<PAGE>
Exhibit 99.c(3)
================================================================================
FIRST UNION SECURITIES, INC.
Presentation to
BOARD OF DIRECTORS
June 5, 2000
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<PAGE>
================================================================================
Presentation to: BOARD OF DIRECTORS
page 1
================================================================================
--------------------------------------------------------------------------------
Introduction
--------------------------------------------------------------------------------
Situation Overview
Proposed Offer from Lew and LaVonda Rothman
Exhibits
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
INTRODUCTION Presentation to: BOARD OF DIRECTORS
page 2
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OVERVIEW
o Frustrated by lack of interest and movement in the common stock of
Cutter (the "Company"), Messrs. Rothman and Colleton decided to
investigate ways to maximize shareholder value.
o On April 7, 2000, representatives of the Company met with First
Union Securities, Inc. ("FUSI") to discuss various strategic
alternatives to maximize shareholder value, including a potential
sale of the Company and a going private transaction.
- At the meeting, the Company authorized FUSI to conduct a
limited market check to determine the interest of strategic
buyers.
o FUSI contacted the two most likely strategic buyers, Altadis and
Swedish Match, to determine their level of interest in a potential
acquisition of the Company.
- Both Altadis and Swedish Match declined to pursue an
acquisition of the Company.
o On May 18, 2000, FUSI met with representatives of the Company to
update them on the results of the market check, as well as to
discuss further the possibility of a going private transaction.
o At the meeting, the Company's President and Chief Executive Officer,
Lew Rothman, concluded that he believed a going private transaction
would be in the best interests of the Company's shareholders.
o Lew Rothman called a special meeting of the Board of Directors to be
held on June 5, 2000 for the purpose of discussing such a
transaction.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
Presentation to: BOARD OF DIRECTORS
page 3
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Introduction
--------------------------------------------------------------------------------
Situation Overview
--------------------------------------------------------------------------------
Proposed Offer from Lew and LaVonda Rothman
Exhibits
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
SITUATION OVERVIEW Presentation to: BOARD OF DIRECTORS
page 4
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SUMMARY
o The Company currently does not benefit from remaining public, given
its industry segment, size, growth characteristics and institutional
visibility.
o Investor interest in the cigar industry has waned.
- Global tobacco industry consolidation continues.
- Most of the publicly held domestic manufacturers or
distributors of cigars have been acquired or taken private.
o Lack of interest by public markets has led to poor returns for
shareholders of the remaining companies, as well as other companies
of similar size and potential growth.
- Small cap and moderate growth companies significantly
underperforming NASDAQ and S&P 500.
- Trading volume waning in smaller cap issues.
- Institutional support fading.
----------------------------
First Union Securities, Inc.
<PAGE>
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SITUATION OVERVIEW Presentation to: BOARD OF DIRECTORS
page 5
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TIMELINE RELATING TO KEY PALYERS IN THE U.S. CIGAR INDUSTRY
--------------------------------------------------------------------------------
Date Significant Event
--------------------------------------------------------------------------------
August 1996 > Consolidated Cigar Holdings, Inc. completes IPO of 5.4
million shares at $23.00 per share.
> President Clinton approves proposed FDA regulations that
give the FDA the authority to regulate cigarettes as a
drug delivery device.
--------------------------------------------------------------------------------
December 1996 > Swisher International Group Inc. completes IPO of 6.0
million shares at $17.00 per share.
--------------------------------------------------------------------------------
February 1997 > General Cigar Holdings, Inc. completes IPO of 6.0
million shares at $18.00 per share.
--------------------------------------------------------------------------------
March 1997 > Liggett Group settles lawsuits with 22 states. The
company admits that smoking is addictive and can cause
cancer. The company also admits that the industry
intentionally markets to minors.
--------------------------------------------------------------------------------
June 1997 > Cutter completes IPO of 3.0 million shares at $17.00 per
share.
> Tobacco companies settle with state attorney generals.
--------------------------------------------------------------------------------
August 1997 > Tobacco companies settle Florida Medicaid lawsuit for
$11.3 billion. The companies agree to eliminate all
designated billboard ads, to eliminate vending machine
sales and to support educational programs.
--------------------------------------------------------------------------------
October 1997 > Tobacco companies settle the Broin class action suit.
This becomes the first-ever second-hand smoke trial.
--------------------------------------------------------------------------------
December 1997 > A class action lawsuit for 60 union health care funds in
Washington is filed alleging intentional targeting by
tobacco companies of blue collar workers. The 60 funds
involve 500,000 workers. Eight more states are expected
to file soon.
> Liggett Group will list ingredients on the packages of
L&M cigarettes.
> Lorillard pays more than $1.5 million to the family of a
California smoker who died of cancer. This is the
first-ever payment by a tobacco company for a
smoking-related personal injury claim.
> Havatampa Inc. is sold to Tabacalera International SA.
--------------------------------------------------------------------------------
December 1998 > Swisher International Group Inc. announces going private
transaction at $9.50 per share (44.1% discount to IPO
price).
> Consolidated Cigar Holdings, Inc. announces sale to
Seita for $17.85 per share (22.4% discount to IPO
price).
