SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------------------------------------------
SCHEDULE 13E-3/A
(RULE 13e-100)
TRANSACTION STATEMENT UNDER SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF
1934 AND RULE 13-E THEREUNDER
RULE 13e-3 TRANSACTION STATEMENT UNDER
SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
THE SOLOMON-PAGE GROUP LTD.
(Name of Issuer)
THE SOLOMON-PAGE GROUP LTD.
TSPGL MERGER CORP.
LLOYD SOLOMON
SCOTT PAGE
HERBERT SOLOMON
(Name of Persons Filing Statement)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class of Securities)
83427A 10 8
(Cusip Number of Class of Securities)
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Lloyd Solomon
The Solomon-Page Group Ltd.
1140 Avenue of the Americas
New York, New York 10036
Telephone Number (212) 403-6100
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Persons Filing Statement)
------------------------------------------------------------------------
Copies To:
David J. Adler, Esq. Simeon Gold, Esq.
Olshan Grundman Frome Rosenzweig & Weil, Gotshal & Manges LLP
Wolosky LLP 767 Fifth Avenue
505 Park Avenue New York, New York 10022
New York, New York 10022 (212) 310-8000
(212) 753-7200
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]
<PAGE>
Check the following box if the filing fee is a final amendment reporting the
results of the transaction: [ ]
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
$15,756,580.00 $3,151.32
* Determined by (1) multiplying 2,259,448 (the number of outstanding
shares of Common Stock of The Solomon-Page Group Ltd. not owned by the
members of the Management Group) by $5.25 per share and (ii) adding the
$3,894,478 to be paid upon cancellation of outstanding options.
** Determined pursuant to Rule 0-11(b)(1) by multiplying $15,756,580.00 by
1/50 of 1%.
[X] Check Box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount previously paid $3,151.32 Filing The Solomon-Page Group
Party: Ltd.
Form or Registration Preliminary Date Filed: July 14, 2000
No.: Schedule 14A
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<PAGE>
INTRODUCTION
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (this
"Schedule 13E-3") is being filed jointly by The Solomon-Page Group Ltd., a
Delaware corporation (the "Company"), TSPGL Merger Corp., a Delaware corporation
("Mergeco"), Lloyd Solomon, Scott Page and Herbert Solomon pursuant to Section
13(e) of the Securities Exchange Act of 1934, as amended, and Rule 13e-3
thereunder, in connection with the proposed acquisition by Mergeco of all
outstanding shares of common stock, par value $0.001 per share (the "Common
Stock"), of the Company. Mergeco was formed in connection with the proposed
merger and is owned by Lloyd Solomon, Scott Page and Herbert Solomon, the
Company's principal executive officers (who are also directors of the
Company)(Lloyd Solomon, Scott Page and Herbert Solomon are hereinafter
collectively referred to as the "Management Group"). The Company and Mergeco
have entered into an Amended and Restated Agreement and Plan of Merger, dated
June 28, 2000 (the "Merger Agreement"), whereby the Company would be merged (the
"Merger") with and into Mergeco with Mergeco as the surviving corporation in the
Merger (the "Surviving Corporation"). Pursuant to the terms and conditions set
forth in the Merger Agreement, if the Merger is consummated, each outstanding
share of Common Stock (other than Common Stock held (i) in the treasury of the
Company or by any of its wholly-owned subsidiaries, (ii) by the members of the
Management Group, or (iii) by stockholders who perfect their rights under
Delaware law to dissent from the Merger and seek an appraisal of the fair market
value of their shares) will be converted into the right to receive $5.25 per
share in cash, without interest. As a result of the Merger, the Management Group
will own 100% of the capital stock of the Surviving Corporation. The Merger
Agreement and the Merger have already been approved by a special committee of
the Company's Board of Directors and the Company's Board of Directors. The
Company's stockholders will be asked to vote upon the approval of the Merger
Agreement at a special meeting of the stockholders of the Company (the "Special
Meeting").
This Schedule 13E-3 is intended to satisfy the reporting
requirements of Section 13(e) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Concurrently with the filing of this Schedule 13E-3, the
Company is filing a preliminary proxy statement (the "Proxy Statement") pursuant
to which the stockholders of the Company will be given notice of, and an
opportunity to vote on, the Merger at the Special Meeting. The Merger Agreement
has been filed by the Company as Annex A to the Proxy Statement. The information
in the Proxy Statement, including all annexes thereto, is hereby expressly
incorporated herein by reference, and capitalized terms used but not defined
herein shall have the meanings ascribed thereto in the Proxy Statement.
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<PAGE>
ITEM 1. SUMMARY TERM SHEET.
Reg. M-A 1001
The information set forth in the Proxy Statement under the caption
"SUMMARY TERM SHEET" is hereby incorporated herein by reference.
ITEM 2. SUBJECT COMPANY INFORMATION.
(a) The information set forth in the Proxy Statement under the caption
"THE PARTIES - The Company" is hereby incorporated herein by reference.
Reg. M-A 1002
(b) The information set forth in the Proxy Statement under the captions
"SUMMARY" and "INFORMATION CONCERNING THE SPECIAL MEETING - Record
Date; Voting at the Meeting; Quorum" is hereby incorporated herein by
reference.
(c) The information set forth in the Proxy Statement under the captions
"MARKET FOR THE COMMON STOCK - Common Stock Market Price Information"
and " - Market Price of Common Stock" is hereby incorporated herein by
reference.
(d) The information set forth in the Proxy Statement under the caption
"MARKET FOR THE COMMON STOCK - Dividend Information" is hereby
incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in the Proxy Statement under the caption
"MARKET FOR THE COMMON STOCK - Common Stock Purchase Information" is
hereby incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.
Reg. M-A 1003(a) through (c)
(a) The information set forth in the Proxy Statement under the captions
"THE PARTIES - The Company;" " - Mergeco;" and "MANAGEMENT - Directors
and Executive Officers of the Company" is hereby incorporated herein by
reference.
(b) The information set forth in the Proxy Statement under the caption
"THE PARTIES - Mergeco" is hereby incorporated herein by reference.
During the last five years, none of Mergeco nor to the best of its
knowledge, any of its directors, executive officers of controlling
persons,(a) have been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) nor (b) were a party to a
civil proceeding of a judicial or administrative body of competent
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<PAGE>
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining further violations of, or
prohibiting activities, subject to, federal or state securities laws or
finding any violation of such laws.
(c) The information set forth in the Proxy Statement under the caption
"MANAGEMENT - Directors and Executive Officers of the Company" is
hereby incorporated herein by reference.
During the last five years, none of the Company, nor, to the best of
its knowledge, any of its directors, executive officers or controlling
persons, nor Lloyd Solomon, Scott Page and Herbert Solomon, (a) have
been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) or (b) were 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 further violations of, or prohibiting activities,
subject to, federal or state securities laws or finding any violation
of such laws.
ITEM 4. TERMS OF THE TRANSACTION.
Reg. M-A 1004(a) and (c) through (f)
(a) The information set forth in the Proxy Statement under the captions
"SUMMARY TERM SHEET;" "CERTAIN QUESTIONS AND ANSWERS ABOUT THE MERGER;"
"SUMMARY;" "INFORMATION CONCERNING THE SPECIAL MEETING - Purpose of the
Special Meeting"; " - Required Vote"; "SPECIAL FACTORS - Background of
the Transaction;" " - Recommendation of the Special Committee and Board
of Directors; Fairness of the Merger;" " - The Management Group's
Purpose and Reason for the Merger;" " - Certain Effects of the Merger;"
" - Interests of Certain Persons in the Merger;" Certain
Relationships;" " - Accounting Treatment;" " - Material Federal Income
Tax Consequences of the Merger;" "THE MERGER AGREEMENT;" and
"DISSENTERS' RIGHTS OF APPRAISAL" is hereby incorporated herein by
reference.
(c) The information set forth in the Proxy Statement under the captions
"SPECIAL FACTORS - Interests of Certain Persons in the Merger; Certain
Relationships" and " - Employment Agreements" is hereby incorporated
herein by reference.
(d) The information set forth in the Proxy Statement under the caption
"DISSENTERS' RIGHTS OF APPRAISAL" is hereby incorporated herein by
reference.
(e) The information set forth in the Proxy Statement under the caption
"PROVISION FOR UNAFFILIATED SECURITY HOLDERS" is hereby incorporated
herein by reference.
(f) Not applicable.
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<PAGE>
ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Reg. M-A 1005(a) through (c) and (e)
(a) The information set forth in the Proxy Statement under the caption
"SPECIAL FACTORS - Interests of Certain Persons in the Manager; Certain
Relationships" is hereby incorporated herein by reference.
(b)-(c) The information set forth in the Proxy Statement under the
captions "SUMMARY - Special Factors;" and "SPECIAL FACTORS - Background
of the Transaction" is hereby incorporated herein by reference.
(e) The information set forth in the Proxy Statement under the captions
"INFORMATION CONCERNING THE SPECIAL MEETING - Action to be Taken at the
Meeting; Voting Procedures" and "SPECIAL FACTORS - Shareholder Lawsuit
challenging the Merger" is hereby incorporated herein by reference.
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Reg. M-A 1006b) and (c)(1)-(8)
(b) The information set forth in the Proxy Statement under the caption
"SUMMARY TERM SHEET;" "SPECIAL FACTORS - Certain Effects of the Merger"
is hereby incorporated herein by reference.
(c) The information set forth in the Proxy Statement under the captions
"SPECIAL FACTORS - Certain Effects of the Merger" and " - Plans for the
Company after the Merger" is hereby incorporated herein by reference.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
Reg. M-A 1013
(a) The information set forth in the Proxy Statement under the captions
"SUMMARY - Special Factors - Purpose and Effects of the Merger;"
"INFORMATION CONCERNING THE SPECIAL MEETING - Purpose of the Special
Meeting;" "SPECIAL FACTORS - Background of the Transaction;" "-
Recommendation of the Special Committee and Board of Directors;
Fairness of the Merger" " - The Management Group's Purpose and Reason
for the Merger" is hereby incorporated herein by reference.
(b) and (c) The information set forth in the Proxy Statement under the
captions "SUMMARY - Special Factors - Purpose and Effects of the
Merger" "SPECIAL FACTORS - Background of the Transaction;" " -
Recommendation of the Special Committee and Board of Directors;
Fairness of the Merger" and " - The Management Group's Purpose and
Reason for the Merger" is hereby incorporated herein by reference.
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<PAGE>
(d) The information set forth in the Proxy Statement under the captions
"CERTAIN QUESTIONS AND ANSWERS ABOUT THE MERGER;" "SUMMARY - Special
Factors - Purpose and Effects of the Merger;" " - Material Federal
Income Tax Consequences;" " - The Merger Agreement - The Merger
Consideration;" "INFORMATION CONCERNING THE SPECIAL MEETING - Purpose
of the Special Meeting;" "SPECIAL FACTORS - Certain Effects of the
Merger;" " - Plans for the Company After the Merger;" " - Accounting
Treatment;" " - Material Federal Income Tax Consequences of the
Merger;" "THE MERGER AGREEMENT - The Merger;" " - Merger Consideration"
and " - The Exchange Fund; Payment for Shares of Common Stock" is
hereby incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
Reg. M-A 1014
(a) The information set forth in the Proxy Statement under the captions
"CERTAIN QUESTIONS AND ANSWERS ABOUT THE MERGER;" "SUMMARY - Special
Factors;" " - Recommendation of the Company's Board of Directors;" " -
Fairness Opinion of Legg Mason Walker Wood, Incorporated;" "INFORMATION
CONCERNING THE SPECIAL MEETING - Purpose of the Special Meeting;"
"SPECIAL FACTORS - Background of the Transaction;" " - Recommendation
of the Special Committee and Board of Directors; Fairness of the
Merger;" " - The Management Group's Purpose and Reason for the Merger"
and " - Opinion of Financial Advisor to the Special Committee" is
hereby incorporated herein by reference.
(b) The information set forth in the Proxy Statement under the captions
"SUMMARY - Special Factors - Factors Considered by the Special
Committee and Board of Directors;" " - Fairness Opinion of Legg Mason
Wood Walker, Incorporated;" "SPECIAL FACTORS - Background of the
Transaction;" " - Recommendation of the Special Committee and Board of
Directors; Fairness of the Merger;" " - The Management Group's Purpose
and Reason for the Merger" and " -Opinion of Financial Advisor to the
Special Committee" is hereby incorporated herein by reference.
(c) The information set forth in the Proxy Statement under the captions
"CERTAIN QUESTIONS AND ANSWERS ABOUT THE MERGER;" "SUMMARY - The
Special Meeting - Voting;" " - The Merger Agreement - Conditions to the
Merger;" "INFORMATION CONCERNING THE SPECIAL MEETING - Required Vote;"
"THE MERGER AGREEMENT - The Merger; Merger Consideration" and " -
Conditions" is hereby incorporated herein by reference.
(d) The information set forth in the Proxy Statement under the caption
"CERTAIN QUESTIONS AND ANSWERS ABOUT THE MERGER;" "SUMMARY - Special
Factors - Recommendation of the Company's Board of Directors;"
"INFORMATION CONCERNING THE SPECIAL MEETING - Purpose of the Special
Meeting;" "SPECIAL FACTORS - Background of the Transaction;" " -
Recommendation of the Special Committee and Board of Directors;
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<PAGE>
Fairness of the Merger" and " - Opinion of Financial Advisor to the
Special Committee" is hereby incorporated herein by reference.
(e) The information set forth in the Proxy Statement under the captions
"SUMMARY - Special Factors - Recommendation of the Company's Board of
Directors;" "SPECIAL FACTORS - Background of the Transaction" and " -
Recommendation of the Special Committee and Board of Directors;
Fairness of the Merger" is hereby incorporated herein by reference.
(f) Not Applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS.
Reg. M-A 1015
(a) and (b) The information set forth in the Proxy Statement under the
captions "SUMMARY - Special Factors - Factors Considered by the Special
Committee and Board of Directors;" " - Fairness Opinion of Legg Mason
Wood Walker, Incorporated;" "SPECIAL FACTORS - Background of the
Transaction;" " - Recommendation of the Special Committee and Board of
Directors; Fairness of the Merger" and " - Opinion of Financial Advisor
to the Special Committee" is hereby incorporated herein by reference.
(c) The information set forth in the Proxy Statement under the captions
"WHERE YOU CAN FIND MORE INFORMATION" and "AVAILABLE INFORMATION" is
hereby incorporated herein by reference.
ITEM 10. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
Reg. M-A 1007
(a) The information set forth in the Proxy Statement under the captions
"SUMMARY - Special Factors - Financing of the Merger" and "SPECIAL
FACTORS - Financing of the Merger" is hereby incorporated herein by
reference.
(b) The information set forth in the Proxy Statement under the captions
"SPECIAL FACTORS - Financing of the Merger" is hereby incorporated
herein by reference.
(c) The information set forth in the Proxy Statement under the captions
"SPECIAL FACTORS - Fees and Expenses" and "THE MERGER AGREEMENT - Fees
and Expenses" is hereby incorporated herein by reference.
(d) The information set forth in the Proxy Statement under the caption
"SPECIAL FACTORS - Financing of the Merger" is hereby incorporated
herein by reference.
ITEM 11. INTERESTS IN SECURITIES OF THE SUBJECT COMPANY.
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<PAGE>
Reg. M-A 1008
(a) The information set forth in the Proxy Statement under the captions
"SUMMARY - Special Factors - Interests of the Management Group in the
Merger;" "INFORMATION CONCERNING THE SPECIAL MEETING - Record Date;
Voting at the Meeting; Quorum;" "SPECIAL FACTORS -Interests of Certain
Persons in the Merger; Certain Relationships" and "SECURITIES OWNERSHIP
- Beneficial Ownership of Common Stock" is hereby incorporated herein
by reference.
(b) The information set forth in the Proxy Statement under the captions
"SPECIAL FACTORS - Strategy and Share Repurchase Program" and "MARKET
FOR THE COMMON STOCK - Common Stock Purchase Information" is hereby
incorporated herein by reference.
ITEM 12. THE SOLICITATION OR RECOMMENDATION.
Reg. M-A 1012(d) and (e)
(d) The information set forth in the Proxy Statement under the captions
"SUMMARY - The Special Meeting - Voting;" "INFORMATION CONCERNING THE
SPECIAL MEETING - Required Vote" and "SECURITIES OWNERSHIP - Beneficial
Ownership of Common Stock" is hereby incorporated herein by reference.
(e) The information set forth in the Proxy Statement under the captions
"SUMMARY - Special Factors - Recommendation of the Company's Board of
Directors;" "SPECIAL FACTORS - Background of the Transaction" and " -
Recommendation of the Special Committee and Board of Directors;
Fairness of the Merger" is hereby incorporated herein by reference.
ITEM 13. FINANCIAL STATEMENTS.
Reg. M-A 1010(a) and (b)
(a) The information set forth in the Proxy Statement under the captions
"SUMMARY - Selected Historical Consolidated Financial Data of the
Company;" "WHERE YOU CAN FIND MORE INFORMATION" and "Annex E" is hereby
incorporated herein by reference.
(b) Not applicable.
(c) The information set forth in the Proxy Statement under the caption
"SUMMARY - Selected Historical Consolidated Financial Data of the
Company" is hereby incorporated herein by reference.
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<PAGE>
ITEM 14. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
Reg. M-A 1009
(a) The information set forth in the Proxy Statement under the captions
"INFORMATION CONCERNING THE SPECIAL MEETING - Proxy Solicitation" and
"SPECIAL FACTORS - Fees and Expenses" is hereby incorporated herein by
reference.
(b) The information set forth in the Proxy Statement under the caption
"INFORMATION CONCERNING THE SPECIAL MEETING - Proxy Solicitation" is
hereby incorporated herein by reference.
ITEM 15. ADDITIONAL INFORMATION.
Reg. M-A 1011(b)
The information set forth in the Proxy Statement, together with the
proxy card, is hereby incorporated herein by reference.
ITEM 16. MATERIAL TO BE FILED AS EXHIBITS.
Reg. M-A 1016(a) through (d), (f) and (g)
(a) Proxy Statement, together with the proxy card.
(b) Financing Commitment Letter, dated June 27, 2000 and Summary of
Terms and Conditions, incorporated by reference to Amendment No. 4 to
the Schedule 13D filed by Lloyd Solomon, Scott Page, Herbert Solomon
and TSPGL Merger Corp. on July 11, 2000.
(c)(1) Opinion of Legg Mason Wood Walker, Incorporated, dated June 27,
2000 (set forth as Annex B to the Proxy Statement).*
(c)(2) Report of Legg Mason Wood Walker, Incorporated dated June 27,
2000.
(d)(1) Amended and Restated Agreement and Plan of Merger between The
Solomon-Page Group Ltd., and TSPGL Merger Corp., dated June 28, 2000
(set forth as Annex A to the Proxy Statement).*
(d)(2) Letter from Lloyd Solomon, Scott Page and Herbert Solomon dated
June 28, 2000 to The Solomon-Page Group Ltd. in respect of
indemnification.
(d)(3) Memorandum of Understanding dated as of June 14, 2000, by and
among William Straub, The Solomon-Page Group Ltd. and the directors of
the Solomon-Page Group as individual defendants in the action captioned
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<PAGE>
William Straub vs. The Solomon-Page Group Ltd. and Scott Page, et al.,
C.A. 17977-NC, pending before the Court of Chancery of the State of
Delaware in and by New Castle County.
(d)(4) Report of Peter J. Solomon Company dated August 5, 1999.**
(d)(5) Report of Peter J. Solomon Company dated November 12, 1999.**
(d)(6) Report of Peter J. Solomon Company dated March 8, 2000.**
(d)(7) Opinion of Legg Mason Wood Walker, Incorporated dated March 30,
2000.**
(d)(8) Report of Legg Mason Wood Walker Incorporated dated March 31,
2000.**
(f) Section 262 of the Delaware General Corporation Law (set forth as
Annex C to the Proxy Statement).*
----------
* Incorporated by reference to the Proxy Statement
** Filed herewith
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<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
THE SOLOMON-PAGE GROUP LTD.
