SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------------------------------------------
SCHEDULE 13E-3
(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. 2)
THE SOLOMON-PAGE GROUP LTD.
(Name of Issuer)
THE SOLOMON-PAGE GROUP LTD.
TSPGL MERGER CORP.
LLOYD SOLOMON
SCOTT PAGE
HERBERT SOLOMON
ERIC DAVIS
(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)
------------------------------------------------------------------------
Lloyd Solomon
The Solomon-Page Group Ltd.
1140 Avenue of the Americas
New York, New York 10036
Telephone Number (212) 403-6100
------------------------------------------------------------------------
(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.
<PAGE>
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]
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, Herbert Solomon and Eric M. Davis
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 caption
"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
jurisdiction and as a result of such proceeding was or is subject to a
-4-
<PAGE>
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, Herbert Solomon and Eric M.
Davis, (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;" "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;" " - Conflicts of 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 - Conflicts of 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
caption "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 1006(b) 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
"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 "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.
(d) The information set forth in the Proxy Statement under the captions
"INFORMATION CONCERNING THE SPECIAL MEETING - Purpose of the Special
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<PAGE>
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;" and "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
"INFORMATION CONCERNING THE SPECIAL MEETING - Purpose of the Special
Meeting;" and "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
"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
"INFORMATION CONCERNING THE SPECIAL MEETING - Required Vote;" and "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 captions
"INFORMATION CONCERNING THE SPECIAL MEETING - Purpose of the Special
Meeting;" and "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.
(e) The information set forth in the Proxy Statement under the captions
"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.
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<PAGE>
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 "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;" "Financial Advisor to the Management Group" 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 AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Reg. M-A 1007
(a) The information set forth in the Proxy Statement under the caption
"SPECIAL FACTORS - Financing of the Merger" is hereby incorporated herein
by reference.
(b) The information set forth in the Proxy Statement under the caption
"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.
Reg. M-A 1008
(a) The information set forth in the Proxy Statement under the captions
"INFORMATION CONCERNING THE SPECIAL MEETING - Record Date; Voting at the
Meeting; Quorum;" "SPECIAL FACTORS - Conflicts of 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 - Share Repurchase Program" and "MARKET FOR THE COMMON
STOCK - Common Stock Purchase Information" is hereby incorporated herein
by reference.
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<PAGE>
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
"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
"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
"WHERE YOU CAN FIND MORE INFORMATION" and "Annex E" is hereby
incorporated herein by reference.
(b) Not applicable.
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.
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<PAGE>
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.
(c)(3) Report of Peter J. Solomon Company dated August 5, 1999.
(c)(4) Report of Peter J. Solomon Company dated November 12, 1999.
(c)(5) Report of Peter J. Solomon Company dated March 8, 2000.
(c)(6) Report of Legg Mason Wood Walker, Incorporated dated March 8,
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.
(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
/s/ Eric M. Davis
---------------------------------------
Eric M. Davis
Dated: September 18, 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.
(c)(3) Report of Peter J. Solomon Company dated August 5, 1999.
(c)(4) Report of Peter J. Solomon Company dated November 12, 1999.
(c)(5) Report of Peter J. Solomon Company dated March 8, 2000.
(c)(6) Report of Legg Mason Wood Walker, Incorporated dated March 8,
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.
(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
<PAGE>
--------------------------------------------------------------------------------
SUMMARY OF MATERIALS PREPARED FOR:
PROJECT SAGE
MARCH 8, 2000
<PAGE>
TABLE OF CONTENTS
I. Sage Statistical Data
- Selected Operating Data
- Purchase Price Ratio Analysis
- Sage Two-Year Share Price Chart
II. Peter J. Solomon Company Valuation Analyses (Updated)
- Comparable Company Analysis
- Comparable "Going Private" Transaction Analysis
III. Legg Mason Valuation Analyses
- Comparable Company Analysis
- Comparable "Going Private" Transaction Analysis
- Leveraged Buyout Analysis
- Discounted Cash Flow Analysis
- Analysis of "Going Private" Premia Paid
- Summary Historical Stock Price Performance
<PAGE>
I. SAGE STATISTICAL DATA
<PAGE>
Project Sage
Selected Operating Data
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Twelve Months
FY Ended Three Months Ended Ended Projected
------------------ ---------------------------------------- ------------------ -----------------
9/30/99 12/31/98 12/31/99 12/31/99 9/30/00
------------------ ------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Revenues $56,329 $11,516 $15,991 $60,804 $62,980
EBITDA 4,419 507 1,119 5,031 4,689
% of revenues 7.8% 4.4% 7.0% 8.3% 7.4%
EBIT 3,759 342 927 4,344 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>
<PAGE>
GRAPH OMITTED
<PAGE>
II. PETER J. SOLOMON COMPANY
VALUATION ANALYSES
<PAGE>
Project Sage
Summary Comparison Multiples for P.J. Solomon-Provided Comparable Companies
<TABLE>
<CAPTION>
Market Value Enterprise Value
as a Multiple of: as a Multiple of:
----------------- -----------------------
LTM LFY Share Market LTM Book LTM LTM LTM
Date Date Price Cap. EPS Value Revenues EBITDA EBIT
----- ---- ----- ------ --- ----- -------- ------ ----
(3/7/00) (millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mean 7.9x 1.03x 0.23x 3.9x 5.6x
Median 7.9 0.88 0.21 3.7 6.2
High 8.5 1.62 0.28 5.7 8.1
Low 7.2 0.59 0.20 2.2 2.4
--------------------------------------------------------------------------------------------------------------------------------
Sage 12/31/99 9/30/99 $3.06 $13.96 6.3x 1.67x 0.27x 3.2x 3.8x
--------------------------------------------------------------------------------------------------------------------------------
Diversified Corporate Resources, Inc. (HIR) 9/30/99 12/31/98 $2.88 $8.02 8.5x 0.59x 0.21x 3.7x 6.2x
General Employment Enterprises, Inc. (JOB) 12/31/99 9/30/99 4.31 21.94 7.2 1.62 0.28 2.2 2.4
Joule Inc. (JOL) 12/31/99 9/30/99 1.88 6.89 7.9 0.88 0.20 5.7 8.1
</TABLE>
------------------------
Enterprise Value is equal to Market Value plus Total Debt less Cash &
Equivalents.
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. JOL - EBITDA, EBIT, NI
and EPS for 1999 exclude one-time expenses of $0.5 MM, net of taxes.
<PAGE>
Project Sage
Comparable Company Implied Valuation
(Dollars in millions, except per share data)
*BASED ON P.J. SOLOMON-PROVIDED COMPARABLE COMPANIES*
<TABLE>
<CAPTION>
Enterprise Value
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 7.9 X 1.03 X 0.23 X 3.9 X 5.6 X
Median 7.9 0.88 0.21 3.7 6.2
----------------------------------------------------------------------------------------------------------------------------
Sage $2.33 $8.34 $60.80 $5.03 $4.34
----------------------------------------------------------------------------------------------------------------------------
Implied Enterprise Value
Mean $20.66 $10.94 $14.08 $19.60 $24.13
Median 20.71 9.68 13.07 18.81 26.84
Less Net Debt (b) $2.35 $2.35 $2.35 $2.35 $2.35
--------------- ------------ ------------- ------------ --------------
Implied Equity Value
Mean $18.31 $8.59 $11.73 $17.24 $21.77
Median 18.36 7.33 10.71 16.45 24.48
Implied Per Share Value (c)
-----------------------------------------------------------------------------------------
Mean $4.02 $1.88 $2.57 $3.78 $4.77
Median 4.03 1.61 2.35 3.61 5.37
-----------------------------------------------------------------------------------------
</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 non-senior management options which are assumed to be
exercised (using treasury method).
<PAGE>
Peter J. Solomon Company
<TABLE>
<CAPTION>
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
(Dollars in Millions)
Enterprise Value as a 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 Multiple of
-----------
<S> <C> <C> <C> <C> <C> <C> <C>
Oct. 99 Investor Group $24.4 75.5% 5.9x 8.7x $34.4 16.2x
CEM Group
Sep. 99 Liquid Holdings Inc. 37.3 102.7(b) 26.6(b) 39.1(b) 40.4 67.3(b)
Geerlings & Wade Inc.
Jul 99 Investor Group 24.7 27.3 3.9 5.5 28..6 14.8
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 42.8 5.0 9.9 28.8 10.7
Back Bay Restaurants Group Inc.
Sep. 98 PH II Inc. 14.3 70.3 3.8 4.6 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 20.8 6.2 11.8 19.5 14.9
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 HRG Investment Group 27.4 60.1 NA 7.0 21.5 8.3
Thermal Industries Inc.
Median
All Deals 42.8% 4.3x 6.1x 10.7x
Deals $15 million or less 51.8% 3.6x 4.4x 7.5x
</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 Sage
Comparable "Going Private" Analysis Implied Valuation
(Dollars in millions, except per share data)
* BASED ON P.J. SOLOMON-PROVIDED TRANSACTIONS*
<TABLE>
<CAPTION>
Enterprise Value
as a Multiple of:
------------------------------------------------------
LTM LTM LTM
Revenues (a) EBITDA (a) EBIT (a)
--------------------------------------------------
<S> <C> <C> <C>
Mean 0.44 X 4.6 X 6.9 X
Median 0.43 4.3 6.1
-------------------------------------------------------------------------------------------
Sage $60.80 $5.03 $4.34
-------------------------------------------------------------------------------------------
Implied Enterprise Value
Mean $26.52 $22.95 $29.88
Median 26.02 21.63 26.50
Less Net Debt (b) $2.35 $2.35 $2.35
-------------- ------------- ---------------
Implied Equity Value
Mean $24.17 $20.60 $27.52
Median 23.67 19.28 24.15
Implied Per Share Value (c)
Mean $5.30 $4.52 $6.04
Median 5.19 4.23 5.30
------------------------------------------------------
</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 non-senior management options which are assumed to be
exercised (using treasury method).
<PAGE>
III. LEGG MASON VALUATION ANALYSES
<PAGE>
Project Sage
Summary Comparison Multiples for Selected Companies within
the Professional Services Staffing Industry
<TABLE>
<CAPTION>
LTM LFY Market
Date Date Share Price Cap.
---------------- ---------------- -----------------------------------
(3/7/00) (millions)
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
Sage 12/31/99 9/30/99 $3.06 $13.96
---------------------------------------------------------------------------------------------------------------------------------
ACSYS, Inc. (AYS) 9/30/99 12/31/98 $1.81 $26.29
C.H. Heist Corp. (HST) 9/26/99 12/27/98 5.88 16.93
Diversified Corporate Resources, Inc. (HIR) 9/30/99 12/31/98 2.88 8.02
General Employment Enterprises, Inc. (JOB) 12/31/99 9/30/99 4.31 21.94
Headway Corporate Resources, Inc. (HDWY) 9/30/99 12/31/98 3.56 40.37
Joule Inc. (JOL) 12/31/99 9/30/99 1.88 6.89
</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>
Mean 7.5x 1.00x 0.27x 4.5x 6.0x
Median 7.2 0.81 0.25 5.0 6.6
High 8.5 1.62 0.39 5.7 8.1
Low 6.9 0.59 0.20 2.2 2.4
-----------------------------------------------------------------------------------------------------------------------------------
Sage 6.3x 1.67x 0.27x 3.2x 3.8x
-----------------------------------------------------------------------------------------------------------------------------------
ACSYS, Inc. (AYS) 7.1x 0.75x 0.39x 5.0x 6.6x
C.H. Heist Corp. (HST) 53.4 0.59 0.21 5.0 41.1
Diversified Corporate Resources, Inc. (HIR) 8.5 0.59 0.21 3.7 6.2
General Employment Enterprises, Inc. (JOB) 7.2 1.62 0.28 2.2 2.4
Headway Corporate Resources, Inc. (HDWY) 6.9 1.57 0.35 5.3 6.6
Joule Inc. (JOL) 7.9 0.88 0.20 5.7 8.1
</TABLE>
_____________________
Enterprise Value is equal to Market Value plus Total Debt less Cash &
Equivalents.
AYS - EBITDA, EBIT, NI and EPS for nine months ended 9/30/99 exclude one-time
expenses of $3.3 MM, net of taxes. AYS - EBITDA, EBIT, NI and EPS for nine
months ended 9/30/98 exclude one-time expenses of $1.7 MM and $0.7 MM, net of
taxes. AYS - EBITDA, EBIT, NI and EPS for 1998 exclude combination and severance
expenses of $2.4 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 nine months ended 9/30/99
exclude one-time expenses of $2.3 MM, net of taxes. HDWY - NI and EPS for nine
months ended 9/30/99 exclude one-time expenses of $1.5 MM, net of taxes. HDWY-NI
and EPS for 1998 exclude $0.9 MM gain on sale of investments, net of taxes.
JOL - EBITDA, EBIT, NI and EPS for 1999 exclude one-time expenses of $0.5 MM,
net of taxes.