--------------------------------------------------------------------------------
January 2000 > General Cigar Holdings, Inc. announces sale of majority
ownership to Swedish Match for $15.25 per share (15.3%
discount to IPO price).
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----------------------------
First Union Securities, Inc.
<PAGE>
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SITUATION OVERVIEW Presentation to: BOARD OF DIRECTORS
page 6
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SMALL CAP INDEX, MODERATE GROWTH INDEX AND THE COMPANY VERSUS NASDAQ AND S&P 500
(1)(2)
(Since Company's IPO)
--------------------------------------------------------------------------------
Small Caps Trading Discount to
----------------------------------------
NASDAQ S&P 500
------ -------
Current 66.6% 49.1%
One Year 44.6% 36.5%
Moderate Growth Cos. Trading Discount to
----------------------------------------
NASDAQ S&P 500
------ -------
Current 58.1% 36.3%
One Year 29.5% 19.1%
Company Trading Discount to
----------------------------------------
NASDAQ S&P 500
------ -------
Current 79.3% 68.5%
One Year 73.0% 69.1%
--------------------------------------------------------------------------------
[LINE CHART OMITTED]
Footnote:
---------
(1) Small cap index composed of all companies with market capitalization below
$100.0 million.
(2) Moderate growth index composed of all companies with 3-5 year earnings
growth of 10.0% or less.
o The discount to the NASDAQ and S&P 500 for both the small cap and
moderate growth indices has gotten significantly larger over time
and will continue to increase as more capital flows into "New
Economy" companies.
----------------------------
First Union Securities, Inc.
<PAGE>
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SITUATION OVERVIEW Presentation to: BOARD OF DIRECTORS
page 7
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ANALYSIS OF INSTITUTIONAL SUPPORT FOR THE COMPANY'S STOCK
o The Company's stock is very thinly traded and has very little
institutional support and visibility.
- From the IPO date to January 1, 1999, the median trading
volume of the Company's stock was 27,400 shares a day.
- Since January 1, 1999, the median daily trading volume of the
Company's stock has been 9,100 shares a day.
- Of the sixteen brokerage firms that actively traded the
Company's stock between the IPO and December 31, 1999, only
six are trading the stock in calendar 2000.
- Only one institution, FUSI, provides research on the Company
vs. three at the time of the Company's IPO.
o Without significant institutional interest, research or trading
support, catalysts for near to intermediate term price appreciation
are very limited.
Trading Volume Analysis
-----------------------
(Latest Twelve Months)
[BAR CHART OMITTED]
Comparison of Total Shares Traded Year Over Year
------------------------------------------------
[BAR CHART OMITTED]
Footnote:
---------
(1) IPO on June 25, 1997.
(2) YTD as of June 5, 2000.
----------------------------
First Union Securities, Inc.
<PAGE>
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SITUATION OVERVIEW Presentation to: BOARD OF DIRECTORS
page 8
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THE COMPANY'S FORWARD P/E MULTIPLE(1)
(From July 21, 1997 to Present)
o Despite achieving consistent historical revenue growth (14.8% CAGR
from 1997 to 1999) and stable cash flows, the Company's forward P/E
multiple has contracted dramatically since September 1997.
[LINE GRAPHIC OMITTED]
Footnote:
--------
(1) Data was unavailable for the period of April 1999 to February 2000 due to
lack of forward twelve months quarter-over-quarter EPS projections.
----------------------------
First Union Securities, Inc.
<PAGE>
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SITUATION OVERVIEW Presentation to: BOARD OF DIRECTORS
page 9
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SHIFT IN INSTITUTIONAL OWNERSHIP - QUARTER OVER QUARTER SINCE IPO
[BAR CHART OMITTED]
o Total shares purchased by institutions has declined dramatically
since quarter ended June 30, 1999.
----------------------------
First Union Securities, Inc.
<PAGE>
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SITUATION OVERVIEW Presentation to: BOARD OF DIRECTORS
page 10
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LACK OF INTEREST FROM STRATEGIC BUYERS
o On April 7, 2000, the Company's management team authorized FUSI to
conduct a market check to gauge the interest of the Company's two
most likely strategic buyers regarding a possible acquisition of the
Company.
o FUSI contacted Altadis and Swedish Match to determine their level of
interest in a potential acquisition of the Company. Both companies
declined to pursue an acquisition.
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Overview of Altadis
--------------------------------------------------------------------------------
Ticker: ALT
Location: Eloy Gonzalo 10
28010 Madrid, Spain
Market Capitalization: $4,862.9
Description: Altadis was formed in December 1999 as a result of
a merger of equals between Tabacalera SA located
in Madrid, Spain and Sieta, located in Paris,
France. The terms of the transaction required the
exchange of 19 Tabacalera shares for six Sieta
shares and an extraordinary dividend of Euro 5 to
Seita shareholders. Altadis is currently the
fourth-largest tobacco company in the world by
market capitalization and the sixth largest by
cigarette production.
Brands: Cigar brands include Dutch Treats, Antonio y
Cleopatra, Dutch Masters, Upmann, Montecristo and
Por Larranga.
Market Share
--------------------------------------------------------------------------------
[The following table was depicted as a pie chart in the printed material.]
