ADAMS, HARKNESS & HILL
PROJECT ELBOW
PRELIMINARY PRESENTATION TO
THE SPECIAL COMMITTEE OF
THE BOARD OF DIRECTORS
AUGUST 23, 2001
AGENDA
SECTION A FAIRNESS OPINION COMPONENTS AND METHODOLOGY
SECTION B CURRENT & PROJECTED COMPANY PERFORMANCE
SECTION C PRELIMINARY COMPARATIVE VALUATION
SECTION D TRANSACTION OVERVIEW
EXHIBITS
SECTION A
FAIRNESS OPINION COMPONENTS
AND METHODOLOGY
FAIRNESS OPINION COMPONENTS AND METHODOLOGY
WHAT IS A FAIRNESS OPINION?
A FAIRNESS OPINION IS A SPECIAL FORM OF VALUATION REPORT, USUALLY IN THE
FORM OF A LETTER, WHICH IS OFTEN VIEWED AS A DETERRENT AGAINST LEGAL
CHALLENGES AND A "SHIELD" AGAINST POTENTIAL LEGAL DAMAGES.
- - A FAIRNESS OPINION STATES THAT, IN THE VIEW OF THE INVESTMENT BANKER,
BASED UPON A SET OF PROCEDURAL ANALYSES AND ASSUMPTIONS, A SPECIFIC
TRANSACTION AT A SPECIFIC PRICE IS FAIR, FROM A FINANCIAL POINT OF
VIEW, TO SPECIFIC PARTIES
- The opinion itself, however, speaks only to relative fairness
and is not a recommendation to the Special Committee, the
Board or shareholders as to what actions they should take
- - A FAIRNESS OPINION, BACKED BY A THOROUGH AND PROPER STUDY, HELPS A
BOARD OR A COMMITTEE OF THE BOARD MEET ITS DUTY OF CARE, AS IMPLIED BY
THE BUSINESS JUDGEMENT RULE, AND THEREBY INSULATE ITSELF FROM
LIABILITY
- Serves as evidence of due diligence in fulfilling fiduciary
duty to make a reasonable and informed decision with regards
to a transaction
WHAT IS FAIR IS NOT NECESSARILY OBVIOUS TO CONTENDING PARTIES IN A LAWSUIT,
AND WHILE NOT REQUIRED BY LAW, THE LACK OF A FAIRNESS OPINION CAN BE
FINANCIALLY DEVASTATING TO COMPANIES AND THEIR DIRECTORS.
Page 4
FAIRNESS OPINION COMPONENTS AND METHODOLOGY
WHAT IS THE BUSINESS JUDGEMENT RULE?
BJR: Presumption that directors' decisions are made in good faith, on an
informed basis, and in the honest belief that such decision is in the
best interests of the company.
- - Under Delaware law, to pierce the liability shield of the BJR, a
plaintiff must prove the company's Board breached either its:
- Duty of Loyalty
- Concerned with "self-dealing"
- Duty of Care
- Requires showing of "Gross Negligence"
- A key component of meeting the duty of care is the
process involved in reaching a decision
- Directors can reasonably rely on opinions of
qualified third party advisors (e.g., investment
bankers)
WE FRAME OUR UNDERTAKINGS AND ANALYSES IN THIS CONTEXT.
Page 5
FAIRNESS OPINION COMPONENTS AND METHODOLOGY
KEY ISSUES FOR THE SPECIAL COMMITTEE
ADAMS, HARKNESS & HILL UNDERSTANDS THE ISSUES UNIQUE TO A PUBLIC-COMPANY
MBO. WE APPRECIATE THE COMPLEXITIES ASSOCIATED WITH THE DUTIES OF A SPECIAL
COMMITTEE AND ARE WELL-ACQUAINTED WITH THE PROCESS AND REQUIREMENTS.
- - Defining the Engagement and its Scope
- What is being valued?
- What is the standard of value and how is it being applied?
- What are the limitations imposed, either explicitly or
implicitly?
- To what extent is the Committee charged with "maximizing
value"?
- To whom is the opinion addressed and when is it dated?
- - Standard of Value
- What is it worth?
- Market value? / Intrinsic value? / Earnings value?
- Relevant case law
- Circumstantial, legal and regulatory considerations
- - Process and documentation to date
- To what extent and for how long has the Board considered
"value maximizing alternatives"?
- What tangible evidence of a "market test" exists?
Page 6
FAIRNESS OPINION COMPONENTS AND METHODOLOGY
IMPORTANT VALUATION CONSIDERATIONS
AS A FAIRNESS OPINION ADDRESSES "FAIRNESS, FROM A FINANCIAL POINT OF VIEW",
ADAMS, HARKNESS & HILL FOCUSES ON THE IMPLICATIONS OF RELATIVE VALUE.
- - "Value is in the eye of the beholder"
- Key is understanding of relative valuation drivers
- Public trading statistics
- Precedent transactions
- Highly subjective interpretation of wide range of variables
- Particularly confidential internal performance
forecasts
- Special Committee must assess the "sandbag" factor with a MBO
- Any valuation assessment is limited to a range of
reasonableness
- - Strategic value often differs from comparable public market value
- Specific to circumstances
- Driven by positioning of sale and potential fit
- Premium to average market driven by confirmed opportunities
and potential for competitive synergies
- Trading value versus transaction value
- Application of range of control premium to trading
value
Page 7
FAIRNESS OPINION COMPONENTS AND METHODOLOGY
FORM OF DELIVERABLE
Graphic highlighting major points of fairness letter.
Page 8
FAIRNESS OPINION COMPONENTS AND METHODOLOGY
GENERAL METHODOLOGIES/STANDARDS OF VALUE
ADAMS, HARKNESS & HILL WILL ASSESS MULTIPLE QUANTITATIVE AND QUALITATIVE DATA
POINTS TO DETERMINE WHETHER A PROPOSED TRANSACTION IS FAIR, FROM A FINANCIAL
POINT OF VIEW, TO YOUR COMPANY'S SHAREHOLDERS.
STRATEGIC RATIONALE
HISTORIC & PROFORMA FINANCIAL ANALYSIS
COMPARABLE COMPANIES ANALYSIS
COMPARABLE TRANSACTIONS ANALYSIS
TRANSACTION TERMS & CONDITIONS
DCF ANALYSIS
STOCK PERFORMANCE ANALYSIS
OTHER CONSIDERATIONS & ALTERNATIVES
FINANCIAL FAIRNESS
- Delivery of oral opinion
- Letter to Board of Directors
- Proxy Insert
EACH SUBJECTIVE METHODOLOGY HAS INHERENT STRENGTHS AND WEAKNESSES, AND THE
NATURE OF THE CIRCUMSTANCES AND AMOUNT OF AVAILABLE INFORMATION MAY FURTHER
EFFECT THE USEFULNESS OF A PARTICULAR METHODOLOGY.
Page 9
FAIRNESS OPINION COMPONENTS AND METHODOLOGY
KEY QUESTIONS FOR CONSIDERATION
- - Will/can shareholder value be realized assuming the status quo?
- What is internal plan for turning around performance and how
realistic are the goals and timing?
- - What are the alternatives to status quo?