<PAGE>
Project Sage
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 7.5 x 1.00 x 0.27 x 4.5 x 6.0 x
Median 7.2 0.81 0.25 5.0 6.6
High 8.5 1.62 0.39 5.7 8.1
Low 6.9 0.59 0.20 2.2 2.4
------------------------------------------------------------------------------------------------------------
Sage $2.33 $8.34 $60.80 $5.03 $4.34
------------------------------------------------------------------------------------------------------------
Implied Enterprise Value
Mean $19.87 $10.69 $16.68 $22.60 $25.94
Median 19.08 9.13 15.00 25.10 28.49
High 22.19 15.90 23.77 28.92 34.99
Low 18.40 7.24 12.25 11.06 10.55
Less Net Debt (b) $2.35 $2.35 $2.35 $2.35 $2.35
------------- ---------- ----------- ----------- -------------
Implied Equity Value
Mean $17.52 $8.34 $14.33 $20.25 $23.59
Median 16.73 6.77 12.65 22.75 26.14
High 19.84 13.54 21.41 26.57 32.63
Low 16.05 4.89 9.89 8.71 8.20
Implied Per Share Value (c)
-----------------------------------------------------------------------------
Mean $3.84 $1.83 $3.14 $4.44 $5.17
Median 3.67 1.49 2.77 4.99 5.73
-----------------------------------------------------------------------------
High 4.35 2.97 4.70 5.83 7.16
Low 3.52 1.07 2.17 1.91 1.80
</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 non-senior management options which are assumed to be
exercised (using treasury method).
<PAGE>
Project Sage
Going Private Transactions < $100 million
(1998 - Current)
<TABLE>
<CAPTION>
Enterprise Value as a Multiple of:
--------------------------------------
Date Enterprise LTM LTM TM
Effective Acquiror Name Target Name Value Net Sales EBITDA EBIT
------------------------------------------- ----------------------------------- ----------- -------------------------- --------
($ in Millions)
<S> <C> <C> <C> <C> <C> <C>
Mean 0.83x 6.6x 10.1x
Median 0.66 7.7 10.4
High 1.98 9.2 21.6
Low 0.20 3.4 3.9
11/1/99 MANAGEMENT PHYSICIANS SPECIALTY CORP. $98.8 1.39x 8.4x 10.4x
Provides physician practice
management services to
specialists.
10/28/99 MANAGEMENT KENTEK INFORMATION SYSTEMS, INC. (a) 38.2 0.99x 8.7x 12.5x
Supplies printers and related
accessories.
9/3/99 MANAGEMENT WINSTON RESOURCES INC. 12.5 0.20x 3.6x 3.9x
Provides temporary and
full-time employment staffing.
8/6/99 CORNERSTONE EQUITY EQUITRAC CORP. 74.3 1.33x 7.9x 12.5x
INVESTORS LLC. Designs and manufactures
computer integrated systems.
4/5/99 SRC HOLDINGS INC. BACK BAY RESTAURANT GROUP 38.5 0.40x 5.0x 10.9x
(MANAGEMENT) Ownes and operated full service
restaurants.
1/12/99 MANAGEMENT LION BREWERY, INC. 18.1 0.66x 4.1x 5.4x
Produces and bottles brewed
beverages
9/24/98 CITICORP VENTURE ALLIED DIGITAL TECHNOLOGIES CORP. 66.3 0.40x 3.4x 7.1x
CAPITAL LTD / Duplicates and replicates
399 Venture Partners, Inc. multimedia software
8/31/98 LINSALATA CAPITAL PERSONNEL MANAGEMENT INC. 34.7 0.42x 9.2x 12.2x
PARTNERS FUND II Provides Temporary and
Long-Term Staffing Services.
7/29/98 GREEN I ACQUISITION CORP. GNI GROUP, INC. 82.4 1.98x 7.7x 21.6x
Provides hazardous waste
handling services.
2/2/98 INVESTOR GROUP PLASTI-LINE, INC. 55.3 0.42x 6.0x 8.0x
Manufactures signs and
related products.
1/29/98 WEISS, PECK & GREER LLC ATC GROUP SERVICES INC. 91.3 0.95x 8.7x 7.0x
Provides various services for
environmental projects.
</TABLE>
------------------------
(A) KENTEK EBIT AND EBITDA EXCLUDE ONE-TIME RESTRUCTURING CHARGES OF
$1.1 MILLION.
<PAGE>
Project Sage
Comparable "Going Private" Analysis 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 0.83 X 6.6 X 10.1 X
Median 0.66 7.7 10.4
High 1.98 9.2 21.6
Low 0.20 3.4 3.9
---------------------------------------------------------------------------
Sage $60.80 $5.03 $4.34
---------------------------------------------------------------------------
Implied Enterprise Value
Mean $50.57 $33.24 $44.04
Median 40.11 38.86 45.13
High 120.20 46.35 93.70
Low 12.37 16.85 16.76
Less Net Debt (b) $2.35 $2.35 $2.35
----------- ----------- -------------
Implied Equity Value
Mean $48.22 $30.89 $41.68
Median 37.76 36.50 42.78
High 117.84 44.00 91.35
Low 10.02 14.50 14.41
Implied Per Share Value (c)
--------------------------------------------
Mean $10.57 $6.77 $9.14
Median 8.28 8.01 9.38
--------------------------------------------
High 25.84 9.65 20.03
Low 2.20 3.18 3.16
-------------------------------
(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 non-senior management options which are assumed to be
exercised (using treasury method).
<PAGE>
Project Sage
Leveraged Buyout Analysis
<TABLE>
<CAPTION>
Assumptions
<S> <C> <C> <C>
Financing Sources: Investment Parameters:
Senior Financing 50% - 55% Exit Multiple 4.0x - 6.0x
Subordinated Financing 16% - 19% Total Debt/EBITDA Coverage Ratio 3.0x - 4.0x
Equity Financing 29% - 31% Returns: Equity Holders 30% - 40%
Subordinated Debt Holders 20% - 25%
Results
Scenario 1: Scenario 2: Scenario 3:
Transaction Value (Millions) $18.32 Transaction Value (Millions) $21.72 Transaction Value (Millions) $24.15
Price Per Share (a) $4.02 Price Per Share (a) $4.76 Price Per Share (a) $5.30
</TABLE>
(a) Assumes Sage's shares outstanding as of February 10, 2000 and adding to it
all non-senior management options which are assumed to be exercised (using
the treasury method).
<PAGE>
SUMMARY OF TRANSACTION
Sage
($ in millions)
--------------------------------------------------------------------------------
Sources and Uses of Funds For Transaction
Interest
Sources: Rate Millions Sources Ownership
------- ---------------------------------
ASSUMED LONG-TERM DEBT 11.00% $0.00 0.0% 0.0%
ASSUMED CAPITALIZED LEASES 11.00% 0.00 0.0% 0.0%
WORKING CAPITAL REVOLVER 0.00% 0.00 0.0% 0.0%
SENIOR BANK FINANCING 9.00% 13.00 54.2% 0.0%
SENIOR DEBENTURES 8.25% 0.00 0.0% 0.0%
SUBORDINATED DEBT 12.00% 4.00 16.7% 10.0%
SELLER'S NOTE 9.00% 0.00 0.0% 0.0%
EXCESS CASH 4.00% 0.00 0.0% 0.0%
NEW PREFERRED STOCK 5.00% 0.00 0.0% 0.0%
NEW COMMON STOCK 7.00 29.2% 90.0%
------- -------- --------
Total Sources: $24.00 100.0% 100.0%
======= ======== ========
----------------------------------------------------------
USES: Millions Percent
------------------
Cash Purchase Price $21.72 90.5%
EXISTING DEBT:
Refinance Existing Long-Term Debt 1.60 6.7%
Refinance Existing Deferred Taxes 0.00 0.0%
Refinance Existing Capitalized Leases 0.00 0.0%
Working Capital Revolver 0.00 0.0%
EXPANSION CAPITAL 0.00 0.0%
INCREASE CASH BALANCE TO MIN. REQUIREMENTS 0.00 0.0%
------- -------
Total Consideration 23.32 97.1%
FINANCING FEES 0.51 2.1%
TRANSACTION EXPENSES 0.17 0.7%
------- -------
TOTAL USES: $24.00 97.9%
======= =======
----------------------------------------------------------
<TABLE>
<CAPTION>
Interest Coverages: Ending Sept. 30 PRO FORMA
-------------------
1999 2000
------- --------
<S> <C> <C>
EBITDA / Senior Interest 3.8 x 4.0 x
EBITDA / Total Interest 2.7 2.8
Cash Flow (a) / Senior Interest 4.7 3.4
Cash Flow (a) / Total Interest 3.4 2.4
Senior Debt / EBITDA 2.9 2.8
Total Debt / EBITDA 3.8 3.6
Total Debt / Capitalization (b) 0.7 0.7
Fixed Charge Ratio (c) 0.8 2.0
Cash $1.43 $1.43
Senior Debt 13.00 13.00
Total Debt 17.00 17.00
Stockholders' Equity 7.00 7.00
Senior Interest 1.17 1.17
Total Interest 1.65 1.65
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Projected
--------------------------------------------------------------------------------------
Interest Coverages: Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
-------------------
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
------- ------- -------- -------- ------- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA / Senior Interest 6.0 x 8.2 x 11.5 x 18.9 x 49.0 x NMF NMF NMF NMF NMF
EBITDA / Total Interest 4.1 5.2 6.6 9.0 13.7 30.3 NMF NMF NMF NMF
Cash Flow (a) / Senior Interest 4.0 5.9 8.2 13.6 35.1 NMF NMF NMF NMF NMF
Cash Flow (a) / Total Interest 2.7 3.7 4.8 6.5 9.8 21.7 NMF NMF NMF NMF
Senior Debt / EBITDA 1.6 1.2 0.8 0.4 0.1 NMF NMF NMF NMF NMF
Total Debt / EBITDA 2.3 1.8 1.3 0.9 0.5 0.1 NMF NMF NMF NMF
Total Debt / Capitalization (b) 0.6 0.5 0.4 0.3 0.2 0.0 0.0 0.0 0.0 0.0
Fixed Charge Ratio (c) 1.7 1.7 1.7 1.8 1.8 1.9 1.9 1.9 1.9 1.9
Cash $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $2.91 $7.45 $12.51 $18.15
Senior Debt 10.27 8.39 6.17 3.58 0.56 0.00 0.00 0.00 0.00 0.00
Total Debt 14.27 12.39 10.17 7.58 4.56 1.10 0.00 0.00 0.00 0.00
Stockholders' Equity 8.68 10.76 13.25 16.21 19.69 23.84 28.63 34.05 40.15 46.97
Senior Interest 1.05 0.84 0.66 0.44 0.19 0.03 0.00 0.00 0.00 0.00
Total Interest 1.53 1.32 1.14 0.92 0.67 0.33 0.07 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Summary Acquisition Multiples: Summary Five Year IRR Analysis:
------------------------------ -------------------------------
based on Total EBITA EBITDA EBITA Multiple
Consideration ------------------------- -------------------------
4.0x 5.0x 6.0x
------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
1998 Historical 14.4x 10.9x Equity Investors 27.2% 33.9% 39.5%
1999 Historical 6.2 5.3 Subordinated Debt 20.6% 22.7% 24.6%
2000 Pro Forma 5.9 5.0
2001 Projected 4.5 3.7
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Debt Retired:
-------------
5 Years 7 Years 10 Years
---------------------------
<S> <C> <C> <C
Senior Bank Financing 95.7% 100.0% 100.0%
Subordinated Debt 0.0% 100.0% 100.0%
-------- ------- -------
Total Debt 73.2% 100.0% 100.0%
-------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Operating Data Summary: Historical Pro Forma Year 1 Year 2 Year 3
($ in millions) 1997 1998 1999 2000 2001 2002 2003
-------- -------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $29.00 $44.64 $56.33 $62.98 $69.28 $76.21 $83.83
% Growth Rate N/A 53.9% 26.2% 11.8% 10.0% 10.0% 10.0%
EBITDA 2.03 2.14 4.42 4.69 6.24 6.86 7.54
% Revenues 7.0% 4.8% 7.8% 7.4% 9.0% 9.0% 9.0%
EBITA 1.69 1.62 3.76 3.92 5.20 5.72 6.29
% Revenues 5.8% 3.6% 6.7% 6.2% 7.5% 7.5% 7.5%
Capital Expenditures 0.79 1.09 0.69 0.70 1.39 1.52 1.68
Depreciation 0.34 0.52 0.66 0.77 1.04 1.14 1.26
Cash from Working - - (1.68) 1.81 0.00 (0.66) (0.42) (0.46)
Capital
Cash Flow (a) - - (0.63) 5.53 3.99 4.19 4.91 5.40
Cash For Debt
Repayment - - - - - - - - 2.73 1.88 2.22
</TABLE>
Operating Data
Summary: Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
($ in millions) 2004 2005 2006 2007 2008 2009 2010
--------- ------- ------- -------- -------- ------- -------
Revenues $92.21 $101.43 $111.57 $122.73 $135.00 $148.50 $163.35
% Growth Rate 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
EBITDA 8.30 9.13 10.04 11.05 12.15 13.37 14.70
% Revenues 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%
EBITA 6.92 7.61 8.37 9.20 10.13 11.14 12.25
% Revenues 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%
Capital Expenditures 1.84 2.03 2.23 2.45 2.70 2.97 3.27
Depreciation 1.38 1.52 1.67 1.84 2.03 2.23 2.45
Cash from Working (0.51) (0.56) (0.62) (0.68) (0.75) (0.82) (0.90)
Capital
Cash Flow (a) 5.95 6.54 7.19 7.91 8.70 9.57 10.53
Cash For Debt
Repayment 2.59 3.02 3.47 4.00 7.45 12.51 18.15
--------------------
(a) Cash Flow is defined as EBITDA - CAPEX + Change in Non-Cash W/C.
(b) Capitalization is defined as Total Debt + Shareholders' Equity.
(c) Fixed Charge Ratio is defined as EBITDA divided by (Interest Expense +
Scheduled Amortization + CAPEX + Cash Taxes + Change in Non-Cash W/C + Rent
Expense + Dividends).