Other 8%
Rest of Europe 9%
U.S. 15%
France 34%
Spain 34%
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Overview of Swedish Match
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Ticker: SWMA
Location: Rosenlundsgatan 36
118 85 Stockholm, Sweden
Market Capitalization: $1,295.9
Description: Swedish Match is a Swedish-based international
group that manufactures and markets a broad range
of tobacco products and tobacco-related products
including cigars, snuff, chewing tobacco, pipe
tobacco, disposable lighters and matches. The
company is one of the largest manufacturers and
distributors of cigars and cigarillos and ranks
second in terms of sales value in the world cigar
market.
Brands: Cigar brands include Macanudo, Garcia y Vega,
White Owl, El Credito, El Rico Habano, La Hoya
Selecta and Montague.
Market Share
--------------------------------------------------------------------------------
[The following table was depicted as a pie chart in the printed material.]
Other 2%
South America 6%
North America 20%
Other Europe 25%
East Europe 2%
Sweden 45%
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----------------------------
First Union Securities, Inc.
<PAGE>
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Presentation to: BOARD OF DIRECTORS
page 11
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Introduction
Situation Overview
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Proposed Offer from Lew and LaVonda Rothman
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Exhibits
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
PROPOSED OFFER FROM LEW AND LAVONDA Presentation to: BOARD OF DIRECTORS
ROTHMAN Page 12
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REASONS FOR TAKING THE COMPANY PRIVATE
o Lew and LaVonda M. Rothman have carefully considered all options and
believe that the proposed transaction is in the best interests of
both the Company and its shareholders.
o Minority shareholders receive a significant premium to current share
price and immediate liquidity.
o Logical strategic buyers do not appear to have any interest in
acquiring the Company.
o There is little likelihood of significant multiple expansion in the
near term.
o The Company has very limited growth prospects.
- Publicly announced plans regarding no further expansion of
retail operations.
- The only research analyst covering the Company projects modest
organic growth going forward.
o The Company is not currently enjoying the benefits of public
ownership.
o All existing employees, stores, operations and other "stakeholders"
remain in place.
o Financing is readily available.
o Ability to close the transaction quickly.
o The proposed transaction does not preclude the Board's consideration
of potentially superior proposals.
----------------------------
First Union Securities, Inc.
<PAGE>
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PROPOSED OFFER FROM LEW AND LAVONDA Presentation to: BOARD OF DIRECTORS
ROTHMAN page 13
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SUMMARY OF PROPOSED OFFER BY LEW AND LAVONDA M. ROTHMAN
Offer Price: $12.00 per share.
Consideration Offered: Cash.
Transaction Structure: Tender Offer.
Offer Predicated Upon: Majority of the minority shares are tendered.
Financing Sources: Negotiating with three financial institutions
to provide 100% of the financing.
Breakup Fee: None.
----------------------------
First Union Securities, Inc.
<PAGE>
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PROPOSED OFFER FROM LEW AND LAVONDA Presentation to: BOARD OF DIRECTORS
ROTHMAN page 14
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BREAKDOWN OF LEW AND LAVONDA M. ROTHMAN'S OFFER
o Following a review of strategic alternatives, Lew and LaVonda M.
Rothman are proposing a tender offer of $12.00 a share for all
outstanding shares of the Company's stock.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Price Offered By Lew and LaVonda M. Rothman $12.00
--------------------------------------------------------------------------------
Company's Total Shares Outstanding (1) 11,882,955
Less: Shares Contributed By Lew and LaVonda M. Rothman (2) 8,775,840
-----------
Total Shares Subject To Tender Offer 3,107,115
--------------------------------------------------------------------------------
Capital Required To Purchase All Minority Shares $37,285,380
--------------------------------------------------------------------------------
Plus: Refinancing Existing Debt (3) 5,983,000
Plus: Estimated Fees Relating To Transaction 3,000,000
-----------
Total Capital Required To Execute Transaction $46,268,380
===========
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Footnote:
---------
(1) Obtained from Proxy filed December 31, 1999.
(2) Obtained from management and excludes shares held in trust.
(3) As of March 31, 2000.
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Sources And Use of Funds (1)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Sources Of Funds (2)
--------------------------------------------------------------------------------
Debt /
Amount FY99 EBITDA
----------- -----------
Senior Term Loan $46,268,380 2.1x
=========== ===========
--------------------------------------------------------------------------------
Uses Of Funds (3)
--------------------------------------------------------------------------------
Number Of Total Purchase
Shares Price
----------- -------------
Institutional Shares 1,641,142 $19,693,704
Trust Shares 524,160 6,289,920
Retail & Other 941,813 11,301,756
Current Debt -- 5,983,000
Transaction Fees -- 3,000,000
----------- ------------
Total 3,107,115 $46,268,380
=========== ============
Footnote:
---------
(1) Sources and uses of funds excludes $15.2 million of cash on the balance
sheet as of March 31, 2000.
(2) Sources of funds excludes an additional $5.0 million revolver for working
capital purposes.
(3) Shares obtained from 13F filings and management.
----------------------------
First Union Securities, Inc.