- MBO at APPROPRIATE value
- Strategic sale for cash at APPROPRIATE value
- Strategic sale for shares of NEWCO (i.e., stock swap)
- LBO to third party sponsor
Page 10
SECTION B
CURRENT & PROJECTED
COMPANY PERFORMANCE
CURRENT & PROJECTED COMPANY PERFORMANCE
SUMMARY P&L
HISTORICAL FORECAST PROJECTED
1999 2000 2001 2002
------------ ------------ ------------ ------------
TOTAL REVENUE $ 46,598,000 $ 45,616,000 $ 29,905,908 $ 30,324,186
COST OF GOODS SOLD 22,544,000 25,301,000 18,725,292 15,753,754
------------ ------------ ------------ ------------
GROSS MARGIN 24,054,000 20,315,000 11,180,616 14,570,432
OPERATING EXPENSES 17,067,000 23,823,000 19,758,431 18,565,964
------------ ------------ ------------ ------------
OPERATING INCOME 6,987,000 (3,508,000) (8,577,815) (3,995,532)
INTEREST INCOME 1,584,000 2,299,000 1,713,903 1,230,514
------------ ------------ ------------ ------------
PRETAX INCOME 8,571,000 (1,209,000) (6,863,912) (2,765,018)
PROVISION FOR INCOME TAX (3,048,000) (375,000) 1,418,790 --
------------ ------------ ------------ ------------
NET INCOME $ 5,523,000 $ (1,584,000) $ (5,445,123) $ (2,765,018)
============ ============ ============ ============
GROSS MARGIN 51.6% 44.5% 37.4% 48.0%
OPERATING MARGIN 15.0% -7.7% -28.7% -13.2%
Page 12
CURRENT & PROJECTED COMPANY PERFORMANCE
2002 REVENUE MODEL
HISTORICAL FORECAST PROJECTED
1999 2000 2001 2002
----------- ----------- ----------- -----------
Revenues:
License Fees $26,102,000 56% $22,070,000 48% $ 7,022,722 23% $ 8,500,000 28%
New License Fees 8,341,701 18% 6,835,060 15% 3,756,534 13% 4,500,000 15%
Upgrade License Fees 17,760,299 38% 15,234,940 33% 3,266,188 11% 4,000,000 13%
3rd Party Hardware & Software 8,598,000 18% 8,661,000 19% 7,416,031 25% 7,638,616 25%
New Sales 6,972,175 15% 5,757,181 13% 2,998,302 10% 3,000,000 10%
Upgrade Sales 1,625,825 3% 2,903,819 6% 4,417,729 15% 4,638,616 15%
Support 7,630,000 16% 9,696,000 21% 9,741,018 33% 8,940,000 29%
Services 4,268,000 9% 5,189,000 11% 3,478,830 12% 3,652,771 12%
International -existing 1,990,999 1,592,799
International - Global Product 0
New Haven - existing 256,308 0
New Haven - Castle 0
Total Revenue $46,598,000 100% $45,616,000 100% $29,905,908 100% $30,324,186 100%
=========== =========== =========== ===========
PERCENTAGE CHANGE 38% -2% -34% 1%
Page 13
CURRENT & PROJECTED COMPANY PERFORMANCE
2002 REVENUE MODEL - DRIVERS
HISTORICAL BUDGET PROJECTED
1999 2000 2001 2002
----------- ----------- ----------- -----------
Number of Implementations - % Increase 10%
Number of Implementations 42 37 27 30
Number active 38 34 27 30
Number Inactive 4 3 0 0
% of Customers that go inactive during year 10%
Number of Customers that go inactive during year 0 0 0 25
Active Customers 178 212 239 244
Inactive Customers 61 64 64 89
Total Customers 239 276 250 308
Average Contract Size $ 283,000 $ 405,000 $ 242,000 $ 250,000
% New License Fees 54% 54% 56% 60.0%
% 3rd Party Hardware & Software 46% 46% 44% 40.0%
Contract Size % Increase 0.0%
Upgrade License Revenue - normalized 2002 value $ 4,000,000
Upgrade License Revenue - % increase 5.0%
Upgrade 3rd party Revenue - % increase 5.0%
Support Revenues:
% of License Fees 18.0%
% of New Major Accounts 5.0%
Add'l Major Account Fee (per month) $ 5,000
Support Fee Increase 0%
Services Revenues:
% increase 5.0%
Page 14
CURRENT & PROJECTED COMPANY PERFORMANCE
SUMMARY OF COGS & OPERATING EXPENSES
HISTORICAL FORECASTED PROJECTED
1999 2000 2001 2002
----------- ------------ ------------ ------------
Cost of Goods Sold:
License Fees 7,957,000 30.5% 8,595,000 38.9% 1,862,007 26.5% 1,375,395 16.2%
3rd Party Hardware & Software 6,372,000 74.1% 7,083,000 81.8% 5,475,599 73.8% 5,728,962 75.0%
Support 5,050,000 66.2% 6,098,000 62.9% 5,848,622 60.0% 4,850,410 54.3%
Services 3,165,000 74.2% 3,525,000 67.9% 2,132,942 61.3% 2,046,909 56.0%
International (inc. op. expenses) 2,640,483 1,752,079
New Haven (inc. op. expenses) 765,639
Total Cost of Goods Sold 22,544,000 48.4% 25,301,000 55.5% 18,725,292 62.6% 15,753,754 52.0%
Gross Margin $24,054,000 51.6% $ 20,315,000 44.5% $ 11,180,616 37.4% $ 14,570,432 48.0%
Operating Expenses:
General & Administrative 8,061,000 17.3% 11,559,000 25.3% 8,997,168 30.1% 8,456,702 27.9%
Selling & Marketing 5,585,000 12.0% 7,825,000 17.2% 6,124,046 20.5% 5,875,623 19.4%
Research & Development 3,421,000 7.3% 4,439,000 9.7% 4,637,217 15.5% 4,233,639 14.0%
R&D - International
R&D - New Haven
Total Operating Expenses 17,067,000 36.6% 23,823,000 52.2% 19,758,431 66.1% 18,565,964 61.2%
Operating Income $ 6,987,000 15.0% $ (3,508,000) -7.7% $ (8,577,815) -28.7% $ (3,995,532) -13.2%
Page 15
SECTION C
PRELIMINARY
COMPARATIVE VALUATION
PRELIMINARY COMPARATIVE VALUATION
ELBOW CLOSING PRICES SINCE IPO
[GRAPH OMITTED]
Graphic that plots the company's closing stock prices since the company's
initial public offering through August 22, 2001.
Page 17
PRELIMINARY COMPARATIVE VALUATION
ELBOW VERSUS NASDAQ INDEX SINCE IPO
[GRAPH OMITTED]
Graphic that plots the percentage increases and decreases of the company's
stock price compared to Nasdaq Index since the company's initial public
offering.
Page 18
PRELIMINARY COMPARATIVE VALUATION
ELBOW VERSUS SMALL CAP PEERS
[GRAPH OMITTED]
Graphic that plots the percentage increases or decreases in the company's stock
prices as compared to the percentage increases or decreases in stock price for
SVI Solutions, SS&C Technologies, Radiant Systems, Inc., Pegasystems, Inc., Kana
Software Inc., Fundtech Ltd., EXE Technologies, Inc., Exchange Applications,
Inc. and Blue Martini Software.
Page 19
PRELIMINARY COMPARATIVE VALUATION
ELBOW VERSUS SELECTED SMALL CAP PEERS
[GRAPH OMITTED]
Graphic that plots the percentage increases or decreases in the company's stock
price as compared to the percentage increases or decreases in stock price for
SVI Solutions, EXE Technologies, Inc., Exchange Applications, Inc. and Blue
Martini Software.
Page 20
PRELIMINARY COMPARATIVE VALUATION
SMALL CAP PEER GROUP ANALYSIS
8/21/01 52 WEEK SHARES EPS
FISCAL ------------------------------------------------------------ MARKET ENTERPRISE
COMPANY TKR. YEAR CLOSE HIGH LOW OUT. CY01E CY02E CAP VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
$s $s $s MM $s $s $MM $MM
- -----------------------------------------------------------------------------------------------------------------------------------
Blue Martinii Software BLUE Dec $1.00 $72.25 $0.90 63.5 $(0.81) $(0.09) $ 64 $ 9
Exchange Applications, Inc. EXAP Dec $0.35 $27.00 $0.34 34 $(0.55) $(0.07) $ 12 $ 35
EXE Technologies, Inc. EXEE Dec $3.60 $21.00 $3.45 45.3 $(0.11) $ 0.15 $163 $126
Fundtech Ltd. FNDT Dec $6.55 $26.00 $5.63 14.2 $(0.37) $ 0.24 $ 93 $ 38
Kana Software Inc. # KANA Dec $0.91 $41.75 $0.50 172.5 $(0.55) $(0.05) $157 $ 61
Pegasystems Inc. PEGA Dec $3.45 $ 9.00 $1.81 32.7 $ 0.17 $ 0.20 $113 $ 88
Radiant Systems, Inc. RADS Dec $8.70 $29.13 $8.30 27.9 $ 0.17 $ 0.51 $243 $208
SS&C Technologies SSNC Dec $6.90 $ 7.50 $3.94 15.0 $ 0.30 NA $103 $ 43
SVI Solutions (2) SVI Mar $0.84 $ 5.88 $0.60 37.9 $(0.22) NA $ 32 $ 52
--------------------------------------
MEAN: $(0.22) $ 0.13 $109 $ 73
MAX: $ 0.30 $ 0.51 $243 $208
MIN: $(0.81) $ (0.09) $ 12 $ 9
STRIPPED MEAN: $(0.21) $ 0.09 $104 $ 63
--------------------------------------
Ecometry ECOM Dec $1.40 $4.50 $1.19 12.5 $ (0.55) NA $ 17 $(20)*
REV. REV. REV. MARKET CAP. / REV.