<PAGE>
PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
Sage
($in millions)
--------------------------------------------------------------------------------------------------------------
Pre-Transaction Transaction Adjustments Pro Forma
--------------------------
9/30/99 Write-Up Financing 9/30/99
---------- ---------------------------------------- ----------
Assets
<S> <C> <C> <C> <C>
Cash $1.43 $0.00 $0.00 $1.43
Accounts Receivable, Net 11.42 0.00 0.00 11.42
Inventories 0.00 0.00 0.00 0.00
Other Current Assets 0.39 0.00 0.00 0.39
---------- ---------- ---------- ----------
Current Assets 13.24 0.00 0.00 13.24
Net Property, Plant & Equipment 2.26 0.00 0.00 2.26
Other Long-Term Assets 1.41 0.00 0.00 1.41
Intangible Assets 1.44 0.00 0.00 1.44
Financing Fees 0.00 0.00 0.51 0.51
Goodwill 0.00 14.04 (A) 0.00 14.04
---------- ---------- ---------- ----------
Total Assets $18.35 $14.04 $0.51 $32.89
========== ========== ========== ==========
Liabilities & Equity
Accounts Payable $1.28 $0.00 $0.00 $1.28
Accrued Expenses 4.61 0.00 0.00 4.61
Other Current Liabilities 2.37 0.00 0.00 2.37
---------- ---------- ---------- ----------
Current Liabilities 8.26 0.00 0.00 8.26
Other Liabilities 0.64 0.00 0.00 0.64
Deferred Income Taxes 0.00 0.00 0.00 0.00
Assumed Long-Term Debt 1.60 0.00 (1.60) 0.00
Assumed Capitalized Leases 0.00 0.00 0.00 0.00
Working Capital Revolver 0.00 0.00 0.00 0.00
Senior Bank Financing 0.00 0.00 13.00 13.00
Senior Debentures 0.00 0.00 0.00 0.00
Subordinated Debt 0.00 0.00 4.00 4.00
Seller's Note 0.00 0.00 0.00 0.00
---------- ---------- ---------- ----------
Total Debt 1.60 0.00 15.40 17.00
Minority Interest 0.00 0.00 0.00 0.00
---------- ---------- ---------- ----------
Total Liabilities 10.49 0.00 15.40 25.89
Stockholders' Equity:
Preferred Stock 0.00 0.00 0.00 0.00
Common Stock 0.01 0.00 (0.01) 0.00
New Preferred Stock 0.00 0.00 0.00 0.00
New Common Stock 0.00 0.00 7.00 7.00
Retained Earnings 7.85 0.00 (7.85) 0.00
---------- ---------- ---------- ----------
Total Stockholders' Equity 7.85 0.00 (0.85) 7.00
Total Liabilities & Equity $18.35 $0.00 $14.55 $32.89
========== ========== ========== ==========
Check 0.00 14.04 (14.04) 0.00
-----------------------------------------------------------------------------------------------------
</TABLE>
(A) GOODWILL OF $14.04 IS CALCULATED AS EQUITY PURCHASE PRICE OF $21.72
PLUS TRANSACTION EXPENSES OF $0.17 LESS NET BOOK VALUE (AFTER ANY
WRITE-UPS OR ADJUSTMENTS) OF ASSETS ACQUIRED OF $7.85.
<PAGE>
PRO FORMA BALANCE SHEETS
<TABLE>
<CAPTION>
Sage
($in millions)
------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Ending Sept. 30 Opening 2001 2002 2003 2004 2005 2006
------------ ----------- ------------ ------------ ------------ ------------ -----------
Assets
<S> <C> <C> <C> <C> <C> <C> <C>
Cash $1.43 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Accounts Receivable, Net 11.42 12.56 13.81 15.19 16.71 18.39 20.22
Inventories 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other Current Assets 0.39 0.43 0.47 0.52 0.57 0.63 0.69
------------ ----------- ------------ ------------ ------------ ------------ -----------
Current Assets 13.24 12.99 14.29 15.72 17.29 19.02 20.92
Net Property, Plant & Equipment 2.26 2.61 2.99 3.41 3.87 4.38 4.94
Other Long-Term Assets 1.41 1.41 1.41 1.41 1.41 1.41 1.41
Intangible Assets 1.44 1.44 1.44 1.44 1.44 1.44 1.44
Financing Fees 0.51 0.41 0.31 0.20 0.10 0.00 0.00
Goodwill 14.04 13.47 12.91 12.35 11.79 11.23 10.67
------------ ----------- ------------ ------------ ------------ ------------ -----------
Total Assets $32.89 $32.33 $33.35 $34.53 $35.90 $37.47 $39.37
============ =========== ============ ============ ============ ============ ===========
Liabilities & Equity
Accounts Payable $1.28 $1.36 $1.49 $1.64 $1.81 $1.99 $2.18
Accrued Expenses 4.61 4.90 5.39 5.93 6.52 7.17 7.89
Other Current Liabilities 2.37 2.52 2.78 3.05 3.36 3.69 4.06
------------ ----------- ------------ ------------ ------------ ------------ -----------
Current Liabilities 8.26 8.78 9.65 10.62 11.68 12.85 14.14
Other Liabilities 0.64 0.64 0.64 0.64 0.64 0.64 0.64
Deferred Income Taxes 0.00 (0.04) (0.09) (0.15) (0.20) (0.27) (0.34)
Assumed Long-Term Debt 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Assumed Capitalized Leases 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Working Capital Revolver 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Senior Bank Financing 13.00 10.27 8.39 6.17 3.58 0.56 0.00
Senior Debentures 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Subordinated Debt 4.00 4.00 4.00 4.00 4.00 4.00 1.10
Seller's Note 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------------ ----------- ------------ ------------ ------------ ------------ -----------
Total Debt 17.00 14.27 12.39 10.17 7.58 4.56 1.10
Minority Interest 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------------ ----------- ------------ ------------ ------------ ------------ -----------
Total Liabilities 25.89 23.64 22.59 21.28 19.69 17.78 15.53
Stockholders' Equity:
Preferred Stock 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Common Stock 7.00 7.00 7.00 7.00 7.00 7.00 7.00
Retained Earnings 0.00 1.68 3.76 6.25 9.21 12.69 16.84
------------ ----------- ------------ ------------ ------------ ------------ -----------
Total Stockholders' Equity 7.00 8.68 10.76 13.25 16.21 19.69 23.84
Total Liabilities & Equity $32.89 $32.33 $33.35 $34.53 $35.90 $37.47 $39.37
============ =========== ============ ============ ============ ============ ===========
Check 0.00 0.00 0.00 0.00 0.00 0.00 0.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Year 7 Year 8 Year 9 Year 10
Ending Seot. 30 2007 2008 2009 2010
----------- ----------- ------------ ------------
Assets
<S> <C> <C> <C> <C>
Cash $2.91 $7.45 $12.51 $18.15
Accounts Receivable, Net 22.25 24.47 26.92 29.61
Inventories 0.00 0.00 0.00 0.00
Other Current Assets 0.76 0.84 0.92 1.01
----------- ----------- ------------ ------------
Current Assets 25.91 32.75 40.35 48.77
Net Property, Plant & Equipment 5.55 6.22 6.97 7.78
Other Long-Term Assets 1.41 1.41 1.41 1.41
Intangible Assets 1.44 1.44 1.44 1.44
Financing Fees 0.00 0.00 0.00 0.00
Goodwill 10.11 9.54 8.98 8.42
----------- ----------- ------------ ------------
Total Assets $44.42 $51.37 $59.15 $67.83
=========== =========== ============ ============
Liabilities & Equity
Accounts Payable $2.40 $2.64 $2.91 $3.20
Accrued Expenses 8.68 9.54 10.50 11.55
Other Current Liabilities 4.47 4.92 5.41 5.95
----------- ----------- ------------ ------------
Current Liabilities 15.55 17.10 18.81 20.70
Other Liabilities 0.64 0.64 0.64 0.64
Deferred Income Taxes (0.40) (0.43) (0.45) (0.48)
Assumed Long-Term Debt 0.00 0.00 0.00 0.00
Assumed Capitalized Leases 0.00 0.00 0.00 0.00
Working Capital Revolver 0.00 0.00 0.00 0.00
Senior Bank Financing 0.00 0.00 0.00 0.00
Senior Debentures 0.00 0.00 0.00 0.00
Subordinated Debt 0.00 0.00 0.00 0.00
Seller's Note 0.00 0.00 0.00 0.00
----------- ----------- ------------ ------------
Total Debt 0.00 0.00 0.00 0.00
Minority Interest 0.00 0.00 0.00 0.00
----------- ----------- ------------ ------------
Total Liabilities 15.79 17.32 19.00 20.85
Stockholders' Equity:
Preferred Stock 0.00 0.00 0.00 0.00
Common Stock 7.00 7.00 7.00 7.00
Retained Earnings 21.63 27.05 33.15 39.97
----------- ----------- ------------ ------------
Total Stockholders' Equity 28.63 34.05 40.15 46.97
Total Liabilities & Equity $44.42 $51.37 $59.15 $67.83
=========== =========== ============ ============
Check 0.00 0.00 0.00 0.00
</TABLE>
<PAGE>
PRO FORMA INCOME STATEMENTS
<TABLE>
<CAPTION>
Sage
($in millions)
------------------------------------------------------------------------------------------------------------------------------------
PRO FORMA Year 1 Year 2 Year 3 Year 4 Year 5
Ending Sept. 30 1998 1999 2000 2001 2002 2003 2004 2005
---------- ---------- --------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $44.64 $56.33 $62.98 $69.28 $76.21 $83.83 $92.21 $101.43
% Growth Rate 53.9% 26.2% 11.8% 10.0% 10.0% 10.0% 10.0% 10.0%
COST OF SALES (EXCL. DEPRECIATION) 35.02 23.67 28.02 29.79 32.77 36.05 39.65 43.61
---------- ---------- --------- --------- --------- --------- ---------- ---------
GROSS PROFIT 9.62 32.66 34.96 39.49 43.44 47.78 52.56 57.82
% of Revenues 21.6% 58.0% 55.5% 57.0% 57.0% 57.0% 57.0% 57.0%
OPERATING EXPENSES (EXCL. DEPR. AND AMORT.)