<PAGE>
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PROPOSED OFFER FROM LEW AND LAVONDA Presentation to: BOARD OF DIRECTORS
ROTHMAN page 15
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IMPLIED VALUTION OF THE COMPANY BASED ON LEW AND LAVONDA M. ROTHMAN'S OFFER
($ in Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
Valuation
--------------------------------------------------------------------------------
Purchase Price Per Share $12.00
Company's Total Shares Outstanding 11,883
--------
Implied Equity Value $142,595
Plus: Net Debt(1)(2) (9,251)
--------
Implied Enterprise Value $133,344
========
--------------------------------------------------------------------------------
Footnote:
---------
(1) Net debt equals total debt and capitalized leases less excess cash.
(2) As of March 31, 2000, the Company had approximately $6.0 million in debt
and $15.2 million in cash on its balance sheet.
--------------------------------------------------------------------------------
Valuation Mutliples (1)
--------------------------------------------------------------------------------
Amount Multiple
-------- ---------
LTM Sales $314,615 0.4x
LTM EBITDA 21,575 6.2x
LTM EBIT 19,253 6.9x
--------------------------------------------------------------------------------
Premiums Analysis (2)
--------------------------------------------------------------------------------
One Day One Week Four Weeks
------- -------- ----------
17.1% 21.5% 20.0%
--------------------------------------------------------------------------------
Footnote:
---------
(1) LTM as of March 31, 2000.
(2) Assumes announcement date is June 5, 2000.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
PROPOSED OFFER FROM LEW AND LAVONDA Presentation to: BOARD OF DIRECTORS
ROTHMAN page 16
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ANALYSIS OF TRADING VOLUME OF THE COMPANY'S STOCK BETWEEN VARIOUS PRICE RANGES
(Latest Twelve Months)
[The following table was depicted as a bar chart in the printed material.]
Number
of Shares
---------
$7.00 - $9.50 [NEED VALUE] 53.6% of all
$9.51 - $12.00 [NEED VALUE] 41.2%
> $12.00 [NEED VALUE] 5.2%
o Since June 5, 1999, approximately 94.8% of all trades have occurred below
$12.00.
o The last time the Company's stock price was at or above $12.00 was July 8,
1999, almost one year ago.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
PROPOSED OFFER FROM LEW AND LAVONDA Presentation to: BOARD OF DIRECTORS
ROTHMAN page 17
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COMPARABLE GOING PRIVATE CASE STUDY
SWISHER INTERNATIONAL GROUP INC.'S ACQUISITION BY INVESTOR GROUP
Description of Company: Swisher International Group Inc. ("Swisher") and
its subsidiaries manufacture and sell cigars and smokeless tobacco
products. Swisher is one of the largest manufacturers and marketers of
cigars in the world, as measured by units sold. On December 17, 1996,
Swisher completed an initial public offering of 6.0 million Class A Common
Shares ("Class A") for $17.00 per share, with aggregate proceeds of $102.0
million. Swisher's Chairman and CEO, William Ziegler, III, held 28.1
million Class B Common Shares ("Class B"). The Class B represented
approximately 83.0% of the total outstanding common shares and 98.0% of
the outstanding voting power.
During 1998, Swisher's stock price fell approximately 47% as a result of a
general slowdown in demand for cigars. As a result, Mr. Ziegler decided to
take Swisher private and allow the existing Class A shareholders the
opportunity to receive a premium of approximately 40% over the market
price. The transaction was structured as a tender offer and was announced
on December 9, 1998. The transaction closed on June 14, 1999.
Stock Price / Volume Analysis
[STOCK CHART OMITTED]
[PLOT POINTS TO COME]
Valuation Analysis (1)
--------------------------------------------------------------------------------
($ in Thousands)
--------------------------------------------------------------------------------
------------------------------------
Per Share Equity Value $9.50
------------------------------------
Total Shares Outstanding LTM Valuation Multiples
Class A Common Shares 5,778 Financials Multiple
Class B Common Shares 28,100 ---------------------
------- Sales $266,998 1.5x
Total Common Shares 33,878 EBITDA 66,456 6.2x
EBIT 59,742 6.9x
Equity Value $321,844
Plus: Net Debt 91,439 ----------------------------------
-------- Premiums Analysis
Enterprise Value $413,283 ----------------------------------
======== One Day One Week Four Weeks
----------------------------------
39.5% 49.0% 67.0%
----------------------------------
--------------------------------------------------------------------------------
Footnote:
---------
(1) LTM as of December 31, 1998.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
PROPOSED OFFER FROM LEW AND LAVONDA Presentation to: BOARD OF DIRECTORS
ROTHMAN page 18
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VALUATION COMPARISON - THE COMPANY'S IMPLIED VALUATION BASED UPON OFFER PRICE
VS. SWISHER'S VALUATION
--------------------------------------------------------------------------------
($ in Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
------------------------------------- --------------------------------------
Company's Valuation Swisher's Valuation
------------------------------------- --------------------------------------
-------- ---------
Per Share Equity Value $12.00 Per Share Equity Value $9.50
-------- ---------
Total Shares Outstanding Total Shares Outstanding
Total Common Shares (1) 11,883 Class A Common Shares 5,778
Class B Common Shares 28,100
--------
Total Shares 33,878
Equity Value $142,595 Equity Value $321,844
Plus: Net Debt (9,251) Plus: Net Debt 91,439
-------- --------
Enterprise Value $133,344 Enterprise Value $413,283
======== ========
LTM Valuation Multiples (2) LTM Valuation Multiples (3)
------------------------------------- -------------------------------------
Amount Margin Multiple Amount Margin Multiple
----------------------------- -----------------------------
Sales $314,615 -- 0.4x Sales $266,998 -- 1.5x
EBITDA 21,575 6.9% 6.2x EBITDA 66,456 24.9% 6.2x
EBIT 19,253 6.1% 6.9x EBIT 59,742 22.4% 6.9x
--------------------------------------------------------------------------------
Footnote:
---------
(1) Obtained from Proxy filed December 31, 1999.