By: /s/ Lloyd B. Solomon
------------------------------------
Name: Lloyd B. Solomon
Title: Chief Executive Officer
TSPGL MERGER CORP.
By: /s/ Lloyd B. Solomon
------------------------------------
Name: Lloyd B. Solomon
Title: Chief Executive Officer
/s/ Lloyd B. Solomon
----------------------------------------
Lloyd B. Solomon
/s/ Scott Page
----------------------------------------
Scott Page
/s/ Herbert Solomon
----------------------------------------
Herbert Solomon
Dated: August 21, 2000
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<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
(a) Proxy Statement, together with the proxy card.
(b) Financing Commitment Letter, dated June 27, 2000 and Summary
of Terms and Conditions, incorporated by reference to
Amendment No. 4 to the Schedule 13D filed by Lloyd Solomon,
Scott Page, Herbert Solomon and TSPGL Merger Corp. on July
11 2000.
(c)(1) Opinion of Legg Mason Wood Walker, Incorporated dated June
27, 2000 (set forth as Annex B the Proxy Statement).*
(c)(2) Report of Legg Mason Wood Walker, Incorporated dated June
27, 2000.
(d)(1) Amended and Restated Agreement and Plan of Merger between
The Solomon-Page Group Ltd., and TSPGL Merger Corp., dated
June 28, 2000 (set forth as Annex A to the Proxy
Statement).*
(d)(2) Letter from Lloyd Solomon, Scott Page and Herbert Solomon
dated June 28, 2000 to The Solomon-Page Group Ltd. in
respect of indemnification.
(d)(3) Memorandum of Understanding dated as of June 14, 2000, by
and among William Straub, The Solomon-Page Group Ltd. and
the directors of the Solomon-Page Group as individual
defendants in the action captioned William Straub vs. The
Solomon-Page Group Ltd. and Scott Page, et al., C.A.
17977-NC, pending before the Court of Chancery of the State
of Delaware in and by New Castle County.
(d)(4) Report of Peter J. Solomon Company dated August 5, 1999.**
(d)(5) Report of Peter J. Solomon Company dated November 12,
1999.**
(d)(6) Report of Peter J. Solomon Company dated March 8, 2000.**
(d)(7) Opinion of Legg Mason Wood Walker, Incorporated dated March
30, 2000.**
(d)(8) Report of Legg Mason Wood Walker, Incorporated dated as of
March 31, 2000.**
(f) Section 262 of the Delaware General Corporation Law (set
forth as Annex C to the Proxy Statement).*
----------
* Incorporated by reference to the Proxy Statement
** Filed herewith
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<PAGE>
PROJECT WISE
August 5, 1999
PETER J. SOLOMON COMPANY
LIMITED
<PAGE>
Table of Contents
Tab Page
I. Overview of Peter J. Solomon Company 2
II. Summary Historical Financial Information 5
III. Summary Historical Stock Performance 10
IV. Summary Valuation Analysis 14
PROJECT WISE 1 PETER J. SOLOMON COMPANY
<PAGE>
Overview of Peter J. Solomon Company
PROJECT WISE 2 PETER J. SOLOMON COMPANY
<PAGE>
Overview of Peter J. Solomon Company
o Peter J. Solomon Company ("PJSC") is a leading independent
investment banking firm.
o Since its formation in 1989, PJSC has successfully completed over
150 advisory assignments.
o PJSC has over 35 investment banking professionals.
o PJSC advised on over $15 billion of completed transactions for the
quarter ended March 31, 1999 ranking it as the 11th leading M&A
advisor for this period.
o PJSC has extensive experience advising companies and special
committees in going private transactions.
PROJECT WISE 3 PETER J. SOLOMON COMPANY
<PAGE>
Select Special Committee Experience of Peter J. Solomon Company
Company Transaction
Concord Fabrics Inc. Represented the special committee and rendered a
fairness opinion regarding a going private
transaction. Concord is a diversified textile
manufacturer.
Cosmetic Centers, Inc. Provided a fairness opinion to shareholders
regarding MacAndrews & Forbes sale of 83% of
Cosmetic Centers to York management. Cosmetic
Centers is a retailer of cosmetics and
fragrances.
General Cigar Holdings, Inc. Provided a fairness opinion to the special
committee regarding General Cigar's sale of its
mass market cigar business to Swedish Match
North America.
McKesson Corporation Represented the board of directors and provided
a fairness opinion regarding McKesson's $2
billion purchase of HBOC.
Meridian Sports Inc Represented the special committee and rendered a
fairness opinion regarding the purchase by
MacAndrews & Forbes of the 35% of the Company
owned by public shareholders. Meridian is the
largest manufacturer of ski boats in the
country.
Office Depot Represented the board of directors and provided
a fairness opinion regarding Office Depot's $3
billion purchase of Viking Office Products. Both
Office Depot and Viking are retailers of office
products.
Winston Resources, Inc. Represented the management which owned 47% of
the Company in a going private transaction.
Winston is a personal recruitment and placement
business.
PROJECT WISE 4 PETER J. SOLOMON COMPANY
<PAGE>
Summary Historical Financial Information
PROJECT WISE 5 PETER J. SOLOMON COMPANY
<PAGE>
Summary Capitalization and Valuation Data
(Dollars in Millions, except per share amounts)
<TABLE>
<CAPTION>
Stock Information LTM Financial Information (6/30/99) Capitalization
-------------------------------------------------- ------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
Ticker Symbol SOLP Net Sales $51.9 As of
Stock Exchange NASD EBITDA 3.5 03/31/99
Stock Price as of August 4, 1999 $3.00 EBIT 2.8 --------
Fiscal year end 9/31/1998 CURRENT DEBT $2.3
LONG TERM DEBT 1.0
------
LTM EPS $0.31 Total Debt 3.3
52-Week Stock Price Shareholders' Equity 7.3
-----
High 07/02/1999 $3.25 Total Capitalization $10.7
======
Low 02/24/1999 1.34
Total Debt/ Total
Capitalization 31.3%
5-Year Stock Price Total Debt/EBITDA 1.0 x
High 11/04/1994 $7.00 EBITDA/Interest Expense 10.4 x
Low 02/07/1996 0.36
</TABLE>
<TABLE>
<CAPTION>
Market Capitalization and Firm Value Valuation
-------------------------------------------------- ----------------------------------------
<S> <C> <C> <C>
Stock Price as of August 4, 1999 $3.00 Enterprise Value as a Multiple of LTM:
----------------------------------------
Shares Outstanding (a) 4.2 Net Sales 32.1%
Option Equivalent Shares (b) 0.5 EBITDA 4.8 x
------
Equity Value 13.9 EBIT 5.9
Plus: Total Debt (as of 3/31/99) (c) 3.3
Less: Cash (as of 3/31/99) (c) (0.5) P/E Ratio:
-------
Enterprise Value $16.7 LTM EPS 9.5 x
</TABLE>
Common Stock Ownership by Category (d)
--------------------------------------
(Shares in 000s) Common Percent
Shares of Total
---------------------
Ownership
HERBERT SOLOMON 790.9 12.5%
LLOYD SOLOMON 1,068.3 16.9%
SCOTT PAGE 885.2 14.0%
Other Insiders 191.7 3.0%
-------------------
Total Insiders 2,936.2 46.4%
-------------------
NEUBERGER&BERMAN 27.0 0.4%
BARCLAYS BANK PLC 2.5 0.0%
Other Institutions 0.0 0.0%
-------------------
Total Institutions 29.5 0.5%
Public and Other 3,356.2 53.1%
-------------------
Total Shares 6,321.9 100.0%
-------------------------------
(a) Source: Company Press Release as of August 4, 1999.
(b) Source: Company Form 10-K dated September 30, 1998. Represents treasury
stock method applied to outstanding options at a weighted average exercise
price of $1.95.
(c) Source: Company Form 10-Q dated March 31, 1999.
(d) Source: Company Proxy dated April 15, 1999 and Bloomberg.
PROJECT WISE 6 PETER J. SOLOMON COMPANY
<PAGE>
HISTORICAL COMPANY INCOME STATEMENT
(Dollars in Millions, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended LTM
----------------------------
Fiscal Year Ended September 30, 1996 1997 1998 6/30/98 6/30/99 6/30/99
------------------------------- ----------- --------- -------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $17.2 $29.0 $44.6 $33.2 $40.4 $51.9
EBITDA 0.9 2.1 2.1 1.9 (a) 3.2 (a) 3.5
EBIT 0.6 1.7 1.6 1.7 2.8 2.8
Net Income $0.7 $1.3 $0.8 $0.9 $1.5 $1.4
=========== ========= ======== ========= ============ =============
Diluted Weighted Average Shares 5.5 6.4 5.9 6.3 4.9 4.5
Diluted EPS $0.13 $0.20 $0.14 $0.14 $0.30 $0.31
Margins:
--------
EBITDA 5.2% 7.1% 4.8% 5.8% 8.0% 6.7%
EBIT 3.8% 6.0% 3.6% 5.0% 7.0% 5.4%
Net Income 4.1% 4.4% 1.8% 2.7% 3.6% 2.7%
Growth Rates
------------
Revenue -- 68.9% 53.9% -- 21.9% --
EBITDA -- 132.4% 3.6% -- 68.5% --
EBIT -- 166.8% 6.0% -- 70.9% --
Net Income -- 80.5% 35.9% -- 66.6% --
EPS -- 53.8% 30.0% -- 114.3% --
</TABLE>
----------------------------------------------------------------------
Source: Company Form 10-K dated September 30, 1998 and Form 10-Q dated March 31,
1999.
(a) Depreciation & Amortization for the 9 months ending 6/30/99 and 6/30/98
is assumed to equal 75% of annual Depreciation & Amortization for years
ended September 30, 1998 and 1997, respectively.
PROJECT WISE 7 PETER J. SOLOMON COMPANY
<PAGE>
HISTORICAL COMPANY BALANCE SHEET
(Dollars in Millions)
<TABLE>
<CAPTION>
As of
Fiscal Year Ended September 30, 1997 1998 3/31/99
------------------------------- --------- -------- ---------
Current Assets:
<S> <C> <C> <C>
Cash and Cash Equivalents $ 0.4 $ 0.9 $ 0.5
Accounts Receivable 7.4 10.2 10.5
Inventory 0.0 0.0 0.0
Other Current Assets 1.2 0.8 1.1
-------- ------- -------
Total Current Assets 8.98 11.9 12.1
Net Plant, Property & Equipment 1.5 2.1 2.4
Intangible Assets 0.8 1.0 1.0
Other Non-Current Assets 1.6 1.7 1.4
-------- ------- -------
TOTAL ASSETS $ 12.8 $ 16.7 $ 16.8
======== ======= =======
Current Liabilities:
Current Portion of Long-Term Debt $ 0.1 $ 3.1 $ 2.3
Accounts Payable 1.0 1.0 1.0
Accrued Liabilities 2.5 3.5 3.2
Other Current Liabilities 0.5 0.6 1.4
-------- ------- -------
Total Current Liabilities 4.1 8.2 7.9
Long-Term Debt 0.0 0.5 1.0
Other Long-Term Liabilities 0.4 0.0 0.6
Shareholders Equity 8.3 8.0 7.3
-------- ------- -------
TOTAL LIABILITIES & EQUITY $ 12.8 $ 16.7 $ 16.8
======== ======= =======
</TABLE>
----------------
Source: Company Form 10-K dated September 30, 1998 and Form 10-Q dated March 31,
1999.
PROJECT WISE 8 PETER J. SOLOMON COMPANY
<PAGE>
Summary Ownership Profile of Solomon Page
<TABLE>
<CAPTION>
(Amounts in Thousands) % of Shares Issuable
Total Common upon Exercise Total
Common Stock of Stock Beneficial % of
Shares Outstanding Options (d) Ownership Total
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inside Owners (a)
Herbert Solomon 507.6 12.2 % 283.3 790.9 12.5 %
Lloyd Solomon 785.0 18.9 283.3 1,068.3 16.9
Scott Page 601.9 14.5 283.3 885.2 14.0
Eric M. Davis 110.0 2.6 46.7 156.7 2.5
Edward Ehrenberg 0.0 0.0 17.5 17.5 0.3
Joel A. Klarreich 0.0 0.0 17.5 17.5 0.3
Other Executive Officers and Directors 0.0 0.0 0.0 0.0 0.0
-----------------------------------------------------------------------------------------
Total Insiders 2,004.5 48.3 931.7 2,936.2 46.4
-----------------------------------------------------------------------------------------
Institutions (b)
Neuberger & Berman 27.0 0.7 - 27.0 0.4
BZW Barclays 2.5 0.1 - 2.5 0.0
Other Institutions 0.0 0.0 - 0.0 0.0
-----------------------------------------------------------------------------------------
Total Institutions 29.5 0.7 - 29.5 0.5
Public and Other 2,118.3 51.0 1,237.9 3,356.2 53.1
-----------------------------------------------------------------------------------------
Total Shares Outstanding (c) 4,152.3 100.0 % 2,169.6 6,321.9 100.0 %
=========================================================================================
</TABLE>
------------------------------
(a) Source: Company's Proxy Statement dated April 15, 1999.
(b) Source: Bloomberg.
(c) Source: Company Press Release as of August 4, 1999.
(d) Includes options held by directors and executive officers, as provided by
Company's Proxy Statement dated April 15, 1999. Total outstanding options
(including out-of-the money options) as provided by Company 10-K dated
September 30, 1998.
PROJECT WISE 9 PETER J. SOLOMON COMPANY
<PAGE>
SUMMARY HISTORICAL STOCK PERFORMANCE
PROJECT WISE 10 PETER J. SOLOMON COMPANY
<PAGE>
<TABLE>
<CAPTION>
Summary of Solomon Page Closing Stock Prices
------------------------------------------------------------------------------------------------------------------------------------
Daily for the Fabric Closing Stock Prices
-----------------------------------------------------
Following Periods: Time Period High Low Average Median
----------------------------- -------------- --------------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
07/27/99 - 8/3/99 LAST WEEK $2.250 $1.938 $2.172 $2.203
07/20/99 - 8/3/99 Last 14 Days 2.688 1.938 2.327 2.250
07/02/99 - 8/3/99 Last 30 Days 3.250 1.938 2.579 2.563
06/17/99 - 8/3/99 Last 45 Days 3.250 1.938 2.633 2.688
06/03/99 - 8/3/99 Last 60 Days 3.250 1.938 2.609 2.625
05/05/99 - 8/3/99 Last 90 Days 3.250 1.688 2.406 2.500
02/04/99 - 8/3/99 Last 180 Days 3.250 1.344 1.988 1.750
08/03/98 - 8/3/99 Last 1 Year 3.250 1.344 2.004 1.953
08/14/97 - 8/3/99 Last 2 Years 4.875 1.344 2.699 2.750
08/05/96 - 8/3/99 Last 3 Years 4.875 1.313 2.559 2.500
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Bloomberg.
PROJECT WISE 13 PETER J. SOLOMON COMPANY
<PAGE>
SUMMARY VALUATION ANALYSIS
PROJECT WISE 14 PETER J. SOLOMON COMPANY
<PAGE>
SUMMARY COMPARABLE COMPANY ANALYSIS
All publicly traded companies in the U.S. with a SIC of 7360, 7361 and 7362 with
an enterprise value less than $70 million, provided by Bloomberg.
(Amounts in millions, except per share data)
<TABLE>
<CAPTION>
TICKER PRICE @ FISCAL SHARES MARKET ENTERPRISE TTM
COMPANY SYMBOL 8/4/99 YEAR END OUTSTANDING VALUE VALUE (1) SALES
------------------------------------------------------------------------------------------------------------------------------
<S> <C> > <C> <C> <C> <C> <C>
SOLOMON PAGE GROUP LTD. SOLP $ 3.00 09/30/98 4.2 $12.5 $15.3 $51.9
--------------------------------------------------------------------------------------------------------------------------------
ASI Solutions Inc. ASIS $ 8.50 03/31/99 6.5 55.6 69.8 59.7
Diversified Corporate Resources HIR $ 4.75 12/31/98 2.8 13.1 4.8 45.3
General Employment Enterprises JOB $ 5.94 09/31/98 4.4 26.3 17.4 35.6
LAI Worldwide Inc. LAIX $ 5.88 02/28/99 8.0 47.1 30.9 44.0
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRICE AS A MULTIPLE OF ENTERPRISE VALUE AS A MULTIPLE OF:
------------------------------------------------------------------------------
LTM CFY1999E BOOK LTM NET LTM LTM
COMPANY EPS EPS (2) VALUE SALES EBITDA EBIT
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SOLOMON PAGE GROUP LTD. 10.0 NA 1.6x 29.4% 4.6x 5.6x
----------------------------------------------------------------------------------------------------------------------
ASI Solutions Inc. 10.2 12.3 2.8x 116.9% 6.5x 8.4x
Diversified Corporate Resources 8.5 9.1 1.0x 10.5% 1.4x 1.9x
General Employment Enterprises 9.7 NA 2.3x 48.8% 3.4x 3.6x
LAI Worldwide Inc. nm 34.0 (3) 0.7x 70.3% nm nm
----------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Average 9.5x 10.7x 1.7x 61.6% 3.8x 4.6x
Median 9.7x 10.7x 1.7x 59.6% 3.4x 3.6x
Maximum 10.2x 12.3x 2.8x 116.9% 6.5x 8.4x
Minimum 8.5x 9.1x 0.7x 10.5% 1.4x 1.9x
-------------------------------------------------------------------------------------------
</TABLE>
(1) Market value of common stock plus all debt, less cash.
(2) Comparable company earning estimates based on IBES estimates per Bloomberg.
(3) Excluded as significant outlier.
Note: All multiples based on most recent fiscal year end or trailing twelve
month results.
Source: Bloomberg
PROJECT WISE 15 PETER J. SOLOMON COMPANY
<PAGE>
DESCRIPTION OF COMPARABLE COMPANIES
ASI Solutions Inc.
ASI Solutions Incorporated provides a variety of human resources outsourcing
services for organizations. The Company's services include assessment and
selection, training and development, customer contact monitoring, and
employment process administration. ASI serves the telecommunications,
consumer products, healthcare, financial services, and information
technology industries.
Diversified Corporate Resources
Diversified Corporate Resources, Inc. is an employment services firm. The
Company provides professional and technical personnel on a permanent basis.
Diversified serves high-end niche employment markets with a primary emphasis
on the information technology market.
General Employment Enterprises
General Employment Enterprises, Inc. provides professional staffing services
in the areas of information technology, engineering, and accounting. The
Company offers full-time and contract employee placement. General Employment
operates in the United States.
LAI Worldwide Inc.
LAI Worldwide, Inc. provides executive recruiting services, offering its
services exclusively on a retained basis. The Company identifies, evaluates,
and recommends qualified candidates for senior executive positions primarily
at Fortune 500 and large, private companies. LAI operates offices throughout
the United States.
PROJECT WISE 16 PETER J. SOLOMON COMPANY
<PAGE>
Summary Analysis of Selected Precedent Transactions
Based on "Going Private" Transactions of Companies with Enterprise Value Between
$10 and $50 million from 1997 to Present.
<TABLE>
<CAPTION>
(Dollars in Millions) Enterprise Value as a Equity Value as a
Enterprise Value as a Multiple of: Multiple of:
--------------------------------- -----------
Date Acquiror Name Enterprise LTM LTM LTM Equity LTM Net
Annc'd Target Name Value (a) Sales EBITDA EBIT Value Income
----------- ------------------------------------ ------------ ---------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jul-99 Investor Group $24.7 27.3 % 3.9 x 5.5 x $28.6 14.8 x
Concord Fabrics Inc.
Jun-99 Investor Group 12.4 20.3 3.6 3.9 $14.9 8.1
Winston Resources, Inc.