------------------------------------------------------------
COMPANY LTM 2001E 2002E LTM 2001E 2002E
- -----------------------------------------------------------------------------------------------
$MM $MM $MM x x x
- -----------------------------------------------------------------------------------------------
Blue Martinii Software $ 85 $ 63 $ 88 0.7x 1.0x 0.7x
Exchange Applications, Inc. $ 53 $ 50 $ 61 0.2x 0.2x 0.2x
EXE Technologies, Inc. $117 $105 $116 1.4x 1.5x 1.4x
Fundtech Ltd. $ 50 $ 48 $ 56 1.9x 2.0x 1.7x
Kana Software Inc. # $130 $147 $181 1.2x 1.1x 0.9x
Pegasystems Inc. $ 87 $ 87 NA 1.3x 1.3x NA
Radiant Systems, Inc. $136 $150 $206 1.8x 1.6x 1.2x
SS&C Technologies $ 57 $ 60 NA 1.8x 1.7x NA
SVI Solutions (2) $ 30 NA NA 1.1x NA NA
-------------------------------------------------------------
MEAN: $ 83 $ 89 $118 1.3x 1.3x 1.0x
MAX:
MIN: $136 $150 $206 1.9x 2.0x 1.7x
STRIPPED MEAN: $ 30 $ 48 $ 56 0.2x 0.2x 0.2x
$ 83 $ 85 $111 1.3x 1.4x 1.0x
------------------------------------------------------------
Ecometry $ 37 $ 89** NA 0.5x 0.2x NA
LTM - Latest Twelve Months; CY - Calendar Year; NA - Not Available; NMF - Not
Meaningful
# Denotes AH&H research coverage
Company information based on Bloomberg and actual company filings. Earnings per
share estimates are based on First Call Consensus estimates
* Given the unusual environment, Market Cap to Revenue is a more appropriate
metric than Enterprise Value to Revenue
** Revenue for 2001 is based on available estimates, using nonpublic figures
provided by management, the forward metrics are both approximately 0.57x
(2) EPS estimates reflect a March fiscal year end.
THIS GROUP OF PEER COMPANIES SHOULD BE CONSIDERED THE MOST RELEVANT, AS THE
STRATEGIC FOCUS AND SIZE OF EACH OF THESE NAMES CAN BE CONSIDERED MORE CLOSELY
COMPARABLE WITH BUILDER.
Page 21
PRELIMINARY COMPARATIVE VALUATION
SMALL CAP PEER GROUP ANALYSIS
- --------------------------------------------------------------------------------
MARKET CAP. (MM) ENTERPRISE VAL. (MM) 2001E REVENUE
- --------------------------------------------------------------------------------
RADS $243 RADS $208 RADS $150
EXEE $163 EXEE $126 KANA $147
KANA $157 PEGA $ 88 EXEE $105
PEGA $113 KANA $ 61 ECOM $ 89
SSNC $103 SVI $ 52 PEGA $ 87
FNDT $ 93 SSNC $ 43 BLUE $ 63
BLUE $ 64 FNDT $ 38 SSNC $ 60
SVI $ 32 EXAP $ 35 EXAP $ 50
- --------------------------------------------------------------------------------
ECOM $ 17 BLUE $ 9 FNDT $ 48
- --------------------------------------------------------------------------------
EXAP $ 12 ECOM $(20) SVI NA
- -------------------------------------------------------------------------------
MEAN: $100 MEAN: $ 64 MEAN: $ 89
STRIPPED MEAN: $ 93 STRIPPED MEAN: $ 57 STRIPPED MEAN: $ 86
- --------------------------------------------------------------------------------
Page 22
PRELIMINARY COMPARATIVE VALUATION
SMALL CAP PEER GROUP ANALYSIS
- ----------------------------- -------------------------------- --------------------------------
ENTERPRISE VAL./LTM REV. ENTERPRISE VAL./2001E REV. ENTERPRISE VAL./2002E REV.
- ----------------------------- -------------------------------- --------------------------------
SVI 1.7x RADS 1.4x EXEE 1.1x
RADS 1.5x EXEE 1.2x RADS 1.0x
EXEE 1.1x PEGA 1.0x FNDT 0.7x
PEGA 1.0x FNDT 0.8x EXAP 0.6x
SSNC 0.8x SSNC 0.7x KANA 0.3x
FNDT 0.7x EXAP 0.7x BLUE 0.1x
-------------------------------
EXAP 0.7x KANA 0.4x ECOM NA
BLUE 0.1x -------------------------------
KANA 0.5x ------------------------------- SSNC NA
BLUE 0.1x ECOM -0.2x SVI NA
- ---------------------------- ------------------------------- PEGA NA
ECOM -0.5X SVI NA -------------------------------
- ---------------------------- -------------------------------
MEAN: 0.8 MEAN: 0.7 MEAN: 0.6
STRIPPED MEAN: 0.8 STRIPPED MEAN: 0.7 STRIPPED MEAN: 0.6
- ----------------------------- -------------------------------- --------------------------------
Page 23
PRELIMINARY COMPARATIVE VALUATION
PEER GROUP ANALYSIS
8/21/01 52 WEEK SHARES EPS
FISCAL ------------------------------------------------------------------
COMPANY TKR. YEAR CLOSE HIGH LOW OUT. CY01E CY02E
- -----------------------------------------------------------------------------------------------------------------------------------
$s $s $s MM $s $s
- -----------------------------------------------------------------------------------------------------------------------------------
Broadvision, Inc.# BVSN Dec $ 2.58 $ 39.75 $ 2.50 273.4 $ (0.68) $ (0.15)
Blue Martinii Software (a) BLUE Dec $ 1.00 $ 72.25 $ 0.90 63.5 $ (0.81) $ (0.09)
Descartes Systems Group, Inc. (1) DSGX Jan $ 6.00 $ 54.25 $ 5.67 44.0 $ 0.04 $ 0.05
E.Piphany, Inc.# EPNY Dec $ 6.08 $ 75.83 $ 5.50 67.1 $ (1.01) $ (0.07)
Exchange Applications, Inc. # (d) EXAP Dec $ 0.35 $ 27.00 $ 0.34 34 $ (0.55) $ (0.07)
EXE Technologies, Inc. EXEE Dec $ 3.60 $ 21.00 $ 3.45 45.3 $ (0.11) $ 0.15
Fair, Isaac and Company (2) FIC Sep $ 62.72 $ 69.90 $ 25.46 22.4 $ 1.96 $ 2.33
Fundtech Ltd. FNDT Dec $ 6.55 $ 26.00 $ 5.63 14.2 $ (0.37) $ 0.24
HNC Software HNCS Dec $ 20.18 $ 82.50 $ 11.00 35.0 $ 0.66 $ 0.99
JDA Software JDAS Dec $ 19.37 $ 22.94 $ 7.19 24.8 $ 0.65 $ 0.85
J.D. Edwards & Co. (3) (c) JDEC Oct $ 8.03 $ 29.50 $ 6.80 114.0 $ 0.01 $ 0.21
Kana Software Inc. # KANA Dec $ 0.91 $ 41.75 $ 0.50 172.5 $ (0.55) $ (0.05)
Manhattan Associates, Inc. MANH Dec $ 21.18 $ 75.25 $ 10.13 31.0 $ 0.76 $ 1.00
Pegasystems Inc. PEGA Dec $ 3.45 $ 9.00 $ 1.81 32.7 $ 0.17 $ 0.20
Radiant Systems, Inc. RADS Dec $ 8.70 $ 29.13 $ 8.30 27.9 $ 0.17 $ 0.51
Retek Inc. RETK Dec $ 23.60 $ 60.00 $ 15.56 50.7 $ 0.09 $ 0.46
SS&C Technologies SSNC Dec $ 6.90 $ 7.50 $ 3.94 15.0 $ 0.30 NA
SVI Solutions (4) SVI Mar $ 0.84 $ 5.88 $ 0.60 37.9 $ (0.22) NA
Transaction Systems Architects (2) TSAI Sep $ 10.67 $ 19.38 $ 5.69 36.7 $ 0.35 $ 0.41
Travelocity.com (b) TVLY Dec $ 24.80 $ 38.79 $ 8.75 16.9 $ 0.31 $ 0.72
--------------------
MEAN: $ 0.06 $ 0.43
MAX: $ 1.96 $ 2.33
MIN: $ (1.01) $ (0.15)
STRIPPED MEAN: $ 0.01 $ 0.34
Ecometry ECOM Dec $ 1.40 $ 4.50 $ 1.19 12.5 $ (0.55) NA
REV. REV. REV ENTERPRISE VAL. / REV.