(2) LTM values as of March 31, 2000.
(3) LTM values as of December 31, 1998.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
PROPOSED OFFER FROM LEW AND LAVONDA Presentation to: BOARD OF DIRECTORS
ROTHMAN page 19
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PREMIUMS PAID ANALYSIS (1)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Premiums Paid Analysis
--------------------------------------------------------------------------------
One Day One Week Four Weeks
-----------------------------------
Company's Stock Price $10.25 $9.88 $10.00
Premium Over Stock Price (2)(3) 11.8% 16.7% 21.2%
--------------------------------------------------------------------------------
Implied Valuation For Company's Stock Price $11.46 $11.52 $12.12
--------------------------------------------------------------------------------
------
Median Per Share Equity Value Based Upon Premiums Analysis $11.52
------
--------------------------------------------------------------------------------
Footnote:
---------
(1) Assumes announcement date is June 5, 2000.
(2) Source: Securities Data Corporation.
(3) Premiums reflect initial premiums offered in transactions from January 1,
1998 to present where the acquiror was a majority shareholder.
o The premiums paid analysis yielded an implied per share equity value
range of $11.46 to $12.12, resulting in a median per share equity
value of $11.52.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
Presentation to: BOARD OF DIRECTORS
page 20
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Introduction
Situation Overview
Proposed Offer from Lew and LaVonda Rothman
----------------------------------------------------------------------
Exhibits
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----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
EXHIBITS Presentation to: BOARD OF DIRECTORS
page 21
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TABLE OF CONTENTS
Exhibit
-------
Proposed Timetable.........................................................A
Historical and Projected Financial Statements..............................B
Ownership Analysis.........................................................C
Transactions Used in Premiums Analysis.....................................D
Valuation Observations.....................................................E
----------------------------
First Union Securities, Inc.
<PAGE>
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EXHIBIT A Presentation to: BOARD OF DIRECTORS
page 22
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PROPOSED TIMETABLE
[GRAPHIC OMITTED]
Date Key Event Responsibility
------------ ----------------------------------------------- ---------------
Week of o FUSI makes a formal presentation to the FUSI, Company
June 5th Board of Directors informing the Board of Counsel
Mr. Rothman's buyout offer.
o Outside directors of the Board form a
Special Committee to evaluate the proposal
by Mr. Rothman.
o Special Committee engages independent
financial and legal advisors.
Week of o Special Committee and its advisors FUSI, Company
June 12th negotiate with Mr. Rothman and his Counsel
advisors to finalize a definitive
agreement.
o Financial institutions complete their due
diligence and submit final proposals.
o The financial institution with the winning
proposal prepares appropriate
documentation to finalize financing.
o Mr. Rothman, FUSI and Counsel select a
Dealer Manager, Depository Institution and
Information Agent.
o Management calls a special meeting of the
Board of Directors to approve Mr.
Rothman's offer.
o Legal Counsel prepares appropriate
documentation to form an acquisition
subsidiary ("Acquisition Corp.")
controlled by Mr. Rothman into which the
Company will be merged upon completion of
the Transaction.
Week of o Special Committee's financial advisor FUSI, Company
June 19th delivers a fairness opinion. Counsel
o Board and Special Committee vote in favor
of the Transaction and recommend it to the
Shareholders.
o Acquisition Corp. signs a commitment
letter with the financial institution.
o Acquisition Corp. formally commences the
tender offer.
July 24 o Parties obtain regulatory clearances and
(Monday) consummate tender offer.
o Parties consummate short form merger.
----------------------------
First Union Securities, Inc.