Dec-98 SRC Holdings 42.6 43.8 5.1 10.4 28.8 11.5
Back Bay Restaurants Group Inc
Sep-98 PH II Inc 14.3 73.1 4.0 4.9 8.7 4.8
THT Inc
Aug-98 Malt Acquiring Inc 14.4 51.8 3.4 4.4 15.8 7.5
Lion Brewery Inc
May-97 Oxford Automotive Inc 19.1 20.5 7.1 (b) 15.9 (b) 19.5 27.9 (b)
Howell Industries Inc
Mar-97 Hamilton Acquisition LLC 30.9 23.7 4.7 6.1 36.2 11.0
Strober Organization Inc
Jan-97 HIG Investment Group 27.4 60.1 NA 7.0 21.5 8.3
Thermal Industries Inc
-------------------------------------------------------------------------
Mean 40.1 % 4.1 x 6.0 x 9.4 x
Median 35.5 % 3.9 x 5.5 x 8.3 x
-------------------------------------------------------------------------
</TABLE>
Source: Securities Data Company and other public sources.
(a) Enterprise value equals equity value plus debt less cash.
(b) Excluded as outlier.
PROJECT WISE 17 PETER J. SOLOMON COMPANY
<PAGE>
CONTROL PREMIUM ANALYSIS
<TABLE>
<CAPTION>
(Dollars in Millions) 1-Day 1-Week 4-Week
Premium Premium Premium
Ann'cd TEV Prior to Prior to Prior to
Date Target Business Acquirer Value Annc. Annc. Annc.
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/16/99 Winston Resources Inc Personnel recruitment svcs Investor Group $12.4 60.9% 42.3% 39.6%
12/24/98 COHR Inc Pvd outsourcing svcs Investor Group 29.7 66.4% 89.1% 116.7%
12/03/98 Vincam Group Inc Provide temporary help svcs Automatic Data Processing, Inc 287.7 24.3% 26.4% 39.2%
06/16/98 Personnel Management Inc Employment agency Linsalata Capital Partners 37.5 25.5% 23.1% 23.1%
02/02/98 Source Services Corp Provide help supply services Romac International Inc 431.1 51.1% 56.7% 50.2%
08/14/97 Uniforce Services Inc Pvd temporary personnel svcs Comforce Corp 133.7 37.6% 37.6% 52.6%
09/26/96 General Physics Corp Provide training services National Patent Development 70.4 16.6% 31.6% 36.0%
08/26/96 Career Horizons Inc Pvd temporary personnel svcs AccuStaff Inc 835.8 34.4% 33.9% 64.0%
02/27/96 Brandon Systems Corp Personnel agency, consulting Interim Services Inc 162.7 32.2% 39.4% 29.8%
01/18/96 AMSERV Healthcare Inc Pvd temp nursing employment Star Multi Care Services Inc 7.9 14.6% 27.3% 20.6%
------------------------------------------------------------------------------------------------------------------------------------
High $835.8 66.4% 89.1% 116.7%
Low $7.9 14.6% 23.1% 20.6%
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Median $102.1 33.3% 35.8% 39.4%
Mean $200.9 36.4% 40.7% 47.2%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
---------------------------
Source: Transaction summary based on completed, controlling interest
transactions in the employment help supply industry. Transactions with
announcement dates between 01/01/96 and 07/30/99 for which purchase
price multiples were available were considered. Target companies had to
have an SIC code of 7361, 7363, 7389, 8741 or 8742. Sources include
SDC, Mergerstat, HLHZ Control Premium Study, Bloomberg and public
company filings.
PROJECT WISE 18 PETER J. SOLOMON COMPANY
<PAGE>
SUMMARY PREMIUM ANALYSIS
<TABLE>
<CAPTION>
(Dollars in millions)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Company Price Per Share $3.00 $3.30 $3.60 $3.90 $4.20 $4.50 $4.80 $5.10
------------------------------------------------------------------------------------
Premium (Discount) to Stock Prices
Current Stock Price (8/4/99) $3.000 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%
52 week High (7/2/99) $3.250 (7.7)% 1.5% 10.8% 20.0% 29.2% 38.5% 47.7% 56.9%
52 week Low (2/24/99) $1.340 123.9% 146.3% 168.7% 191.0% 213.4% 235.8% 258.2% 280.6%
Shares Outstanding
Shares Outstanding (a) 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2
Equivalent Options Outstanding (b) 0.5 0.6 0.6 0.7 0.7 0.8 0.8 0.8
---- ---- ---- ---- ---- ---- ---- ----
Equivalent Shares Outstanding 4.6 4.7 4.8 4.8 4.9 4.9 5.0 5.0
Total Equity Value $13.9 $15.5 $17.2 $18.8 $20.5 $22.1 $23.8 $25.4
Total Enterprise Value (c) 16.7 18.3 20.0 21.6 23.3 24.9 26.6 28.2
Enterprise Value as a Multiple:
LTM
Revenues $51.9 32.1% 35.3% 38.5% 41.7% 44.8% 48.0% 51.2% 54.4%
EBITDA $3.5 4.8 x 5.3 x 5.8 x 6.3 x 6.7 x 7.2 x 7.7 x 8.2x
EBIT $2.8 5.9 x 6.5 x 7.1 x 7.7 x 8.3 x 8.9 x 9.5 x 10.1x
Equity Value as a Multiple:
EPS $0.31 9.5 x 10.5 x 11.4 x 12.4 x 13.3 x 14.3 x 15.3 x 16.2x
</TABLE>
---------------------------
(a) Source: Company Press Release as of August 4, 1999.
(b) Source: Company Form 10-K dated September 30, 1998. Represents treasury
stock method applied to outstanding options at a weighted average
exercise price of $1.95.
(c) Source: Total cash and debt per Company Form 10-Q ended March 31, 1999.
PROJECT WISE 19 PETER J. SOLOMON COMPANY
<PAGE>
PROJECT WISE
DISCUSSION MATERIALS
November 12, 1999
PETER J. SOLOMON COMPANY
LIMITED
<PAGE>
PROJECT WISE
SUMMARY CAPITALIZATION AND VALUATION DATA
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
Stock Information FYE Financial Information (9/30/99)
-------------------------------------------------------- --------------------------------------
<S> <C> <C> <C>
Ticker Symbol SOLP Net Sales $56,092
Stock Exchange NASD EBITDA 4,533
Stock Price as of November 11, 1999 $2.00 EBIT 3,873
Fiscal year end Sep-99 Net Income 2,221 (A)
Earnings per Share $0.51 (B)
52-Week Stock Price
High 08/16/1999 $3.44 Projected EBITDA
---------------------------------------
Low 02/18/1999 1.34
EBITDA LTM 12/31/99 (c) $5,110
EBITDA FYE 9/30/00 (d) 4,336
</TABLE>
Capitalization
---------------------------------------
As of
09/30/99
--------
CURRENT DEBT $850
LONG TERM DEBT 750
--------
Total Debt 1,600
Shareholders' Equity 7,900
--------
Total Capitalization $9,500
--------------------------- ========
Total Debt/ Total Capitalization 16.8%
Total Debt/EBITDA 0.4x
EBITDA/Interest Expense 17.4x
<TABLE>
<CAPTION>
Market Capitalization and Firm Value Valuation
--------------------------------------------------- -------------------------------------------
<S> <C> <C>
Stock Price as of November 11, 1999 $2.00 Enterprise Value as a Multiple of FYE 1999:
------------------------------------------
Shares Outstanding (d) 4,152 Net Sales 15.0%
Option Equivalent Shares (d) 185 EBITDA 1.9 x
-----
Equity Value 8,675 EBIT 2.2
Plus: Total Debt (as of 9/30/99) 1,600
Less: Cash (as of 9/30/99) (e) (1,836) P/E Ratio:
------
Enterprise Value $8,439 FYE 9/30/99 EPS 3.9 x
Enterprise Value as a Multiple:
-------------------------------
EBITDA LTM 12/31/99 1.7 x
EBITDA FYE 9/30/00 1.9
</TABLE>
Common Stock Ownership by Category (f)
--------------------------------------
Common Percent
Shares of Total
-------------------
HERBERT SOLOMON 507,600 12.2%
LLOYD SOLOMON 785,000 18.9%
SCOTT PAGE 601,900 14.5%
-------------------
Total Insiders (g) 1,894,500 45.6%
-------------------
NEUBERGER&BERMAN 82,475 2.0%
BARCLAYS BANK PLC 2,500 0.1%
Other Institutions 0 0.0%
-------------------
Total Institutions 84,975 2.0%
Public and Other 2,172,807 52.3%
-------------------
Total Shares 4,152,282 100.0%
----------------------------
(a) Net income is calculated assuming a 40% tax rate applied to pretax income.
(b) Assumes 4.34 million fully-diluted shares outstanding: 4.15 million primary
shares and 0.19 million option equivalent shares.
(c) LTM EBITDA calculation assumes EBITDA for the quarter ending 12/31/99 is
equal to 25% of projected EBITDA for the FYE 9/30/00.
(d) Source: As per Management.
(e) Includes cash and cash equivalents of $0.3 million and investments of $1.5
million.
(f) Source: As per Management and Bloomberg.
(g) Total Insiders includes only those executives and directors who are part of
the management buyout group.
<PAGE>
PROJECT WISE
CONSOLIDATED INCOME STATEMENT
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
Historical Projected
-------------------------------------------------------- ---------
Fiscal Year Ended September 30, 1996 1997 1998 1999 2000 (a)
------------------------------- -------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Revenue $17,166 $28,996 $44,639 $56,092 $60,598
Operating Income (EBIT) 509 1,691 1,622 3,873 3,586
Net Income (b) $ 438 $ 1,101 $ 920 $ 2,221 $ 2,085
======= ======= ======= ======= =======
Diluted Weighted Average Shares 5,464 5,634 5,985 4,338 4,338
Diluted EPS (b) $ 0.08 $ 0.20 $ 0.15 $ 0.51 $ 0.59
Calculation of EBITDA:
EBIT $ 509 $ 1,691 $ 1,622 $ 3,873 $ 3,586
D&A 241 337 515 660 750
------- ------- ------- ------- -------
EBITDA $ 750 $ 2,029 $ 2,137 $ 4,533 $ 4,336
Growth and Margins:
Revenue Growth 134.2% 68.9% 53.9% 25.7% 8.0%
EBITDA 4.4% 7.0% 4.8% 8.1% 7.2%
EBIT 3.0% 5.8% 3.6% 6.9% 5.9%
Net Income (b) 2.5% 3.8% 2.1% 4.0% 3.4%
</TABLE>
-------------
Source: Company Form 10-K
(a) As per Management projections.
(b) Net Income is calculated assuming a 40% tax rate applied to pretax income.
<PAGE>
PROJECT WISE
INCOME STATEMENT DATA BY DIVISION
(Dollars in Thousands, except per share amounts)
<TABLE>
<CAPTION>
Revenue EBITDA (a)
---------------------------------------- -------------------------------------------
1998 1999 2000 P 1998 1999 2000 P
----- ------ ------- ------- ----- --------
PERMANENT STAFFING
<S> <C> <C> <C> <C> <C> <C>
Capital Markets $4,251 $8,945 $6,050 $1,678 $3,272 $1,886
Accounting NY 1,062 1,839 1,675 163 505 418
Accounting CA 572 604 500 38 191 137
Fashion 602 754 775 201 259 269
IT Perm 3,581 3,451 3,575 1,138 993 1,101
Admin 850 1,193 975 147 195 154
Healthcare NY 1,547 1,521 1,600 455 391 397
Healthcare CA 620 403 1,470 124 34 446
HR Perm 969 898 1,000 262 155 233
Legal 1,299 877 950 511 311 320
Publishing 2,241 2,293 2,375 924 918 840
--------- ------------ ------------ --------- ------------ ----------------
------------------------------------------------------------------------------------------------------------------------------
Total - Permanent Staffing $17,593 $22,779 $20,945 $5,641 $7,226 $6,200
------------------------------------------------------------------------------------------------------------------------------
TEMPORARY STAFFING
ITP $22,762 $23,989 $22,281 $2,932 $3,210 $2,356
Acctg. Temp - NY 2,020 2,776 3,902 300 318 666
Acctg. Temp - CA 1,199 2,730 5,346 132 371 987
HR Temp NY 1,065 2,972 5,026 (241) 273 912
Legal Temp - 750 1,599 - 171 299
--------- ------------ ------------ --------- ------------ ----------------
-----------------------------------------------------------------------------------------------------------------------------------
Total - Temporary Staffing $27,045 $33,217 $38,153 $3,123 $4,342 $5,220
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Banker's Registry - $96 $1,500 - $22 $396
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Divisional Total $44,639 $56,092 $60,598 $8,764 $11,590 $11,816
-----------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Adjustment to include corporate allocations ($6,627) ($7,057) ($7,480)
Consolidated EBITDA $2,137 $4,533 $4,336
======= ======= =============
----------------------------------------------------------------------------------------------
</TABLE>
----------------------------
(a) Excludes corporate allocations.
<PAGE>
PROJECT WISE
INCOME STATEMENT DATA BY DIVISION
(Dollars in Thousands, except per share amounts)
<TABLE>
<CAPTION>
Revenue Growth EBITDA Margin (a)
------------------------------------------- ---------------------------------------
1998 1999 2000 P 1998 1999 2000 P
-------------- ----------- ---------- ------- ----- -----------
PERMANENT STAFFING
<S> <C> <C> <C> <C> <C> <C>
Capital Markets - 110% -32% 39.5% 36.6% 31.2%
Accounting NY - 73% -9% 15.4% 27.5% 24.9%
Accounting CA - 6% -17% 6.7% 31.7% 27.4%
Fashion - 25% 3% 33.3% 34.4% 34.7%
IT Perm - -4% 4% 31.8% 28.8% 30.8%
Admin - 40% -18% 17.3% 16.3% 15.8%
Healthcare NY - -2% 5% 29.4% 25.7% 24.8%
Healthcare CA - -35% 265% 20.0% 8.5% 30.3%
HR Perm - -7% 11% 27.1% 17.2% 23.3%
Legal - -32% 8% 39.4% 35.5% 33.7%
Publishing - 2% 4% 41.2% 40.1% 35.4%
--------------------------------------------------------------------------------------------------------------------------------
Total - Permanent Staffing 22% 29% -8% 32.1% 31.7% 29.6%
--------------------------------------------------------------------------------------------------------------------------------
TEMPORARY STAFFING
ITP - 5% -7% 12.9% 13.4% 10.6%
Acctg. Temp - NY - 37% 41% 14.9% 11.4% 17.1%
Acctg. Temp - CA - 128% 96% 11.0% 13.6% 18.5%
HR Temp NY - 179% 69% -22.7% 9.2% 18.1%
Legal Temp - - 113% - 22.8% 18.7%
--------------------------------------------------------------------------------------------------------------------------------
Total - Temporary Staffing 86% 23% 15% 11.5% 13.1% 13.7%
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
Divisional Total 54% 26% 8% 19.6% 20.7% 19.5%
--------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------
Consolidated EBITDA Margins (b) 4.8% 8.1% 7.2%
-----------------------------------------------------------------------------
</TABLE>
---------------------
(a) Excludes corporate allocations.
(b) Includes corporate allocations.
<PAGE>
PROJECT WISE
CONSOLIDATED ANNUAL BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
Historical Projected
----------------------------------------------------- -----------------
Fiscal Year Ended September 30, 1997 1998 1999 2000 (a)
------------------------------- -------- -------------- ----------- -----------------
Current Assets:
<S> <C> <C> <C> <C>
Cash and Cash Equivalents (b) $2,560 $2,650 $1,836 $3,033
Accounts Receivable 7,378 10,161 11,420 10,920
Other Current Assets 298 246 263 263
-------- --------------- ----------- -----------
Total Current Assets 10,236 13,057 13,519 14,216
Net Plant, Property & Equipment 1,457 2,115 2,258 1,898
Intangible Assets 754 1,019 1,445 1,255
Other Non-Current Assets 368 544 633 633
-------- --------------- ----------- -----------
TOTAL ASSETS $12,815 $16,735 $17,855 $18,002
======== =============== =========== ===========
Current Liabilities:
Current Portion of Long-Term Debt $0 $3,100 $850 $1,100
Accounts Payable and Accrued Expenses 968 968 1,538 1,539
Accrued Payroll and Commissions 2,494 3,498 4,226 3,976
Other Current Liabilities 602 585 1,952 727
-------- --------------- ----------- -----------
Total Current Liabilities 4,064 8,151 8,567 7,342
Long-Term Debt 36 0 750 250
Other Long-Term Liabilities 384 545 638 600
Shareholders Equity 8,331 8,040 7,900 9,810
-------- --------------- ----------- -----------
TOTAL LIABILITIES & EQUITY $12,815 $16,735 $17,855 $18,002
======== =============== =========== ===========
-------------------------------------------------------------------------------------------------------------------------
Working Capital (c) $3,612 $5,356 $3,966 $4,941
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------
Source: Company Form 10-K.
(a) As provided by Management.
(b) Includes cash and cash equivalents and short-term and long-term
investments.
(c) Working capital reflects (i) current assets less cash and cash equivalents
minus (ii) current liabilities less short term debt.
<PAGE>
PROJECT WISE
CONSOLIDATED QUARTERLY BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
Four Quarters - 1999
----------------------------------------------------- -----------------
12/31/98 3/31/99 6/30/99 9/30/99(a)
-------- -------------- ----------- -----------------
Current Assets:
<S> <C> <C> <C> <C>
Cash and Cash Equivalents (b) $1,545 $2,079 $2,405 $1,836
Accounts Receivable 9,807 10,469 10,838 11,420
Other Current Assets 200 352 406 263
-------- --------------- ----------- -----------
Total Current Assets 11,552 12,900 13,649 13,519
Net Plant, Property & Equipment 2,391 2,356 2,235 2,258
Intangible Assets 990 962 933 1,445
Other Non-Current Assets 604 623 638 633
-------- --------------- ----------- -----------
TOTAL ASSETS $15,537 $16,841 $17,455 $17,855
======== =============== =========== ===========
Current Liabilities:
Current Portion of Long-Term Debt $3,839 $2,339 $500 $850
Accounts Payable and Accrued Expenses 860 1,001 1,278 1,538
Accrued Payroll and Commissions 2,418 3,164 4,878 4,226
Other Current Liabilities 719 1,412 1,566 1,952
-------- --------------- ----------- -----------
Total Current Liabilities 7,836 7,916 8,222 8,567
Long-Term Debt 0 1,000 875 750
Other Long-Term Liabilities 568 592 615 638
Shareholders Equity 7,133 7,333 7,743 7,900
-------- --------------- ----------- -----------
TOTAL LIABILITIES & EQUITY $15,537 $16,841 $17,455 $17,855
======== =============== =========== ===========
-------------------------------------------------------------------------------------------------------------------------
Working Capital (c) $6,010 $5,244 $3,522 $3,966
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------
Source: Company Form 10-Q.
(a) As provided by Management.
(b) Includes cash and cash equivalents and short-term and long-term
investments.
(c) Working capital reflects current assets less cash and cash equivalents less
current liabilities plus short term debt.