Selling & Marketing 0.00 20.47 21.81 24.25 26.67 29.34 32.27 35.50
% of Revenues 0.0% 36.3% 34.6% 35.0% 35.0% 35.0% 35.0% 35.0%
General & Administrative 7.49 7.77 8.46 9.01 9.91 10.90 11.99 13.19
% of Revenues 16.8% 13.8% 13.4% 13.0% 13.0% 13.0% 13.0% 13.0%
Other Operating Expenses 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
% of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
---------- ---------- --------- --------- --------- --------- ---------- ---------
Total Operating Expenses 7.49 28.24 30.27 33.25 36.58 40.24 44.26 48.69
% of Revenues 16.8% 50.1% 48.1% 48.0% 48.0% 48.0% 48.0% 48.0%
EBITDA 2.14 4.42 4.69 6.24 6.86 7.54 8.30 9.13
% of Revenues 4.8% 7.8% 7.4% 9.0% 9.0% 9.0% 9.0% 9.0%
Depreciation 0.52 0.66 0.77 1.04 1.14 1.26 1.38 1.52
% of Revenues 1.2% 1.2% 1.2% 1.5% 1.5% 1.5% 1.5% 1.5%
---------- ---------- --------- --------- --------- --------- ---------- ---------
EBITA 1.62 3.76 3.92 5.20 5.72 6.29 6.92 7.61
% of Revenues 3.6% 6.7% 6.2% 7.5% 7.5% 7.5% 7.5% 7.5%
AMORTIZATION OF GOODWILL 0.56 0.56 0.56 0.56 0.56 0.56
AMORTIZATION OF FINANCING FEES 0.10 0.10 0.10 0.10 0.10 0.10
--------- --------- --------- --------- ---------- ---------
EBIT 3.26 4.53 5.05 5.62 6.25 6.94
% of Revenues 5.2% 6.5% 6.6% 6.7% 6.8% 6.8%
INTEREST INCOME (0.03) (0.03) 0.00 0.00 0.00 0.00
COMMITMENT FEE ON UNUSED REVOLVER 0.00 0.00 0.00 0.00 0.00 0.00
OTHER EXPENSE (INCOME) 0.00 0.00 0.00 0.00 0.00 0.00
INTEREST EXPENSE 1.53 1.53 1.32 1.14 0.92 0.67
--------- --------- --------- --------- ---------- ---------
INCOME BEFORE TAXES 1.76 3.03 3.73 4.49 5.33 6.28
INCOME TAXES:
Currently Payable 0.83 1.39 1.71 2.05 2.43 2.86
Deferred (0.04) (0.04) (0.05) (0.05) (0.06) (0.06)
--------- --------- --------- --------- ---------- ---------
Provision for Income Taxes 0.78 1.35 1.66 2.00 2.37 2.79
As a % of Income Before Taxes 44.5% 44.5% 44.5% 44.5% 44.5% 44.5%
--------- --------- --------- --------- ---------- ---------
NET INCOME FROM CONTINUING OPERATIONS 0.97 1.68 2.07 2.49 2.96 3.48
MINORITY INTEREST 0.00 0.00 0.00 0.00 0.00 0.00
PREFERRED DIVIDENDS 0.00 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- ---------- ---------
NET INCOME AVAILABLE TO COMMON $0.97 $1.68 $2.07 $2.49 $2.96 $3.48
========= ========= ========= ========= ========== =========
SHARES OUTSTANDING 4.56 4.56 4.56 4.56 4.56 4.56
EARNINGS PER COMMON SHARE $0.21 $0.37 $0.45 $0.55 $0.65 $0.76
========= ========= ========= ========= ========== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Year 6 Year 7 Year 8 Year 9 Year 10
Ending Sept. 30 2006 2007 2008 2009 2010
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES $111.57 $122.73 $135.00 $148.50 $163.35
% Growth Rate 10.0% 10.0% 10.0% 10.0% 10.0%
COST OF SALES (EXCL. DEPRECIATION) 47.98 52.77 58.05 63.86 70.24
--------- --------- --------- --------- ---------
GROSS PROFIT 63.60 69.96 76.95 84.65 93.11
% of Revenues 57.0% 57.0% 57.0% 57.0% 57.0%
OPERATING EXPENSES (EXCL. DEPR. AND AM
Selling & Marketing 39.05 42.96 47.25 51.98 57.17
% of Revenues 35.0% 35.0% 35.0% 35.0% 35.0%
General & Administrative 14.50 15.95 17.55 19.31 21.24
% of Revenues 13.0% 13.0% 13.0% 13.0% 13.0%
Other Operating Expenses 0.00 0.00 0.00 0.00 0.00
% of Revenues 0.0% 0.0% 0.0% 0.0% 0.0%
--------- --------- --------- --------- ---------
Total Operating Expenses 53.55 58.91 64.80 71.28 78.41
% of Revenues 48.0% 48.0% 48.0% 48.0% 48.0%
EBITDA 10.04 11.05 12.15 13.37 14.70
% of Revenues 9.0% 9.0% 9.0% 9.0% 9.0%
Depreciation 1.67 1.84 2.03 2.23 2.45
% of Revenues 1.5% 1.5% 1.5% 1.5% 1.5%
--------- --------- --------- --------- ---------
EBITA 8.37 9.20 10.13 11.14 12.25
% of Revenues 7.5% 7.5% 7.5% 7.5% 7.5%
AMORTIZATION OF GOODWILL 0.56 0.56 0.56 0.56 0.56
AMORTIZATION OF FINANCING FEES 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- ---------
EBIT 7.81 8.64 9.56 10.58 11.69
% of Revenues 7.0% 7.0% 7.1% 7.1% 7.2%
INTEREST INCOME 0.00 (0.06) (0.21) (0.40) (0.61)
COMMITMENT FEE ON UNUSED REVOLVER 0.00 0.00 0.00 0.00 0.00
OTHER EXPENSE (INCOME) 0.00 0.00 0.00 0.00 0.00
INTEREST EXPENSE 0.33 0.07 0.00 0.00 0.00
--------- --------- --------- --------- ---------
INCOME BEFORE TAXES 7.48 8.64 9.77 10.98 12.30
INCOME TAXES:
Currently Payable 3.40 3.90 4.37 4.91 5.50
Deferred (0.07) (0.06) (0.02) (0.03) (0.03)
--------- --------- --------- --------- ---------
Provision for Income Taxes 3.33 3.84 4.35 4.88 5.47
As a % of Income Before Taxes 44.5% 44.5% 44.5% 44.5% 44.5%
--------- --------- --------- --------- ---------
NET INCOME FROM CONTINUING OPERATIONS 4.15 4.79 5.42 6.09 6.83
MINORITY INTEREST 0.00 0.00 0.00 0.00 0.00
PREFERRED DIVIDENDS 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- ---------
NET INCOME AVAILABLE TO COMMON $4.15 $4.79 $5.42 $6.09 $6.83
========= ========= ========= ========= =========
SHARES OUTSTANDING 4.56 4.56 4.56 4.56 4.56
EARNINGS PER COMMON SHARE $0.91 $1.05 $1.19 $1.34 $1.50
========= ========= ========= ========= =========
</TABLE>
<PAGE>
HISTORICAL & PROJECTED INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
Sage
($in millions)
------------------------------------------------------------------------------------------------------------------------------
Projected
--------------------------------------------
Historical Pro Forma Year 1 Year 2 Year 3 Year 4
--------------------------------
Ending Sept. 30 1997 1998 1999 2000 2001 2002 2003 2004
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $29.00 $44.64 $56.33 $62.98 $69.28 $76.21 $83.83 $92.21
% Growth Rate N/A 53.9% 26.2% 11.8% 10.0% 10.0% 10.0% 10.0%
Cost of Sales (excl. depreciation) 22.41 35.02 23.67 28.02 29.79 32.77 36.05 39.65
% of Revenues 77.3% 78.4% 42.0% 44.5% 43.0% 43.0% 43.0% 43.0%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross Profit 6.58 9.62 32.66 34.96 39.49 43.44 47.78 52.56
% of Revenues 22.7% 21.6% 58.0% 55.5% 57.0% 57.0% 57.0% 57.0%
Operating Expenses (excl. depr. and amort.)
Selling & Marketing 0.00 0.00 20.47 21.81 24.25 26.67 29.34 32.27
% of Revenues 0.0% 0.0% 36.3% 34.6% 35.0% 35.0% 35.0% 35.0%
General & Administrative 4.56 7.49 7.77 8.46 9.01 9.91 10.90 11.99
% of Revenues 15.7% 16.8% 13.8% 13.4% 13.0% 13.0% 13.0% 13.0%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 4.56 7.49 28.24 30.27 33.25 36.58 40.24 44.26
% of Revenues 15.7% 16.8% 50.1% 48.1% 48.0% 48.0% 48.0% 48.0%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
EBITDA 2.03 2.14 4.42 4.69 6.24 6.86 7.54 8.30
% of Revenues 7.0% 4.8% 7.8% 7.4% 9.0% 9.0% 9.0% 9.0%
Depreciation 0.34 0.52 0.66 0.77 1.04 1.14 1.26 1.38
% of Revenues 1.2% 1.2% 1.2% 1.2% 1.5% 1.5% 1.5% 1.5%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
EBIT 1.69 1.62 3.76 3.92 5.20 5.72 6.29 6.92
% of Revenues 5.8% 3.6% 6.7% 6.2% 7.5% 7.5% 7.5% 7.5%
Other Data:
Capital Expenditures 0.79 1.09 0.69 0.70 1.39 1.52 1.68 1.84
% of Revenues 2.7% 2.4% 1.2% 1.1% 2.0% 2.0% 2.0% 2.0%
</TABLE>
<TABLE>
<CAPTION>
Projected
--------------------------------------------------------------------
Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Ending Sept. 30 2005 2006 2007 2008 2009 2010
----------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $101.43 $111.57 $122.73 $135.00 $148.50 $163.35
% Growth Rate 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Cost of Sales (excl. depreciation) 43.61 47.98 52.77 58.05 63.86 70.24
% of Revenues 43.0% 43.0% 43.0% 43.0% 43.0% 43.0%
----------- ---------- ---------- ---------- ----------- ----------
Gross Profit 57.82 63.60 69.96 76.95 84.65 93.11
% of Revenues 57.0% 57.0% 57.0% 57.0% 57.0% 57.0%
Operating Expenses (excl. depr. and amort.)
Selling & Marketing 35.50 39.05 42.96 47.25 51.98 57.17
% of Revenues 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%
General & Administrative 13.19 14.50 15.95 17.55 19.31 21.24
% of Revenues 13.0% 13.0% 13.0% 13.0% 13.0% 13.0%
----------- ---------- ---------- ---------- ----------- ----------
Total 48.69 53.55 58.91 64.80 71.28 78.41
% of Revenues 48.0% 48.0% 48.0% 48.0% 48.0% 48.0%
----------- ---------- ---------- ---------- ----------- ----------
EBITDA 9.13 10.04 11.05 12.15 13.37 14.70
% of Revenues 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%
Depreciation 1.52 1.67 1.84 2.03 2.23 2.45
% of Revenues 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
------------ ---------- ---------- ---------- ----------- ----------
EBIT 7.61 8.37 9.20 10.13 11.14 12.25
% of Revenues 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%
Other Data:
Capital Expenditures 2.03 2.23 2.45 2.70 2.97 3.27
% of Revenues 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
</TABLE>
<PAGE>
PRO FORMA CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
Sage
($ in millions)
----------------------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Ending Sept. 30 2001 2002 2003 2004 2005 2006
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET INCOME AVAILABLE TO COMMON $1.68 $2.07 $2.49 $2.96 $3.48 $4.15
DEPRECIATION 1.04 1.14 1.26 1.38 1.52 1.67
AMORTIZATION OF GOODWILL 0.56 0.56 0.56 0.56 0.56 0.56
Amortization of Financing Fees 0.10 0.10 0.10 0.10 0.10 0.00
DEFERRED TAXES (0.04) (0.05) (0.05) (0.06) (0.06) (0.07)
MINORITY INTEREST 0.00 0.00 0.00 0.00 0.00 0.00
Other Long-Term Assets 0.00 0.00 0.00 0.00 0.00 0.00
ACCRUAL OF SUBORDINATED DEBT INTEREST 0.00 0.00 0.00 0.00 0.00 0.00
ACCRUAL OF SELLER'S NOTE INTEREST 0.00 0.00 0.00 0.00 0.00 0.00
ACCRUAL OF PREFERRED DIVIDEND 0.00 0.00 0.00 0.00 0.00 0.00
----------- ----------- ----------- ----------- ----------- -----------
FUNDS FROM OPERATIONS 3.34 3.83 4.36 4.95 5.60 6.31
WORKING CAPITAL:
(Inc) / Dec Accounts Receivable, Net (1.14) (1.26) (1.38) (1.52) (1.67) (1.84)
(Inc) / Dec Inventories 0.00 0.00 0.00 0.00 0.00 0.00
(Inc) / Dec Other Current Assets (0.04) (0.04) (0.05) (0.05) (0.06) (0.06)
Inc / (Dec) Accounts Payable 0.08 0.14 0.15 0.16 0.18 0.20
Inc / (Dec) Accrued Expenses 0.29 0.49 0.54 0.59 0.65 0.72
Inc / (Dec) Other Current Liabilities 0.15 0.25 0.28 0.31 0.34 0.37
----------- ----------- ----------- ----------- ----------- -----------
Cash provided by (used in) Working Capital (0.66) (0.42) (0.46) (0.51) (0.56) (0.62)
CASH FLOW FROM OPERATIONS 2.68 3.41 3.90 4.44 5.04 5.70
CAPITAL EXPENDITURES (1.39) (1.52) (1.68) (1.84) (2.03) (2.23)
CASH FLOW BEFORE DEBT SERVICE 1.30 1.88 2.22 2.59 3.02 3.47
----------- ----------- ----------- ----------- ----------- -----------
Inc / (Dec) in Assumed Long-Term Debt 0.00 0.00 0.00 0.00 0.00 0.00
Inc / (Dec) in Assumed Capitalized Leases 0.00 0.00 0.00 0.00 0.00 0.00
Inc / (Dec) in Working Capital Revolver 0.00 0.00 0.00 0.00 0.00 0.00
Inc / (Dec) in Senior Bank Financing (2.73) (1.88) (2.22) (2.59) (3.02) (0.56)