<PAGE>
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EXHIBIT B Presentation to: BOARD OF DIRECTORS
page 23
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HISTORICAL AND PROJECTED FINANCIAL STATEMENTS (1)
$ in Thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
Company's Income Statements - Fiscal Years Ended December 31, 1998(A) to December 31, 2001(P)
------------------------------------------------------------------------------------------------------------------------
1998(A) 1999(A) 2000(P) 2001(P)
------------------ ------------------ ------------------ ------------------
Amount % Amount % Amount % Amount %
--------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $286,512 100.0% $317,001 100.0% $339,640 100.0% $366,810 100.0%
Cost of Goods Sold 233,717 81.6 261,706 82.6 279,840 82.4 301,510 82.2
-------- ----- -------- ----- -------- ----- -------- -----
Gross Profit 52,795 18.4 55,295 17.4 59,800 17.6 65,300 17.8
Operating Expenses 30,344 10.6 35,729 11.3 39,460 11.6 42,950 11.7
-------- ----- -------- ----- -------- ----- -------- -----
Operating Income 22,451 7.8 19,566 6.2 20,340 6.0 22,350 6.1
Other (Income) Expense, Net (716) (0.2) (169) (0.1) 0 0.0 0 0.0
-------- ----- -------- ----- -------- ----- -------- -----
EBIT 23,167 8.1 19,735 6.2 20,340 6.0 22,350 6.1
Interest Expense 239 0.1 (127) (0.0) (620) (0.2) (700) (0.2)
-------- ----- -------- ----- -------- ----- -------- -----
Earnings Before Taxes 22,928 8.0 19,862 6.3 20,960 6.2 23,050 6.3
Provision for Taxes 9,194 3.2 7,981 2.5 8,410 2.5 9,240 2.5
-------- ----- -------- ----- -------- ----- -------- -----
Net Income $13,734 4.8% $11,881 3.7% $12,550 3.7% $13,810 3.8%
======== ===== ======== ===== ======== ===== ======== =====
EBITDA $24,744 8.6% $21,890 6.9% $22,870 6.7% $25,100 6.8%
Depreciation & Amortization 1,577 0.6 2,155 0.7 2,530 0.7 2,750 0.7
Capital Expenditures 10,673 3.7 8,831 2.8 1,000 0.3 1,250 0.3
------------------------------------------------------------------------------------------------------------------------
</TABLE>
Footnote:
---------
(1) Projections obtained from FUSI research report dated May 5, 2000.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
EXHIBIT C Presentation to: BOARD OF DIRECTORS
page 24
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OWNERSHIP ANALYSIS
--------------------------------------------------------------------------------
Total Shares Outstanding(1) = 11,882,955
--------------------------------------------------------------------------------
------------------------------------------------------------------------
Institutional Holders(2)
------------------------------------------------------------------------
Date % of Shares
Institution Filed Shares Held Outstanding
------------------------- ------ ----------- -----------
Royce & Associates Mar-00 731,500 6.2%
Wachovia Asset Management Mar-00 303,200 2.6%
Morgan Stanley Mar-00 260,300 2.2%
Dimensional Fund Mar-00 121,500 1.0%
Vanguard Group Mar-00 113,500 1.0%
Advisory Research Mar-00 46,800 0.4%
Barclays Global Mar-00 31,842 0.3%
Mellon Bank Mar-00 20,600 0.2%
LaSalle National Mar-00 10,000 0.1%
Other Institutions 1,900 0.0%
--------- ----
Total 1,641,142 13.8%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-----------------------------------------------------------------
Shares Rolled By Insiders (3)
-----------------------------------------------------------------
% of Shares
Insider Shares Held Outstanding
------------------------ ----------- -----------
Lew & LaVonda M. Rothman 8,775,840 73.9%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-----------------------------------------------------------------
All Other Shares Outstanding (3)
-----------------------------------------------------------------
% of Shares
Shares Held Outstanding
----------- -----------
Rothman Trusts 524,160 4.4%
Estimated Retail and Other 941,813 7.9%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[The following table was depicted as a pie chart in the printed material.]
Ownership Breakdown
-------------------
Lew & LaVonda Rothman (4) 78.3%
Institutions 13.8%
Retail & Other 7.9%
--------------------------------------------------------------------------------
Footnote:
---------
(1) Provided by latest Proxy filed December 31, 1999.
(2) As of latest 13F filing.
(3) Provided by management.
(4) Includes shares held in trust.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
EXHIBIT D Presentation to: BOARD OF DIRECTORS
page 25
================================================================================
TRANSACTIONS USED IN PREMIUMS ANALYSIS(1)(2)
($ in Millions)
<TABLE>
<CAPTION>
% Owned By Initial Offer Premium
Date Acquiror at Equity --------------------------------
Announced Target Name Acquiror Name Announcement ($mil) One Day One Week Four Weeks
--------- ----------------------------- --------------------------- ------------ -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
04/30/98 Mycogen Corp Dow AgroSciences 62.2% $1,067.3 0.0% 2.5% 11.6%
10/27/98 Citizens Corp Allmerica Financial Corp 81.8 1,165.0 5.2 2.2 5.4
11/12/98 Aquila Gas Pipeline Corp UtiliCorp United Inc 81.6 235.2 23.1 17.4 68.4
11/16/98 Western Beef Inc Cactus Acquisitions 71.9 48.1 7.1 (1.6) 5.3
12/09/98 Swisher Intl(American Maize) Investor Group 83.0 54.9 24.8 33.3 49.4
03/08/99 EN Star Inc Investor Group 64.5 37.2 25.0 27.0 21.2
03/21/99 Spelling Entertainment Group Viacom Inc 80.9 927.1 0.0 32.1 42.6
04/12/99 Meadowcraft Inc Investor Group 73.0 197.1 31.9 30.6 42.2
05/07/99 J Ray McDermott SA McDermott International Inc 63.0 1,391.3 16.8 13.1 19.2
06/04/99 Intek Global Corp Securicor Communications 56.3 130.0 (7.9) (11.5) (15.0)
07/29/99 Concord Fabrics Inc Investor Group 63.0 18.0 33.3 29.0 27.6
11/05/99 Synthetic Industries Inc Investor Group 66.0 300.7 11.8 15.0 18.2
01/19/00 Conning Corp Metropolitan Life Insurance 56.6 177.3 (2.9) 16.7 27.8
03/31/00 Solomon-Page Group Ltd Investor Group 55.5 22.9 -- -- --
04/24/00 Cherry Corp Investor Group 54.8 188.3 -- -- --
04/25/00 MPW Industrial Services Group Investor Group 52.4 92.0 -- -- --
05/03/00 Roadhouse Grill Inc Investor Group 66.2 68.0 -- -- --
----------------------------------------------------------------------
Median: 64.5% 11.8% 16.7% 21.2%
----------------------------------------------------------------------
</TABLE>
Footnote:
---------
(1) Source: Securities Data Corporation. From January 1, 1998 to present.