<PAGE>
PROJECT WISE
SUMMARY OWNERSHIP PROFILE
(Amounts in Thousands)
<TABLE>
<CAPTION>
% of Shares Issuable
Total Common upon Exercise Total
Common Stock of Stock Beneficial % of
Shares Outstanding Options (d) Ownership Total
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inside Owners Particpating in MBO (a)
Herbert Solomon 507.6 12.2 % 350.0 857.6 13.4 %
Lloyd Solomon 785.0 18.9 350.0 1,135.0 17.7
Scott Page 601.9 14.5 350.0 951.9 14.8
-----------------------------------------------------------------------------
Insiders Participating in MBO 1,894.5 45.6 1,050.0 2,944.5 45.9
-----------------------------------------------------------------------------
Other Executives and Directors (a)
Eric M. Davis 110.0 2.6 46.7 156.7 2.4
Edward Ehrenberg 0.0 0.0 17.5 17.5 0.3
Joel A. Klarreich 0.0 0.0 17.5 17.5 0.3
Other Executive Officers and Directors 0.0 0.0 0.0 0.0 0.0
-----------------------------------------------------------------------------
Total Other Executives and Directors 110.0 2.6 81.7 191.7 3.0
-----------------------------------------------------------------------------
Institutions (b)
Neuberger & Berman 82.5 2.0 - 82.5 1.3
BZW Barclays 2.5 0.1 - 2.5 0.0
Other Institutions 0.0 0.0 - 0.0 0.0
-----------------------------------------------------------------------------
Total Institutions 85.0 2.0 - 85.0 1.3
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Public and Other 2,062.8 49.7 1,133.9 3,196.7 49.8
-----------------------------------------------------------------------------
Total Shares Outstanding (c) 4,152.3 100.0 % 2,265.6 6,417.9 100.0 %
=============================================================================
</TABLE>
--------------------------------------------
(a) Source: Company's Proxy Statement dated April 15, 1999 and Management as of
September 30, 1999.
(b) Source: Bloomberg.
(c) Source: As per Management as of September 30, 1999.
(d) Includes options held by directors and executive officers, as provided by
Company's Proxy Statement dated April 15, 1999. Total outstanding options
(including out-of-the money options) as provided by Company 10-K dated
September 30, 1998.
<PAGE>
PROJECT WISE
OPTIONS ANALYSIS
<TABLE>
<CAPTION>
Options Outstanding Report Summary: Analysis at Various Share Buyback Prices
---------------------------------- ------------------------------------------------------------------------------
Option Options Price Range per Share for Buyback
Price Outstanding $ 2.00 $ 2.50 $ 3.00 $ 3.50 $ 4.00 $ 4.50
------ ------------ -------- -------- ------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.563 6,000 $8,625 $11,625 $14,625 $17,625 $20,625 $23,625
0.625 5,000 6,875 9,375 11,875 14,375 16,875 19,375
1.000 10,000 10,000 15,000 20,000 25,000 30,000 35,000
1.284 371,334 266,001 451,668 637,335 823,002 1,008,669 1,194,336
1.375 450,000 - - - - - -
1.410 4,000 2,360 4,360 6,360 8,360 10,360 12,360
1.660 23,500 8,000 19,750 31,500 43,250 55,000 66,750
1.560 5,000 2,200 4,700 7,200 9,700 12,200 14,700
1.626 6,000 2,244 5,244 8,244 11,244 14,244 17,244
1.750 26,000 6,500 19,500 32,500 45,500 58,500 71,500
1.840 1,000 160 660 1,160 1,660 2,160 2,660
1.875 6,000 750 3,750 6,750 9,750 12,750 15,750
1.880 22,500 2,700 13,950 25,200 36,450 47,700 58,950
2.019 213,250 - 102,625 209,250 315,875 422,500 529,125
2.060 203,532 - - - - - -
2.125 20,000 - 7,500 17,500 27,500 37,500 47,500
2.219 1,000 - 281 781 1,281 1,781 2,281
2.250 2,500 - 624 1,874 3,124 4,374 5,624
2.270 396,468 - - - - - -
2.355 51,000 - 7,380 32,880 58,380 83,880 109,380
2.375 10,000 - 1,250 6,250 11,250 16,250 21,250
2.430 1,000 - 70 570 1,070 1,570 2,070
2.579 157,500 - - 66,250 145,000 223,750 302,500
2.560 2,500 - - 1,100 2,350 3,600 4,850
2.630 1,000 - - 370 870 1,370 1,870
3.672 2,500 - - - - 820 2,070
2.680 - - - - - - -
2.750 22,000 - - 5,500 16,500 27,500 38,500
2.813 37,500 - - 7,012 25,763 44,513 63,263
2.844 5,000 - - 780 3,280 5,780 8,280
2.875 5,000 - - 625 3,125 5,625 8,125
3.199 151,000 - - - 45,500 121,000 196,500
3.250 5,000 - - - 1,250 3,750 6,250
3.350 25,000 - - - 3,750 16,250 28,750
3.500 10,500 - - - 0 5,250 10,500
3.688 6,000 - - - - 1,872 4,872
----------
Total Including H. Solomon & S. Page Options Proceeds Necessary for Vested Options
------------------------------------------------------------------------------------------------------------------------------------
2,265,584 $316,415 $679,312 $1,153,491 $1,711,783 $2,318,017 $2,925,809
------------------------------------------------------------------------------------------------------------------------------------
Total Excluding H. Solomon, L. Solomon & S. Page Options
-----------------------------------------------------------
1,215,584
-----------------------------------------------------------
</TABLE>
* BOLD = H. Solomon, L. Solomon & S. Page Options
<PAGE>
PROJECT WISE
ANALYSIS AT VARIOUS PRICES
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Company Price Per Share $2.50 $2.75 $3.00 $3.25 $3.50 $3.75 $4.00 $4.25 $4.50
------------------------------------------------------------------------------
Premium (Discount) to Stock Prices
Current Stock Price @ November 11, 1999 $2.00 25.0% 37.5% 50.0% 62.5% 75.0% 87.5% 100.0% 112.5% 125.0%
52 week High August 16, 1999 $3.44 (27.3%) (20.0%) (12.7%) (5.5%) 1.8% 9.1% 16.4% 23.6% 30.9%
52 week Low February 18, 1999 $1.34 86.0% 104.6% 123.2% 141.9% 160.5% 179.1% 197.7% 216.3% 234.9%
Shares Outstanding
Shares Outstanding 4,152 4,152 4,152 4,152 4,152 4,152 4,152 4,152 4,152
Equivalent Options Outstanding 339 418 489 551 611 664 710 751 787
----- ----- ----- ----- ----- ----- ----- ----- -----
Equivalent Shares Outstanding 4,491 4,570 4,641 4,704 4,763 4,816 4,862 4,903 4,939
Total Equity Value $11,228 $12,567 $13,923 $15,286 $16,671 $18,059 $19,449 $20,838 $22,227
Total Enterprise Value (a) 10,992 12,332 13,688 15,051 16,435 17,824 19,213 20,602 21,991
Enterprise Value as a Multiple:
FYE 9/30/99
Revenues $56,092 19.6% 22.0% 24.4% 26.8% 29.3% 31.8% 34.3% 36.7% 39.2%
EBITDA 4,533 2.4x 2.7x 3.0x 3.3x 3.6x 3.9x 4.2x 4.5x 4.9x
EBIT 3,873 2.8x 3.2x 3.5x 3.9x 4.2x 4.6x 5.0x 5.3x 5.7x
LTM EBITDA 12/31/99 $5,110 2.2x 2.4x 2.7x 2.9x 3.2x 3.5x 3.8x 4.0x 4.3x
FYE EBITDA 9/30/00 4,336 2.5x 2.8x 3.2x 3.5x 3.8x 4.1x 4.4x 4.8x 5.1x
Equity Value as a Multiple:
FYE 9/30/99 EPS $0.51 4.9x 5.4x 5.9x 6.3x 6.8x 7.3x 7.8x 8.3x 8.8x
</TABLE>
-------------------------------
(a) Source: Total cash and debt as per Management.
<PAGE>
PROJECT WISE
FUNDING ANALYSIS
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Current Shares Outstanding (a) 2,258
Options Shares Outstanding (b) 1,216
-----
Common Shares and Options Outstanding excluding MBO Group 3,473
Purchase Price $2.50 $3.00 $3.50 $4.00 $4.50
-------------------------------------------------------------------------------------------------------------------
Premium to Price as of November 11, 1999 25.0% 50.0% 75.0% 100.0% 125.0%
Cost of Purchasing Outside Shares $5,644 $6,773 $7,902 $9,031 $10,160
Cost of Purchasing Outside Options (c) 1,963 3,047 4,225 4,862 5,470
-------- ------- ------- ------- -------
Total Cost of Purchasing Outside Equity $7,607 $9,820 $12,127 $13,893 $15,630
Adjustments
Available Cash and Cash Equivalents (d) ($836) ($836) ($836) ($836) ($836)
Proceeds from Exercise of Options (c) (1,283) (1,893) (2,513) (2,544) (2,544)
Transaction Costs 600 600 600 600 600
-------- ------- ------- ------- -------
Total Adjustments (1,519) (2,129) (2,749) (2,780) (2,780)
---------------------------------------------------------
Total Cost of Transaction $6,088 $7,691 $9,378 $11,113 $12,850
---------------------------------------------------------
Repayment of Existing Debt 1,600 1,600 1,600 1,600 1,600
-------- ------- ------- ------- -------
Total Leverage on New Company $7,688 $9,291 $10,978 $12,713 $14,450
======== ======= ======= ======= =======
Debt/FYE 1999 EBITDA (e) 1.7x 2.0x 2.4x 2.8x 3.2x
FYE 1999 EBITDA/Interest Expense (e) 6.6x 5.4x 4.6x 4.0x 3.5x
Debt/FYE 2000 EBITDA (e) 1.8x 2.1x 2.5x 2.9x 3.3x
FYE 2000 EBITDA/Interest Expense (e) 6.3x 5.2x 4.4x 3.8x 3.3x
</TABLE>
------------------------------------------
(a) Excludes common shares owned by Herb Solomon, Lloyd Solomon and Scott Page.
(b) Excludes options owned by Herb Solomon, Lloyd Solomon and Scott Page.
(c) Includes only those options that are in-the-money relative to the offer
price and excludes options owned by Herb Solomon, Lloyd Solomon and Scott
Page.
(d) Assumes company maintains a minimum cash balance of $1 million.
(e) Assumes amount to complete MBO funded with senior bank debt with a 9%
coupon.
<PAGE>
xx
PROJECT WISE
SUMMARY HISTORICAL STOCK PRICE PERFORMANCE
Summary of Solomon Page Closing Stock Prices
<TABLE>
<CAPTION>
Daily for the Closing Stock Prices
Following Periods: Time Period High Low Average Median
---------------------------- ----------- ------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
11/04/99 - 11/11/99 LAST WEEK $2.063 $1.875 $1.958 $1.938
10/28/99 - 11/11/99 LAST 14 DAYS 2.063 1.875 1.966 2.000
10/12/99 - 11/11/99 LAST 30 DAYS 2.375 1.875 2.077 2.063
09/24/99 - 11/11/99 LAST 45 DAYS 2.813 1.875 2.219 2.156
09/10/99 - 11/11/99 LAST 60 DAYS 2.844 1.875 2.338 2.250
08/13/99 - 11/11/99 LAST 90 DAYS 3.188 1.875 2.514 2.625
05/14/99 - 11/11/99 LAST 180 DAYS 3.250 1.750 2.524 2.563
11/11/98 - 11/11/99 LAST 1 YEAR 3.250 1.344 2.130 2.063
11/11/97 - 11/11/99 LAST 2 YEARS 4.875 1.344 2.632 2.531
11/12/96 - 11/11/99 LAST 3 YEARS 4.875 1.313 2.610 2.625
</TABLE>
Source: Bloomberg.
<PAGE>
PROJECT WISE
Selected Comparable Companies: Human Resources Industry
SELECTED COMPARABLE COMPANIES - HUMAN RESOURCES INDUSTRY
* All publicly traded companies in the U.S. with a SIC 7361 (Employment
Agencies) with an enterprise value less than $70 million, provided by Bloomberg.
(Amounts in millions, except per share data)
<TABLE>
<CAPTION>
TICKER PRICE @ FISCAL SHARES MARKET ENTERPRISE TTM
COMPANY SYMBOL 11/11/99 YEAR END OUTSTANDING VALUE VALUE (a) SALES
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PROJECT WISE - $ 2.00 09/30/99 4.3 $8.7 $8.4 $56.1
--------------------------------------------------------------------------------------------------------------
ASI Solutions Inc. ASIS $ 3.69 03/31/99 6.7 24.8 38.3 63.9
Diversified Corporate Resources HIR $ 3.25 12/31/98 2.8 9.0 11.8 51.0
General Employment Enterprises JOB $ 4.81 09/30/98 4.6 22.2 12.2 36.7
Joule Inc. JOL $ 1.88 09/30/98 3.7 6.9 12.8 62.9
--------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRICE AS A MULTIPLE OF: ENTERPRISE VALUE AS A MULTIPLE OF:
-------------------------------------------------------------------------------------------
LTM CFY1999E BOOK LTM NET LTM LTM
COMPANY EPS EPS (b) VALUE SALES EBITDA EBIT
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PROJECT WISE 3.9x 3.4x 1.1x 15.0% 1.9x 2.2x
-----------------------------------------------------------------------------------------------------------------------------
ASI Solutions Inc. 7.5 9.5 1.2 59.9% 4.0 (c) 5.4
Diversified Corporate Resources 11.2 13.0 0.7 23.1% 4.0 6.6
General Employment Enterprises 7.2 NA 2.2 33.3% 2.5 2.6
Joule Inc. 7.8 NA 0.9 20.4% 4.7 6.2
-----------------------------------------------------------------------------------------------------------------------------
Average 8.4x 11.2x 1.2x 34.2% 3.8x 5.2x
Median 7.7 11.2 1.0 28.2% 4.0 5.8
Maximum 11.2 13.0 2.2 59.9% 4.7 6.6
Minimum 7.2 9.5 0.7 20.4% 2.5 2.6
</TABLE>
(a) Market value of common stock plus all debt, less cash.
(b) Comparable company earning estimates based on IBES estimates per Bloomberg.
(c) LTM 9/30/99 EBITDA for ASI Solutions Inc. assumes depreciation &
amortization to be same as that for LTM 6/30/99.
Note: All multiples based on most recent fiscal year end or trailing twelve
month results.
Source: Bloomberg
<PAGE>
PROJECT WISE
SELECTED COMPARABLE COMPANIES - HUMAN RESOURCES INDUSTRY
COMPANY DESCRIPTIONS
ASI Solutions Inc.
ASI Solutions Incorporated provides a variety of human resources
outsourcing services for organizations. The Company's services include
assessment and selection, training and development, customer contact monitoring,
and employment process administration.
Diversified Corporate Resources
Diversified Corporate Resources, Inc. is an employment services firm. The
Company provides professional and technical personnel on a permanent basis.
Diversified serves high-end niche employment markets with a primary emphasis on
the information technology.
General Employment Enterprises
General Employment Enterprises, Inc. provides professional staffing
services in the areas of information technology, engineering, and accounting.
The Company offers full-time and contract employee placement. General Employment
operates in the United States.
Joule Inc.
Joule Inc. supplies temporary personnel to business and industry clients
through 17 branch offices. The company's technical staffing covers engineering,
scientific, and information technology jobs by providing workers such as
architects, chemists, and programmers.
<PAGE>
PROJECT WISE
SUMMARY ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS
* Based on "Going Private" Transactions of Companies with Enterprise Value
Between $10 and $50 million from 1997 to Present.
<TABLE>
<CAPTION>
(Dollars in Millions) Equity Value as
Enterprise Value as a Multiple of: a Multiple of:
-------------------------------------------- ---------------
Date Acquiror Name Enterprise LTM LTM LTM Equity LTM Net
Annc'd Target Name Value (a) Sales EBITDA EBIT Value Income
-------- ------------------------------------------ ----------- --------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jul-99 Investor Group 24.7 27.3% 3.9x 5.5x $28.6 14.8 x
Concord Fabrics Inc.
Jun-99 Investor Group 12.4 20.3 3.6 3.9 14.9 8.1
Winston Resources, Inc.
Dec-98 SRC Holdings 42.6 43.8 5.1 10.4 28.8 11.5
Back Bay Restaurants Group Inc
Sep-98 PH II Inc 14.3 73.1 4.0 4.9 8.7 4.8
THT Inc
Aug-98 Malt Acquiring Inc 14.4 51.8 3.4 4.4 15.8 7.5
Lion Brewery Inc
May-97 Oxford Automotive Inc 19.1 20.5 7.1 (b) 15.9(b) 19.5 27.9(b)
Howell Industries Inc
Mar-97 Hamilton Acquisition LLC 30.9 23.7 4.7 6.1 36.2 11.0
Strober Organization Inc
Jan-97 HIG Investment Group 27.4 60.1 NA 7.0 21.5 8.3
Thermal Industries Inc
-----------------------------------------------------------------------
Mean 40.1% 4.1x 6.0x 9.4x
Median 35.5 % 3.9x 5.5x 8.3x
-----------------------------------------------------------------------
</TABLE>
Source: Securities Data Company and other public sources.
(a) Enterprise value equals equity value plus debt less cash.
(b) Excluded as outlier.
<PAGE>
PROJECT WISE
MBO FINANCING MODEL
<TABLE>
<CAPTION>
TABLE OF CONTENTS ASSUMPTIONS
----------------------------------------------- ----------------------------------------------------------------------
<S> <C>
TABLES: - Transaction closed on the date of the most recent FYE 9/30/99
- Purchase price of $3.50 per share
Sources and Uses Page 2 - Management Group includes Herb Solomon, Lloyd Solomon and Scott Page
Purchase Multiples
Pro Forma Capitalization Analysis
Coverage Ratios Page 3
Summary Financial Results
Capitalization - Year End Page 4
Asset Coverage
Income Statement Assumptions Page 5
Balance Sheet Assumptions
Margin Analysis
Consolidated Statements of Operations Page 6
Opening Balance Sheet Page 7
Consolidated Balance Sheet Page 8
Consolidated Statements of Cash Flow Page 9
Debt Amortization Schedule Page 10
Property & Equipment Schedule Page 11
Debt Amortization Schedule
Equity Valuation and IRR Analysis Page 12
Terminal Value Multiple Assumptions
</TABLE>
<PAGE>
PROJECT WISE
FINANCIAL SUMMARY
SOURCES AND USES
----------------------------------------------------------------
USES:
Current Share Price @ November 11, 1999 $2.00
Assumed Purchase Price per Share $3.50
Total Shares Purchased (including options) (a) 3,465
-------
Purchase Price of Total Common Outstanding Shares $12,127
Plus:
Proceeds of Exercised Options ($2,513)
Transaction Expenses $600
Repayment of Existing Debt 1,600
Less: Available Cash and Marketable Securities (836)
-----
Total Cost of Acquisition $10,978
SOURCES:
Revolving Credit Facility $4,978
Bank Term Loan 6,000
-----
Total Sources: $10,978
===============================================================
(a) Total shares purchased does not include shares and options owned by
Management Group.
<TABLE>
<CAPTION>
PURCHASE MULTIPLES
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Value $16,671 (a)
Plus: Net Debt (236)
-----
Adjusted Enterprise Value $16,435 Net
Sales EBITDA EBIT Income
----- ------ ---- ------
Purchase Multiples
1999 0.29 x 3.63 x 4.24 x 8.19 x
2000 0.27 x 3.79 x 4.62 x 10.55 x
2001 0.27 x 3.79 x 4.40 x 9.37 x
===================================================================================================
</TABLE>
(a) The Treasury Method is used to calculate option equivalent shares
outstanding in determining Equity Value.
<TABLE>
<CAPTION>
PRO FORMA CAPITALIZATION ANALYSIS
------------------------------------------------------------------------------------------------------------------------------------
Proforma at 9/30/99 Actual at 9/30/99
-------------------------------------------------------- --------------
$ % Coupon $ %
---- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C>
Cash $300 NA NA $301 NA
INVESTMENTS 700 NA NA 1,535 NA
---- ------
Total Cash and Cash Equivalents 1,000 1,836
Debt:
Line of Credit 4,978 53.7% 9.00% 350 3.7%
Bank Term Loan 6,000 64.8% 9.00% 1,250 13.2%
------ ------
Total Debt 10,978 118.5% 1,600 16.8%
Shareholder Equity (1,714) -18.5% 7,900 83.2%
Total Capitalization $9,264 100.0% $9,500 100.0%
=======================================================================================================================
</TABLE>
Ownership
---------------------------------------------- EBITDA
Primary Fully 4.0 X
Primary Adjusted Diluted IRR
------- -------- ------- ---
0.0% 0.0% 0.0%
0.0% 0.0% 0.0%
100.0% 0.0% 100.0% 15.7% (a)
------ ----
100.0% 0.0% 100.0%
===============================================================
(a) IRR calculation assumes Management Group's equity ownership that rolls over
is in the amount of $8.36 million.