Inc / (Dec) in Senior Debentures 0.00 0.00 0.00 0.00 0.00 0.00
Inc / (Dec) in Subordinated Debt 0.00 0.00 0.00 0.00 0.00 (2.90)
Inc / (Dec) in Seller's Note 0.00 0.00 0.00 0.00 0.00 0.00
----------- ----------- ----------- ----------- ----------- -----------
Inc / (Dec) in Total Debt (2.73) (1.88) (2.22) (2.59) (3.02) (3.47)
NET CHANGE IN CASH (1.43) 0.00 0.00 0.00 0.00 0.00
BEGINNING CASH BALANCE $1.43 $0.00 $0.00 $0.00 $0.00 $0.00
----------- ----------- ----------- ----------- ----------- -----------
ENDING CASH BALANCE $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Year 7 Year 8 Year 9 Year 10
Ending Sept. 30 2007 2008 2009 2010
--------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET INCOME AVAILABLE TO COMMON $4.79 $5.42 $6.09 $6.83
DEPRECIATION 1.84 2.03 2.23 2.45
AMORTIZATION OF GOODWILL 0.56 0.56 0.56 0.56
Amortization of Financing Fees 0.00 0.00 0.00 0.00
DEFERRED TAXES (0.06) (0.02) (0.03) (0.03)
MINORITY INTEREST 0.00 0.00 0.00 0.00
Other Long-Term Assets 0.00 0.00 0.00 0.00
ACCRUAL OF SUBORDINATED DEBT INTEREST 0.00 0.00 0.00 0.00
ACCRUAL OF SELLER'S NOTE INTEREST 0.00 0.00 0.00 0.00
ACCRUAL OF PREFERRED DIVIDEND 0.00 0.00 0.00 0.00
--------- ------------ ------------ ------------
FUNDS FROM OPERATIONS 7.13 7.99 8.85 9.81
WORKING CAPITAL:
(Inc) / Dec Accounts Receivable, Net (2.02) (2.22) (2.45) (2.69)
(Inc) / Dec Inventories 0.00 0.00 0.00 0.00
(Inc) / Dec Other Current Assets (0.07) (0.08) (0.08) (0.09)
Inc / (Dec) Accounts Payable 0.22 0.24 0.26 0.29
Inc / (Dec) Accrued Expenses 0.79 0.87 0.95 1.05
Inc / (Dec) Other Current Liabilities 0.41 0.45 0.49 0.54
--------- ------------ ------------ ------------
Cash provided by (used in) Working Capital (0.68) (0.75) (0.82) (0.90)
CASH FLOW FROM OPERATIONS 6.46 7.24 8.03 8.91
CAPITAL EXPENDITURES (2.45) (2.70) (2.97) (3.27)
CASH FLOW BEFORE DEBT SERVICE 4.00 4.54 5.06 5.64
--------- ------------ ------------ ------------
Inc / (Dec) in Assumed Long-Term Debt 0.00 0.00 0.00 0.00
Inc / (Dec) in Assumed Capitalized Lease 0.00 0.00 0.00 0.00
Inc / (Dec) in Working Capital Revolver 0.00 0.00 0.00 0.00
Inc / (Dec) in Senior Bank Financing 0.00 0.00 0.00 0.00
Inc / (Dec) in Senior Debentures 0.00 0.00 0.00 0.00
Inc / (Dec) in Subordinated Debt (1.10) 0.00 0.00 0.00
Inc / (Dec) in Seller's Note 0.00 0.00 0.00 0.00
--------- ------------ ------------ ------------
Inc / (Dec) in Total Debt (1.10) 0.00 0.00 0.00
NET CHANGE IN CASH 2.91 4.54 5.06 5.64
BEGINNING CASH BALANCE $0.00 $2.91 $7.45 $12.51
--------- ------------ ------------ ------------
ENDING CASH BALANCE $2.91 $7.45 $12.51 $18.15
========= ============ ============ ============
</TABLE>
<PAGE>
HISTORICAL BALANCE SHEETS
Sage
($ in millions)
--------------------------------------------------------------------------------
Historical
--------------------------------------------
As of Sept. 30 1997 1998 1999
------------ ------------- -------------
Assets
Cash & ST Investments $1.31 $1.54 $1.43
Accounts Receivable, Net 7.38 10.16 11.42
Other Current Assets 0.30 0.25 0.39
------------ ------------- -------------
Current Assets 8.98 11.95 13.24
Net Property, Plant & Equipment 1.46 2.12 2.26
Other Long-Term Assets 1.62 1.66 1.41
Intangible Assets 0.75 1.02 1.44
Goodwill (Existing) 0.00 0.00 0.00
------------ ------------- -------------
Total Assets $12.82 $16.74 $18.35
============ ============= =============
Liabilities & Equity
Accounts Payable $0.97 $0.97 $1.28
Accrued Expenses 2.49 3.50 4.61
Other Current Liabilities 0.54 0.59 2.37
------------ ------------- -------------
Current Liabilities 4.00 5.05 8.26
Other Liabilities 0.38 0.55 0.64
Deferred Income Taxes 0.00 0.00 0.00
Long-Term Debt 0.10 3.10 1.60
------------ ------------- -------------
Total Liabilities 4.48 8.70 10.49
Stockholders' Equity:
Preferred Stock 0.00 0.00 0.00
Common Stock 0.01 0.01 0.01
Retained Earnings 8.33 8.03 7.85
------------ ------------- -------------
Total Stockholders' Equity $8.33 $8.04 $7.85
------------ ------------- -------------
Total Liabilities & Equity $12.82 $16.74 $18.35
============ ============= =============
Check 0.00 0.00 0.00
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
As of Sept. 30 2001 2002 2003 2004 2005
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash & ST Investments
Accounts Receivable, Net
Other Current Assets
Current Assets
Net Property, Plant & Equipment SEE PRO FORMA BALANCE SHEETS
Other Long-Term Assets
Intangible Assets
Goodwill (Existing)
Total Assets
Liabilities & Equity
Accounts Payable
Accrued Expenses
Other Current Liabilities
Current Liabilities
Other Liabilities
Deferred Income Taxes
Long-Term Debt
Total Liabilities
Stockholders' Equity:
Preferred Stock
Common Stock
Retained Earnings
Total Stockholders' Equity
Total Liabilities & Equity
Check
</TABLE>
<PAGE>
HISTORICAL & PROJECTED WORKING CAPITAL
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Most
---------------------------------
Historical Recent Year 1 Year 2 Year 3
-------------------------------
Ending Sept. 30 1997 1998 1999 9/30/99 2001 2002 2003
--------- --------- --------- ------------------------ ---------- ---------
CURRENT ASSETS:
<S> <C> <C> <C> <C> <C> <C> <C>
Accounts Receivable, Net $7.38 $10.16 $11.42 $11.42 $12.56 $13.81 $15.19
ACCOUNTS RECEIVABLES / REVENUES 25.4% 22.8% 20.3% 18.1% 18.1% 18.1% 18.1%
DAYS IN ACCOUNTS RECEIVABLES 92.87 83.08 73.97 66.16 66.16 66.16 66.16
Other Current Assets $0.30 $0.25 $0.39 $0.39 $0.43 $0.47 $0.52
OTHER CURRENT ASSETS / REVENUES 1.0% 0.6% 0.7% 0.6% 0.6% 0.6% 0.6%
Total Current Assets / Revenues 26.5% 23.3% 21.0% 18.7% 18.7% 18.7% 18.7%
CURRENT LIABILITIES:
Accounts Payable $0.97 $0.97 $1.28 $1.28 $1.36 $1.49 $1.64
ACCOUNTS PAYABLES / COST OF GOODS SOLD 4.3% 2.8% 5.4% 4.6% 4.6% 4.6% 4.6%
DAYS IN ACCOUNTS PAYABLES 15.76 10.09 19.68 16.62 16.62 16.62 16.62
Accrued Expenses $2.49 $3.50 $4.61 $4.61 $4.90 $5.39 $5.93
ACCRUED EXPENSES / COST OF GOODS SOLD 11.1% 10.0% 19.5% 16.4% 16.4% 16.4% 16.4%
Other Current Liabilities $0.54 $0.59 $2.37 $2.37 $2.52 $2.78 $3.05
OTHER CURRENT LIABILITIES / 2.4% 1.7% 10.0% 8.5% 8.5% 8.5% 8.5%
COST OF GOODS SOLD
Total Current Liabilities / 17.8% 14.4% 34.9% 29.5% 29.5% 29.5% 29.5%
Cost of Goods Sold
Working Capital $3.68 $5.36 $3.55 $3.55 $4.21 $4.63 $5.09
Cash provided by (used in) Working Capital NA ($1.68) $1.81 $0.00 ($0.66) ($0.42) ($0.46)
Total Working Capital / Revenues 12.7% 12.0% 6.3% 5.6% 6.1% 6.1% 6.1%
Reference Data
Revenue $ 29.00 $ 44.64 $ 56.33 $ 62.98 $ 69.28 $ 76.21 $ 83.83
Cost of Goods Sold 22.41 35.02 23.67 28.02 29.79 32.77 36.05
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
Projected
----------------------------------------------------------------------------
Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Ending Sept. 30 2004 2005 2006 2007 2008 2009 2010
---------- --------- --------- --------- --------- --------- ---------
CURRENT ASSETS:
<S> <C> <C> <C> <C> <C> <C> <C>
Accounts Receivable, Net $16.71 $18.39 $20.22 $22.25 $24.47 $26.92 $29.61
ACCOUNTS RECEIVABLES / REVENUES 18.1% 18.1% 18.1% 18.1% 18.1% 18.1% 18.1%
DAYS IN ACCOUNTS RECEIVABLES 66.16 66.16 66.16 66.16 66.16 66.16 66.16
Other Current Assets $0.57 $0.63 $0.69 $0.76 $0.84 $0.92 $1.01
OTHER CURRENT ASSETS / REVENUES 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6%
Total Current Assets / Revenues 18.7% 18.7% 18.7% 18.7% 18.7% 18.7% 18.7%
CURRENT LIABILITIES:
Accounts Payable $1.81 $1.99 $2.18 $2.40 $2.64 $2.91 $3.20
ACCOUNTS PAYABLES / COST OF GOODS SOLD 4.6% 4.6% 4.6% 4.6% 4.6% 4.6% 4.6%
DAYS IN ACCOUNTS PAYABLES 16.62 16.62 16.62 16.62 16.62 16.62 16.62
Accrued Expenses $6.52 $7.17 $7.89 $8.68 $9.54 $10.50 $11.55
ACCRUED EXPENSES / COST OF GOODS SOLD 16.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4%
Other Current Liabilities $3.36 $3.69 $4.06 $4.47 $4.92 $5.41 $5.95
OTHER CURRENT LIABILITIES / COST OF GOODS SOLD 8.5% 8.5% 8.5% 8.5% 8.5% 8.5% 8.5%
Total Current Liabilities / Cost of Goods SOLD 29.5% 29.5% 29.5% 29.5% 29.5% 29.5% 29.5%
Working Capital $5.60 $6.16 $6.78 $7.46 $8.20 $9.03 $9.93
Cash provided by (used in) Working Capital ($0.51) ($0.56) ($0.62) ($0.68) ($0.75) ($0.82) ($0.90)
Total Working Capital / Revenues 6.1% 6.1% 6.1% 6.1% 6.1% 6.1% 6.1%
Reference Data
Revenue $ 92.21 $ 101.43 $ 111.57 $ 122.73 $ 135.00 $ 148.50 $ 163.35
Cost of Goods Sold 39.65 43.61 47.98 52.77 58.05 63.86 70.24
</TABLE>
<PAGE>
SCHEDULE OF LONG TERM DEBT
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4
Ending Sept. 30 2001 2002 2003 2004
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Beginning Cash less Minimum Cash $1.43 $0.00 $0.00 $0.00
Cash Flow Before Debt Service 1.30 1.88 2.22 2.59
Scheduled Debt Amortization 0.00 0.00 0.00 0.00
----------- ---------- ----------- ----------
Cash Flow Available to Service Debt 2.73 1.88 2.22 2.59
Assumed Long-Term Debt
Beginning Balance $0.00 $0.00 $0.00 $0.00
Scheduled Amortization 0.00 0.00 0.00 0.00
----------- ---------- ----------- ----------
Ending Balance $0.00 $0.00 $0.00 $0.00
=========== ========== =========== ==========
Interest Rate 11.00% 11.00% 11.00% 11.00%
Interest Expense $0.00 $0.00 $0.00 $0.00
Working Capital Revolver
Beginning Balance $0.00 $0.00 $0.00 $0.00
Excess Cash (Payment) Withdrawal 0.00 0.00 0.00 0.00
----------- ---------- ----------- ----------
Ending Balance $0.00 $0.00 $0.00 $0.00
=========== ========== =========== ==========
Interest Rate 0.00% 0.00% 0.00% 0.00%
Interest Expense $0.00 $0.00 $0.00 $0.00
Senior Bank Financing
Beginning Balance $13.00 $10.27 $8.39 $6.17
Scheduled Amortization 0.00 0.00 0.00 0.00
Excess Cash (Payment) Withdrawal (2.73) (1.88) (2.22) (2.59)
----------- ---------- ----------- ----------
Ending Balance $10.27 $8.39 $6.17 $3.58
=========== ========== =========== ==========
Interest Rate 9.00% 9.00% 9.00% 9.00%
Interest Expense $1.05 $0.84 $0.66 $0.44
Subordinated Debt
Beginning Balance $4.00 $4.00 $4.00 $4.00
Scheduled Amortization 0.00 0.00 0.00 0.00
Excess Cash (Payment) Withdrawal 0.00 0.00 0.00 0.00
----------- ---------- ----------- ----------
Ending Balance $4.00 $4.00 $4.00 $4.00
=========== ========== =========== ==========
Interest Rate 12.00% 12.00% 12.00% 12.00%
Interest Expense $0.48 $0.48 $0.48 $0.48
Total Long-Term Debt
Beginning Balance $17.00 $14.27 $12.39 $10.17
Net Change (2.73) (1.88) (2.22) (2.59)
----------- ---------- ----------- ----------
Ending Balance $14.27 $12.39 $10.17 $7.58
=========== ========== =========== ==========
Average Cost of Debt 9.77% 9.90% 10.06% 10.35%
Total Interest Expense $1.53 $1.32 $1.14 $0.92
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------- ------ --------
Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Ending Sept. 30 2005 2006 2007 2008 2009 2010
----------- ---------- ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Beginning Cash less Minimum Cash $0.00 $0.00 $0.00 $2.91 $ 7.45 $12.51
Cash Flow Before Debt Service 3.02 3.47 4.00 4.54 5.06 5.64
Scheduled Debt Amortization 0.00 0.00 0.00 0.00 0.00 0.00
----------- ---------- ----------- ---------- ------ ------
Cash Flow Available to Service Debt 3.02 3.47 4.00 7.45 12.51 18.15
Assumed Long-Term Debt
Beginning Balance $0.00 $0.00 $0.00 $0.00 $ 0.00 $ 0.00
Scheduled Amortization 0.00 0.00 0.00 0.00 0.00 0.00
----------- ---------- ----------- ---------- ------ ------
Ending Balance $0.00 $0.00 $0.00 $0.00 $ 0.00 $ 0.00
=========== ========== =========== ========== ====== ======
Interest Rate 11.00% 11.00% 11.00% 11.00% 11.00% 11.00%
Interest Expense $0.00 $0.00 $0.00 $0.00 $ 0.00 $ 0.00
Working Capital Revolver
Beginning Balance $0.00 $0.00 $0.00 $0.00 $ 0.00 $ 0.00
Excess Cash (Payment) Withdrawal 0.00 0.00 0.00 0.00 0.00 0.00
----------- ---------- ----------- ---------- ------ ------
Ending Balance $0.00 $0.00 $0.00 $0.00 $ 0.00 $ 0.00
=========== ========== =========== ========== ====== ======
Interest Rate 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Interest Expense $0.00 $0.00 $0.00 $0.00 $ 0.00 $ 0.00
Senior Bank Financing
Beginning Balance $3.58 $0.56 $0.00 $0.00 $ 0.00 $ 0.00
Scheduled Amortization 0.00 0.00 0.00 0.00 0.00 0.00
Excess Cash (Payment) Withdrawal (3.02) (0.56) 0.00 0.00 0.00 0.00
----------- ---------- ----------- ---------- ------ ------
Ending Balance $0.56 $0.00 $0.00 $0.00 $ 0.00 $ 0.00
=========== ========== =========== ========== ====== ======
Interest Rate 9.00% 9.00% 9.00% 9.00% 9.00% 9.00%
Interest Expense $0.19 $0.03 $0.00 $0.00 $ 0.00 $ 0.00
Subordinated Debt
Beginning Balance $4.00 $4.00 $1.10 $0.00 $ 0.00 $ 0.00
Scheduled Amortization 0.00 0.00 0.00 0.00 0.00 0.00
Excess Cash (Payment) Withdrawal 0.00 (2.90) (1.10) 0.00 0.00 0.00
----------- ---------- ----------- ---------- ------ ------
Ending Balance $4.00 $1.10 $0.00 $0.00 0.00 0.00
=========== ========== =========== ========== ====== ======
Interest Rate 12.00% 12.00% 12.00% 12.00% 12.00% 12.00%
Interest Expense $0.48 $0.31 $0.07 $0.00 $ 0.00 $ 0.00
Total Long-Term Debt
Beginning Balance $7.58 $4.56 $1.10 $0.00 $ 0.00 $ 0.00
Net Change (3.02) (3.47) (1.10) 0.00 0.00 0.00
----------- ---------- ----------- ---------- ------ ------
Ending Balance $4.56 $1.10 $0.00 $0.00 $ 0.00 $ 0.00
=========== ========== =========== ========== ====== ======
Average Cost of Debt 10.98% 11.70% 12.00% NA NA NA
Total Interest Expense $0.67 $0.33 $0.07 $0.00 $ 0.00 $ 0.00
</TABLE>
<PAGE>
Sage
Summary Historical Stock Price Performance
<TABLE>
<CAPTION>
SOLP Closing Stock Prices
Daily for the ---------------------------------------------------------
Following Periods: Time Period High Low Mean
---------------------------------- --------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
03/01/00 - 03/07/00 Last Week $3.06 $2.69 $2.95
02/23/00 - 03/07/00 Last 14 Days $3.06 $2.69 $2.86
02/07/00 - 03/07/00 Last 30 Days $3.06 $2.56 $2.84
01/23/00 - 03/07/00 Last 45 Days $3.06 $2.56 $2.79
01/08/00 - 03/07/00 Last 60 Days $3.06 $2.50 $2.76
12/09/99 - 03/07/00 Last 90 Days $3.06 $2.31 $2.65
09/10/99 - 03/07/00 Last 180 Days $3.06 $1.88 $2.49
03/05/99 - 03/07/00 Last 1 Year $3.25 $1.41 $2.38
03/06/98 - 03/07/00 Last 2 Years $4.88 $1.34 $2.51
03/07/97 - 03/07/00 Last 3 Years $4.88 $1.34 $2.66
</TABLE>
<TABLE>
<CAPTION>
Implied Price at the Following
Premia to Mean Stock Price
Daily for the -----------------------------------------------------------
Following Periods: Time Period 30% 40% 50%
---------------------------------- --------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
03/01/00 - 03/07/00 Last Week $3.84 $4.13 $4.43
02/23/00 - 03/07/00 Last 14 Days $3.72 $4.01 $4.29
02/07/00 - 03/07/00 Last 30 Days $3.69 $3.97 $4.26
01/23/00 - 03/07/00 Last 45 Days $3.62 $3.90 $4.18
01/08/00 - 03/07/00 Last 60 Days $3.59 $3.87 $4.14
12/09/99 - 03/07/00 Last 90 Days $3.45 $3.71 $3.98
09/10/99 - 03/07/00 Last 180 Days $3.23 $3.48 $3.73
03/05/99 - 03/07/00 Last 1 Year $3.10 $3.33 $3.57
03/06/98 - 03/07/00 Last 2 Years $3.26 $3.51 $3.76
03/07/97 - 03/07/00 Last 3 Years $3.46 $3.73 $4.00
</TABLE>
<PAGE>
Project Sage
Analysis of "Going Private" Premia Paid
Completion
Date Acquiror Target
---------- ------------------------------------------------------
1/22/98 CRACKEN, HARKEY & CO. LLC EL CHICO RESTAURANTS INC.
2/2/98 INVESTOR GROUP PLASTI-LINE, INC.
2/6/98 SUPERCANAL HOLDING S.A. TESCORP INC.
2/10/98 BLACKSTONE GROUP / BLACKSTONE MCOMMNET CELLULAR INC.
CAPITAL PARTNERS II
3/3/98 HICKS, MUSE, TATE, AND FURST LIN TELEVISION CORP.
3/25/98 GOLDMAN SACHS & CO / WHITEHALL CHARTWELL LEISURE INC.
STREET REAL ESTATE LP IX
4/1/98 MCCOWN DE LEEUW & CO. / UNION CORP.
OUTSOURCING SOLUTIONS, INC.
4/6/98 DAVCO ACQUISITION HOLDING INC. DAVCO RESTAURANTS, INC.
5/22/98 CLAYTON, DUBILIER & RICE INC. DYNATECH CORPORATION
5/27/98 KOHLBERG KRAVIS ROBERTS & CO./ REGAL CINEMAS.INC.
HICKS, MUSE, TATE, AND FURST INC
5/29/98 HICKS, MUSE, TATE, AND FURST / SFXR BROADCASTING INC.
CAPSTAR BROADCASTING
6/4/98 J RICHARD INDUSTRIES, INC./MHD PORTEC INC.
ACQUISITION CORP.
6/8/98 GOLDER, THOMA, CRESSEY, RAUNER MONROC, INC.
INC./US AGGREGATES INC.
7/21/98 NE RESTAURANT COMPANY INC. BERTUCCI'S INC.
7/29/98 INVESTOR GROUP GNI GROUP INC.
7/31/98 KOHLBERG KRAVIS ROBERTS & CO./ MEDCATHTINC.
WELSH,CARSON, ANDERSON & STOWE
8/12/98 INVESTOR GROUP TELEMUNDO GROUP INC.
<TABLE>
<CAPTION>
Premium %
Completion Target Business Transaction --------------------------------------------
Date Description Va1ue(mm) 1 Day 1 Week 1 Month
------------------------------- ------------------------------------------------------ --------------------------------------------
<S> <C> <C> <C> <C> <C>
1/22/98 RESTUARANT OPERATOR $47.32 21.43 17.24 22.89
2/2/98 SIGN MANUFACTURER 55.30 36.47 36.47 30.34
2/6/98 CABLE TV OPERATOR 132.40 33.33 33.33 38.46
2/10/98 OPERATES, MANAGES AND FINANCES
CELLULAR TELEPHONE SYSTEMS 717.97 21.01 28.64 39.81
3/3/98 OWNS AND OPERATES SEVEN NETWORK 1,950.08 15.28 13.79 19.98
AFFILIATED TELEVISION STATIONS
3/25/98 PROVIDES LEISURE AND RECREATION SERVICES 271.54 8.66 9.52 8.66
4/1/98 PROVIDES ACCOUNTS OUTSTANDING SERVICES 182.67 14.55 13.51 29.23
4/6/98 OPERATES RESTAURANT FRANCHISES 131.88 49.53 49.53 49.53
5/22/98 MANUFACTURES AND SELLS A DIVERSIFIED 837.28 35.03 42.55 29.95
LINE OF ELECTRONIC EQUIPMENT
5/27/98 OPERATES MOVIE THEATRES ACROSS THE 1,409.10 2.48 10.71 34.78
UNITED STATES
5/29/98 OWNS AND OPERATES AM AND FM RADIO 2,970.00 10.50 13.64 22.95
STATIONS
6/4/98 MANUFACTURES RAILROAD, CONSTRUCTION 71.26 8.93 14.29 11.30
AND MATERIALS HANDLING EQUIPMENT
6/8/98 PRODUCES AND SELLS READY-MIX 48.62 5.08 10.47 7.71
CONCRETE
7/21/98 OPERATES ITALIAN RESTAURANTS $97.16 35.48 35.48 33.33
7/29/98 PROVIDES HAZARDOUS AND NON- 82.44 17.88 17.88 40.00
HAZARDOUS WASTE SERVICES
7/31/98 PROVIDES CARDIOLOGY AND 332.17 15.15 10.95 34.51
CARDIOVASCULAR SERVICES
8/12/98 SPANISH-LANGUAGE TELEVISION NETWORK 447.30 11.75 20.55 27.54
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Completion
Date Acquiror Target
---------- ------------------------------------------------------
<S> <C> <C>
8/17/98 EQUITABLE COMPANIES INC./ INSILCO CORP
DONALDSON, LUFKIN & JENRETTE/DLJ
MERCHANT BANKING PARTNERS II
8/18/98 HB ACQUISITION CORP. BELL SPORTS CORP.
8/25/98 INVESTOR GROUP PCA INTERNATIONAL INC.
8/26/98 EBC TEXAS ACQUISITION CORP. E-Z SERVE CORP.
8/31/98 LINSALATA CAPITAL PARTNERS FUND II L.P. PERSONNEL MANAGEMENT INC.
9/2/98 DONALDSON, LUFKIN & JENRETTE / DLJ DECRANE AIRCRAFT HOLDINGS
MERCHANT BANKING PARTNERS II/ INC.
DECRANE ACQUISITION CO.
9/4/98 AEI HOLDING COMPANY INC. ZEIGLER COAL HOLDING CO.
9/8/98 BLACKSTONE GROUP / BLACKSTONE REPUBLIC ENGINEERED STEELS,
CAPITAL PARTNERS II MERCHANT/ INC
VERITAS CAPITAL INC.
9/24/98 CITICORP / CITICORP VENTURE CAPITAL ALLIED DIGITAL
LTD / 399 VENTURE PARTNERS, INC. TECHNOLOGIES CORP.
10/1/98 NATIONWIDE MUTUAL INSURANCE CO ALLIED GROUP INC.
10/2/98 QUESTOR PARTNERS FUND LP / GT BICYCLES INC.
SCHWINN HOLDINGS CORP.
10/9/98 CRESCENT CAPITAL INC. INTERNATIONAL FRANCHISE
SYSTEMS
10/22/98 LICKING RURAL ELECTRIFICATION INC. NATIONAL GAS & OIL CO.
10/30/98 FPK, LLC NORWOOD PROMOTIONAL
PRODUCTS, INC.
12/15/98 J.F. LEHMAN & CO. SPECIAL DEVICES
12/15/98 STONINGTON PARTNERS INC. GLOBAL MOTORSPORT GROUP,
INC.
12/29/98 CARL C. ICAHN AMERICAN REAL ESTATE PARTNERS LP
1/7/99 WELSH, CARSON, ANDERSON & STOWE CENTENNIAL CELLULAR CORP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Premium %
Completion Target Business Transaction --------------------------------------------
Date Description Va1ue(mm) 1 Day 1 Week 1 Month
------------------------------- ------------------------------------------------------ --------------------------------------------
<S> <C> <C> <C> <C> <C>
8/17/98 MANUFACTURES INDUSTRIAL COMPONENTS 722.97 4.65 11.11 12.85
8/18/98 DESIGNS, MANUFACTURES AND MARKETS BICYCLE ACCESSORIES. 141.98 13.89 13.10 8.60
8/25/98 OPERATES PHOTOGRAPHIC COLOR PORTRAIT 276.00 23.26 17.78 17.78
STUDIOS
8/26/98 OPERATES AND FRANCHISES RETAIL 41.61 37.14 20.00 37.14
CONVENIENCE STORES
8/31/98 PROVIDES TEMPORARY AND LONG-TERM STAFFING SERVICES 34.70 25.49 23.08 23.08
9/2/98 MANUFACTURES AVIONICS COMPONENTS;
AND PERFORMS INTEGRATION SERVICES 183.54 30.50 28.67 31.43
9/4/98 PRODUCES COAL 858.56 32.81 30.77 18.47
9/8/98 PRODUCES CARBON AND ALLOY HIGH
QUALITY ENGINEERED STEELS 420.00 61.11 54.67 65.71
9/24/98 DUPLICATES AND REPLICATES MULTIMEDIA 66.30 26.97 48.15 63.24
SOFTWARE PRODUCTS
10/1/98 WRITES A VARIETY OF INSURANCE PRODUCTS $1,563.49 73.87 79.53 52.57
10/2/98 DESIGNS AND MANUFACTURES MOUNTAIN 168.63 68.42 77.78 36.17
AND JUVENILE BMX BICYCLES
10/9/98 OWNS, OPERATES AND FRANCHISES 8.53 64.61 64.61 37.14
"DOMINO'S" PIZZA STORES
10/22/98 HAS SUBSIDIARIES THAT PURCHASE, 93.04 7.22 18.18 26.06
DISTRIBUTE AND RETAIL NATURAL GAS
10/30/98 SUPPLIES CUSTOM-IMPRINTED 162.47 19.14 19.14 23.58
PROMOTIONAL PRODUCTS TO DISTRIBUTE
WORLDWIDE
12/15/98 MANUFACTURES AUTOMOTIVE AND 268.01 6.09 10.86 8.82
AIRCRAFT PRODUCTS
12/15/98 SUPPLIES PARTS AND ACCESSORIES FOR 100.87 15.56 14.71 44.44
MOTORCYLCES MANUFACTURED BY
HARLEY-DAVIDSON
12/29/98 ACQUIRES AND MANAGES REAL ESTATE 67.65 44.83 41.18 40.00
1/7/99 ACQUIRES, OPERATES AND INVESTS IN 1,543.41 8.14 12.16 19.00
CELLULAR TELEPHONE SYSTEMS
</TABLE>
<PAGE>
Completion
Date Acquiror Target
---------- ------------------------------------------------------
1/12/99 INVESTOR GROUP LION BREWERY, INC.