(2) Acquiror had majority ownership of company.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
EXHIBIT E Presentation to: BOARD OF DIRECTORS
page 26
================================================================================
INTRODUCTION TO VALUATION OBSERVATIONS
o Our valuation is based on information provided by the Company's
management and FUSI research reports.
o In valuing the Company, FUSI has utilized the following methods:
- Comparison to publicly held companies.
- Comparison to the Swisher transaction.
- Discounted cash flow analysis.
- Leveraged buyout analysis.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
EXHIBIT E Presentation to: BOARD OF DIRECTORS
page 27
================================================================================
COMPARABLE COMPANIES ANALYSIS
($ in Millions, Except Per Share Data)
<TABLE>
<CAPTION>
----------------------------------------- ----------------------------------------
Market Data Earnings Per Share Data
----------------------------------------- ----------------------------------------
6/2/00 Shares Adjusted Growth
Company Name Price Out. Mkt. Market 2000E-
Latest Qtr.- FYE Ticker Low-High (Mils.) Value Value (1) LTM 2000E (2) 2001E (2) 2001E
--------------------------- ------ ----------- ------- ------ --------- ----- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Holt's Cigar Holdings, Inc. HOLT $5.38 6.2 $33.6 $21.7 $0.54 $0.64 NA NA
12/31/99 Mar. 3.06 - 6.75
---------------------------------------------------------------------------------------------------------------------------
Company $10.25 11.9 $121.8 $112.5 $0.96 $1.05 $1.15 9.5%
3/31/00 Dec. 7.56 -12.81
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------------------------------------------
Valuation Data
-----------------------------------------------------------------
P/E Multiples 2001 P/E EnterpriseValue/
Company Name ------------------------ to Proj. --------------------------
Latest Qtr.- FYE LTM 2000E 2001E Growth Sales EBITDA EBIT
--------------------------- ----- ----- ----- --------- ----- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Holt's Cigar Holdings, Inc. 10.0x 8.4x NA NA 0.7x 4.6x 5.0x
12/31/99 Mar.
-----------------------------------------------------------------
----------------------------------------------------------------------------------------------
Company 10.7x 9.8x 8.9x 93.6% 0.4x 5.2x 5.8x
3/31/00 Dec.
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------- --------------------------------------------
Income Statement Data Profitability & Returns
-------------------------------------------- --------------------------------------------
Latest Twelve Months Percent of Sales
-------------------------------------------- -------------------------------- Return
Gross Net Gross Net on
Sales Profit EBITDA EBIT Income(3) Profit EBITDA EBIT Income Equity(4)
------ ------ ------ ----- --------- ------ ------ ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Holt's Cigar Holdings, Inc. $32.0 $14.3 $4.7 $4.4 $3.2 44.6% 14.6% 13.6% 10.0% 11.9%
---------------------------------------------------------------------------------------------------------------------------
Company $314.6 $54.6 $21.6 $19.3 $11.8 17.4% 6.9% 6.1% 3.7% 14.5%
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------ -----------------------------
Historical Growth Capitalization
------------------------------------ -----------------------------
Operating
Sales Income Net Income Net Debt
2 - Year 2 - Year 2 - Year to Total Book Net
CAGR CAGR CAGR Capital Value Debt(5)
-------- --------- ---------- -------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Holt's Cigar Holdings, Inc. 32.9% 32.4% 26.5% NM $26.8 ($11.9)
--------------------------------------------------------------------------------------------------------
Company 14.8% (9.5%) (21.6%) NM $80.8 ($9.3)
--------------------------------------------------------------------------------------------------------
</TABLE>
Footnote:
---------
(1) Market value of equity plus net debt.
(2) Estimates obtained from the First Call Network on June 2, 2000.
(3) Before one-time charges.
(4) Equal to net income divided by period-end book equity.