<PAGE>
PROJECT WISE
MBO FINANCING MODEL
<TABLE>
<CAPTION>
COVERAGE RATIOS
------------------------------------------------------------------------------------------------------------------------------------
Pro
Historical Forma Projected
1999 1999 2000 2001 2002 2003 2004
---------- ------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EBIT/Senior Bank Interest 14.85x 3.70x 3.80x 4.77x 6.05x 9.21x 25.72x
EBIT/Total Interest Net 14.85x 3.70x 3.80x 4.77x 6.05x 9.21x 25.72x
EBITDA/Senior Bank Interest 17.38x 4.59x 4.64x 5.53x 7.08x 10.86x 30.55x
EBITDA/Total Interest Net 17.38x 4.59x 4.64x 5.53x 7.08x 10.86x 30.55x
(EBITDA - CapEx)/Senior Bank Interest 14.74x 4.39x 4.42x 5.28x 6.75x 10.35x 29.14x
(EBITDA - CapEx)/Total Interest Net 14.74x 4.39x 4.42x 5.28x 6.75x 10.35x 29.14x
Debt/EBIT 0.41x 3.00x 2.75x 2.04x 1.62x 0.78x 0.08x
Debt/EBITDA 0.35x 2.42x 2.26x 1.76x 1.38x 0.66x 0.06x
Debt/(EBITDA - CapEx) 0.42x 2.53x 2.37x 1.84x 1.45x 0.70x 0.07x
Debt/Equity 0.20x NM NM 4.63x 1.71x 0.52x 0.04x
Debt/Total Capital 16.8% 118.5% 101.4% 82.2% 63.0% 34.3% 3.5%
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SUMMARY FINANCIAL RESULTS
------------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, Pro
Historical Forma Projected
1997 1998 1999 1999 2000 2001 2002 2003 2004
---------------------------- ------- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $28,996 $44,639 $56,092 $56,092 $60,598 $60,598 $60,598 $60,598 $60,598
EBITDA 2,029 2,137 4,533 4,533 4,336 4,336 4,336 4,336 4,336
EBIT 1,691 1,622 3,873 3,654 3,555 3,736 3,708 3,679 3,650
Capital Expenditures 791 1,088 689 200 200 200 200 200 200
Net Income $1,282 $823 $2,036 $1,607 $1,580 $1,779 $1,872 $1,983 $2,112
====================================================================================================================================
</TABLE>
<PAGE>
PROJECT WISE
MBO FINANCING MODEL
<TABLE>
<CAPTION>
CAPITALIZATION-YEAR END
--------------------------------------------------------------------------------------------------------------------------------
Years Ended September 30, Historical Pro Forma Projected
--------------------------- --------- -----------------------------------------
1997 1998 1999 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash $410 $935 $301 $300 $300 $300 $985 $300 $300
Investments 2,150 1,715 1,535 700 700 700 700 700 700
----- ------ ------ ---- ---- ---- ---- ---- -----
Total Cash and Cash Equivalents 2,560 2,650 1,836 1,000 1,000 1,000 1,685 1,000 1,000
Debt:
Line of Credit 0 3,100 350 4,978 3,793 1,615 0 0 0
Bank Term Loan 0 0 750 6,000 6,000 6,000 6,000 2,875 278
Term Loan Payable 0 0 500 0 0 0 0 0 0
----- ------- ------ ------ ------ ------ ------ ------ ------
Total Debt 36 3,100 1,600 10,978 9,793 7,615 6,000 2,875 278
Shareholder Equity 8,331 8,040 7,900 (1,714) (135) 1,644 3,517 5,500 7,612
----- ------ ------ ------- ------- ------ ------ ------ ------
Total Capitalization $8,368 $11,140 $9,500 $9,264 $9,659 $9,259 $9,517 $8,375 $7,890
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
ASSET BASED AVAILABILITY
------------------------------------------------------------------------------------------------------------------------------------
Years Ended September 30,
Balance as Availability Projected Availability
of 9/30/99 Eligibility % $ 2000 2001 2002 2003 2004
---------- ----------- ------ ------ ------ ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receivables $11,420 90.00% 80.00% $8,222 $7,862 $7,862 $7,862 $7,862 $7,862
Revolver Capacity 8,222 7,862 7,862 7,862 7,862 7,862
Revolver Usage 350 3,793 1,615 0 0 0
------ ------ ------ ------ ------- ------
Revolver Availability 7,872 4,069 6,247 7,862 7,862 7,862
Net PP&E 2,258 100.00% 50.00% 1,129 949 859 755 637 504
----- ------ ------ ------ ------- ------
Term Capacity 1,129 949 859 755 637 504
Term Usage (a) 1,250 6,000 6,000 6,000 2,875 278
----- ------ ------ ------ ------ ------
Term Availability (121) (5,051) (5,141) (5,245) (2,239) 226
Total Asset Based Availability $13,678 $7,751 ($982) $1,106 $2,617 $5,624 $8,088
====================================================================================================================================
</TABLE>
(a) Includes outstanding bank term debt and senior subordinated note.
<PAGE>
PROJECT WISE
MBO FINANCING MODEL
INCOME STATEMENT ASSUMPTIONS
<TABLE>
<CAPTION>
Years Ended September 30, Historical Projected
---------------------------- -------------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004
---------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue Growth Rate NA 53.9% 25.7% 8.0% 0.0% 0.0% 0.0% 0.0%
Selling Expenses as % of Revenues 77.3% 78.4% 78.2% 79.1% 79.1% 79.1% 79.1% 79.1%
General & Administrative Expenses as % of Revenues 15.7% 16.8% 13.7% 13.7% 13.7% 13.7% 13.7% 13.7%
Depreciation & Amortization as % of Revenues 1.2% 1.2% 1.2% 1.3% 1.0% 1.0% 1.1% 1.1%
Marginal Tax Rate 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET ASSUMPTIONS AND CAPITAL EXPENDITURES
Years Ended September 30,
Historical Projected
--------------------------- --------------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004
--------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Capital Expenditures 791 1,088 689 200 200 200 200 200
A/R as % of Gross Revenues 25.4% 22.8% 20.4% 18.0% 18.0% 18.0% 18.0% 18.0%
Days Receivable Outstanding 92.9 83.1 74.3 65.8 65.8 65.8 65.8 65.8
Other Current Assets as % of Revenues 1.0% 0.6% 0.5% 0.4% 0.4% 0.4% 0.4% 0.4%
A/P and Accrued Expenses as % of Selling Expenses 4.3% 2.8% 3.5% 3.2% 3.2% 3.2% 3.2% 3.2%
Days Payable Outstanding 15.8 10.1 12.8 11.7 11.7 11.7 11.7 11.7
Accrued Payroll and Commissions as % of Revenues 8.6% 7.8% 7.5% 6.6% 6.6% 6.6% 6.6% 6.6%
Other Current Liabilities as % of Revenues 2.1% 1.3% 3.5% 1.2% 1.2% 1.2% 1.2% 1.2%
Minimum Cash Balance Requirement (a) 300 300 300 300 300
====================================================================================================================================
</TABLE>
(a) Does not include investments/cash equivalents; total minimum cash and cash
equivalents balance required is $1 million.
<TABLE>
<CAPTION>
MARGIN ANALYSIS
Years Ended September 30, Historical Projected
---------------------------------- ------------------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004
---------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA Margin 7.0% 4.8% 8.1% 7.2% 7.2% 7.2% 7.2% 7.2%
EBIT Margin 5.8% 3.6% 6.9% 5.9% 6.2% 6.1% 6.1% 6.0%
Net Earnings Margin 4.4% 1.8% 3.6% 2.6% 2.9% 3.1% 3.3% 3.5%
===================================================================================================================================
</TABLE>
<PAGE>
PROJECT WISE
MBO FINANCING MODEL
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per Share Data)
------------------------------------------------------------------------------------------------------------------------------------
Years Ended September 30, Historical Projected
---------------------------- Pro -----------------------------------------------
Forma
1997 1998 1999 1999 2000 2001 2002 2003 2004
---------------------------- -------- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Revenue $28,996 $44,639 $56,092 $56,092 $60,598 $60,598 $60,598 $60,598 $60,598
Operating Expenses:
Selling Expenses 22,413 35,015 43,874 43,874 47,936 47,936 47,936 47,936 47,936
General & Administrative Expenses 4,555 7,486 7,685 7,685 8,327 8,327 8,327 8,327 8,327
------ ------ ------ ------ ------ ------ ------ ------ -----
Total Operating Expenses 26,968 42,501 51,559 51,559 56,263 56,263 56,263 56,263 56,263
------------------------------------------------------------------------------------------------------------------------------------
EBITDA 2,029 2,137 4,533 4,533 4,336 4,336 4,336 4,336 4,336
------------------------------------------------------------------------------------------------------------------------------------
Depreciation and Amortization 337 515 660 660 560 380 408 437 466
Amortization of Transaction Expenses 0 0 0 30 30 30 30 30 30
Goodwill Amortization 0 0 0 190 190 190 190 190 190
-- -- -- ---- ---- ---- ---- ---- ---
Earnings/(Losses) from Operations (EBIT) 1,691 1,622 3,873 3,654 3,555 3,736 3,708 3,679 3,650
Other Expense/(Income)
Interest Expense 27 219 261 988 935 783 613 399 142
(Interest Income) (133) (128) (110) (12) (12) (12) (26) (26) (12)
Net Investment (Gain/Income) Loss (37) (2) 21 0 0 0 0 0 0
---- --- --- -- -- -- -- -- -
Total Other Expense/(Income) (143) 90 172 976 923 771 587 374 130
Earnings/(Losses) before (Benefit)/
Provision for Income Taxes 1,835 1,533 3,702 2,678 2,633 2,965 3,121 3,305 3,520
(Benefit)/Provision for
Income Taxes (a) 553 710 1,666 1,071 1,053 1,186 1,248 1,322 1,408
---- ---- ------ ------ ------ ------ ------ ------ -----
Net (Losses)/Earnings before Dividend 1,282 823 2,036 1,607 1,580 1,779 1,872 1,983 2,112
====================================================================================================================================
</TABLE>
(a) Projected income tax expense assumes 40% tax rate on projected pretax
income; historical income tax expense as per actual results.
<PAGE>
PROJECT WISE
MBO FINANCING MODEL
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
(In Thousands, except per Share Data)
------------------------------------------------------------------------------------------------------------------------------
Years Ended September 30, Opening MBO Pro Forma
1999 Adjustments 1999
---------------- ---------------- -----------
Current Assets:
<S> <C> <C> <C>
Cash $301 ($1) $300
Investments 1,535 (835) 700
Accounts Receivable, net 11,420 11,420
Other Current 263 263
------ ------
Total Current Assets 13,519 (836) 12,683
Property, Plant and Equipment:
PP&E, at Cost 3,917 3,917
Accumulated Depreciation (1,659) (1,659)
------- -------
Net PP&E 2,258 2,258
Other Assets:
Goodwill and Intangibles, Net 1,445 1,445
Other Assets 633 633
Transaction Costs - Net of Amortization 0 600 600
------- ----- ------
2,078 600 2,678
------- ----- -----
Total Assets $17,855 ($236) $17,619
======== ======= =========
Current Liabilities
Accounts Payable and Accrued Expenses $1,538 $1,538
Accrued Payroll and Commissions 4,226 4,226
Line of Credit 350 4,628 4,978
Term Loan Payable 500 (500) 0
Other Current Liabilities 1,952 1,952
------ -----
Total Current Liabilities 8,567 4,128 12,695
Long-Term Liabilities:
Bank Term Loan 750 5,250 6,000
Other Liabilities 638 638
----- -----
Total Long-Term Liabilities 1,388 5,250 6,638
Deferred Taxes 0 0
Shareholders' Equity
Total Shareholders' Equity 7,900 (9,614) (1,714)
------ ------- -------
Total Liabilities and Shareholders' Equity $17,855 ($236) $17,619
===========================================================================================================
</TABLE>
<PAGE>
PROJECT WISE
MBO FINANCING MODEL
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
(In Thousands, except per Share Data)
Years Ended September 30, Historical Projected
------------------------------- Pro --------------------------------------------
Forma
1997 1998 1999 1999 2000 2001 2002 2003 2004
------------------------------ --------------------------------------------------------
Current Assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash $410 $935 $301 $300 $300 $300 $985 $300 $300
Investments 2,150 1,715 1,535 700 700 700 700 700 700
Accounts Receivable, net 7,378 10,161 11,420 11,420 10,920 10,920 10,920 10,920 10,920
Other Current 298 246 263 263 263 263 263 263 263
---- ---- ---- ---- ---- ---- ---- ---- ---
Total Current Assets 10,236 13,057 13,519 12,683 12,183 12,183 12,868 12,183 12,183
Property, Plant and Equipment:
PP&E, at Cost 2,140 3,228 3,917 3,917 4,117 4,317 4,517 4,717 4,918
Accumulated Depreciation (683) (1,113) (1,659) (1,659) (2,219) (2,599) (3,007) (3,444) (3,910)
----- ------- ------- ------- ------- ------- ------- ------- -------
Net PP&E 1,457 2,115 2,258 2,258 1,898 1,718 1,510 1,273 1,008
Other Assets:
Goodwill and Intangibles, Net 754 1,019 1,445 1,445 1,255 1,065 876 686 497
Other Assets 368 545 633 633 633 633 633 633 633
Transaction Costs - Net of Amortization 0 0 0 600 570 540 510 480 450
------ ------ ------ ------ ------ ------ ------ ------ ------
1,122 1,564 2,078 2,678 2,458 2,238 2,019 1,799 1,580
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Assets $12,815 $16,735 $17,855 $17,619 $16,539 $16,140 $16,397 $15,255 $14,770
======================================================================================
Current Liabilities
Accounts Payable and Accrued Expenses $968 $968 $1,538 $1,538 $1,539 $1,539 $1,539 $1,539 $1,539
Accrued Payroll and Commissions 2,494 3,498 4,226 4,226 3,976 3,976 3,976 3,976 3,976
Line of Credit 0 3,100 350 4,978 3,793 1,615 0 0 0
Term Loan Payable 0 0 500 0 0 0 0 0 0
Other Current Liabilities 602 585 1,952 1,952 727 727 727 727 727
---- ---- ------ ------ ---- ---- ---- ---- ---
Total Current Liabilities 4,064 8,151 8,567 12,695 10,035 7,857 6,242 6,242 6,242
Long-Term Liabilities:
Bank Term Loan 0 0 750 6,000 6,000 6,000 6,000 2,875 278
Other Liabilities 384 545 638 638 638 638 638 638 638
---- ---- ---- ---- ---- ---- ---- ---- ---
Total Long-Term Liabilities 420 545 1,388 6,638 6,638 6,638 6,638 3,514 917
Shareholders' Equity
Total Shareholders' Equity 8,331 8,040 7,900 (1,714) (135) 1,644 3,517 5,500 7,612
------ ------ ------ ------- ----- ------ ------ ------ -----
Total Liabilities and Shareholders' Equity $12,815 $16,735 $17,855 $17,619 $16,539 $16,140 $16,397 $15,255 $14,770
====================================================================================================================================
</TABLE>
<PAGE>
PROJECT WISE
MBO FINANCING MODEL
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Years Ended September 30, Projected
---------------------------------------------------------------
2000 2001 2002 2003 2004
---------------------------------------------------------------
Cash Flows from Operating Activities:
<S> <C> <C> <C> <C> <C>
Net Earnings/(Losses) $1,580 $1,779 $1,872 $1,983 $2,112
Items Included in Net Earnings not Affecting Cash:
Depreciation and Amortization 560 380 408 437 466
Amortization of Transaction Expenses 30 30 30 30 30
Amortization of Goodwill and Intangibles 190 190 190 190 190
(Increase) Decrease in Accounts Receivables, net 500 0 0 0 0
(Increase) Decrease in Other Current Assets 0 0 0 0 0
(Increase) Decrease in Other Non-Current Assets 0 0 0 0 0
Increase (Decrease) in Accounts Payable and Accrued Expenses 1 0 0 0 0
Increase (Decrease) in Accrued Payroll and Commission (250) 0 0 0 0
Increase (Decrease) in Other Current Liabilities (1,225) 0 0 0 0
------- ----- ----- ----- -----
Net Cash (Used in)/Provided by Operating Activities 1,385 2,378 2,500 2,640 2,797
Cash Flows Used in Investing Activities:
Capital Expenditures (200) (200) (200) (200) (200)
Sale of Assets and Others 0 0 0 0 0
------- ----- ----- ----- -----
Net Cash Used in Investing Activities (200) (200) (200) (200) (200)
Cash Flow Available for Debt Repayment 1,185 2,178 2,300 2,440 2,597
Excess Cash Available, net of minimum cash balance
----- ----- ----- ----- -----
Net Cash Available for Debt Repayment
after Capital Lease Financing 1,185 2,178 2,300 2,440 2,597
Cash Flows Provided by Financing Activities:
Proceeds/(Repayment) of Line of Credit (1,185) (2,178) (1,615) 0 0
Proceeds/(Repayment) of Bank Term Loan 0 0 0 (3,125) (2,597)
Cash Dividends 0 0 0 0 0
Net Proceeds from the Issuance of Stock 0 0 0 0 0
------- ----- ----- ----- -----
Net Cash Provided by Financing Activities (1,185) (2,178) (1,615) (3,125) (2,597)
Net Increase/(Decrease) in Cash 0 0 685 (685) (0)
------- ----- ----- ----- -----
Cash, Beginning of Period 300 300 300 985 300
------- ----- ----- ----- -----
Cash, End of Period $300 $300 $985 $300 $300
====================================================================================================================================
</TABLE>
<PAGE>
PROJECT WISE
MBO FINANCING MODEL
<TABLE>
<CAPTION>
DEPRECIATION AND AMORTIZATION SCHEDULE
------------------------------------------------------------------------------------------------------------------------------------
Projected
-------------------------------------------------
Book Depreciation 1999 Years 2000 2001 2002 2003 2004
----- ----- -------------------------------------------------
Depreciable Assets
<S> <C> <C> <C> <C> <C> <C>
Net PP&E 2,258 7 $323 $323 $323 $323
------ ----- ----- ----- ----
Book Depreciation of Existing Assets $2,258 323 323 323 323
Straight-Line Depreciable Life 7
Annual Capital Spending
(End of Year CapEx) 2000 200 29 29 29 29
2001 200 29 29 29 29
2002 200 29 29 29
2003 200 29 29
2004 200 29
Book Depreciation on Capital Spending 57 86 114 143
--- --- ---- ---
Total Book Depreciation $560 $380 $408 $437 $466
=================================================
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
Goodwill Amortization (Existing and New) 1999 Years
----- -----
Beginning Goodwill 1,445 $1,445 $1,255 $1,065 $876 $686
Amortization 8 190 190 190 190 190
---- ---- ---- ---- ---
Ending Goodwill 1,255 1,065 876 686 497
Transaction Expenses Amortization 1999
----
Beginning Transaction Expenses $600 $600 $570 $540 $510 $480
Amortization of Transaction Expenses 600 20 30 30 30 30 30
--- --- --- --- --
Ending Transaction Expenses $570 $540 $510 $480 $450
Total Book Depreciation and Amortization $780 $599 $628 $657 $685
====================================================================================================================================
</TABLE>
<PAGE>
PROJECT WISE
MBO FINANCING MODEL
<TABLE>
<CAPTION>
PROPERTY & EQUIPMENT
Years Ended September 30, Projected
1999 2000 2001 2002 2003 2004
-------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Property and Equipment $3,917 $4,117 $4,317 $4,517 $4,717 $4,918
Accumulated Depreciation and Amortization 1,659 2,219 2,599 3,007 3,444 3,910
------ ------ ------ ------ ------ -----
Property and Equipment, Net $2,258 $1,898 $1,718 $1,510 $1,273 $1,008
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
DEBT AMORTIZATION SCHEDULE
Pro Forma Projected
Existing Debt 1999 1999 2000 2001 2002 2003 2004
------------- ----- ---- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Line of Credit $4,978 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%
Bank Term Loan 6,000 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%
------
Total Debt $10,978
Interest Income 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Debt Amortization
Line of Credit 0 1,185 2,178 1,615 0 0
Bank Term Loan 0 0 0 0 3,125 2,597
----- ----- ----- ----- ------ -----
Total Debt Amortization 0 1,185 2,178 1,615 3,125 2,597
Remaining Debt
Line of Credit 4,978 3,793 1,615 0 0 0
Bank Term Loan 6,000 6,000 6,000 6,000 2,875 278
------ ------ ------ ------ ------ ----
Total Debt Remaining 10,978 9,793 7,615 6,000 2,875 278
Interest Expense
Line of Credit 395 243 73 0 0
Bank Term Loan 540 540 540 399 142
---- ---- ----- ------ ------
Total Interest Expense 935 783 613 399 142
Interest Income 12 12 26 26 12
====================================================================================================================================
</TABLE>
<PAGE>
PROJECT WISE
MBO FINANCING MODEL
DETERMINATION OF EQUITY VALUE
--------------------------------------------------------------------------------
2004 EBITDA $4,336 $4,336 $4,336
EBITDA Multiples 3.00x 4.00x 5.00x
------- ------- ------
Terminal Enterprise Value $13,007 $17,342 $21,678
Less:
Revolving Credit Facility $0 $0 $0
Bank Term Loan 278 278 278
----- ---- ---
Total Debt 278 278 278
Plus: Cash 300 300 300
----- ---- ----
Equals Equity Value $13,028 $17,363 $21,699
================================================================================
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004 Multiple IRR
---- ---- ---- ---- ---- ---- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Equity ($8,364) 0 0 0 0 13,028 3.00 x 9%
($8,364) 0 0 0 0 17,363 4.00 x 16%
($8,364) 0 0 0 0 21,699 5.00 x 21%
========================================================================================================
</TABLE>
CALCULATION OF MANAGEMENT EQUITY VALUE ROLLED OVER IN MBO
---------------------------------------------------------
Number of Common Shares Owned by Management Group 1,895
Number of Management Options "In-the-Money" Relative to Offer Price 1,050
Assumed MBO Purchase Price $3.50
-------
Equity Value $10,306
Less: Proceeds of Excercised Options ($1,941)
--------------
Total Value of Management Equity $8,364
===============================================================================
<PAGE>
PROJECT WISE
DISCUSSION MATERIALS
March 8, 2000
PETER J. SOLOMON COMPANY
LIMITED
<PAGE>
PROJECT WISE
CONSOLIDATED INCOME STATEMENT
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
LTM Ended
Historical December 31,
------------------------------------------------------------ -------------------
Fiscal Year Ended September 30, 1996 1997 1998 1999 1999
------------------------------- ---------- ---------- ------------ ----------- ------------------
<S> <C> <C> <C> <C> <C>
Revenue $17,166 $28,996 $44,639 $56,329 $60,804
Operating Income (EBIT) 509 1,691 1,622 3,759 4,343
Net Income $710 $1,282 $823 $1,999 $2,327
========== ========== ============ =========== ==================
Diluted Weighted Average Shares 5,464 5,634 5,985 4,886 4,749
Diluted EPS $0.13 $0.23 $0.14 $0.41 $0.49
Calculation of EBITDA:
EBIT $509 $1,691 $1,622 $3,759 $4,343
D&A 241 337 515 660 688
---------- ---------- ------------ ----------- ------------------
EBITDA $750 $2,029 $2,137 $4,419 $5,031
Growth and Margins:
-------------------
Revenue Growth 134.2% 68.9% 53.9% 26.2% -
EBITDA 4.4% 7.0% 4.8% 7.8% 8.3%
EBIT 3.0% 5.8% 3.6% 6.7% 7.1%
Net Income 4.1% 4.4% 1.8% 3.5% 3.8%
</TABLE>
--------------------
Source: Company public disclosure documents filed with the SEC.