1/25/99 CRACKEN, HARKEY & CO. LLC. / SPAGHETTI WAREHOUSE, INC.
CONSOLIDATED RESTAURANT INC.
2/24/99 NEWS & MEDIA PLC / UNITED AUDITS & SURVEYS
INFORMATION GROUP WORLDWIDE, INC.
3/2/99 CASTLE CREEK PARTNERS L.P. BOSTON CELTICS LP
3/26/99 INFORMATION HANDLING SERVICES INTERNATIONAL COMPUTEX, INC.
GROUP INC.
3/26/99 SCIENCE APPLICATIONS OACIS HEALTHCARE HOLDINGS
INTERNATIONAL CORP.
4/5/99 SRC HOLDINGS INC. BACK BAY RESTAURANT GROUP.
4/20/99 TINICUM CAPITAL PARTNERS, L.P. HASKEL INTERNATIONAL, INC.
5/10/99 VESTAR CAPITAL PARTNERS / INVESTOR SHERIDAN HEALTHCARE INC.
GROUP (SHERIDAN SENIOR)
6/14/99 INVESTOR GROUP (SWISHER MANAGEMENT) SWISHER INTERNATIONAL
GROUP INC.
6/16/99 DYSON-KISSNER-MORAN CORP. OPTEK TECHNOLOGY, INC.
6/17/99 MWI ACQUISITION CO. / SRB-MWI, LLC MEADOWCRAFT, INC.
6/18/99 GOLDER, THOMA, CRESSEY, RAUNER COMPDENTACORP.
INC. / TA ASSOCIATES/NMS CAPITAL
PARTNERS
6/23/99 ANTEON CORP. ANALYSIS & TECHNOLOGY INC.
6/30/99 FREMONT PARTNERS INC. JUNO LIGHTING INC.
7/8/99 MIDCITY FINANCIAL CORP. DAMEN FINANCIAL CORP.
7/19/99 INVESTOR GROUP TRANSFINANCIAL HOLDINGS INC.
8/6/99 CORNERSTONE EQUITY INVESTORS LLC EQUITRAC CORP.
/ INVESTOR GROUP
8/18/99 INVESTORS ROCK BOTTOM RESTAURANTS
INC.
8/19/99 GOLDMAN INDUSTRIAL GROUP INC. BRIDGEPORT MACHINES INC.
<TABLE>
<CAPTION>
Premium %
Completion Target Business Transaction --------------------------------------------
Date Description Va1ue(mm) 1 Day 1 Week 1 Month
------------------------------- ------------------------------------------------------ --------------------------------------------
<S> <C> <C> <C> <C> <C>
1/12/99 PRODUCES AND BOTTLES BREWED 18.10 8.99 13.94 27.46
BEVERAGES
1/25/99 HOLDING COMPANY FOR SUBSIDIARIES WHO 60.00 39.13 31.96 2.40
OPERATE RESTAURANTS
2/24/99 MANUFACTURES AND DISTRIBUTES 42.50 32.92 36.42 44.00
CHEMICALS AND EQUIPTMENT
3/2/99 OWNS AND OPERATES THE BOSTON CELTICS 7.31 21.43 16.24 67.90
3/26/99 DEVELOPS AND MARKETS CLIENT/SERVER 8.84 46.15 90.00 67.95
SOLUTIONS
3/26/99 PROVIDES FLEXIBLE, CLINICAL $47.42 36.92 42.40 42.40
INFORMATION SYSTEMS
4/5/99 OPERATES RESTAURANTS 38.49 12.33 13.89 28.13
4/20/99 MANUFACTURES PUMPS AND AIR PRESSURE 62.82 42.34 49.57 51.76
AMPLIFIERS
5/10/99 OWNS AND OPERATES PHYSICIAN 125.29 8.82 12.12 17.46
PRACTICES
6/14/99 MANUFACTURES AND MARKETS BROAD 417.45 39.45 49.02 52.00
LINE TOBACCO PRODUCTS
6/16/99 MANUFACTURES COMPONENTS FOR MANY 190.97 29.94 47.83 96.15
INDSUSTRIES
6/17/99 MANUFACTURES FURNITURE 49.00 42.86 42.86 37.93
6/18/99 OFFERS MANAGED DENTAL CARE PLANS 151.70 33.33 30.91 23.61
AND INSURANCE
6/23/99 DEVELOPS AND MANUFACTURES TACTICAL 102.30 18.86 16.20 23.81
SYSTEMS
6/30/99 MANUFACTURES AND MARKETS RECESSED 564.61 21.21 19.76 21.58
AND TRACK LIGHTING
7/8/99 FEDERALLY CHARTERED STOCK SAVINGS 51.75 20.33 28.77 24.41
BANK
7/19/99 PROVIDES TRANSPORTATION AND 20.64 27.27 27.27 13.51
INSURANCE SERVICES
8/6/99 DESIGNS AND MANUFACTURES COMPUTER 74.32 4.35 5.66 12.00
INTEGRATED SYSTEMS
8/18/99 OWNS AND OPERATES RESTAURANTS $58.00 53.85 53.85 86.05
8/19/99 MANUFACTURES METAL CUTTING MACHINE 55.93 67.54 77.78 81.82
TOOLS
</TABLE>
<PAGE>
Completion
Date Acquiror Target
---------- ------------------------------------------------------
8/30/99 TRIVEST FURNITURE CORP. WINSLOEW FURNITURE INC.
9/14/99 INVESTORS (63% of Shareholders) CONCORD FABRICS INC.
9/23/99 PICTSWEET LLC UNITED FOODS INC.
9/29/99 KIRTLAND CAPITAL PARTNERS INSTRON CORP.
10/15/99 BERKSHIRE REALTY HOLDINGS, LP BERKSHIRE REALTY COMPANY
INC.
10/28/99 INVESTORS KENTEK INFORMATION
SYSTEMS, INC.
11/1/99 INVESTOR GROUP PHYSICIANS SPECIALTY CORP.
11/4/99 WARBURG, PINCUS VENTURES LP / KNOLL INC.
INVESTOR GROUP (KNOLL MANAGEMENT)
11/16/99 DLZ Corp. DIGITAL LINK CORP.
11/22/99 SHP ACQUISITION, LLC. SUNSTONE HOTEL INVESTORS
INC.
11/23/99 DLJ MERCHANT BANKING PARTNERS II LP MERRILL CORPORATION
11/30/99 INVESTOR GROUP NOVEX SYSTEMS
INTERNATIONAL, INC.
12/1/99 INVESTOR GROUP ENSTAR, INC.
12/9/99 BRUCKMANN, ROSSER, SHERRILL & CO. O'SULLIVAN INDUSTRIES
HOLDINGS, INC.
12/15/99 CENTRAL BANCOMPANY, INC. FULTON BANCORP, INC.
<TABLE>
<CAPTION>
Premium %
Completion Target Business Transaction --------------------------------------------
Date Description Va1ue(mm) 1 Day 1 Week 1 Month
------------------------------- ------------------------------------------------------ --------------------------------------------
<S> <C> <C> <C> <C> <C>
8/30/99 DESIGNS, MANUFACTURES, AND 254.68 28.70 36.27 35.94
DISTRIBUTES FURNITURE
9/14/99 FABRIC PRODUCER 6.32 8.70 35.48 43.18
9/23/99 PROCESSESES AND SELLS FROZEN VEGGIES 53.53 7.69 40.00 40.00
9/29/99 PRODUCES AND SERVICES MATERIALS TESTING 182.09 36.43 29.41 37.50
EQUIPMENT
10/15/99 OWNS AND MANAGES MULTI-FAMILY 1,260.00 8.89 10.11 7.10
RESIDENTIAL PROPERTIES
10/28/99 SUPPPLIES MID-RANGE, NON-IMPACT 38.17 22.81 27.54 27.54
PRINTERS
11/1/99 PROVIDES PHYSICIAN PRACTICE 98.80 13.51 20.86 21.74
MANAGEMENT SERVICES
11/4/99 MANUFACTURES OFFICE FURNITURE 495.60 83.61 51.86 46.41
11/16/99 DESIGNS AND MANUFACTURES DIGITAL 86.92 32.52 29.55 28.59
ACCESS PRODUCTS
11/22/99 REIT WITH FOCUS ON WESTERN UNITED 880.00 36.86 39.16 34.63
STATES
11/23/99 PROVIDES TYPESETTING SERVICES 354.88 0.57 2.33 15.41
11/30/99 DEVELOPS, MANUFACTURES AND MARKETS 0.36 53.55 26.32 20.00
CEMENT
12/1/99 PROVIDES SERVICES TO NETWORK $12.79 56.25 58.73 63.93
COMMUNICATIONS INDUSTRY
12/9/99 MANUFACTURES ELECTRONICS AND 328.89 5.04 2.10 13.62
FURNITURE
12/15/99 BANK HOLDING COMPANY 31.67 12.65 12.65 41.85
Mean 26.83 % 29.36 % 33.19 %
Median 22.81 27.27 29.95
</TABLE>
----------------
Criteria Used:
-Closed Going Private transactions 1/1/98 - current. -No negative premia.
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
A. Projected Cash Flow
-------------------
Year 1 Year 2 Year 3 Year 4 Year 5
Ending Sept. 30 2001 2002 2003 2004 2005
---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
EBIT $5.20 $5.72 $6.29 $6.92 $7.61
Less: Taxes 44.5% 2.31 2.54 2.80 3.08 3.39
---------- ----------- ---------- ----------- -----------
After Tax Income 2.88 3.17 3.49 3.84 4.22
Depreciation 1.04 1.14 1.26 1.38 1.52
Cash provided by (used in) Working Capital (0.66) (0.42) (0.46) (0.51) (0.56)
Capital Expenditures (1.39) (1.52) (1.68) (1.84) (2.03)
---------- ----------- ---------- ----------- -----------
Unlevered Cash Flow 1.88 2.37 2.61 2.87 3.15
Terminal Value 38.04
---------- ----------- ---------- ----------- -----------
Total Cash Flow $1.88 $2.37 $2.61 $2.87 $41.19
========== =========== ========== =========== ===========
B. Net Present Value Analysis
--------------------------
Discount Rate 15.0%
Post 2005 EBIT Multiple 5.0 x
-------------------------------------------- -----------------------------------------------
Enterprise Value Net Equity Value
-------------------------------------------- -----------------------------------------------
PV of Annual Cash Flow $8.35 Enterprise Value $27.26
PV of Terminal Value 18.91 Cash (b) 1.43
--------------------
Debt (b) (1.60)
-----------
Enterprise Value $27.26
====================
Net Equity Value $27.09
===========
Price Per Share $5.94
----------------------------------------------------------------------------------------------------------------
</TABLE>
C. EQUITY VALUE PER SHARE SENSITIVITY ANALYSIS (A)
-----------------------------------------------
Discount Post 2005 EBIT Multiple
----------------------------------
Rate 4.0x 5.0x 6.0x
---------- ----------- ---------- -----------
22.5% $4.26 $4.93 $5.60
----------------------------------
20.0% 4.26 4.93 5.60
17.5% 4.66 5.41 6.15
15.0% 5.11 5.94 6.77
----------------------------------
12.5% 5.62 6.55 7.47
------------------------------------------------------
----------------------------
(a) 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.
(b) As of September 30, 1999.