(5) Equal to the sum of short-term debt, long-term debt and capital leases
less cash and marketable securities.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
EXHIBIT E Presentation to: BOARD OF DIRECTORS
page 28
================================================================================
VALUATION BASED UPON COMPARABLE COMPANIES ANALYSIS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
($ in Thousands)
--------------------------------------------------------------------------------------------------------------
Median Debt -
Capitalization Rate Company x Multiple = Gross Value - Cash(1) = Equity Value
---------------------------- -------- -------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C>
Enterprise Value / Net Sales $314,615 0.7 x $213,293 ($9,251) $222,544
Enterprise Value / EBITDA 21,575 4.6 100,145 (9,251) 109,396
Enterprise Value / EBIT 19,253 5.0 95,703 (9,251) 104,954
Market Value / Net Income 11,755 10.0 -- -- 117,006
--------
--------
Implied Equity Value Based Upon Median Multiple $113,201
--------
--------------------------------------------------------------------------------------------------------------
Implied Equity Per Share Value $9.53
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
</TABLE>
Footnote:
---------
(1) As of March 31, 2000, the Company had approximately $6.0 million in
third-party debt and $15.2 million in excess cash on the balance sheet.
o Based upon a comparison to publicly traded companies, the median
equity value per share for the Company is approximately $9.53.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
EXHIBIT E Presentation to: BOARD OF DIRECTORS
page 29
================================================================================
VALUATION BASED UPON SWISHER TRANSACTION
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
($ in Thousands)
--------------------------------------------------------------------------------------------------------------
Median Debt -
Capitalization Rate Company x Multiple = Gross Value - Cash(1) = Equity Value
---------------------------- -------- -------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C>
Enterprise Value / Net Sales $314,615 1.5 x $486,989 ($9,251) $496,240
Enterprise Value / EBITDA 21,575 6.2 134,173 (9,251) 143,424
Enterprise Value / EBIT 19,253 6.9 133,188 (9,251) 142,439
--------
--------
Implied Equity Value Based Upon Median Multiple $143,424
--------
--------------------------------------------------------------------------------------------------------------
Implied Equity Per Share Value $12.07
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
</TABLE>
Footnote:
---------
(1) As of March 31, 2000, the Company had approximately $6.0 million in
third-party debt and $15.2 million in excess cash on the balance sheet.
o Based upon a comparison to valuation multiples obtained from the
Swisher transaction, the median equity value per share for the
Company is approximately $12.07.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
EXHIBIT E Presentation to: BOARD OF DIRECTORS
page 30
================================================================================
DISCOUNTED CASH FLOW ANALYSIS
o Based upon the valuation analysis used by many strategic and
financial buyers.
o FUSI calculated a weighted average cost of capital of 16.78% for the
Company.
o Using a range of discount rates between 14.78-18.78% for the Company
and a range of multiples of fiscal year 2004 EBITDA, the following
range of per share equity values for the Company was obtained:
--------------------------------------------------------------------------------
------------------------------
Implied Equity Value Per Share
------------------------------
Exit Year EBITDA Multiple
---------------------------------------------------
5.25x 5.75x 6.25x 6.75x 7.25x
---------------------------------------------------
14.78% $11.43 $12.10 $12.77 $13.44 $14.11
---------------------------
15.78% 11.05 11.69 12.33 12.97 13.61
-----
Weighted Average 16.78% 10.68 11.29 11.90 12.52 13.13
Cost of Capital -----
17.78% 10.33 10.91 11.50 12.09 12.68
---------------------------
18.78% 9.99 10.56 11.12 11.68 12.24
--------------------------------------------------------------------------------
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
EXHIBIT E Presentation to: BOARD OF DIRECTORS
page 31
================================================================================
LEVERAGED BUYOUT ANALYSIS
o Sources and uses of funds, as well as potential returns to debt and
equity holders, are based on market guidelines.
o The analysis assumes an exit multiple of 6.25x fiscal year 2004
EBITDA, total asset-based leverage at 70.0% of inventory and 50.0%
of PPE and does not assume recap accounting.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
($ in Thousands)
---------------------------------------------------------------------------------------------------------------------
Uses Amount Sources Amount % Total 5 - Year Returns
-------------------------- -------- ----------------- -------- ------- -----------------------
<S> <C> <C> <C> <C> <C>
Purchase Price of Equity $124,771 Senior Term Loan $30,000 25.3% 8.3%
Repayment of Existing Debt 5,983 Bank Revolver 19,229 16.2 8.5
Transaction Costs 3,000 Subordinated Debt 0 0.0 0.0 - 0.0% warrants
Required Cash (Excess) (15,234) Investor Equity 69,291 58.5 24.8 - 100.0% ownership
-------- -------- -----
Total $118,520 Total $118,520 100.0%
======== ======== =====
-------------------------------------------
Equity Value Per Share $10.50
-------------------------------------------
---------------------------------------------------------------------------------------------------------------------
</TABLE>
o Based upon projections obtained from FUSI's research reports, the
implied equity value per share resulting in approximately 25.0% IRR
for the investor equity is $10.50.
----------------------------
First Union Securities, Inc.
<PAGE>
================================================================================
EXHIBIT E Presentation to: BOARD OF DIRECTORS
page 32
================================================================================
SUMMARY VALUATION RANGE
o FUSI's analysis yielded the following per share equity valuation
ranges for the Company.
[BAR CHART OMITTED]
Footnote:
---------
(1) Valuation range for comparable companies based upon current stock price
and implied per share equity valuation yielded by comparable companies
analysis.
(2) Range for LBO analysis obtained through analyzing equity values providing
IRRs between 25-30%.
----------------------------
First Union Securities, Inc.