<PAGE>
PROJECT WISE
INCOME STATEMENT DATA BY DIVISION
(Dollars in Thousands, except per share amounts)
<TABLE>
<CAPTION>
Revenue EBITDA (a)
------------------------------------- -----------------------------------------
1998 1999 2000 P 1998 1999 2000 P
----------- --------- -------- -------- ------- ----------
PERMANENT STAFFING
<S> <C> <C> <C> <C> <C> <C>
Capital Markets $4,251 $8,945 $7,000 $1,678 $3,178 $2,191
Accounting NY 1,062 1,839 1,675 163 505 418
Accounting CA 572 604 500 38 191 137
Fashion 602 754 775 201 259 269
IT Perm 3,581 3,451 3,000 1,138 993 825
Admin 850 1,215 975 147 215 154
Healthcare NY 1,547 1,486 1,600 455 376 397
Healthcare CA 620 403 1,470 124 34 446
HR Perm 969 898 1,000 262 155 233
Legal 1,299 877 950 511 311 320
Publishing 2,241 2,321 2,625 924 922 938
----------- ---------- ---------- -------- -------------- ------------
--------------------------------------------------------------------------------------------------------------------------
Total - Permanent Staffing $17,593 $22,793 $21,570 $5,641 $7,139 $6,327
--------------------------------------------------------------------------------------------------------------------------
TEMPORARY STAFFING
ITP $22,762 $24,207 $23,818 $2,932 $3,203 $2,692
Acctg. Temp - NY 2,020 2,780 3,902 300 348 666
Acctg. Temp - CA 1,199 2,730 5,346 132 357 982
HR Temp NY 1,065 2,973 5,026 (241) 273 912
Legal Temp - 750 1,599 - 171 299
----------- ---------- ---------- -------- -------------- ------------
-------------------------------------------------------------------------------------------------------------------------
Total - Temporary Staffing $27,045 $33,440 $39,690 $3,123 $4,352 $5,550
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Banker's Registry - $96 $1,720 - $22 $423
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Divisional Total $44,639 $56,329 $62,980 $8,764 $11,513 $12,300
-------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Adjustment to include corporate allocations ($6,627) ($7,094) ($7,612)
Consolidated EBITDA $2,137 $4,419 $4,689
======== ======= =======
-------------------------------------------------------------------------------------
</TABLE>
-----------------------------
(a) Excludes corporate allocations.
<PAGE>
PROJECT WISE
SUMMARY OWNERSHIP PROFILE
(Amounts in Thousands)
<TABLE>
<CAPTION>
% of Shares Issuable
Total Common upon Exercise Total
Common Stock of Stock Beneficial % of
Shares Outstanding Options (d) Ownership Total
---------------------------------------------------------------------------------------
Inside Owners Particpating in MBO (a)
<S> <C> <C> <C> <C> <C>
Herbert Solomon 512.6 12.3 % 200.0 712.6 11.9 %
Lloyd Solomon 785.0 18.9 200.0 985.0 16.4
Scott Page 601.9 14.5 200.0 801.9 13.4
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Insiders Participating in MBO 1,899.5 45.7 600.0 2,499.5 41.6
---------------------------------------------------------------------------------
Other Executives and Directors (a)
Eric M. Davis 110.0 2.6 46.7 156.7 2.6
Edward Ehrenberg 0.0 0.0 17.5 17.5 0.3
Joel A. Klarreich 0.0 0.0 17.5 17.5 0.3
Other Executive Officers and Directors 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------------
Total Other Executives and Directors 110.0 2.6 81.7 191.7 3.2
---------------------------------------------------------------------------------
Institutions (b)
Bridgeway Cap. Mgmt. 116.2 2.8 - 116.2 1.9
Barclays Bank PLC 2.5 0.1 - 2.5 0.0
Other Institutions 0.0 0.0 - 0.0 0.0
---------------------------------------------------------------------------------
Total Institutions 118.7 2.9 - 118.7 2.0
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Public and Other 2,024.1 48.7 1,168.8 3,192.8 53.2
---------------------------------------------------------------------------------
Total Shares Outstanding (c) 4,152.3 100.0 % 1,850.4 6,002.7 100.0 %
=================================================================================
</TABLE>
------------------------------------------
(a) Source: Company's Proxy Statement dated April 15, 1999 and Management as of
March 7, 2000.
(b) Source: Bloomberg, MarketGuide and Management as of March 7, 2000.
(c) Source: As per Management as of March 7, 2000.
(d) Includes options held by directors and executive officers, as provided by
Company's Proxy Statement dated April 15, 1999 and Management as of March
7, 2000.
<PAGE>
PROJECT WISE
OPTIONS ANALYSIS
<TABLE>
<CAPTION>
Options Outstanding Report Summary: Analysis at Various Share Buyback Prices
------------------------------------ -----------------------------------------------------------------------
Option Options Price Range per Share for Buyback
Price Outstanding $ 2.00 $ 2.50 $ 3.00 $ 3.50 $ 4.00 $ 4.50
----------------- ------------ ------ ------- ------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0.563 6,000 $8,625 $11,625 $14,625 $17,625 $20,625 $23,625
0.625 5,000 6,875 9,375 11,875 14,375 16,875 19,375
1.000 10,000 10,000 15,000 20,000 25,000 30,000 35,000
1.250 369,668 277,251 462,085 646,919 831,753 1,016,587 1,201,421
1.410 1,000 590 1,090 1,590 2,090 2,590 3,090
1.500 23,500 11,750 23,500 35,250 47,000 58,750 70,500
1.626 6,000 2,244 5,244 8,244 11,244 14,244 17,244
1.750 26,000 6,500 19,500 32,500 45,500 58,500 71,500
1.840 1,000 160 660 1,160 1,660 2,160 2,660
1.875 11,000 1,375 6,875 12,375 17,875 23,375 28,875
1.880 22,500 2,700 13,950 25,200 36,450 47,700 58,950
1.937 1,000 63 563 1,063 1,563 2,063 2,563
2.000 198,250 - 99,125 198,250 297,375 396,500 495,625
2.060 203,532 - - - - - -
2.063 2,500 - 1,093 2,343 3,593 4,843 6,093
2.125 15,000 - 5,625 13,125 20,625 28,125 35,625
2.188 5,000 - 1,560 4,060 6,560 9,060 11,560
2.219 1,000 - 281 781 1,281 1,781 2,281
2.270 396,468 - - - - - -
2.310 51,000 - 9,690 35,190 60,690 86,190 111,690
2.375 10,000 - 1,250 6,250 11,250 16,250 21,250
2.438 2,500 - 155 1,405 2,655 3,905 5,155
2.500 198,500 - - 99,250 198,500 297,750 397,000
2.560 2,500 - - 1,100 2,350 3,600 4,850
2.620 2,500 - - 950 2,200 3,450 4,700
2.630 1,000 - - 370 870 1,370 1,870
2.750 33,000 - - 8,250 24,750 41,250 57,750
2.813 37,500 - - 7,012 25,763 44,513 63,263
2.844 5,000 - - 780 3,280 5,780 8,280
2.875 5,000 - - 625 3,125 5,625 8,125
3.000 151,000 - - 0 75,500 151,000 226,500
3.250 5,000 - - - 1,250 3,750 6,250
3.350 5,000 - - - 750 3,250 5,750
3.400 20,000 - - - 2,000 12,000 22,000
3.500 10,500 - - - 0 5,250 10,500
3.688 6,000 - - - - 1,872 4,872
---------
Total Including H. Solomon,
L. Solomon & S. Page Options Proceeds Necessary for Vested Options (a)
----------------------------------- -----------------------------------------------------------------------
1,850,418 $328,133 $688,246 $1,190,542 $1,796,501 $2,420,582 $3,045,791
----------------------------------- -----------------------------------------------------------------------
Total Excluding H. Solomon,
L. Solomon & S. Page Options
-----------------------------------
1,250,418
-----------------------------------
</TABLE>
* BOLD = H. Solomon, L. Solomon & S. Page Options
(a) Excludes option owned by management group.
<PAGE>
PROJECT WISE
Summary Historical Stock Price Performance
<TABLE>
<CAPTION>
Daily for the Wise Closing Stock Prices
Following Periods: Time Period High Low Average Median
--------------------------------- --------------------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
02/29/00 - 3/7/00 LAST WEEK $3.063 $2.688 $2.917 $3.000
02/22/00 - 3/7/00 LAST 14 DAYS 3.063 2.688 2.858 2.813
02/07/00 - 3/7/00 LAST 30 DAYS 3.063 2.563 2.821 2.813
01/21/00 - 3/7/00 LAST 45 DAYS 3.063 2.563 2.777 2.750
01/07/00 - 3/7/00 LAST 60 DAYS 3.063 2.438 2.751 2.750
12/07/99 - 3/7/00 LAST 90 DAYS 3.063 2.313 2.655 2.688
09/07/99 - 3/7/00 LAST 180 DAYS 3.063 1.875 2.486 2.563
03/08/99 - 3/7/00 LAST 1 YEAR 3.250 1.438 2.373 2.500
03/06/98 - 3/7/00 LAST 2 YEARS 4.875 1.344 2.488 2.438
03/07/97 - 3/7/00 LAST 3 YEARS 4.875 1.344 2.647 2.625
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Bloomberg.
<PAGE>
PROJECT WISE
SELECTED COMPARABLE COMPANIES - HUMAN RESOURCES INDUSTRY
($ in millions)
<TABLE>
<CAPTION>
AVG.
TRADING PERCENT
LTM LTM ENTERPRISE MARKET VOLUME PERMANENT
COMPANY REVENUE EBITDA VALUE CAP 6 MONTHS PLACEMENT
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PROJECT WISE $60.8 $5.0 $15.4 $13.8 11,388 41.6%
20.7%
Diversified Corporate Resources 51.0 2.9 11.0 8.0 4,611 53.3%
General Employment Enterprises 40.3 5.1 11.2 21.9 14,617 57.4%
Joule Inc. 72.9 2.6 14.7 6.9 2,840 -
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Average $54.7 $3.5 $12.3 $12.3 7,356 -
------------------------------------------------------------------------------------------------------------------------------
Acsys Inc. $165.7 $12.9 $64.8 $26.3 29,750 20.7%
Headway Corporate Resources Inc. 358.3 23.6 104.0 40.1 43,439 6.8%
------------------------------------------------------------------------------------------------------------------------------
Average $262.0 $18.3 $84.4 $33.2 36,595 NA
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Winston Resources, Inc. $60.7 $2.7 $8.4 $10.9 600 -
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROJECT WISE
SUMMARY ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS
Based on "Going Private" Transactions of Companies with Enterprise Value Between
$10 and $35 million from 1997 to Present.
<TABLE>
<CAPTION>
(Dollars in Millions) Enterprise Value as a Equity Value as a
Enterprise Value as a Multiple of: Multiple of: Premium
---------------------------------- ------ ---------------
Date Acquiror Name Enterprise LTM LTM LTM Equity LTM Net 1 Week Prior to
Annc'd Target Name Value (a) Sales EBITDA EBIT Value Income Announcement
----------- ----------------------------------------- ------------------------------ ------ ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Oct-99 Investor Group $24.4 75.5% 5.9x 8.7x $34.4 16.2 x 46.1%
CEM Corp
Jul-99 Investor Group 24.7 27.3 3.9 5.5 28.6 14.8 35.5%
Concord Fabrics Inc.
----------------------------------------------------------------------------------------------------------------------------------
Jun-99 Investor Group 12.4 20.3 3.6 3.9 14.9 8.1 68.2%
Winston Resources, Inc.
----------------------------------------------------------------------------------------------------------------------------------
Sep-98 PH II Inc 14.3 70.3 3.8 4.6 8.7 4.8 55.6%
THT Inc
Aug-98 Malt Acquiring Inc 14.4 51.8 3.4 4.4 15.8 7.5 19.3%
Lion Brewery Inc
May-97 Oxford Automotive Inc 19.1 20.8 6.2 11.8 19.5 14.9 -2.2%
Howell Industries Inc
Mar-97 Hamilton Acquisition LLC 30.9 23.7 4.7 6.1 36.2 11.0 3.2%
Strober Organization Inc
Jan-97 HIG Investment Group 27.4 60.1 NA 7.0 21.5 8.3 25.0%
Thermal Industries Inc
-----------------------------------------------------------------------------------------------------------
Median 39.6% 3.9x 5.8x 9.6x 30.2%
-----------------------------------------------------------------------------------------------------------
</TABLE>
Source: Securities Data Company and other public sources.
(a) Enterprise value equals equity value plus debt less cash.
<PAGE>
PROJECT WISE
SUMMARY ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS
CEM Corp
CEM Corporation develops, manufactures, sells, and services microwave-based
instrumentation for testing, analysis, and process control. The Company's
products are used in the general analytical laboratory market and in
manufacturing and processing industries, including chemical and food processing.
Concord Fabrics Inc.
Concord Fabrics Inc. develops, designs, and produces woven and knitted fabrics
of natural and synthetic fibers in a variety of colors and patterns. The Company
produces its fabrics at its own facility and through unaffiliated contractors,
and sells it to manufacturers and to retailers for resale to the home sewing
market. Concord's fabrics are used for apparel and for home furnishings.
Winston Resources, Inc.
Winston Resources, Inc. founded in 1967 and headquartered in New York, through
its niche marketing approach satisfies its clients needs in many areas, among
them specialties ranging from Information Technology, Legal, Medical, and
Accounting/Finance to Office Support in both Temporary and Full-Time employment
staffing, through its six company owned and seventeen franchised locations.
THT Inc
THT Inc., through its wholly-owned subsidiaries, is engaged in the manufacture
of rolled paper sticks used principally in confection and sanitary
health-related products and the manufacture of fabricated steel products used on
gas stoves and various steel wire forms such as pail handles, strap hooks, door
anchors and rings.
Lion Brewery Inc
The Lion Brewery, Inc. is a brewer and bottler of malta, specialty beers and
premium soft drinks.
Howell Industries Inc
Howell Industries is a major Tier 1 manufacturer of high quality welded
sub-assemblies and detailed stampings used primarily in suspension system
applications. Howell Industries expects sales of over $96 million in fiscal
1997. Howell has plants in Masury, Ohio and Lapeer, Michigan and is
headquartered in Southfield, Michigan.
Strober Organization Inc
The headquarters of The Strober Organization will be maintained in Brooklyn, New
York. Strober is a leading supplier of building materials to professional
contractors from 11 centers in New York, New Jersey, Connecticut and
Pennsylvania.
Thermal Industries Inc
Thermal Industries, Inc., is engaged in the manufacture and distribution of
vinyl-framed, made-to-order windows. These windows include double and
triple-paned replacement windows in a variety of styles. The Company has also
developed a line of replacement sliding doors and patio enclosure systems which
are currently being marketed. Vinylium Corporation, a wholly-owned subsidiary,
extrudes rigid and dual- durometer PVC profile extrusions which are used solely
in the Company's window manufacturing operations.
<PAGE>
PROJECT WISE
CONTROL PREMIUM ANALYSIS
<TABLE>
<CAPTION>
(Dollars in Millions) 1-Day 1-Week 4-Week
Premium Premium Premium
Ann'cd TEV Prior to Prior to Prior to
Date Target Business Acquirer Value Annc. Annc. Annc.