MARKET ENTERPRISE ------------------------------------------------------------------
COMPANY CAP VALUE LTM 2001E 2002E LTM 2001E 2002E
- -----------------------------------------------------------------------------------------------------------------------------------
$MM $MM $MM $MM $MM x x x
- -----------------------------------------------------------------------------------------------------------------------------------
Broadvision, Inc.# $ 705 $ 524 $406 $245 NA 1.3x 2.1x NA
Blue Martinii Software (a) $ 64 $ 9 $ 85 $ 63 $ 88 0.1x 0.1x 0.1x
Descartes Systems Group, Inc. (1) $ 264 $ 251 $ 82 $102 $183 3.1x 2.5x 1.4x
E.Piphany, Inc.# $ 408 $ 59 $158 $136 $169 0.4x 0.4x 0.3x
Exchange Applications, Inc. # (d) $ 12 $ 35 $ 53 $ 50 $ 61 0.7x 0.7x 0.6x
EXE Technologies, Inc. $ 163 $ 126 $117 $105 $116 1.1x 1.2x 1.1x
Fair, Isaac and Company (2) $1,404 $ 1,368 $321 $355 NA 4.3x 3.8x NA
Fundtech Ltd. $ 93 $ 38 $ 50 $ 48 $ 56 0.7x 0.8x 0.7x
HNC Software $ 707 $ 602 $246 $244 $297 2.4x 2.5x 2.0x
JDA Software $ 481 $ 399 $183 $195 $215 2.2x 2.0x 1.9x
J.D. Edwards & Co. (3) (c) $ 916 $ 709 $973 $907 NA 0.7x 0.8x NA
Kana Software Inc. # $ 157 $ 61 $130 $147 $181 0.5x 0.4x 0.3x
Manhattan Associates, Inc. $ 657 $ 579 $142 $152 $189 4.1x 3.8x 3.1x
Pegasystems Inc. $ 113 $ 88 $ 87 $ 87 NA 1.0x 1.0x NA
Radiant Systems, Inc. $ 243 $ 208 $136 $150 $206 1.5x 1.4x 1.0x
Retek Inc. $1,196 $ 1,143 $139 $180 $262 8.2x 6.4x 4.4x
SS&C Technologies $ 103 $ 43 $ 57 $ 60 NA 0.8x 0.7x NA
SVI Solutions (4) $ 32 $ 52 $ 30 NA NA 1.7x NA NA
Transaction Systems Architects (2) $ 391 $ 376 $307 NA NA 1.2x NA NA
Travelocity.com (b) $ 420 $ 310 $274 $327 $414 1.1x 0.9x 0.7x
$ 426 $ 349 $199 $197 $187 1.9x 1.8x 1.4x
$1,404 $ 1,368 $973 $907 $414 8.2x 6.4x 4.4x
$ 12 $ 9 $ 30 $ 48 $ 56 0.1x 0.1x 0.1x
$ 395 $ 311 $165 $162 $179 1.6x 1.6x 1.2x
Ecometry $ 17 $ (20) $ 37 $ 89 NA -0.6x -0.2x NA
LTM - Latest Twelve Months; CY - Calendar Year; NA - Not Available; NMF - Not
Meaningful
# Denotes AH&H research coverage
Company information based on Bloomberg and actual company filings. Earnings per
share estimates are based on First Call Consensus estimates
(1) EPS estimates reflect a January fiscal year end.
(2) EPS estimates reflect a September fiscal year end.
(3) EPS estimates reflect a October fiscal year end.
(4) EPS estimates reflect a March fiscal year end.
WHILE ALL OF THESE COMPANIES ARE STRATEGICALLY RELEVANT, MANY OF THEM CANNOT BE
CONSIDERED TRULY COMPARABLE, DUE TO SIZE AND/OR MATURITY.
Page 24
PRELIMINARY COMPARATIVE VALUATION
PEER GROUP ANALYSIS - RANKING
Market Cap. (MM) Enterprise Val. (MM) 2001E Revenue
FIC $1,404 FIC $ 1,368 JDEC $907
RETK $1,196 RETK $ 1,143 FIC $355
JDEC $ 916 JDEC $ 709 TVLY $327
HNCS $ 707 HNCS $ 602 BVSN $245
BVSN $ 705 MANH $ 579 HNCS 244
MANH $ 657 BVSN $ 524 JDAS $195
JDAS $ 481 JDAS $ 399 RETK $180
TVLY $ 420 TSAI $ 376 MANH $152
EPNY $ 408 TVLY $ 310 RADS $150
TSAI $ 391 DSGX $ 251 KANA $147
DSGX $ 264 RADS $ 208 EPNY $136
RADS $ 243 EXEE $ 126 EXEE $105
EXEE $ 163 PEGA $ 88 DSGX $102
---------------------
KANA $ 157 KANA $ 61 ECOM $ 89
---------------------
PEGA $ 113 EPNY $ 59 PEGA $ 87
SSNC $ 103 SVI $ 52 BLUE $ 63
FNDT $ 93 SSNC $ 43 SSNC $ 60
BLUE $ 64 FNDT $ 38 EXAP $ 50
SVI $ 32 EXAP $ 35 FNDT $ 48
- -----------------------
ECOM $ 17 BLUE $ 9 SVI NA
- ----------------------- ------------------------
EXAP $ 12 ECOM $ (20) TSAI NA
- ----------------------- ------------------------ ---------------------
Mean: $ 407 Mean: $ 331 Mean: $192
Stripped Mean: $ 375 Stripped Mean: $ 295 Stripped Mean: $158
Page 25
PRELIMINARY COMPARATIVE VALUATION
PEER GROUP ANALYSIS - VALUATION METRICS
Enterprise Val./LTM Rev. Enterprise Val./2001E Rev Enterprise Val./2002E Rev.
RETK 8.2x RETK 6.4x RETK 4.4x
FIC 4.3x FIC 3.8x MANH 3.1x
MANH 4.1x MANH 3.8x HNCS 2.0x
DSGX 3.1x HNCS 2.5x JDAS 1.9x
HNCS 2.4x DSGX 2.5x DSGX 1.4x
JDAS 2.2x BVSN 2.1x EXEE 1.1x
SVI 1.7x JDAS 2.0x RADS 1.0x
RADS 1.5x RADS 1.4x TVLY 0.7x
BVSN 1.3x EXEE 1.2x FNDT 0.7x
TSAI 1.2x PEGA 1.0x EXAP 0.6x
TVLY 1.1x TVLY 0.9x EPNY 0.3x
EXEE 1.1x FNDT 0.8x KANA 0.3x
PEGA 1.0x JDEC 0.8x BLUE 0.1x
----------------------
SSNC 0.8x SSNC 0.7x ECOM NA
----------------------
FNDT 0.7x EXAP 0.7x BVSN NA
JDEC 0.7x EPNY 0.4x SVI NA
EXAP 0.7x KANA 0.4x FIC NA
KANA 0.5x BLUE 0.1x SSNC NA
-----------------------
EPNY 0.4x ECOM -0.2x TSAI NA
-----------------------
BLUE 0.1x SVI NA PEGA NA
- -----------------------
ECOM -0.6x TSAI NA JDEC NA
- ----------------------- ----------------------- -----------------------
Mean: 1.7 Mean: 1.7 Mean: 1.4
Stripped Mean: 1.5 Stripped Mean: 1.5 Stripped Mean: 1.2
Page 26
PRELIMINARY COMPARATIVE VALUATION
RECENT MANAGEMENT BUY-OUTS AND RECAPS
DATE TRANSACTION TARGET
TARGET NAME ACQUIROR NAME ANNOUNCED VALUE ENTERPRISE VALUE
- ---------------------------------------------------------------------------------------------------------
$MM $MM
- ---------------------------------------------------------------------------------------------------------
CONTINUOUS SOFTWARE TELELOGIC AB 10/25/00 43.33 40.16
Telelogic acquired Continuous for $3.46 a share in cash through tender offer of at least 6,194,930 shares
of Continuous stock.
