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PROJECT BLUE
Discussion Materials
October 14, 2003
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R H O N E G R O U P L L C
Executive Summary
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o Based on publicly-available information, Rhone Group LLC
("Rhone") has analyzed the trading patterns of Blue's smaller
shareholders in order to determine an appropriate price at
which the company should undertake an odd-lot tender offer.
o Small Blue shareholders seem to have acquired their shares in
the first 2-3 years of Blue trading, hence, their basis is most
likely in the $4.00 to $6.00 per share range, a meaningful
premium to today's stock price of $3.52 per share.
- During the past 4 years, over 90% of the float traded in
the first two and half years, when Blue shares were at
the higher levels
- Non-odd lot shareholders have generated the majority of
Blue volume recently, indicating that odd-lot
shareholders may have done little trading since the
stock's decline in the past 16 months and may have just
held on their stock positions
o However, the stock has been rather illiquid, especially since
late 2001, trading on average (median) at volumes of 200 shares
a day. While stock price movements have shown little
correlation to volume traded, we expect that a small investor
may still experience some downward pressure on price if he/she
attempted to sell his/her stock in the open market today.
o As such, in order to attract small shareholders to tender their
shares, Rhone recommends that the Blue offer price be at least
$4.00 per share. This would still represent a meaningful
premium to today's stock price for an illiquid security and may
help to draw out a larger number of odd-lot shareholders.
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Stock & Volume Performance -- Last 4 Years
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Price & Volume Analysis
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Cumulative Period Prior to 10/01/03
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4 Years 3 Years 2 Years 1 Year 6 Months
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Stock Price
High $7.17 $7.17 $7.05 $5.40 $3.75
Low 2.20 2.20 2.20 2.20 2.32
Average 4.66 4.78 4.30 3.01 2.78
Daily Volume
High 230,303 66,177 30,500 30,500 30,500
Low 0 0 0 0 0
Median 400 133 116 200 200
Average 4,502 1,617 1,304 1,524 1,333
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Stock Basis Analysis -- Last 4 Years by Quarter
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(Volume in '000s)
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Current Price of
$3.52 @ 10/13/03
Total Volume Traded 1,373.0 620.4 704.7 737.8 179.5 257.7 119.8
% of Float (1) 51.9% 23.4% 26.6% 27.9% 6.8% 9.7% 4.5%
% of Total Shares 25.7% 11.6% 13.2% 13.8% 3.4% 4.8% 2.2%
Average Volume / Day 20.5 9.5 10.8 11.4 2.8 4.0 1.8
Cumulative
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Total Volume Traded 26.2 66.0 92.2 85.9 33.4 107.4 115.7 121.1 50.3 4,691.2
% of Float (1) 1.0% 2.5% 3.5% 3.2% 1.3% 4.1% 4.4% 4.6% 1.9% 177.3%
% of Total Shares 0.5% 1.2% 1.7% 1.6% 0.6% 2.0% 2.2% 2.3% 0.9% 87.8%
Average Volume / Day 0.4 1.0 1.4 1.3 0.5 1.6 1.8 1.9 0.8 4.5
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(1) Based on estimated float of 2.6 mm shares per the Proxy and Bloomberg
information.
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Regression Analysis -- Daily Price Change vs. Daily Volume Traded Last 2 Years
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Intra-Day Trading Volume Analysis -- Last 2 Months
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% of Total Aug-03 Sep-03 Cumulative
Lots of 101+ Shares 83.5% 94.5% 89.3%
Lots of 100 Shares 16.5 5.5 10.7
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Total Volume 100.0% 100.0% 100.0%
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Stock Basis Analysis -- Last 2 Months (1)
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Lots of 100 Shares or Less
[GRAPHIC CHART OMITTED]
Current Price of
$3.52 @ 10/13/03
August-03 September-03
Vol. Weigh. Average Price $2.96 $3.51
Total Small Lot Volume Traded 3,000 1,100
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(1) Source: Bloomberg
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