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/16/99 Winston Resources Inc Personnel recruitment svcs Investor Group $12.4 60.9% 42.3% 39.6%
12/24/98 COHR Inc Pvd outsourcing svcs Investor Group 29.7 66.4% 89.1% 116.7%
12/03/98 Vincam Group Inc Provide temporary help svcs Automatic Data Processing, Inc 287.7 24.3% 26.4% 39.2%
06/16/98 Personnel Management Inc Employment agency Linsalata Capital Partners 37.5 25.5% 23.1% 23.1%
02/02/98 Source Services Corp Provide help supply services Romac International Inc 431.1 51.1% 56.7% 50.2%
08/14/97 Uniforce Services Inc Pvd temporary personnel svcs Comforce Corp 133.7 37.6% 37.6% 52.6%
09/26/96 General Physics Corp Provide training services National Patent Development 70.4 16.6% 31.6% 36.0%
08/26/96 Career Horizons Inc Pvd temporary personnel svcs AccuStaff Inc 835.8 34.4% 33.9% 64.0%
02/27/96 Brandon Systems Corp Personnel agency, consulting Interim Services Inc 162.7 32.2% 39.4% 29.8%
01/18/96 AMSERV Healthcare Inc Pvd temp nursing employment Star Multi Care Services Inc 7.9 14.6% 27.3% 20.6%
------------------------------------------------------------------------------------------------------------------------------------
High $835.8 66.4% 89.1% 116.7%
Low $7.9 14.6% 23.1% 20.6%
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Median $102.1 33.3% 35.8% 39.4%
Mean $200.9 36.4% 40.7% 47.2%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
----------------------------------
Source: Transaction summary based on completed, controlling interest
transactions in the employment help supply industry. Transactions with
announcement dates between 01/01/96 and 07/30/99 for which purchase
price multiples were available were considered. Target companies had to
have an SIC code of 7361, 7363, 7389, 8741 or 8742. Sources include SDC,
Mergerstat, HLHZ Control Premium Study, Bloomberg and public company
filings.
<PAGE>
PROJECT WISE
ANALYSIS AT VARIOUS PRICES
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Company Price Per Share $3.25 $3.50 $3.75 $4.00 $4.25
------------------------------------------------------------------------------
Premium (Discount) to Stock Prices
Stock Price as of March 7, 2000 $3.00 8.3% 16.7% 25.0% 33.3% 41.7%
52 week High August 16, 1999 $3.44 (5.5%) 1.8% 9.1% 16.4% 23.6%
52 week Low February 18, 1999 $1.34 141.9% 160.5% 179.1% 197.7% 216.3%
Shares Outstanding
Shares Outstanding 4,152 4,152 4,152 4,152 4,152
Equivalent Options Outstanding 405 457 502 543 578
------ ------ ----- ------ -----
Equivalent Shares Outstanding 4,557 4,609 4,655 4,695 4,731
Total Equity Value $14,811 $16,131 $17,455 $18,780 $20,105
Total Enterprise Value (a) 16,484 17,804 19,128 20,453 21,778
Enterprise Value as a Multiple:
FYE 9/30/99:
Revenues $56,329 29.3% 31.6% 34.0% 36.3% 38.7%
EBITDA 4,419 3.7x 4.0x 4.3x 4.6x 4.9x
EBIT 3,759 4.4x 4.7x 5.1x 5.4x 5.8x
LTM 12/31/99:
Revenues $60,804 27.1% 29.3% 31.5% 33.6% 35.8%
EBITDA 5,031 3.3x 3.5x 3.8x 4.1x 4.3x
EBIT 4,343 3.8x 4.1x 4.4x 4.7x 5.0x
FYE 9/30/00:
Revenues $62,980 26.2% 28.3% 30.4% 32.5% 34.6%
EBITDA 4,689 3.5x 3.8x 4.1x 4.4x 4.6x
EBIT 3,919 4.2x 4.5x 4.9x 5.2x 5.6x
Equity Value as a Multiple:
FYE 9/30/99 EPS $0.41 7.9x 8.5x 9.1x 9.8x 10.4x
LTM 12/31/99 EPS $0.49 6.6x 7.1x 7.7x 8.2x 8.7x
FYE 9/30/00 EPS $0.51 (b) 6.4x 6.9x 7.4x 7.9x 8.4x
--------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Source: Total cash and debt as per Management.
(b) Assumes 4.5 million fully-diluted shares outstanding: 4.15 million primary
shares and 0.35 million option equivalent shares.
<PAGE>
PROJECT WISE
FUNDING ANALYSIS
(Dollars in Thousands, except per share data)
---------------------------------------------------------------
Current Shares Outstanding (a) 2,253
Options Shares Outstanding (b) 1,250
-----
Common Shares and Options Outstanding excluding MBO Group 3,503
---------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Purchase Price $3.20 $3.30 $3.40 $3.50 $3.60 $3.70 $3.80 $3.90 $4.00
------------------------------------------------------------------------------------------------------------------------------------
Premium to Price as of March 07, 2000 6.7% 10.0% 13.3% 16.7% 20.0% 23.3% 26.7% 30.0% 33.3%
Cost of Purchasing Outside Shares $7,209 $7,434 $7,659 $7,885 $8,110 $8,335 $8,561 $8,786 $9,011
Cost of Purchasing Outside Options (c) 3,853 3,989 4,195 4,355 4,480 4,627 4,752 4,877 5,002
------- ------- ------- ------- ------- ------- ------- ------- --------
Total Cost of Purchasing Outside Equity $11,061 $11,424 $11,855 $12,240 $12,590 $12,962 $13,312 $13,662 $14,013
Adjustments
Available Cash and Cash Equivalents (d) ($927) ($927) ($927) ($927) ($927) ($927) ($927) ($927) ($927)
Proceeds from Exercise of Options (c) (2,421) (2,437) (2,522) (2,559) (2,559) (2,581) (2,581) (2,581) (2,581)
Transaction Costs 750 750 750 750 750 750 750 750 750
------- ------- ------- ------- ------- ------- ------- ------- --------
Total Adjustments (2,598) (2,614) (2,699) (2,736) (2,736) (2,758) (2,758) (2,758) (2,758)
------- ------- ------- ------- ------- ------- ------- ------- --------
Total Cost of Transaction $8,463 $8,809 $9,156 $9,504 $9,854 $10,204 $10,554 $10,904 $11,255
------- ------- ------- ------- ------- ------- ------- ------- --------
Repayment of Existing Debt 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600
------- ------- ------- ------- ------- ------- ------- ------- --------
Total Leverage on New Company $12,063 $12,409 $12,756 $13,104 $13,454 $13,804 $14,154 $14,504 $14,855
======= ======= ======= ======= ======= ======= ======= ======= ========
Debt/FYE 1999 EBITDA (e) 2.7x 2.8x 2.9x 3.0x 3.0x 3.1x 3.2x 3.3x 3.4x
FYE 1999 EBITDA/Interest Expense (e) 3.9x 3.7x 3.6x 3.5x 3.5x 3.4x 3.3x 3.2x 3.1x
Debt/LTM EBITDA (e) (f) 2.4x 2.5x 2.5x 2.6x 2.7x 2.7x 2.8x 2.9x 3.0x
LTM EBITDA/Interest Expense (e) (f) 4.4x 4.3x 4.2x 4.0x 3.9x 3.8x 3.7x 3.7x 3.6x
Debt/FYE 2000 EBITDA (e) 2.6x 2.6x 2.7x 2.8x 2.9x 2.9x 3.0x 3.1x 3.2x
FYE 2000 EBITDA/Interest Expense (e) 4.1x 4.0x 3.9x 3.8x 3.7x 3.6x 3.5x 3.4x 3.3x
</TABLE>
-----------------------
(a) Excludes common shares owned by Herb Solomon, Lloyd Solomon and Scott Page.
(b) Excludes options owned by Herb Solomon, Lloyd Solomon and Scott Page.
(c) Includes only those options that are in-the-money relative to the offer
price and excludes options owned by Herb Solomon, Lloyd Solomon and Scott Page.
(d) Assumes company maintains a minimum cash balance of $1.0 million. (e)
Assumes amount to complete MBO funded with senior bank debt with a 9.5% coupon.
(f) EBITDA for the Last Twelve Months Ended December 31, 1999.
<PAGE>
PROJECT WISE
CONSOLIDATED QUARTERLY INCOME STATEMENT
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
3/31/98 6/30/98 9/30/98 12/31/98 3/31/99 6/30/99 9/30/99 12/31/99
---------- ---------- ---------- ----------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $11,278 $11,696 $11,451 $11,516 $12,779 $16,151 $15,883 $15,991
EBITDA 575 624 95 507 905 1,939 1,068 1,119
Revenue Growth 10.4% 3.7% -2.1% 0.6% 11.0% 26.4% -1.7% 0.7%
EBITDA Margin 5.1% 5.3% 0.8% 4.4% 7.1% 12.0% 6.7% 7.0%
</TABLE>
<PAGE>
PROJECT WISE
SELECTED COMPARABLE COMPANIES - HUMAN RESOURCES INDUSTRY
* All publicly traded companies in the U.S. with a SIC 7361 (Employment
Agencies) with an enterprise value less than $35 million, provided by Bloomberg.
(Amounts in millions, except per share data)
<TABLE>
<CAPTION>
TICKER PRICE @ FISCAL SHARES MARKET ENTERPRISE LTM
COMPANY SYMBOL 3/7/00 YEAR END OUTSTANDING VALUE VALUE (a) SALES
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PROJECT WISE - $ 3.06 09/30/99 4.5 $13.8 $15.4 $60.8
------------------------------------------------------------------------------------------------------------------------
Diversified Corporate Resources HIR $ 2.88 12/31/98 2.8 8.0 11.0 51.0
General Employment Enterprises JOB $ 4.31 09/30/99 5.1 21.9 11.2 40.3
Joule Inc. JOL $ 1.88 09/30/99 3.7 6.9 14.7 72.9
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRICE AS A MULTIPLE OF: ENTERPRISE VALUE AS A MULTIPLE OF:
---------------------- ----------------------------------
LTM BOOK LTM NET LTM LTM
COMPANY EPS VALUE SALES EBITDA EBIT
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PROJECT WISE 6.3x 1.7x 25.4% 3.1x 3.6x
---------------------------------------------------------------------------------------------------------------------------
Diversified Corporate Resources 8.5 0.6 21.5% 3.7 6.2
General Employment Enterprises 7.2 1.6 27.8% 2.2 2.4
Joule Inc. 7.8 (b) 0.9 20.1% 5.7 (b) 8.1
---------------------------------------------------------------------------------------------------------------------------
Average 7.8x 1.0x 23.2% 3.9x 5.6x
Median 7.8 0.9 21.5% 3.7 6.2
Maximum 8.5 1.6 27.8% 5.7 8.1
Minimum 7.2 0.6 20.1% 2.2 2.4
</TABLE>
<TABLE>
<CAPTION>
TICKER PRICE @ FISCAL SHARES MARKET ENTERPRISE LTM
COMPANY SYMBOL 3/7/00 YEAR END OUTSTANDING VALUE VALUE (a) SALES
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Acsys Inc. (c) AYS $ 1.81 12/31/98 14.5 $26.3 $64.8 $165.7
Headway Corporate Resources, Inc. (d) HDWY $ 3.56 12/31/98 11 40.1 104.0 358.3
</TABLE>
<TABLE>
<CAPTION>
PRICE AS A MULTIPLE OF: ENTERPRISE VALUE AS A MULTIPLE OF:
-------------------------- ----------------------------------------
LTM BOOK LTM NET LTM LTM
COMPANY EPS VALUE SALES EBITDA EBIT
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Acsys Inc. (c) 7.3x 0.7x 39.1% 5.0x 6.6x
Headway Corporate Resources, Inc. (d) 6.9 0.9 29.0% 4.4 5.5
Average 7.1x 0.8x 34.1% 4.7x 6.1x
Median 7.1 0.8 34.1% 4.7 6.1
Maximum 7.3 0.9 39.1% 5.0 6.6
Minimum 6.9 0.7 29.0% 4.4 5.5
</TABLE>
---------------------------------------
(a) Market value of common stock plus all debt, less cash.
(b) EBITDA and EBIT adjusted to add-back a $500,000 expense taken to establish a
reserve related to the bankruptcy of a Commercial Staffing customer. Net
Income is also adjusted and tax effected assuming a 40% tax rate. LTM sales,
EBITDA, EBIT and net income include only 7 months of operations from its
acquisition of Ideal Technical Services in May 1999.
(c) EBIT, EBITDA and EPS are adjusted to exclude severance and franchise
termination costs and combination expenses.
(d) EBIT, EBITDA and EPS are adjusted to exclude an expense for the termination
of an employment contract and the gain on sale of investment.
Note: All multiples based on most recent fiscal year end or trailing twelve
month results.
Source: Bloomberg
<PAGE>
March 30, 2000
Special Committee of the Board of Directors
The Solomon-Page Group Ltd.
1140 Avenue of the Americas
New York, NY 10036
Members of the Special Committee:
We understand that The Solomon-Page Group Ltd., a Delaware corporation
("Solomon-Page" or the "Company"), and TSPGL Merger Corp., a Delaware
corporation ("Mergeco"), are considering entering into an Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which Mergeco will merge with and
into the Company with the Company being the surviving corporation (the
"Merger"). All capitalized terms used herein and not otherwise defined shall
have the same meanings ascribed to such terms in the Merger Agreement. Pursuant
to the Merger, each share of Company Common Stock (with certain exceptions) will
be converted into the right to receive $4.25 in cash (the "Per Share Purchase
Price").
You have asked for our opinion as investment bankers as to whether the Per Share
Purchase Price to be received by the holders of the Company's Common Stock
(other than Mergeco, the Management Group and the other holders of Retained
Shares) in the Merger is fair from a financial point of view as of the date
hereof.
In arriving at our opinion set forth below, we have, among other things:
(i) reviewed the financial terms and conditions of the draft Merger
Agreement dated March [27], 2000;
(ii) reviewed certain publicly available audited and unaudited financial
statements of Solomon-Page and certain other publicly available
information of Solomon-Page;
(iii) reviewed and discussed with representatives of the management of
Solomon-Page certain information of a business and financial nature
regarding Solomon-Page furnished to us by them, including financial
forecasts and related assumptions of Solomon-Page;
<PAGE>
Special Committee of the Board of Directors March 30, 2000
The Solomon-Page Group Ltd. Page 2
(iv) reviewed public information with respect to certain other companies in
lines of business which we believe to be generally comparable to the
business of Solomon-Page;
(v) reviewed the financial terms, to the extent publicly available, of
certain business combinations which we believe to be generally comparable
to the Merger;
(vi) reviewed certain publicly available information concerning the historical
stock price and trading volume of Solomon-Page common stock; and
(vii) conducted such other financial studies, analyses and investigations and
considered such other information as we deemed necessary or appropriate.
In connection with our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of the foregoing
information, all financial and other information supplied to us by Solomon-Page,
and all publicly available information. We have further relied upon the
assurances of management of the Company that they are unaware of any facts that
would make the information provided incomplete or misleading. We have assumed
that there has been no material change in the assets, financial condition,
business or prospects of Solomon-Page since the date of the most recent
financial statements made available to us. We have not assumed any
responsibility for any independent valuation or appraisal of any of the assets
or liabilities of the Company or concerning the solvency of, or issues relating
to solvency concerning, the Company.
With respect to financial forecasts, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of management of the Company as to the future financial
performance of the Company. We assume no responsibility for and express no view
as to such forecasts or the assumptions on which they are based. The forecasts
and projections were based on numerous variables and assumptions that are
inherently uncertain, including, without limitation, facts related to general
economic and market conditions. Accordingly, actual results could vary
significantly from those set forth in such forecasts and projections. Our
opinion is necessarily based on share prices and economic and other conditions
and circumstances as in effect on, and the information made available to us up
to and including, the date of this letter. In rendering our opinion, we did not
address the relative merits of the Merger, any alternative potential transaction
or the Company's underlying decision to effect the Merger.
In rendering our opinion, we have assumed that the Merger will be consummated on
the terms described in the Merger Agreement without any waiver of any material
term or condition by the Company. In addition, we have assumed that there have
been no material changes made to the definitive Merger Agreement from the draft
Merger Agreement we reviewed for purposes of rendering our opinion.
Legg Mason Wood Walker, Incorporated is acting as investment banker to the
Special Committee of the Board of Directors of Solomon-Page in connection with
the Merger and we will receive a fee for our services, a substantial portion of
which is contingent upon the delivery of this opinion.
<PAGE>
Special Committee of the Board of Directors March 30, 2000
The Solomon-Page Group Ltd. Page 3
It is understood that this letter is directed to the Special Committee of the
Board of Directors of Solomon-Page and does not constitute a recommendation to
any holder of Company Common Stock as to how such stockholder should vote on the
proposed merger between Solomon-Page and Mergeco. This letter is not to be
quoted or referred to, in whole or in part, in any registration statement,
prospectus or proxy statement, or in any other document used in connection with
the offering or sale of securities, nor shall this letter be used for any other
purposes, without our prior written consent, provided that this opinion (and
references to this opinion) may be included in its entirety in the proxy
statement and any filing made by Solomon-Page with the Securities and Exchange
Commission with respect to the Merger.
Based upon and subject to the foregoing, we are of the opinion that, as of the
date hereof, the Per Share Purchase Price to be received by the holders of the
Company's Common Stock (other than Mergeco, the Management Group and the other
holders of Retained Shares) in the Merger is fair from a financial point of
view.
Very truly yours,
LEGG MASON WOOD WALKER, INCORPORATED
<PAGE>
SUMMARY OF MATERIALS PREPARED FOR:
Project Sage
MARCH 31, 2000
TABLE OF CONTENTS
I. Introduction
II. Project Sage Statistical Data
- Selected Operating Data
- Purchase Price Ratio Analysis
- Project Sage Two-Year Share Price Chart
- Project Sage Five-Year Share Price Chart
III. Valuation Analyses
- Comparable Company Analysis
- Comparable "Going Private" Transaction Analysis
- Comparable "Going Private" Premia Paid Implied Valuation
- Summary Historical Stock Price Performance
I. INTRODUCTION
<PAGE>
INTRODUCTION
The Special Committee of the Board of Directors of The Solomon-Page Group Ltd.
(the "Company") has requested that Legg Mason Wood Walker, Incorporated ("Legg
Mason") provide a written opinion (the "Opinion") as to the fairness, from a
financial point of view, of the per share purchase price to be received by
holders of the Company's common stock (other than TSPGL Merger Corp.
("Mergeco"), the Management Group and the other holders of Retained Shares) in
the merger of Mergeco and the Company (the "Merger").
It is recognized that Legg Mason has been retained to render financial advice
solely to the Special Committee of the Board of Directors of the Company (the
"Committee"). No one other than the Committee is authorized to rely upon this
engagement of Legg Mason or any statements, conduct or advice of Legg Mason
(including our Opinion), and no one other than the Company is intended to be a
beneficiary of this engagement. This presentation is not to be quoted or
referred to, in whole or in part, in any registration statement, prospectus or
proxy statement, or in any other document used in connection with any offering
or sale of securities, nor shall this presentation be used for any other
purposes, without the prior written consent of Legg Mason.
In connection with our review, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information provided to us by the management of the Company, and other
publicly available information. We have further relied upon the assurances of
management that they are unaware of any facts that would make the information
provided to us incomplete or misleading. With respect to the financial forecasts
and other information provided to us or otherwise discussed with us, we have
also relied upon the management of the Company as to the reasonableness and
achievability of such financial forecasts and other information (and the
assumptions and bases therein) provided to us. We assumed that such forecasts
and other information were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of the Company as
to the expected future financial performance of the Company. In arriving at our
Opinion, we have not been requested to make, nor have we made or obtained, any
independent appraisal of the assets or liabilities (contingent or otherwise) of
the Company. We have not been involved in discussions regarding, and our
analyses do not address issues involving, other strategic or transactional
alternatives or other issues regarding the Company other than the Merger.
This summary of information does not constitute our Opinion and is provided for
informational purposes only. Our Opinion is limited to the terms of our Opinion
letter to you with regard to the Merger. We believe that our analysis should be
considered as a whole, and that selecting portions of our analysis and the
factors we considered, without considering all analyses and factors, could be
misleading. The preparation of an opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In our
analysis, we made numerous assumptions where necessary with respect to industry
performance, general business and economic conditions, and other matters, many
of which are beyond the control of the Company.
