 $230.6 $81.0 $311.6
EBITDA:
KRCS $ 7.7 $ 8.6 $ 8.3 $ 26.2 $ 7.9 $ 34.1
SPSG 4.5 6.4 6.3 17.2 5.3 22.5
ISG 0.2 0.0 (0.8) (0.6) 0.0 (0.6)
Corporate (1.7) (2.5) (3.5) (7.7) (2.9) (10.6)
----- ----- ----- ------ ----- ------
Total (Including Calvi) $10.7 $12.5 $10.3 $ 35.1 $10.3 $ 45.4
Calvi Recovery $ (1.6) $ (1.6)
------ ------
Adjusted EBITDA $ 33.6 $ 43.8
EBIT:
KRCS $ 5.6 $ 6.0 $ 5.2 $ 18.4 $ 5.3 $ 23.7
SPSG 3.9 5.6 5.4 14.9 4.5 19.4
ISG 0.2 0.0 (0.8) (0.6) 0.0 (0.6)
Corporate (1.8) (2.6) (3.6) (7.9) (3.0) (10.9)
----- ----- ----- ------ ----- ------
Total (Including Calvi) $ 8.0 $ 9.1 $ 6.2 $ 24.8 $ 6.8 $ 31.5
Calvi Recovery $ (1.6) $ (1.6)
Adjusted EBIT $ 23.2 $ 30.0
------ ------
____________________
<FN>
<F1> Pro forma for the Buchler Phillips and Fact Finders acquisitions.
Results exclude merger and restructuring charges.
</TABLE>
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