NETPLIANCE INC. COMPANY MANAGEMENT 12/22/00 $39.00 $11.50
The original proposal called for a management buy-out of all common stock at $0.65 a share. Management
already owned approximately 52% of the common stock. One month after the announcement, however, the deal
was terminated.
CYBERSHIFT INC. COMPANY MANAGEMENT 01/01/01 NA NA
CyberShift provides integrated workplace management solutions. The management buy-out was sponsored by
LLR Equity Partners and the Edison Venture Fund. Blick PLC, a UK based company, previously owned a 50%
stake in CyberShift. It will retain a minority ownership position.
MATHSOFT INC COMPANY MANAGEMENT 01/23/01 $ 7.00 NA
Capital for the deal was provided by management as well as the Edison Venture Fund and Spring Capital
Partners. The buyout will allow MathSoft Engineering & Education, Inc., to maintain its leading position
in key corporate and education markets and to focus on investment in innovation and profitable growth
from new products and markets.
INTERWORLD J NET ENTERPRISES 01/25/01 $40.00 NA
Interworld agreed to sell up to $40 million worth of common stock to J Net Enterprises. The infusion of
capital will allow Interworld to follow through on its short-term and long-term business goals. Each of
InterWorld's existing stockholders will receive the right to acquire approximately 1.05 shares of new
InterWorld common stock at $.65 per share.
ROSS SYSTEMS, INC NOW SOLUTIONS, LLC 02/05/01 $ 6.10 NA
Ross Systems agreed to a management buy-out of its Human Resource and Payroll Product Line that provides
enterprise management software and e-business solutions for mid-market process manufacturers.
WOWTOWN.COM PHOENIX STAR VENTURES 02/12/01 NA
Phoenix Star Ventures is comprised of present and former officers of WOWtown.com. The deal included a
reverse split of Wowtown.com's common stock so that five outstanding shares was converted into one share.
In return, WOWtown.com received 9.5 million shares of private stock ands $218,400 of liabilities were
assumed.
VOTENET COMPANY MANAGEMENT 02/14/01 NA NA
Votenet, an online database designed for campaign finance research and an interactive voice response
system for grassroots lobbying, was bought out by management from Medinex, a web-based physician's office
management software system
SERIF COMPANY MANAGEMENT 04/02/01 $ 1.14 NA
Serif, a division of Vizacom, was bought by company management for $1.1375 million. The deal represented
another step in Vizacom's restructuring strategy. Serif provides software and visual communications
operations and will be able to license the software.
CLICKACTION COMPANY MANAGEMENT 06/20/01 $ 4.50 NA
Purchase agreement to sell the assets of its Elibrium Division to its management team. The deal provides
for a cash payment to ClickAction of a minimum of $4.5 million, of which $2.0 million is scheduled to be
paid on closing, with the balance to be paid of the total consideration represents licensing fees for a
private label version of ClickAction's email marketing services and use of ClickAction's opt-in email
database.
Page 27
PRELIMINARY COMPARATIVE VALUATION
VOLUME AT PRICE HISTOGRAMS
Histograms only imply a particular basis range for shareholders and do
not incorporate qualitative analysis. Nevertheless, they do, in certain
circumstances, allow for an inference of that price level at which a
simple majority* of shareholders would realize some investment gain.
[* Delaware companies require a simple majority for approval of a merger.]
Page 28
PRELIMINARY COMPARATIVE VALUATION
VOLUME AT PRICE HISTOGRAM: ONE YEAR
[GRAPHIC OMITTED]
Graphic that depicts the trading volume of the company's common stock within
certain price per share categories, ranging from $1.20 per share to $4.40 per
share, and plots the cumulative trading volume as a percentage of float within
the same price per share categories.
$1.20 - $1.60 - $2.00 - $2.40 - $2.80 - $3.20 - $3.60 - $4.00 -
$1.60 $2.00 $2.40 $2.80 $3.20 $3.60 $4.00 $4.40
Trading Volume as %
of Volume Traded 15.3% 26.2% 4.5% 19.0% 14.2% 10.8% 5.6% 4.4%
Cumulative Volume as %
of Volume Traded 15.3% 41.5% 46.0% 64.9% 79.2% 90.0% 95.6% 100.0%
Trading Volume as %
of Total Shares Outstanding 19.0% 32.7% 5.6% 23.7% 17.8% 13.5% 7.0% 5.5%
Cumulative Volume as %
of Total Shares Outstanding 19.0% 51.7% 57.3% 81.0% 98.7% 112.3% 119.2% 124.7%
Trading Volume as %
of Float 29.2% 50.1% 8.5% 36.2% 27.2% 20.7% 10.7% 8.4%
Cumulative Volume as %
of Float 29.2% 79.3% 87.8% 124.0% 151.2% 172.0% 182.6% 191.1%
Source: FactSet and Bloomberg. Shares outstanding assumed to be
10.987 million and float assumed to be 2.85 million.
Page 29
PRELIMINARY COMPARATIVE VALUATION
FORM 13 FILERS (SOURCE: BLOOMBERG)
TOP 16 HOLDERS SHARES HELD %OUTSTANDING
- -------------- ----------- ------------
Allan J. Gardner 2,175,000 17.44%
Wilburn W. Smith 2,150,000 17.24%
Taunus Corporation 271,200 2.175%
Aon Advisors 30,000 0.241%
Brown Brothers 20,000 0.160%
Franklin Advisors 32,600 0.261%
Northern Trust 10,680 0.086%
Fidelity Management 13,100 0.105%
Barclays Global 6,000 0.048%
Dimensional Fund 7,300 0.059%
Bridgeway Capital 4,000 0.032%
Sentry Investment Management 3,845 0.031%
Wilshire Association 700 0.006%
Merrill Lynch 634 0.005%
John A. Marrah 500 0.004%
T. Rowe Price 400 0.003%
- ---------------------------------------------------------------
Of Total Shares Outstanding 4,725,959 37.90%
- ---------------------------------------------------------------
Source: Bloomberg
Page 30
SECTION D
TRANSACTION OVERVIEW
PRELIMINARY & SUBJECT TO SIGNIFICANT CHANGE
TRANSACTION OVERVIEW
PROPOSED STRUCTURE
Taxable Reverse Merger; Cash as Consideration
[GRAPH OMITTED]
Graphic depicts the corporate structure of two companies before and after a
taxable reverse merger for which cash is paid as merger consideration.
Page 32
EXHIBIT
PEER GROUP PROFILES
PRELIMINARY & SUBJECT TO SIGNIFICANT CHANGE
PEER GROUP PROFILES - BLUE MARTINI SOFTWARE
BUSINESS DESCRIPTION
Blue Martinii Software, Inc. competes in the eCRM market and provides enterprise
software applications and services designed to enable companies to understand,
target and interact with customers and channel partners. The Company's products'
analytic capabilities are allow companies to develop insights regarding customer
behavior and use these insights to provide customers with relevant products,
content and offerings. Blue Martinii's application suite allows companies to
interact with customers and channel partners across multiple touch points,
including, Websites, mobile wireless devices, cellular phones, e-mail and online
marketplaces.
COMMENT
BLUE reported second quarter revenues of $15.6 million, as compared to revenues
of $15.0 million reported for the same period in the prior year. On a pro forma
basis, Blue Martinii reported a net loss of $15.8 million for the quarter, as
compared to a pro forma net loss of $11.1 million for the second quarter of
2000.
Stock Price as of Aug. 21: $ 1.00
Market Capitalization: $ 63.5 Mil
Enterprise Value: $ 9.1 Mil
LTM (Jun) Sales: $ 84.7 Mil
LTM (Jun) Net Income: $(76.7)Mil
CY2001E Sales: $ 63.4 Mil
CY2001E EPS: $ (.81)
[BLUE MARTINI SOFTWARE LOGO]
[GRAPHIC OMITTED]
Graphic plots trading prices of Blue Martini Software stock from August 21, 2000
to August 21, 2001.
Page 34
PEER GROUP PROFILES - BROADVISION, INC.
BUSINESS DESCRIPTION:
BroadVision, Inc. develops and sells an integrated suite of packaged
applications for conducting e-business interactions, transactions and services.