<PAGE>
RETURN ON INVESTMENT ANALYSIS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Fully
Diluted Debt &
Issue $ Ownership EBITA Pref. Cash
-----
--------- ---------------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subordinated Debt $4.00 10.0% 2003 Year 3 6.29 10.17 0.00
Seller's Note 0.00 0.0% 2004 Year 4 6.92 7.58 0.00
New Preferred Stock 0.00 0.0% 2005 Year 5 7.61 4.56 0.00
New Common Stock 7.00 90.0% 2006 Year 6 8.37 1.10 0.00
--------- ----------
2007 Year 7 9.20 0.00 2.91
$11.00 100.0%
========= ==========
Subordinated Debt Seller's Note New Preferred Stock
-------------------------------- -------------------------------- -------------------------------
EBITA Multiple 4.0x 5.0x 6.0x 4.0x 5.0x 6.0x 4.0x 5.0x 6.0x
-------- ---------- --------- -------- ---------- --------- --------- ------- ---------
Return on Investment
Over 3 years 22.1% 25.8% 29.4% #N/A #N/A #N/A #N/A #N/A #N/A
Over 4 years 21.2% 23.9% 26.4% #N/A #N/A #N/A #N/A #N/A #N/A
Over 5 years 20.6% 22.7% 24.6% #N/A #N/A #N/A #N/A #N/A #N/A
Over 7 years 19.7% 21.1% 22.5% #N/A #N/A #N/A #N/A #N/A #N/A
CASH FLOWS
Over 3 years
Closing ($4.00) ($4.00) ($4.00) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Year 1 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 2 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 3 $5.98 $6.61 $7.24 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Over 4 years
Closing ($4.00) ($4.00) ($4.00) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Year 1 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 2 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 3 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 4 $6.49 $7.18 $7.87 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Over 5 years
Closing ($4.00) ($4.00) ($4.00) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Year 1 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 2 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 3 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 4 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 5 $7.07 $7.83 $8.59 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Over 7 years
Closing ($4.00) ($4.00) ($4.00) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Year 1 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 2 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 3 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 4 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 5 0.48 0.48 0.48 0.00 0.00 0.00 0.00 0.00 0.00
Year 6 3.21 3.21 3.21 0.00 0.00 0.00 0.00 0.00 0.00
Year 7 $5.13 $6.05 $6.97 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
</TABLE>
--------------------------------------------------------------------------------
Market Value of Equity
-----------------------------------
Issue 4.0x 5.0x 6.0x
-----
---------- --------- ----------
Subordinated Debt $14.98 $21.26 $27.55
Seller's Note 20.09 27.00 33.92
New Preferred Stock 25.87 33.48 41.08
New Common Stock 32.38 40.74 49.11
$39.72 $48.93 $58.13
New Common Stock
----------------------------------
EBITA Multiple 4.0x 5.0x 6.0x
--------- --------- ----------
Return on Investment
Over 3 years 24.4% 39.8% 52.4%
Over 4 years 26.8% 36.5% 44.5%
Over 5 years 27.2% 33.9% 39.5%
Over 7 years 26.2% 30.0% 33.3%
CASH FLOWS
Over 3 years
Closing ($7.00) ($7.00) ($7.00)
Year 1 0.00 0.00 0.00
Year 2 0.00 0.00 0.00
Year 3 $13.48 $19.14 $24.80
Over 4 years
Closing ($7.00) ($7.00) ($7.00)
Year 1 0.00 0.00 0.00
Year 2 0.00 0.00 0.00
Year 3 0.00 0.00 0.00
Year 4 $18.08 $24.30 $30.53
Over 5 years
Closing ($7.00) ($7.00) ($7.00)
Year 1 0.00 0.00 0.00
Year 2 0.00 0.00 0.00
Year 3 0.00 0.00 0.00
Year 4 0.00 0.00 0.00
Year 5 $23.28 $30.13 $36.97
Over 7 years
Closing ($7.00) ($7.00) ($7.00)
Year 1 0.00 0.00 0.00
Year 2 0.00 0.00 0.00
Year 3 0.00 0.00 0.00
Year 4 0.00 0.00 0.00
Year 5 0.00 0.00 0.00
Year 6 0.00 0.00 0.00
Year 7 $35.75 $44.04 $52.32
<PAGE>
INCOME TAX SCHEDULE
<TABLE>
<CAPTION>
Sage
($ in millions)
---------------------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Ending Sept. 30 2001 2002 2003 2004 2005 2006
----------- ------------ ----------- ------------ ----------- ------------
Book Basis (GAAP)
<S> <C> <C> <C> <C> <C> <C> <C>
GAAP PRE-TAX INCOME $3.03 $3.73 $4.49 $5.33 $6.28 $7.48
GOODWILL 0.00 0.00 0.00 0.00 0.00 0.00
----------- ------------ ----------- ------------ ----------- ------------
GAAP PRE-TAXABLE INCOME 3.03 3.73 4.49 5.33 6.28 7.48
INCREASE (UTILIZE) OF NOL 0.00 0.00 0.00 0.00 0.00 0.00
----------- ------------ ----------- ------------ ----------- ------------
TAXABLE INCOME 3.03 3.73 4.49 5.33 6.28 7.48
INCOME-TAX EXPENSE 1.35 1.66 2.00 2.37 2.79 3.33
----------- ------------ ----------- ------------ ----------- ------------
GAAP NOL BALANCE $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
TAX Basis
GAAP PRE-TAX INCOME $3.03 $3.73 $4.49 $5.33 $6.28 $7.48
PLUS: GAAP GOODWILL 0.56 0.56 0.56 0.56 0.56 0.56
LESS: TAX GOODWILL (0.56) (0.56) (0.56) (0.56) (0.56) (0.56)
PLUS: GAAP DEPRECIATION 1.04 1.14 1.26 1.38 1.52 1.67
LESS: TAX DEPRECIATION (0.94) (1.03) (1.14) (1.25) (1.38) (1.51)
----------- ------------ ----------- ------------ ----------- ------------
PRE-NOL TAXABLE INCOME 3.13 3.84 4.61 5.47 6.42 7.63
INCREASE (UTILIZE) OF NOL 0.00 0.00 0.00 0.00 0.00 0.00
----------- ------------ ----------- ------------ ----------- ------------
TAXABLE INCOME 3.13 3.84 4.61 5.47 6.42 7.63
INCOME TAXES 1.39 1.71 2.05 2.43 2.86 3.40
----------- ------------ ----------- ------------ ----------- ------------
TAX NOL BALANCE $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
INCREASE IN DEFERRED TAX ($0.04) ($0.05) ($0.05) ($0.06) ($0.06) ($0.07)
CUMULATIVE DEFERRED TAX $0.00 ($0.04) ($0.09) ($0.15) ($0.20) ($0.27) ($0.34)
STATUTORY INCOME TAX RATE 44.5% 44.5% 44.5% 44.5% 44.5% 44.5%
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Year 7 Year 8 Year 9 Year 10
Ending Sept. 30 2007 2008 2009 2010
---------- ------------ ----------- ------------
Book Basis (GAAP)
<S> <C> <C> <C> <C>
GAAP PRE-TAX INCOME $8.64 $9.77 $10.98 $12.30
GOODWILL 0.00 0.00 0.00 0.00
---------- ------------ ----------- ------------
GAAP PRE-TAXABLE INCOME 8.64 9.77 10.98 12.30
INCREASE (UTILIZE) OF NOL 0.00 0.00 0.00 0.00
---------- ------------ ----------- ------------
TAXABLE INCOME 8.64 9.77 10.98 12.30
INCOME-TAX EXPENSE 3.84 4.35 4.88 5.47
---------- ------------ ----------- ------------
GAAP NOL BALANCE $0.00 $0.00 $0.00 $0.00
TAX Basis
GAAP PRE-TAX INCOME $8.64 $9.77 $10.98 $12.30
PLUS: GAAP GOODWILL 0.56 0.56 0.56 0.56
LESS: TAX GOODWILL (0.56) (0.56) (0.56) (0.56)
PLUS: GAAP DEPRECIATION 1.84 2.03 2.23 2.45
LESS: TAX DEPRECIATION (1.70) (1.97) (2.17) (2.39)
---------- ------------ ----------- ------------
PRE-NOL TAXABLE INCOME 8.77 9.82 11.03 12.37
INCREASE (UTILIZE) OF NOL 0.00 0.00 0.00 0.00
---------- ------------ ----------- ------------
TAXABLE INCOME 8.77 9.82 11.03 12.37
INCOME TAXES 3.90 4.37 4.91 5.50
---------- ------------ ----------- ------------
TAX NOL BALANCE $0.00 $0.00 $0.00 $0.00
INCREASE IN DEFERRED TAX ($0.06) ($0.02) ($0.03) ($0.03)
CUMULATIVE DEFERRED TAX ($0.40) ($0.43) ($0.45) ($0.48)
STATUTORY INCOME TAX RATE 44.5% 44.5% 44.5% 44.5%
</TABLE>
<PAGE>
SCHEDULE OF FIXED ASSETS & DEPRECIATION EXPENSE
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Assumptions for Book Depreciation ASSUMPTIONS FOR TAX DEPRECIATION
--------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Option 1 2 Option 1 2
Method SLN DDB Method OSLN ACRS
Salvage $0.00 $0.00 Salvage $0.00 $0.00
Life 7 7 Life 7 3
Factor 100% 200% Factor 100% 200%
-------- --------
OPTION TOGGLE 1 OPTION TOGGLE 1
-------- --------
Year 1 Year 2 Year 3 Year 4 Year 5
Ending Sept. 30 2000 2001 2002 2003 2004 2005
-------- --------- --------- -------- --------- ---------
Capital Expenditures $1.39 $1.52 $1.68 $1.84 $2.03
% of Revenues 2.0% 2.0% 2.0% 2.0% 2.0%
Book Depreciation (GAAP)
Original Depreciable Fixed Assets $2.26 $0.84 $0.73 $0.60 $0.46 $0.31
Asset Write-Up 0.00 0.00 0.00 0.00 0.00 0.00
Capital Expenditures 2001 0.20 0.20 0.20 0.20 0.20
Capital Expenditures 2002 0.22 0.22 0.22 0.22
Capital Expenditures 2003 0.24 0.24 0.24
Capital Expenditures 2004 0.26 0.26
Capital Expenditures 2005 0.29
Capital Expenditures 2006
Capital Expenditures 2007
Capital Expenditures 2008
Capital Expenditures 2009
Capital Expenditures 2010
-------- --------- --------- -------- --------- ---------
Total Book Depreciation 1.04 1.14 1.26 1.38 1.52
Ending Fixed Assets, Gross $2.26 3.65 5.17 6.85 8.69 10.72
Less: Accumulated Depreciation 0.00 1.04 2.18 3.44 4.82 6.34
Ending Fixed Assets, Net 2.26 $2.61 $2.99 $3.41 $3.87 $4.38
Tax Depreciation
Original Depreciable Fixed Assets $2.26 $0.84 $0.73 $0.60 $0.46 $0.31
Capital Expenditures 2001 0.10 0.20 0.20 0.20 0.20
Capital Expenditures 2002 0.11 0.22 0.22 0.22
Capital Expenditures 2003 0.12 0.24 0.24
Capital Expenditures 2004 0.13 0.26
Capital Expenditures 2005 0.14
Capital Expenditures 2006
Capital Expenditures 2007
Capital Expenditures 2008
Capital Expenditures 2009
Capital Expenditures 2010
-------- --------- --------- -------- --------- ---------
Total Tax Depreciation 0.94 1.03 1.14 1.25 1.38
Ending Fixed Assets, Gross $2.26 3.65 5.17 6.85 8.69 10.72
Less: Accumulated Depreciation 0.00 0.94 1.97 3.11 4.36 5.74
Ending Fixed Assets, Net 2.26 $2.71 $3.20 $3.74 $4.33 $4.98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
--------
Assumptions for Book Depreciation ACRS RECOVERY PERIOD TABLE 3
--------------------------------- ------------------------
--------
<S> <C> <C> <C> <C> <C>
Option 1) 3 years
Method 2) 5 years
Salvage 3) 7 years
Life 4) 10 years
Factor 5) 15 years
6) 20 years
OPTION TOGGLE
Year 6 Year 7 Year 8 Year 9 Year 10
Ending Sept. 30 2006 2007 2008 2009 2010
-------- --------- --------- -------- ---------
Capital Expenditures $2.23 $2.45 $2.70 $2.97 $3.27
% of Revenues 2.0% 2.0% 2.0% 2.0% 2.0%
Book Depreciation (GAAP)
Original Depreciable Fixed Assets $0.15 $0.00 $0.00 $0.00 $0.00
Asset Write-Up 0.00 0.00 0.00 0.00 0.00
Capital Expenditures 2001 0.20 0.20 0.00 0.00 0.00
Capital Expenditures 2002 0.22 0.22 0.22 0.00 0.00
Capital Expenditures 2003 0.24 0.24 0.24 0.24 0.00
Capital Expenditures 2004 0.26 0.26 0.26 0.26 0.26
Capital Expenditures 2005 0.29 0.29 0.29 0.29 0.29
Capital Expenditures 2006 0.32 0.32 0.32 0.32 0.32
Capital Expenditures 2007 0.35 0.35 0.35 0.35
Capital Expenditures 2008 0.39 0.39 0.39
Capital Expenditures 2009 0.42 0.42
Capital Expenditures 2010 0.47
-------- --------- --------- -------- ---------
Total Book Depreciation 1.67 1.84 2.03 2.23 2.45
Ending Fixed Assets, Gross 12.95 15.41 18.11 21.08 24.35
Less: Accumulated Depreciation 8.02 9.86 11.88 14.11 16.56
Ending Fixed Assets, Net $4.94 $5.55 $6.22 $6.97 $7.78
Tax Depreciation
Original Depreciable Fixed Assets $0.15 $0.00 $0.00 $0.00 $0.00
Capital Expenditures 2001 0.20 0.20 0.10 0.00 0.00
Capital Expenditures 2002 0.22 0.22 0.22 0.11 0.00
Capital Expenditures 2003 0.24 0.24 0.24 0.24 0.12
Capital Expenditures 2004 0.26 0.26 0.26 0.26 0.26
Capital Expenditures 2005 0.29 0.29 0.29 0.29 0.29
Capital Expenditures 2006 0.16 0.32 0.32 0.32 0.32
Capital Expenditures 2007 0.18 0.35 0.35 0.35
Capital Expenditures 2008 0.19 0.39 0.39
Capital Expenditures 2009 0.21 0.42
Capital Expenditures 2010 0.23
-------- --------- --------- -------- ---------
Total Tax Depreciation 1.51 1.70 1.97 2.17 2.39
Ending Fixed Assets, Gross 12.95 15.41 18.11 21.08 24.35
Less: Accumulated Depreciation 7.25 8.96 10.93 13.10 15.48
Ending Fixed Assets, Net $5.70 $6.45 $7.18 $7.98 $8.86
</TABLE>