1
<PAGE>
Project Sage - Selected Operating Data
--------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Twelve Months
Ended Three Months Ended Ended Projected
9/30/99 3/31/99 3/31/00 12/31/99 9/30/00
------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $56,329 $11,516 $15,991 $60,804 $62,980
Cost of Sales 44,139 5,807 6,495 44,827 49,833
------- ------- ------- ------- -------
Gross Profit 12,190 5,710 9,496 15,976 13,147
% of revenues 21.6% 49.6% 59.4% 26.3% 20.9%
SG&A 7,771 5,194 8,376 10,953 8,458
------- ------- ------- ------- -------
EBITDA 4,419 516 1,121 5,024 4,689
% of revenues 7.8% 4.5% 7.0% 8.3% 7.4%
Depreciation & Amort. 660 165 193 688 770
------- ------- ------- ------- -------
EBIT 3,759 350 927 4,336 3,919
% of revenues 6.7% 3.0% 5.8% 7.1% 6.2%
Net Income $1,999 $165 $494 $2,328 $2,092
======= ======= ======= ======= ========
% of revenues 3.5% 1.4% 3.1% 3.8% 3.3%
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Project Sage - Purchase Price Ratio Analysis
--------------------------------------------
(Dollars in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Share Price $3.25 $3.50 $3.75 $4.00 $4.25
Implied Premium 13.0% 21.7% 30.4% 39.1% 47.8%
Multiplied by: Shares Outstanding 4.512 4.505 4.504 4.504 4.504
(in millions) (b) ----- ----- ----- ----- -----
Market Value $14.66 $15.77 $16.89 $18.01 $19.14
Plus: Net Debt 2.35 2.35 2.35 2.35 2.35
Enterprise Value $17.02 $18.12 $19.24 $20.37 $21.49
Enterprise Value as a Multiple of:
Revenues
2000P $62.98 0.27 x 0.29 x 0.31 x 0.32x 0.34 x
LTM (c) 60.80 0.28 0.30 0.32 0.33 0.35
1999A 56.33 0.30 0.32 0.34 0.36 0.38
EBITDA
2000P $4.69 3.6 x 3.9 x 4.1 x 4.3x 4.6 x
LTM (c) 5.02 3.4 3.6 3.8 4.1 4.3
1999A 4.42 3.9 4.1 4.4 4.6 4.9
EBIT
2000P $3.92 4.3 x 4.6 x 4.9 x 5.2x 5.5 x
LTM (c) 4.34 3.9 4.2 4.4 4.7 5.0
1999A 3.76 4.5 4.8 5.1 5.4 5.7
Market Value as a Multiple of:
Net Income
2000P $2.09 7.0 x 7.5 x 8.1 x 8.6x 9.2 x
LTM (c) 2.33 6.3 6.8 7.3 7.7 8.2
1999A 2.00 7.3 7.9 8.5 9.0 9.6
Share Price $4.50 $4.75
Implied Premium (a) 56.5% 65.2%
Multiplied by: Shares Outstanding 4.504 4.504
(in millions)(b) ----- ------
Market Value $20.27 $21.39
Plus: Net Debt 2.35 2.35
Enterprise Value $22.62 $23.75
Enterprise Value as a Multiple of:
Revenues
2000P 0.36 x 0.38 x
LTM (c) 0.37 0.39
1999A 0.40 0.42
EBITDA
2000P 4.8 x 5.1 x
LTM (c) 4.5 4.7
1999A 5.1 5.4
EBIT
2000P 5.8 x 6.1 x
LTM (c) 5.2 5.5
1999A 6.0 6.3
Market Value as a Multiple of:
Net Income
2000P 9.7 x 10.2 x
LTM (c) 8.7 9.2
1999A 10.1 10.7
</TABLE>
(a) Assumes a share price of $2.88, the closing price on 3/30/00.
(b) Assumes Sage's shares outstanding as of February 10, 2000 (from 10-Q) and
adding to it all options, excluding those held by H. Solomon, L. Solomon and S.
Page (using the Treasury Method).
(c) LTM date is December 31, 1999.
3
<PAGE>
Project Sage Two - Year Share Price Chart
-----------------------------------------
(March 30, 1998 - March 30, 2000)
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
4
<PAGE>
Project Sage Five - Year Share Price Chart
------------------------------------------
(March 30, 1995 - March 30, 2000)
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
5
<PAGE>
III. VALUATION ANALYSES
A. COMPARABLE COMPANY ANALYSIS
<TABLE>
<CAPTION>
LTM LFY Market Enterprise
Date Date Share Price Cap. Value
---- ---- ----------- ---------- ----------
(3/30/00) (millions) (millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Sage 12/31/99 9/30/99 $2.88 $13.1 $15.5
ACSYA, Inc. (AYS) 12/31/99 12/31/99 $3.38 $48.9 $87.7
Ablest Inc. (ABI) 12/26/99 12/26/99 6.75 19.5 34.8
Diversified Corporate Resources, Inc. (HIR) 9/30/99 12/31/98 3.00 8.4 11.3
General Employment Enterprises, Inc. (JOB) 12/31/99 9/30/99 4.25 21.6 10.9
Headway Corporate Resources, Inc. (HDWY) 12/31/99 12/31/99 3.63 41.2 133.2
Joule Inc. (JOL) 12/31/99 9/30/99 1.75 6.4 14.2
</TABLE>
<TABLE>
<CAPTION>
Market Value
as a Multiple of Enterprise Value as a Multiple of:
----------------- ----------------------------------
LTM Book LTM LTM LTM
EPS Value Revenues EBITDA EBIT
--- ----- -------- ------ ----
<S> <C> <C> <C> <C> <C>
Sage 5.9x 1.57x 0.25x 3.1x 3.6x
ACSYA, Inc. (AYS) 17.8x 1.49x 0.53x 7.2x 9.9x
Ablest Inc. (ABI) 27.4* 1.05 0.36 11.5
* 21.6 *
Diversified Corporate Resources, Inc. (HIR) 8.9 0.61 0.22 3.9 6.4
General Employment Enterprises, Inc. (JOB) 7.1 1.60 0.27 2.1 2.4
Headway Corporate Resources, Inc. (HDWY) 8.5 1.47 0.37 5.7 7.2
Joule Inc. (JOL) 7.4 0.82 0.20 5.6 7.8
Mean 9.9x 1.17x 0.32x 4.9x 6.7x
Median 8.5 1.26 0.31 5.6 7.2
High 17.8x 1.60x 0.53x 7.2x 9.9x
Low 7.1 0.61 0.20 2.1 2.4
*Excluded from mean, median, high and low calculations.
</TABLE>
--------------------------
Enterprise Value is equal to Market Value plus Total Debt less Cash &
Equivalents AYS - EBITDA, EBIT, NI and EPS for 1999 exclude severance and office
closing costs of $5.5 MM, net of taxes.
ABI - Name changed from C.H. Heist Corp. in March of 2000 after the sale of its
industrial maintenance business.
ABI - EBITDA, EBIT, NI and EPS for 1999 exclude one-time intangible asset
impairment of $5.1 MM, net of taxes.
HIR - NI and EPS for nine months ended 9/30/98 exclude loss from joint venture
operations and other income of $0.03 MM, net of taxes. HDWY - EBITDA, EBIT, NI
and EPS for 1999 exclude one-time termination of employment contract expenses of
$2.3 MM, net of taxes.
JOL- EBITDA, NI and EPS for 1999 exclude one-time expenses of $0.5 MM, net of
taxes.
6
<PAGE>
Comparable Company Implied Valuation
------------------------------------
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Market Value Enterprise Value
as a Multiple of: as a Multiple of:
LTM Book LTM LTM LTM
Net Income (a) Value (b) Revenues (a) EBITDA (a) EBIT (a)
-------------- --------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Mean 9.9 X 1.17 X 0.32 X 4.9 X 6.7 X
Median 8.5 1.26 0.31 5.6 7.2
High 17.8 1.60 0.53 7.2 9.9
Low 7.1 0.61 0.20 2.1 2.4
Sage $2.3 8.3 $60.8 $5.0 $4.3
Implied Enterprise Value
Mean $25.5 $12.1 $19.6 $24.5 $29.1
Median 22.2 12.8 19.0 28.0 31.0
High $43.8 $15.7 $32.0 $36.1 $42.8
Low 18.8 7.5 11.9 10.7 10.2
Less Net Debt (b) $2.4 $2.4 $2.4 $2.4 $2.4
----- ----- ------ ----- -----
Implied Equity Value
Mean $23.1 $9.8 $17.3 $22.2 $26.8
Median 19.9 10.5 16.7 25.6 28.7
High $41.5 $13.3 $29.7 $33.8 $40.5
Low 16.5 5.1 9.5 8.4 7.9
Implied Per Share Value (c)
Mean $5.12 $2.17 $3.83 $4.91 $5.92
Median 4.40 2.32 3.69 5.67 6.34
High $9.17 $2.95 $6.57 $7.47 $8.96
Low 3.65 1.13 2.10 1.85 1.74
</TABLE>
(a) LTM date is December 31, 1999.
(b) Sage net debt and book value as of December 31, 1999.
(c) Assumes Sage's shares outstanding as of February 10, 2000 (from 10-Q) and
adding to it all options, excluding those held by H. Solomon, L. Solomon and S.
Page (using the Treasury Method).
7
<PAGE>
B. Comparable "Going Private" Transaction Analysis
Comparable "Going Private" Transaction Multiples and Premia Paid
----------------------------------------------------------------
(Includes "going private" transactions $100 million, January 1, 1998 - Current)
<TABLE>
<CAPTION>
Date Enterprise
Effective Acquiror Name Target Name Value
--------- ------------- ----------- ----------
($ in Millions)
<S> <C> <C> <C>
10/28/99 Management Kentek Information Systems, Inc. $10.8
Supplies printers and related accessories.
9/3/99 Management Winston Resources Inc. 12.5
Provides temporary and full-time employment
staffing.
8/6/99 Cornerstone Equitrac Corp. 65.0
Equity Investors LLC Designs and manufactures computer integrated
systems.
4/20/99 Tinicum Capital Haskel International, Inc. 52.4
Partners, L.P. Manuractures pumps and air pressure
amplifiers.
4/5/99 SRC Holdings Inc. Back Bay Restaurant Group 42.2
(Management) Ownes and operated full service restaurants.
3/26/99 Science Applications Oacis Healthcare Holdings 47.4
Int'l. Corp. Provides flexible, open architecture clinical
information systems.
2/24/99 News & Media PLC / UIG Audits & Surveys Worldwide, Inc. 42.5
Manufactures and distributes chemicals,
cleaning equipment and testing equipment.
</TABLE>
<TABLE>
<CAPTION>
Enterprise Value as a Multiple of:
Date LTM LTM LTM
Effective Acquiror Name Target Name Revenues EBITDA EBIT
--------- ------------- ----------- -------- ------ ----
<S> <C> <C> <C> <C> <C>
10/28/99 Management Kentek Information Systems, Inc. 0.28x 2.5x 3.6x
Supplies printers and related accessories.
9/3/99 Management Winston Resources Inc. 0.20 3.6 3.9
Provides temporary and full-time employment
staffing.
8/6/99 Cornerstone Equitrac Corp. 1.16 6.9 10.9
Equity Investors LLC Designs and manufactures
computer integrated systems.
4/20/99 Tinicum Capital Haskel International, Inc. 1.03 7.4 9.1
Partners, L.P. Manuractures pumps and air pressure
amplifiers.
4/5/99 SRC Holdings Inc. Back Bay Restaurant Group 0.44 5.5 12.0
(Management) Ownes and operated full service restaurants.
3/26/99 Science Applications Oacis Healthcare Holdings NA NA NA
Int'l. Corp. Provides flexible, open architecture clinical
information systems.
2/24/99 News & Media PLC/UIG Audits & Surveys Worldwide, Inc. NA NA NA
Manufactures and distributes chemicals,
cleaning equipment and testing
equipment.
</TABLE>
<TABLE>
<CAPTION>
Date Premium Paid
Effective Acquiror Name Target Name 1 Day 1 Week 4 Weeks
--------- ------------- ----------- ----- ------ -------
<S> <C> <C> <C> <C> <C>
0/28/99 Management Kentek Information Systems, Inc. 22.8% 27.5% 27.5%
Supplies printers and related accessories.
9/3/99 Management Winston Resources Inc. 60.9% 42.3% 42.3%
Provides temporary and full-time
employment staffing.
8/6/99 Cornerstone Equitrac Corp. 4.3% 5.7% 12.0%
Equity Investors LLC Designs and manufactures
computer integrated systems.
4/20/99 Tinicum Capital Haskel International, Inc. 42.3% 49.6% 51.8%
Partners, L.P. Manuractures pumps and air pressure
amplifiers.
4/5/99 SRC Holdings Inc. Back Bay Restaurant Group 12.3% 13.9% 28.1%
(Management) Ownes and operated full service restaurants.
3/26/99 Science Applications Oacis Healthcare Holdings 36.9% 42.4% 42.4%
Int'l. Corp. Provides flexible, open architecture clinical
information systems.
2/24/99 News & Media PLC / UIG Audits & Surveys Worldwide, Inc. 32.9% 36.4% 44.0%
Manufactures and distributes chemicals,
cleaning equipment and testing equipment.
</TABLE>
B. COMPARABLE "GOING PRIVATE" TRANSACTION ANALYSIS (CONT.)
Comparable "Going Private" Transaction Multiples and Premia Paid (cont.)
------------------------------------------------------------------------
(Includes "going private" transactions $100 million, January 1, 1998 - Current)
8
<PAGE>
<TABLE>
<CAPTION>
Enterprise Value as a Multiple of:
Date Enterprise LTM LTM LTM
Effective Acquiror Name Target Name Value Revenues EBITDA EBIT
--------- ------------- ----------- ----- -------- ------ -----
($ in million)
<S> <C> <C> <C> <C> <C> <C>
1/12/99 Management Lion Brewery, Inc. 14.3 0.52 3.2 4.3
Produces and bottles
brewed beverages
8/31/98 Linsalata Capital Partners Fund II Personnel Management Inc. 42.3 0.51 11.2 14.9
Provides Temporary and
Long-Term Staffing
Services
7/29/98 Green I Acquisition Corp. GNI Group, Inc. $84.9 2.04x 8.0x 22.2x
Provides hazardous waste
handling services.
6/4/98 MHD Acquisition Corp. Portec, Inc. 26.8 1.05 8.4 10.8
Manufacturers railroad,
construction and materials
handling equipment.
2/2/98 Investor Group Plasti-Line, Inc. 59.8 0.46 6.5 8.7
Manufactures signs and
related products.
1/22/98 Cracken, Harkey & Co. LLC El Chico Restaurants Inc. 55.7 0.54 5.2 13.8
Operates and franchises
full-service, family-style
mexican restaurants.
Mean 0.75x 6.2x 10.4x
Median 0.52 6.5 10.8
High 2.04x 11.2x 22.2x
Low 0.20 2.5 3.6
</TABLE>
<TABLE>
<CAPTION>
Enterprise Value as a Multiple of:
Date Premium Paid
Effective Acquiror Name Target Name 1 Day 1 Week 4 Weeks
-------- ------------- ----------- ----- ------ -------
<S> <C> <C> <C> <C> <C>
1/12/99 Management Lion Brewery, Inc. 9.0% 13.9% 27.5%
Produces and bottles
brewed beverages
8/31/98 Linsalata Capital Partners Personnel Management Inc. 25.5% 23.1% 23.1%
Fund II Provides Temporary and
Long-Term Staffing
Services
7/29/98 Green I Acquisition Corp. GNI Group, Inc. 17.9% 17.9% 40.0%
Provides hazardous
waste handling services.
6/4/98 MHD Acquisition Corp. Portec, Inc. 8.9% 14.3% 11.3%
Manufacturers railroad,
construction and materials
handling equipment.
2/2/98 Investor Group Plasti-Line, Inc. 36.5% 36.5% 30.3%
Manufactures signs and
related products.
1/22/98 Cracken, Harkey & Co. LLC El Chico Restaurants Inc. 21.4% 17.2% 22.9%
Operates and franchises
full-service, family-style
mexican restaurants.
Mean 25.5% 26.2% 31.0%
Median 22.8% 23.1% 28.1%
High 60.9% 49.6% 51.8%
Low 4.3% 5.7% 11.3%
</TABLE>
9
<PAGE>
Comparable "Going Private" Transaction Implied Valuation
--------------------------------------------------------
(Dollars in millions, except per share data)
Market Value Plus Net Debt
as a Multiple of:
LTM LTM LTM
Revenues (a) EBITDA (a) EBIT (a)
Mean 0.75 X 6.2 X 10.4 X
Median 0.52 6.5 10.8
High 2.04 11.2 22.2
Low 0.20 2.5 3.6
Sage $60.8 $5.0 $4.3
Implied Enterprise Value
Mean $45.5 $31.2 $44.9
Median 31.6 32.4 46.7
High $123.8 $56.5 $96.3
Low 12.4 12.4 15.4
Less Net Debt (b) $2.4 $2.4 $2.4
------ ----- ------
Implied Equity Value
Mean $43.2 $28.9 $42.6
Median 29.2 30.1 44.3
High $121.4 $54.1 $93.9
Low 10.0 10.1 13.1
Implied Per Share Value (c)
Mean $9.55 $6.39 $9.42
Median 6.47 6.65 9.81
High $26.86 $11.97 $20.79
Low 2.22 2.23 2.89
(a) LTM date is December 31, 1999.
(b) Sage net debt as of December 31, 1999.
(c) Assumes Sage's shares outstanding as of February 10, 2000 (from 10-Q) and
adding to it all options excluding those held by H. Solomon, L. Solomon and S.
Page (using the Treasury Method).
10
<PAGE>
Comparable "Going Private" Premia Paid Implied Valuation
--------------------------------------------------------
(Dollars in millions, except per share data)
Stock Price Prior to Announcement (a)
-------------------------------------
1 Day 1 Week 1 Month
----- ------ -------
Mean 25.5% 26.2% 31.0%
Median 22.8% 23.1% 28.1%
High 60.9% 49.6% 51.8%
Low 4.3% 5.7% 11.3%
Sage $2.88 $2.88 $2.69
Sage Implied Price
Mean $3.61 $3.63 $3.52
Median 3.53 3.54 3.44
High $4.63 $4.30 $4.08
Low 3.00 3.04 2.99
C. SUMMARY HISTORICAL STOCK PRICE PERFORMANCE
Project Sage Historical Stock Performance
-----------------------------------------
<TABLE>
<CAPTION>
Daily for the Sage Closing Stock Prices Implied Premia Based
Following Periods: Time Period High Low Mean on a $4.25 Stock Price(a)
------------------ ----------- ---- --- ---- -------------------------
<S> <C> <C> <C> <C> <C> <C>
03/30/00 Current Price $2.88 $2.88 $2.88 47.8%
03/24/00 - 03/30/00 Last Week $3.00 $2.56 $2.84 49.9%
03/17/00 - 03/30/00 Last 14 days $3.00 $2.56 $2.78 53.0%
03/01/00 - 03/30/00 Last 30 days $3.06 $2.56 $2.80 52.0%
01/31/00 - 03/30/00 Last 60 Days $3.06 $2.41 $2.73 55.8%
01/01/00 - 03/30/00 Last 90 Days $3.06 $1.91 $2.61 63.1%
10/03/99 - 03/30/00 Last 180 Days $3.25 $1.88 $2.59 64.1%
03/30/99 - 03/30/00 Last 1 Year $3.25 $1.59 $2.46 72.5%
03/30/98 - 03/30/00 Last 2 Years $4.88 $1.34 $2.48 71.1%
03/30/97 - 03/30/00 Last 3 Years $4.88 $1.34 $2.66 59.5%
</TABLE>
(a) Premia calculated based on mean Sage closing stock price.