The Company's applications are used to sell, buy and exchange goods, services
and information over the Web and on wireless devices. The BroadVision e-business
application suite enables a corporation to establish and sustain relationships
with customers, suppliers, partners, distributors, employees and other
constituents of the extended enterprise.
COMMENT
BroadVision is currently completing a voluntary stock option exchange program
for the company's employees. As part of the program, eligible
BroadVision employees can elect to cancel any previously granted underwater
options in exchange for an equal number of replacement options to be granted in
the future. The grant date for the replacement options will be November 27,
2001. The exercise price of the new options will be set at the fair market value
of common stock when the replacement option is granted.
Stock Price as of Aug. 21: $ 2.58
Market Capitalization: $ 705.4 Mil
Enterprise Value: $ 523.6 Mil
LTM (Jun) Sales: $ 405.6 Mil
LTM (Jun) Net Income: $(464.8)Mil
CY2001E Sales: $ 244.7 Mil
CY2001E EPS: $ (.68)
[BROADVISION LOGO]
[GRAPHIC OMITTED]
Graphic plots trading prices of Broadvision stock from August 21, 2000 to August
21, 2001.
Page 35
PEER GROUP PROFILES - DESCARTES SYSTEMS GROUP
BUSINESS DESCRIPTION:
Descartes Systems Group, Inc. is a provider of end-to-end logistics solutions
that facilitate B2B e-commerce. Descartes' e-fulfillment software and exchange
solutions create fulfillment networks known as DeliveryNets. DeliveryNet
solutions allow organizations to deliver customer service in a profitable manner
and to create innovative new products and services. These solutions leverage
Descartes' Internet-based Global Logistics Network - an open, worldwide network
of shippers, receivers, carriers, logistics service providers, e-marketplaces,
vertical portals, and transportation exchanges.
COMMENT
Descartes completed an acquisition of Centricity, Inc., a leading provider of
shipper-oriented transportation optimization. The addition of Centricity's
technology and industry experts creates a broad set of applications and services
and an experienced group of industry experts dedicated to the development of
next generation solutions across all modes of transportation.
Stock Price as of Aug. 21: $ 6.00
Market Capitalization: $264.0 Mil
Enterprise Value: $251.2 Mil
LTM (Jun) Sales: $ 81.7 Mil
LTM (Jun) Net Income: $(39.0)Mil
CY2001E Sales: $101.8 Mil
CY2001E EPS: $ .04
[DESCARTES LOGO]
[GRAPHIC OMITTED]
Graphic plots trading prices of Descartes stock from August 21, 2000 to August
21, 2001.
Page 36
PEER GROUP PROFILES - E. PIPHANY, INC.
BUSINESS DESCRIPTION
E.piphany a leading provider of intelligent software and CRM solutions in the
retail, financial services, communications, technology, and travel industries.
The Company combines analytic and operational CRM into a single suite, the
E.piphany E.5 System. E.piphany E.5 integrates information among communications
channels and from legacy databases. Unifying all inbound and outbound marketing,
sales, and service interactions, E.piphany E.5 delivers a single,
enterprise-wide view that helps global businesses better understand and
proactively serve customers in real time.
COMMENT
E.piphany, announced revenues for the quarter ended June 30, 2001 of $31.1
million, representing an increase of 27% over revenues of $24.5 million in the
second quarter of 2000. Second quarter license revenues were $16.3 million and
service revenues were $14.8 million. The net loss for the quarter was $19.1
million, or $(0.28) per share, compared to a net loss of $4.1 million, or
$(0.08) per share during the second quarter of 2000.
Stock Price as of Aug. 21: $ 6.08
Market Capitalization: $407.7 Mil
Enterprise Value: $ 58.6 Mil
LTM (Jun) Sales: $157.5 Mil
LTM (Jun) Net Income: $(1140)Mil
CY2001E Sales: $136.0 Mil
CY2001E EPS: $(1.01)Mil
[E.PHIPHANY LOGO]
[GRAPHIC OMITTED]
Graphic plots trading prices of E. Phiphany stock from August 21, 2000 to August
21, 2001.
Page 37
PEER GROUP PROFILES - EXCHANGE APPLICATIONS, INC.
BUSINESS DESCRIPTION:
Exchange Applications, Inc. (Xchange) offers CRM software and services designed
for Global 2000 and mid-sized companies. The services cover several vertical
markets, including financial services, telecommunications, retail and others.
It's Xchange 7 solution is comprised of five software products. Four of the
products, Xchange Analytics, Xchange Campaign, Xchange Emessaging and Xchange
Enact are encompassed in a suite called Xchange Dialogue and the fifth is
Xchange Real Time.
COMMENT
Xchange issued two 12% Senior Secured Convertible Debentures due January 10,
2005 to Insight Venture Partners in a principal amount of $7,241,307.37 and
$5,000,000, respectively. In consideration for the issuance of the Convertible
Debentures, (i) all of the obligations of the Company under the Company's
$7,000,000 12% Bridge Promissory Note, dated June 1, 2001, issued to Insight,
were terminated and (ii) the Company received $5,000,000 in cash.
Stock Price as of Aug. 21: $ 0.35
Market Capitalization: $ 11.9 Mil
Enterprise Value: $ 35.1 Mil
LTM (Jun) Sales: $ 53.3 Mil
LTM (Jun) Net Income: $(202.3)Mil
CY2001E Sales: $ 49.6 Mil
CY2001E EPS: $ (.55)
[XCHANGE LOGO]
[GRAPHIC OMITTED]
Graphic plots trading prices of Exchange Applications, Inc. stock from August
21, 2000 to August 21, 2001.
Page 38
PEER GROUP PROFILES - EXE TECHNOLOGIES, INC.
BUSINESS DESCRIPTION:
EXE Technologies, Inc. provides fulfillment, warehousing and distribution
software for e-commerce and traditional sales channels. The Company's software
allows companies to manage and control the flow of inventory throughout the
supply chain using the Internet and traditional communication methods. Clients
use its software to reduce distribution costs, manage inventory across the
supply chain and increase customer loyalty and satisfaction. EXE provides global
service and support for its software from established facilities throughout the
world.
COMMENT
EXE announced the appointment of Richard Lackey as its chief technology officer.
Lackey brings more than 20 years of commercial software experience. Prior to
EXE, he served as co-founder, vice president engineering and chief technology
officer at RoamingCloud. Lackey has held senior management and/or CTO positions
for Brio Technology, SQRIBE Technologies, Enterworks, and Compuware EcoSystems.
Stock Price as of Aug. 16: $ 3.60
Market Capitalization: $ 163.3 Mil
Enterprise Value: $ 126.1 Mil
LTM (Jun) Sales: $ 116.7 Mil
LTM (Jun) Net Income: $ (16.6)Mil
CY2001E Sales: $ 105.4 Mil
CY2001E EPS: $ (.11)
[EXE TECHNOLOGIES LOGO]
[GRAPHIC OMITTED]
Graphic plots trading prices of EXE Technologies, Inc. stock from August 21,
2000 to August 21, 2001.
Page 39
PEER GROUP PROFILES - FAIR, ISAAC AND COMPANY
BUSINESS DESCRIPTION:
Fair, Isaac and Company, Inc. is a global provider of decision-making solutions.
The Company serves clients primarily in financial services, insurance, retail
and telecommunications industries. The Company employs various tools, such as
database enhancement software, predictive modeling, adaptive control and systems
automation to help businesses use data to make faster, more profitable decisions
on their marketing, customer acquisition campaigns, operations and portfolio
management. Among the Company's products are the North American credit bureau
scores and the FICO credit bureau risk scores used throughout the credit card,
mortgage, auto lending and other industries.
COMMENT
Fair, Isaac announced that its Board of Directors has adopted a Stockholder
Rights Plan. Under the Rights Plan, rights will be distributed as a dividend at
the rate of one right for each share of Fair, Isaac common stock, held by
shareholders of record as of the close of business on August 21, 2001.
Stock Price as of Aug. 21: $ 62.72
Market Capitalization: $1404.1 Mil
Enterprise Value: $1367.5 Mil
LTM (Jun) Sales: $ 320.9 Mil
LTM (Jun) Net Income: $ 39.7 Mil
CY2001E Sales: $ 355.4 Mil
CY2001E EPS: $ 1.96
[FAIR, ISAAC LOGO]
[GRAPHIC OMITTED]
Graphic plots trading prices of Fair, Isaac and Company, Inc. stock from August
21, 2000 to August 21, 2001.
Page 40
PEER GROUP PROFILES - FUNDTECH
BUSINESS DESCRIPTION:
Fundtech is a provider of software solutions that enable businesses and their
banks to process payments electronically, transfer funds and manage cash
positions. Fundtech's client/server web-enabled software products automate the
process of transferring funds among corporations, banks and clearance systems
and enable businesses to manage global cash positions efficiently and in
real-time. Fundtech's products and related services are designed to integrate
all elements of the electronic payments cycle, including electronic funds
transfer, cash and treasury management.
COMMENT
Michael Carus, Executive Vice President, Chief Operating Officer and Chief
Financial Officer, recently resigned to become the COO and CFO of a leading
international venture capital firm. Oz Cohen, Fundtech's Vice President of
Business Development, has been named Acting Chief Financial Officer and will
assume responsibility for the Company's finance, legal, and human resources
functions.
Stock Price as of Aug. 21: $25.38
Market Capitalization: $ 93.0 Mil
Enterprise Value: $ 37.6 Mil
LTM (Jun) Sales: $320.9 Mil
LTM (Jun) Net Income: $(5.58)Mil
CY2001E Sales: $ 47.5 Mil
CY2001E EPS: $ (.37)
[GRAPHIC]
[GRAPHIC OMITTED]
Graphic plots the trading prices of Fundtech stock from August 21, 2000 to
August 21, 2001.
Page 41
PEER GROUP PROFILES - HNC SOFTWARE
BUSINESS DESCRIPTION:
HNC Software Inc. develops, markets and supports predictive software solutions
for the service industries. Its intelligent decision management solutions employ
proprietary neural-network predictive decision engines, profiles, traditional
statistical modeling, business models, expert rules and/or context vector
technology to convert existing data and business experiences into meaningful
recommendations and actions. The Company currently serves the financial
services, insurance, telecommunications and e-business markets.
COMMENT
HNC announced that on August 20, 2001, it agreed to privately place $125 million
aggregate principal amount of its 5.25% Convertible Subordinated Notes due
September 1, 2008. The company has granted the initial purchasers an option to
purchase up to an additional $25 million in principal amount of these
convertible notes. The notes are convertible into shares of the company's common
stock at a conversion price of $28.80 per share.
Stock Price as of Aug. 21: $ 20.18
Market Capitalization: $ 706.7 Mil
Enterprise Value: $ 602.1 Mil
LTM (Jun) Sales: $ 245.9 Mil
LTM (Jun) Net Income: $(106.0)Mil
CY2001E Sales: $ 244.0 Mil
CY2001E EPS: $ 0.66
[HNC SOFTWARE LOGO]
[GRAPHIC OMITTED]
Graphic plots the trading prices of HNC Software Inc. stock from August 21, 2000
to August 21, 2001.
Page 42
PEER GROUP PROFILES - JDA SOFTWARE GROUP
BUSINESS DESCRIPTION:
JDA Software Group, Inc. is a global provider of sophisticated software
solutions and professional services to help multi-channel companies manage their
operations. The JDA Portfolio consists of integrated software solutions that are
designed to address demand and supply chain management, business process,
analytic application and e-commerce requirements of the retail industry and its
suppliers.
COMMENT
JDA announced a two year agreement with IBM Corporation to resell IBM servers,
personal computing products and point-of-sale systems to clients that license
JDA Portfolio solutions. This is a new dimension to the Company's long-standing
relationship with IBM and represents JDA's second major hardware re-selling
agreement in the current quarter.
Stock Price as of Aug. 21: $19.37
Market Capitalization: $481.2 Mil
Enterprise Value: $398.7 Mil
LTM (Jun) Sales: $183.0 Mil
LTM (Jun) Net Income: $ 8.06 Mil
CY2001E Sales: $194.9 Mil
CY2001E EPS: $ .65
[JDA LOGO]
[GRAPHIC OMITTED]
Graphic plots the trading prices of JDA Software Inc. stock from August 21, 2000
to August 21, 2001.
Page 43
PEER GROUP PROFILES - J.D. EDWARDS & Co.
BUSINESS DESCRIPTION:
J.D. Edwards & Co. is a provider of agile, collaborative solutions that allow
organizations the ability to choose how they assemble internal software
applications and how they collaborate with partners and customers across the
supply chain to increase competitive advantage. The Company delivers its
c-commerce solutions and enables B2B trading communities by licensing its set of
integrated software applications to customers. The Company's latest release,
OneWorld Xe, offers significant new modules and enhancements to several existing
applications.
COMMENT
J.D. Edwards announced the execution of a definitive agreement to acquire
YOUcentric, Inc., a privately-held provider of Java-based CRM software,
including applications for sales force automation, campaign management, contact
center management, and partner relationship management. The Company plans to
acquire 100% of YOUcentric for approximately $86 million, in exchange for J.D.
Edwards common stock and cash.
Stock Price as of Aug. 21: $ 8.03
Market Capitalization: $915.6 Mil
Enterprise Value: $708.6 Mil
LTM (Jun) Sales: $972.7 Mil
LTM (Jun) Net Income: $(24.8)Mil
CY2001E Sales: $906.8 Mil
CY2001E EPS: $ (.01)
[J.D. EDWARDS LOGO]
[GRAPHIC OMITTED]
Graphic plots the trading prices of J.D. Edwards & Co. stock from August 21,
2000 to August 21, 2001.
Page 44
PEER GROUP PROFILES - KANA SOFTWARE
BUSINESS DESCRIPTION
KANA provides software solutions that help bring intelligence and automation to
service and marketing operations to better manage customer and partner
relationships. KANA provides a suite of Web-architected J2EE and COM
applications designed to scale and adapt with businesses as they grow. KANA's
e-business applications enable customers to do business when, where, and how
they want, whether that means Web contact, Web collaboration, e-mail, or
telephone. The Company's goal is to increase interactions and improve customer
experiences while decreasing costs in Contact Centers and Marketing Departments.
COMMENT
KANA and Sightward, Inc., a predictive analytics technology company, announced a
strategic partnership to integrate Sightward's prediction technology and KANA's
eCRM software. Through this new offering, companies will be able to predict the
results of a marketing campaign before it occurs, leading to more effective
management and cost savings as it relates to marketing campaign initiatives and
expenditures.
Stock Price as of Aug. 21: $ .91
Market Capitalization: $157.0 Mil
Enterprise Value: $ 61.4 Mil
LTM (Jun) Sales: $130.2 Mil
LTM (Jun) Net Income: $(3590)Mil
CY2001E Sales: $147.0 Mil
CY2001E EPS: $ (.55)
[KANA LOGO]
[GRAPHIC OMITTED]
Graphic plots trading prices of Kana stock from August 21, 2000 to August 21,
2001.
Page 45
PEER GROUP PROFILES - MANHATTAN ASSOCIATES INC.
BUSINESS DESCRIPTION:
Manhattan Associates Inc. is a provider of solutions to improve supply chain
effectiveness and efficiencies. The Company's solutions enhance distribution
efficiencies through the integration of supply chain constituents with a focus
on supply chain execution. The Company's software includes products to enable
the execution, fulfillment and delivery of customer orders, the optimization of
distribution center operations and the collaboration between and among trading
partners. It's services, including design, configuration, implementation, and
training, along with customer support and software enhancement subscriptions.
COMMENT
Manhattan Associates signed a corporate alliance with Rapistan, a division of
Siemens Dematic, the world's leading supplier of logistics and factory
automation systems. This alliance will create greater coordination between the
two organization's sales and marketing teams and promote close alignment between
technical teams, resulting in tighter integration and upgradeability across the
two companies' product lines.
Stock Price as of Aug. 16: $21.18
Market Capitalization: $656.6 Mil
Enterprise Value: $578.8 Mil
LTM (Jun) Sales: $142.3 Mil
LTM (Jun) Net Income: $ 17.9 Mil
CY2001E Sales: $152.4 Mil
CY2001E EPS: $ .76
[MANHATTAN ASSOCIATES LOGO]
[GRAPHIC OMITTED]
Graphic plots the trading prices of Manhattan Associates Inc. stock from August
21, 2000 to August 21, 2001.
Page 46
PEER GROUP PROFILES - PEGASYSTEMS INC.
BUSINESS DESCRIPTION:
Pegasystems Inc. is a provider of Customer Relationship Management (CRM)
software that enables transaction-intensive organizations to manage a broad
array of customer interactions. The Company's customers represent a range of
industries including banking and financial services, insurance, healthcare, and
telecommunications. The Company's product offerings fall into three categories:
CRM solutions, business rules technology, and private label products.
COMMENT
Pegasystems announced that Christopher J. Sullivan has been named treasurer,
Senior Vice President and Chief Financial Officer. James O'Halloran will retire
as CFO, consistent with plans he expressed last year, and will maintain his role
on the company's Board of Directors. O'Halloran will remain with the company
through August to assist with a smooth and complete transition.
Stock Price as of Aug. 21: $ 3.45
Market Capitalization: $112.7 Mil
Enterprise Value: $ 88.1 Mil
LTM (Jun) Sales: $ 87.2 Mil
LTM (Jun) Net Income: $ (2.0)Mil
CY2001E Sales: $ 87.0 Mil
CY2001E EPS: $ 0.17
[PEGASYSTEMS LOGO]
[GRAPHIC OMITTED]
Graphic plots the trading prices of Pegasystems Inc. stock from August 21, 2000
to August 21, 2001.
Page 47
PEER GROUP PROFILES - RADIANT SYSTEMS, INC.
BUSINESS DESCRIPTION:
Radiant Systems, Inc. provides enterprise-wide technology solutions to
businesses that serve the consumer. The Company offers fully integrated retail
automation solutions including point of sale systems, consumer-activated
ordering systems, back office management systems, headquarters-based management
systems and Web-enabled decision support systems. The Company also develops and
markets a variety of intelligent, Windows CE based devices that are specific to
the retail industry. In addition, the Company offers professional services
focusing on technical implementation, process improvement and change management.
COMMENT
Radiant completed the first phase of its expansion by setting up of its new
Offshore Development facility at Bangalore, India. The facility has a set up at
a cost of $1 million and has a seating capacity for 100 professionals. Radiant
will invest an additional $4 million over the next 4 years.
Stock Price as of Aug. 21: $ 8.70
Market Capitalization: $243.1 Mil
Enterprise Value: $207.8 Mil
LTM (Jun) Sales: $135.8 Mil
LTM (Jun) Net Income: $ 3.4 Mil
CY2001E Sales: $150.1 Mil
CY2001E EPS: $ 0.17
[RADIANT SYSTEMS LOGO]
[GRAPHIC OMITTED]
Graphic plots the trading prices of Radiant Systems, Inc. stock from August 21,
2000 to August 21, 2001.
Page 48
PEER GROUP PROFILES - RETEK
BUSINESS DESCRIPTION:
Retek Inc. provides advanced application software to help retailers create,
manage and fulfill consumer demand. The Company's software solutions enable
retailers to use the Internet to communicate and collaborate efficiently with
their suppliers, distributors, wholesalers, logistics providers, brokers,
transportation companies, consolidators and manufacturers. Its advanced
predictive capabilities provide accurate forecasts of consumer demand, and
integration between planning and execution functions enables retailers to
respond more rapidly to changes in either supply or demand.
COMMENT
Retek's Board of Directors selected Steve Ladwig to succeed the Company's
current chief executive officer John Buchanan. Ladwig transitioned to his role
as CEO on August 4. Buchanan will continue to serve as Chairman of Retek. Ladwig
comes to Retek after serving as Senior Vice President of Imation Corp. and
President of Imation's Data Storage and Information Management Group.
Stock Price as of Aug. 21: $ 23.60
Market Capitalization: $1196.5 Mil
Enterprise Value: $1143.1 Mil
LTM (Jun) Sales: $ 139.1 Mil
LTM (Jun) Net Income: $ (24.3)Mil
CY2001E Sales: $ 179.6 Mil
CY2001E EPS: $ .09
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PEER GROUP PROFILES - SS&C Technologies
BUSINESS DESCRIPTION:
SS&C Technologies, Inc. is a provider of client/server-based financial software
solutions, Application Service Provider/Business Process Outsourcing and
software-related consulting services, designed to improve the efficiency and
effectiveness of investment management, actuarial and analytical functions. The
Company has developed software products that provide a full range of information
management and analysis, trading, accounting, reporting and compliance tools to
help investment and actuarial professionals make real-time decisions and
automate many operational functions in financial markets.
COMMENT
SS&C authorized the continued repurchase of shares of the Company's common stock
of up to $20 million, over the next year as market and business conditions
warrant, in open market, negotiated, and block transactions. The Company
initiated the repurchase program on May 23, 2000, pursuant to which it
repurchased 1,203,219 shares for a total expenditure of $6,449,353.
Stock Price as of Aug. 21: $ 6.90
Market Capitalization: $103.5 Mil
Enterprise Value: $ 43.2 Mil
LTM (Jun) Sales: $ 56.6 Mil
LTM (Jun) Net Income: $ 3.33 Mil
CY2001E Sales: $ 59.5 Mil
CY2001E EPS: $ 0.30
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PEER GROUP PROFILES - SVI SOLUTIONS
BUSINESS DESCRIPTION:
SVI Solutions, Inc. is a global provider of multi-channel application software
technology and associated services for the retail industry including enterprise,
direct-to-consumer and store solutions and related training products and
professional and support services. The Company's applications and services
represent a full suite of offerings that provide retailers with a complete
end-to-end business solution. The Company also develops and distributes PC
courseware and skills assessment products for both desktop and retail
applications.
COMMENT
SVI signed a letter of intent for a transaction to be concluded with Shmulik
Stein International Investment Limited (SSII) and Softline Limited to reduce its
outstanding debt as well as provide the company with additional cash for
operations. The terms provide for Softline to convert its outstanding note of
approximately $11.5 million of principal and interest into common stock and a
convertible instrument of $4.5 million for the balance. SSII will purchase that
common stock from Softline for cash.
Stock Price as of Aug. 21: $ 0.84
Market Capitalization: $ 31.8 Mil
Enterprise Value: $ 51.6 Mil
LTM (Jun) Sales: $ 29.5 Mil
LTM (Jun) Net Income: $(28.9)Mil
CY2001E Sales: NA
CY2001E EPS: $ (.22)
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PEER GROUP PROFILES - TRANSACTION SYSTEMS ARCHITECTS
BUSINESS DESCRIPTION:
Transaction Systems Architects, Inc. (TSA) develops, markets, installs and
supports software products and services primarily focused on facilitating
electronic payments and electronic commerce. In addition to its own products,
TSA distributes or acts as a sales agent for software developed by third
parties. The products and services are used by financial institutions, retailers
and e-payment processors, both in domestic and international markets. The
Company's products and services are organized into four business units: Consumer
e-Payments, Electronic Business Infrastructure, Corporate Banking e-Payments and
Health Payment Systems.
COMMENT
TSA interim CEO Larry Fendley announced an operational restructuring plan and
cost reduction initiatives designed to sharpen the Company's focus on key
investments and initiatives that management believes will contribute to improved
long-term success and profitability. The Company will incur one-time charges in
the third quarter of fiscal 2001 of approximately $22 million.
Stock Price as of Aug. 21: $10.67
Market Capitalization: $391.4 Mil
Enterprise Value: $376.3 Mil
LTM (Jun) Sales: $307.0 Mil
LTM (Jun) Net Income: $(38.5)Mil
CY2001E Sales NA
CY2001E EPS: $ .35
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PEER GROUP PROFILES - TRAVELOCITY.COM
BUSINESS DESCRIPTION:
Travelocity.com Inc. is an online travel agency. Through the Travelocity online
travel website leisure and business travelers can compare prices, make travel
reservations and obtain destination information. The Company's website features
booking and purchase capability for airlines, car rental and hotel companies,
cruise and vacation providers, as well as offer access to a database of
information regarding specific destinations and other information of interest to
travelers.
COMMENT
Travelocity acquired WhereTo, an Australian firm with industry-leading net fare
booking technology. The acquisition of WhereTo and its technology will allow the
Company to efficiently manage net fares in a near real-time manner, greatly
improving customer fare options. The WhereTo technology will also provide better
pricing for more complicated trips such as en-route and multiple stopovers.
Stock Price as of Aug. 21: $24.80
Market Capitalization: $419.6 Mil
Enterprise Value: $310.0 Mil
LTM (Jun) Sales: $274.0 Mil
LTM (Jun) Net Income: $(76.7)Mil
CY2001E Sales: $327.3 Mil
CY2001E EPS: $ 0.31
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